## PREFACE

Theories of Surplus-Value was written by Marx between January 1862
and July 1863. This work is part of the voluminous manuscript of
1861-63, entitled by Marx Zur Kritik der Politischen Oekonomie (A
Contribution to the Critique of Political Economy) and written by
him as the immediate sequel to the first part of A Contribution to
the Critique of Political Economy published in 1859. The 1861-63
manuscript consists of 23 notebooks (the pages numbered consecutively
from 1 to 1472) running to some 200 printed sheets in length: it is the
first systematically worked out draft — though still only rough and
incomplete — of all four volumes of Capital. Theories of
Surplus-Value forms the longest (about 110 printed sheets) and most
fully elaborated part of this manuscript and is the first and only
draft of the fourth, concluding volume of “Capital”. Marx
called this volume, as distinguished from the three theoretical volumes,
the historical, historico-critical, or historico-literary
part of his work.

Marx began to write Theories of Surplus-Value within the
framework of the original plan of his Critique of Political Economy
as he had projected in 1858-62. On the basis of what Marx says of the
structure of his work in his introduction to the first part of A
Contribution to the Critique of Political Economy, in his letters of
1858-62 and in the 1861-63 manuscript itself, this plan can be presented
in the following schematic form:

PLAN OF THE CRITIQUE OF POLITICAL ECONOMY
AS PROJECTED BY MARX IN 1858-62
[[The scheme’s form has been adapted for the Web edition.]]

1. Capital:

1. [Introduction: Commodity and Money]

2. Capital in general:

1. The production process of capital:

1. Transformation of money into capital

2. Absolute surplus-value

3. Relative surplus-value

4. The combination of both

5. Theories of surplus-value

2. The circulation process of capital

3. The unity of the two, or capital and profit

3. The competition of capitals

4. Credit

5. Share capital

2. Landed property

3. Wage-labour

4. The state

5. Foreign trade

6. The world-market

It can be seen from this plan that Theories of Surplus-Value
was originally conceived by Marx as a historical excursus to that
section of his theoretical study of “capital in general” which
was devoted to the problem of the production process of capital. This
historical excursus was to conclude the section on the production
process of capital, in the same way as in the first part of A
Contribution to the Critique of Political Economy the chapter on
commodities was concluded by the historical excursus “On the
History of the Theory of Commodities” and the chapter on money by
the historical excursus “Theories of the Medium of Circulation and
of Money”.

That was Marx’s original plan. But in the process of working it out
the historical excursus on theories of surplus-value went far beyond the
limits of this plan. The subject-matter of the theories to be
investigated and criticised by Marx itself demanded an extension of the
limits of the inquiry. The critical analysis of the views of bourgeois
economists on surplus-value was unavoidably interwoven for Marx with the
analysis of their ideas of profit; and in so far as these ideas were
bound up with erroneous conceptions of ground-rent, it was necessary
also to examine the theory of rent -and so on. On the other hand, in
order to make the criticism of erroneous theories comprehensive and
exhaustive, Marx counterposed to them one or another positive part of
the new economic theory created by Marx himself -a theory that
represents the greatest revolutionary transformation in the whole of
economic science.

To grasp fully the character of the material and structure of Theories
of Surplus-Value it is necessary to bear in mind also the following.
At the time when Marx began his work on the Theories, of the
theoretical parts of Capital only the first — “The
Production Process of Capital” — had been more or less worked out
in writing, and even that not fully (this question is examined in the
first five notebooks of the 1861-63 manuscript). The second and third
parts — to be more exact, certain sections of them — existed only in
the form of preliminary sketches in the manuscript of 1857-58. In
writing the historical part, therefore, Marx could not simply make
reference to certain pages of his theoretical work, but was obliged to
undertake a positive elaboration of those theoretical questions which
came up in the critical analysis of all previous political economy.

All this led to the historical excursus Theories of Surplus-Value
assuming immense proportions. In the voluminous manuscript of 1861-63
the historical, or historico-critical, part fills notebooks VI to XV
inclusive, plus XVIII, and a number of separate historical essays in
notebooks XX to XXIII.

The main text of Theories of Surplus-Value is contained in
notebooks VI to XV and XVIII, written in the period from January 1862 to
January 1863 inclusive. The table of contents compiled by Marx and
written on the covers of notebooks VI to XV refers also to this text.
This table of contents is of great importance for an understanding of
the general structure of Marx’s work, its component parts and its plan.
In the present edition it is printed at the very beginning of the first
part (pp. 37-39). The historico-critical essays and notes contained in
the last notebooks of the manuscript, and written in the spring and
summer of 1863, are supplementary to the main text.

In the course of his work on Theories of Surplus-Value the
range of problems examined by Marx was constantly extending. And in the
end this led Marx to the idea that it was necessary to separate off the
whole of the historico-critical material to form a special, fourth
volume of Capital. In the process of Marx’s work on Capital
the decisive significance of the division into three parts (1. The
Production Process of Capital, 2. The Circulation Process of Capital, 3.
The Unity of the Two) which Marx originally had in mind only for the
section “Capital in General”, became more and more apparent.
This division into three parts proved to be so important and so profound
that gradually even those subjects which, according to the original
plan, were not among the complex of questions allocated by Marx to the
section “Capital in General”, came to be included in it (for
example, the competition of capitals, credit, rent). Parallel with this
process of working out the three theoretical parts of Capital,
which gradually incorporated all the theoretical problems of the
political economy of capitalism, Marx became more and more strongly
convinced that the historico-critical inquiry should be presented in the
form of a separate book — as the fourth volume of Capital.

About a month after finishing his work on the 1861-63 manuscript Marx
(in a letter dated August 15, 1863) wrote to Engels about this
manuscript of his: “… I look at this compilation now and see how
I have had to turn everything upside-down and how I had to create even
the historical part out of material of which some was quite
unknown….” By “the historical part” Marx meant the Theories
of Surplus-Value, which he was therefore already considering as a
separate, special part of his work; whereas as late as January 1863 he
was proposing to distribute this historico-critical material among the
theoretical sections of his inquiry into “Capital in General”,
as is evident from the plans he drew up for the first and the third
parts of Capital (see pp. 414-16 of the present volume).

Marx’s intention to carry through a critical examination of the
history of political economy, starting from the middle of the
seventeenth century, is shown by his detailed historico-critical essay
on Petty, contained in notebook XXII of the manuscript, written in May
1863; it has the characteristic heading “Historical: Petty”.
This essay, which has no internal connection with either the preceding
or following text, was clearly intended by Marx for the historico-critical
part of his work. Petty’s views on value, wages, rent, the price of
land, interest, etc., are analysed in the essay. Such a wide treatment
of Petty’s economic views shows that already in May 1863 Marx had
conceived the idea which four years later (April 30, 1867) he explicitly
set out in a letter to Siegfried Meyer, when he wrote regarding the
structure of his Capital: “Volume I comprises the ’Process
of Capitalist Production’ … Volume II gives the
continuation and conclusion of the theories, Volume III the history
of political economy from the middle of the seventeenth century”
(Marx at that time proposed to issue the second and third books of Capital
in one volume).

We find the first direct reference to the fourth, “historico-literary”,
book of Capital in Marx’s letter to Engels of July 31, 1865. Marx
wrote to Engels about how he is getting on with his Capital:
“There are still three chapters to write in order to complete the
theoretical part (the first three books). Then there is still the fourth
book, the historico-literary one, to write, which is relatively the
easiest part to me as all the problems have been solved in the first
three books and this last is therefore more of a repetition in
historical form.” Here the question may arise why Marx says that he
still has “to write” the fourth book of Capital,
although in the letter of August 15, 1863 quoted above he speaks of
“the historical part” as of something already written. The
difference in the formulations of 1863 and of 1865 is to be explained by
the fact that in the intervening period, in the course of 1864-65, Marx
recast and rewrote all three theoretical parts of his work, but the
fourth part — “the historico-literary” — was still in the
original form as it had been written in 1862-63, and therefore had to be
worked over again in conformity with his re-editing of the first three
volumes of Capital.

From Marx’s letter of November 3, 1877 to Siegmund Schott it appears
that Marx also later on regarded the historical part of Capital
as in some degree already written. In this letter Marx says of his work
on Capital: “In fact I myself began Capital,
precisely in the reverse order (beginning with the third historical
part) from that in which it is presented to the public, with the
qualification, however, that the first volume, which was the last to be
taken in hand, was prepared for the press straightway while the two
others still remained in the raw form that every inquiry originally
assumes.” Here the historical part is called the third for the
reason that Marx, as already mentioned, intended to issue the second and
third books of Capital in one volume, as Volume II, and the
fourth book, “History of the Theory”, as the third volume.

These statements by Marx entitle us to regard Theories of
Surplus-Value (with the supplementary ‘historical sketches and notes
from notebooks XX-XXIII) as the original and only draft of the fourth
book — or fourth volume — of Capital. Engels and Lenin called
Theories of Surplus-Value the fourth volume of Capital.

For these reasons, the words “Volume IV of Capital”
have, in the present volume, been added in round brackets to the title Theories
of Surplus-Value given by Marx in his 1861-63 manuscript.

* * *

Engels first refers to the manuscript Theories of Surplus-Value
in his letters to Kautsky of February 16, and March 24, 1884. In the
second letter Engels sends word of the agreement reached with Meissner,
the publisher of Capital, as to the sequence in which the second
and then the third book of Capital, and Theories of
Surplus-Value as the concluding part of the whole work, were to be
published.

In his letter to Bernstein, written in August 1884, Engels speaks in
greater detail of this concluding part of Capital. Here we find:
“… ‘History of the Theory’, between ourselves, is in the main
written. The manuscript of A Contribution to the Critique of
Political Economy … contains, as I believe I showed you here,
about 500 quarto pages of Theories of Surplus-Value, in which it
is true there is a good deal to be cut out, as since then it has been
worked up in a different way, but there is still enough.”

Engels’s preface (dated May 5, 1885) to Volume II of Capital
gives the most detailed information about the manuscript Theories of
Surplus-Value and the form in which Engels intended to publish it.
He points out that Theories of Surplus-Value makes up the main
body of the lengthy manuscript A Contribution to the Critique of
Political Economy, written in 1861-63, and continues: “This
section contains a detailed critical history of the pith and marrow of
Political Economy, the theory of surplus-value, and develops parallel
with it, in polemics against predecessors, most of the points later
investigated separately and in their logical connection in the
manuscript for Books II and III. After eliminating the numerous passages
covered by Books II and III I intend to publish the critical part of
this manuscript as Capital, Book IV. Valuable as this manuscript
is, it could not be used for the present edition of Book II.”

In his letters of the late eighties and early nineties Engels
repeatedly mentions his intention of proceeding with the preparation of
the fourth volume, Theories of Surplus-Value, after the
publication of Volume III of Capital. He however already speaks far less
categorically about eliminating the theoretical passages contained in
the manuscript of the Theories.

The last mention by Engels of the manuscript Theories of
Surplus-Value is in his letter to Stephan Bauer dated April 10,
1895. As this letter shows, Engels was still hoping in 1895 that he
would succeed in publishing this work of Marx’s. But Engels did not
manage to prepare the concluding volume of Capital for the
printer; he died barely four months after this letter was written.

From Engels’s statements quoted above it is clear that he attributed
great importance to the manuscript Theories of Surplus-Value, and
regarded it as Volume IV of Capital. But it is also evident that
in 1884-85 Engels intended to remove from the text of this manuscript
“numerous passages covered by Books II and III”.

Here the question naturally comes up: what should be our attitude
with regard to this proposal or intention of Engels?

Only Engels, the great companion and comrade-in-arms of Marx, and in
a certain sense the co-author of Capital, could have removed from
the manuscript Theories of Surplus-Value a whole series of
passages. In order that the parts of the manuscript that remained after
the elimination of these passages should not appear as disconnected
fragments, it would have been necessary to work them over to a
considerable extent and to link them together with specially written
interpolations. And only Engels had the right to work over Marx’s text
in such a way.

There is one more reason in favour of keeping in the text of Theories
of Surplus-Value the “numerous passages” mentioned above.
Engels’s intention to cut out these passages was only his original
intention, formed before he had begun a detailed study of the manuscript
Theories of Surplus-Value. And we know from Engels’s preface to
Volume III of Capital that, in the course of his actual work on
the preparation of Marx’s manuscripts for the printer, he sometimes
revised his original intentions and plans. Thus, Engels originally
wanted to recast Part V of Volume III of Capital, as this part of
Marx’s manuscript was still in unfinished form. Engels says in his
preface that he had tried at least three times to make a fundamental
recasting of this part, but in the end abandoned this idea and decided
to confine himself “to as orderly an arrangement of available
matter as possible, and to making only the most indispensable
additions”. By analogy with this, it may be presumed that if Engels
had actually come to prepare the manuscript Theories of Surplus-Value
for the press, he would have kept the theoretical digressions contained
in it. This presumption is all the more probable because among the
digressions are some in which Marx presents very important theoretical
analyses, essentially supplementing the exposition, for example, in
Volume III of Capital — particularly the section on rent.

Lenin had an extremely high regard for the theoretical analyses
contained in the manuscript Theories of Surplus-Value. He often
referred in his writings to Theories of Surplus-Value, expressing
equally great esteem for both the historico-critical and the purely
theoretical content of this work of Marx. He valued particularly highly
the sections in which Marx developed his own views on the nature of rent
(see V. I. Lenin, The Agrarian Question and the “Critics of
Marx”, Eng. ed., Moscow, 1954, pp. 29 and 158; The Agrarian
Programme of Social-Democracy in the First Russian Revolution, 1905-1907,
Eng. ed., Moscow, 1954, pp. 101, 140, 143). Lenin refers to “Marx’s
remarkable passages in his Theories of Surplus-Value, where the
revolutionary significance — in the bourgeois-democratic sense — of
land nationalisation is explained with particular clarity” (The
Proletarian Revolution and the Renegade Kautsky, Eng. ed., Moscow,
1952, p. 152; see The Agrarian Programme of Social-Democracy in the
First Russian Revolution, 1905-1907, Eng. ed., Moscow, 1954, pp.
145, 175-76; Works, 4th Russ. ed., Vol. 15, p. 148, and Vol. 16,
p. 104, etc.). He cited from Theories of Surplus-Value Marx’s
principal theses on absolute rent, and stated that they confirmed the
correctness of his own treatment of this problem made some years before
the publication of the Theories, in his work The Agrarian
Question and the “Critics- of Marx” (see Eng. ed., Moscow,
1954, p. 29).

* * *

Theories of Surplus-Value was first published by Kautsky in
1905-10, and since then has been more than once republished in this
Kautsky edition both in German and in other languages; it has been
published several times in Russian.

The Kautsky edition has many radical defects. Setting out from the
totally false assumption that the manuscript Theories of
Surplus-Value was devoid of any harmonious plan and was something of
a “chaos”, Kautsky subjected it to an arbitrary
“adaptation”, revising the most important principles of
revolutionary Marxism.

First of all Kautsky crudely violated the arrangement of the material
set forth by Marx in the table of contents which he compiled and in fact
adhered to in his work. Kautsky completely ignored this table of
contents in preparing his edition, and did not even include it in the
book.

The material in Marx’s manuscript is arranged consistently and in
definite logical sequence. Analysing the attempts of bourgeois
economists to resolve the basic problems of political economy, Marx
reveals the class limitations that characterised even classical
bourgeois political economy, the inability of the bourgeois economists
to provide any internally consistent and scientifically grounded
solution of the questions they dealt with, and above all of the central
problem-the problem of surplus-value. Marx’s manuscript reveals that the
development of bourgeois political economy was a process full of
contradictions; thus in examining the theories of Smith and Ricardo,
Marx shows that in certain respects they brought science forward in
comparison with the Physiocrats, but in other respects they repeated the
mistakes of the Physiocrats and even took a step backwards. Kautsky
distorted this deeply dialectical survey of Marx; he tried to
subordinate the whole material of the manuscript to an external, purely
chronological sequence, and to present the course of development of
bourgeois political economy as a smooth evolutionary process.

Following his chronological plan, Kautsky placed at the very
beginning of his edition not the characterisation of the views of James
Steuart, which in Marx’s manuscript forms the introduction to the
chapter on the Physiocrats, but four short fragments (on Petty,
D’Avenant, North and Locke, Hume and Massie), taken for the most part
from notebooks XX and XXII. Kautsky mechanically transferred these
fragments (as also certain others) to the first chapter of the first
volume, and by so doing jumbled together the connected exposition of
notebooks VI-XVIII (from James Steuart to Richard Jones) with the
supplementary essays in notebooks XX-XXIII.

In Marx’s manuscript the analysis of Quesnay’s theory on the
reproduction and circulation of the total capital came after the
analysis of Smith’s theories; in the Kautsky edition this part of the
manuscript precedes the chapter on Smith, and is given in a form
rehashed by Kautsky, who arbitrarily removed nine tenths of this section
from the main text and put it into an appendix printed in small type and
wedged into the main text.

Kautsky also put the theoretical digressions in which Marx sets out
his own view of the reproduction of the social capital into a separate
appendix printed in small type and inserted in the text of the book.
Kautsky tore them out from various places in the manuscript, grossly
violating the inner connection between the historico-critical and the
theoretical studies of Marx.

Kautsky was also responsible for obvious departures from the
arrangement of the material given in Marx’s manuscript, in the second
volume of his edition. Marx began this part of the manuscript with a
critique of Rodbertus’s theory of rent; the Kautsky edition starts with
the chapter “Surplus-Value and Profit”, dealing with Ricardo,
and the critique of Rodbertus’s theory comes only after this chapter. In
Marx’s manuscript the analysis of Ricardo’s views on surplus-value and
on the process of the changing rate of profit is placed after the
critique of the Ricardian theory of rent; in the Kautsky edition it is
in the chapter “Surplus-Value and Profit” which begins the
volume. Here also Kautsky, by departing from the sequence of the
material in the manuscript, obscures important points of principle in
Marx’s work, in particular, Marx’s idea that Ricardo’s errors in the
theory of rent had left their stamp on the Ricardian doctrine of profit.

As a result of all these arbitrary rearrangements which he made in
the manuscript, problems that are organically connected are torn apart
in the Kautsky edition. For example, the chapter “Ricardo’s Theory
of Profit” in Marx’s manuscript contains a critique of Ricardo’s
views on the process of the formation of the average rate of profit and
of his views on the causes of its fall. In the Kautsky edition these two
parts of one and the same chapter of Marx’s manuscript are separated
from each other by 350 pages of the text.

All the material in the manuscript is given by Kautsky in a form
which obscures the questions of the class struggle, and the deep
connection between economic theories and the social and political
environment in which they are developed. Thus for example, in the second
volume of the Kautsky edition there is a section headed by Kautsky
“Anderson and Malthus. Roscher”. In the corresponding passage
of the manuscript Marx shows that Anderson’s views on rent were
distorted by Malthus in the interest of the most reactionary elements of
the ruling classes, while Ricardo’s conclusions were directed against
the landowning aristocracy. After this, Marx dwells on the vulgar
economist Roscher, who crudely distorted the whole history of the
question. The clear, politically sharp content of this section of the
manuscript, which is a model of profound class analysis of the history
of political economy, has been unsystematically lumped together by
Kautsky under one general and quite colourless title which is a mere
enumeration of names.

This type of editorial titling is extremely characteristic of the
Kautsky edition. Almost all the titles which Kautsky furnished for the
chapters and paragraphs of his edition bear an objectivist, neutral
character. This applies, for example, to titles such as: “Adam
Smith and the Concept of Productive Labour”, “Ricardo’s
Conception of Value”, “Ricardo’s Idea of Surplus-Value”,
“The Rate of Profit”, “Value and Surplus-Value”,
“Variable Capital and Accumulation”, and so on. Kautsky’s
titles have nowhere set off Smith’s two different definitions of value,
the twofold nature of Smith’s views on the relations between value and
revenue, Ricardo’s inability to connect the law of the average rate of
profit with the law of value, etc., which Marx had brought to light. In
his titling Kautsky also glosses over the vulgar element in the views of
Smith and Ricardo: and he supplies the chapters on Ramsay, Cherbuliez
and Richard Jones with titles calculated to give the reader the entirely
false impression that some elements of Marxist political economy were to
be found already in the works of these bourgeois economists.

Kautsky’s distortions and revisions of Marx’s text are shown in their
crudest and most overt form in the numerous cuts that he made. Kautsky
omitted, in his edition, not only individual words and sentences, but
also whole passages, some of which fill three, four or more pages of the
manuscript, in Marx’s compact writing. Among the parts of the manuscript
Kautsky omitted there is even a whole chapter, which appears in Marx’s
table of contents under the title: “Bray as Adversary of the
Economists”. Kautsky also omitted, among many others, the passage
in the manuscript in which Marx speaks of the economic preconditions of
the absolute impoverishment of the working class under capitalism.
Having started on the path of falsification, the revisionist Kautsky,
who denied the absolute impoverishment of the working class, did not
hesitate to conceal from the reader Marx’s arguments on this important
question, of principle.

In “editing” Marx’s manuscript, Kautsky tried to tone down
the annihilating criticism to which Marx subjected the views of the
bourgeois economists, and to substitute “decorous” sleek
expressions for the angry, passionate, caustic language used by Marx in
his merciless criticism of the apologists of the bourgeoisie. Thus
Kautsky in all passages removed from Marx’s characterisation of
bourgeois economists such epithets as “asses”,
“dogs”, “canaille”.

Finally, characteristic of the entire Kautsky edition are the
numerous and sometimes extremely crude mistakes in deciphering the text
of the manuscript, inaccurate and in a number of cases obviously
incorrect translations of English and French expressions occurring in
the text, arbitrary editorial interpolations inconsistent with the
movement of Marx’s thought, the absolutely impermissible substitution of
some of Marx’s terms by others, and so on.

The complete disregard of Marx’s table of contents, the arbitrary and
incorrect arrangement of the manuscript material, the objectivist titles
which avoid the class essence of the conceptions criticised by Marx, the
obscuring of the fundamental antithesis between Marx’s economic teaching
and the whole bourgeois political economy, the removal of a number of
passages containing important theses of revolutionary Marxism, from
which Kautsky more and more departed — all this suggests that what we
have here is not only gross violations of the elementary requirements of
a scientific edition, but also the direct falsification of Marxism.

* * *

The present edition contains in full both the main text of Theories
of Surplus-Value — to which the table of contents compiled by Marx
refers and which gives a connected exposition of the “history of
the theory” from James Steuart to Richard Jones — and the
digressions supplementing this main text which are in notebooks V, XV,
XX, XXI, XXII and XXIII. These supplementary sections are put in the
form of appendices, in order not to interfere with the sequence of the
exposition given in the main text.

The length of all this material (about 110 printed sheets) makes it
necessary to divide the book into three parts. The appendices are
distributed among these three parts in such a way that each part
concludes with those supplementary digressions and notes which directly
refer to its contents.

The arrangement of the main text follows exactly the table of
contents which Marx compiled. Only those few changes which Marx himself
indicated have been made in the order of the text in some of the
manuscript books. Thus, for example, in notebook VII Marx, in dealing
with Smith’s conception of productive labour, and referring in this
connection to the vulgarisation of Smith’s views by Germain Garnier,
makes a long digression about John Stuart Mill. This begins with these
words: “Before dealing with Garnier, something incidentally here
[by way of a digression] on the above-mentioned Mill junior. What
is to be said here really belongs later in this section, where the
Ricardian theory of surplus-value is to be discussed; therefore not
here, where we are still concerned with Adam Smith.” In accordance
with this indication and with the table of contents of notebook XIV,
later compiled by Marx, the excursus on John Stuart Mill has been placed
in the present edition in the third part of Theories, in the
chapter on the decline of the Ricardian school, where Marx allocates a
special section to John Stuart Mill. Another example of transposition:
notebook X contains a short chapter on the English socialist Bray (pp.
441-44 of the manuscript); in the later compiled plan of the contents of
the last chapters of Theories of Surplus-Value (on the cover of
notebook XIV) Marx however assigned the section “Bray as Adversary
of the Economists” to the chapter “Adversaries of the
Economists”; following this indication by Marx, in the present
edition pages 441-44 have also been transferred to the third part of the
work.

The division of the text into chapters follows Marx’s directions in
the table of contents he compiled and in various places in the
manuscript itself. For the titles given to the separate parts of the
manuscript, use has been made of (1) the titles from Marx’s table of
contents; (2) the titles from Marx’s draft plans for Parts I and III of
Capital, which have reference to certain sections of the manuscript of
Theories; (3) the few headings in the text of Theories itself. All these
taken together, however, form only a comparatively small part of the
titles that had to be provided for the sections and subsections of the
manuscript. The rest of the titles -the majority -have been drawn up by
the editors on the basis of the text of corresponding parts of the
manuscript, with the fullest possible use of Marx’s own terminology and
formulations. The titles given by the editors — as in general all that
the editors are responsible for — have been put in square brackets, so
that they can be easily distinguished from titles given by Marx.

Obvious slips of the pen occurring in the manuscript have been
corrected as a rule without being expressly mentioned in footnotes. A
few obvious slips of the pen in the text of notebooks VI and X were
corrected by Engels’s own hand, in the manuscript itself. Specific terms
used by Marx in the 1861-63 manuscript are explained in notes. The
titles of books cited and mentioned by Marx are given in the text of
this edition in the language of the original.

* * *

In spite of the fact that Theories of Surplus-Value was left
in a form that had not prepared for the press, this work gives a
connected and complete picture of that “History of the Theory”
which Marx intended to form the final, fourth volume of Capital.
In it Marx sets forth the whole course of evolution of bourgeois
political economy from the time of its birth up to its
“grave”, as vulgar political economy was called by Marx.

As already mentioned, in the present edition all the material of Theories
of Surplus-Value and the supplementary sections relating to it have
been divided into three parts. The content of the manuscript itself
determines the way in which the material is divided.

The first part consists of seven chapters of the main text (notebooks
VI-X) and thirteen supplementary sections. This part is devoted in the
main to a critical analysis of the views of the Physiocrats (chapters II
and VI) and of Adam Smith (chapters III and IV). Chapter I (“Sir
James Steuart”), characterising Steuart’s hopeless attempt to give
a rational form to the monetary and mercantile system, serves as an
introduction to the analysis of Physiocratic theory. By contrasting the
Physiocrats with Steuart Marx was able to bring out more sharply the
role of the Physiocrats and their significance in the development of
political economy — namely, that they transferred the origin of
surplus-value from the sphere of circulation to the sphere of
production.

Analysing the economic views of the Physiocrats, Marx shows the
contradictions in their system, the dual nature of their conception of
surplus-value, which is presented in their works sometimes as a pure
gift of nature, at other times as the result of the special productivity
of agricultural labour appropriated by the owner of the land. It is this
that gives the key to an understanding of the further evolution of the
Physiocratic school.

Marx shows the battle of ideas within this school, and traces the
vulgarisation of Physiocratic theory by its epigones. His analysis of
the ideological struggle within the Physiocratic school is inseparably
linked with his characterisation of the class essence of the Physiocrats’
views.

Marx also reveals the contradictions and inconsistencies in the
treatment of the most important economic categories in Adam Smith’s
theory (Chapter III). Subjecting Smith’s theory to a critical analysis,
Marx brings out the vulgar element it contains. This contrast between
the scientific and the vulgar element in Smith’s doctrine provides the
necessary basis for understanding the further evolution of bourgeois
political economy, which, as Marx shows, took on a more and more vulgar
character as the class struggle between the proletariat and the
bourgeoisie grew sharper.

In Chapter III, in connection with the criticism of Smith’s dogma
which resolves the entire value of the social product into revenue, Marx
gives a theoretical analysis of the reproduction of the total social
capital, and deals particularly fully with the problem of the
replacement of constant capital. In addition to its general theoretical
significance, this excursus (the longest of the theoretical digressions
in the first part) is of great importance also because it shows how Marx
arrived at his theory of the two departments of social production.

Chapter IV deals with Smith’s views on productive and unproductive
labour. Along with this it gives an analysis of the struggle that flared
up in connection with Smith’s views, and describes the vulgarisation of
bourgeois political economy in handling the question of productive and
unproductive labour. Marx traces the process of vulgarisation not only
of Smith’s views on this question, but also of the views of the
Physiocrats. Many of the vulgar conceptions here criticised by Marx are
widely held also in contemporary bourgeois political economy, which has
degenerated into open apologetics of capitalism.

Chapter VI (“Quesnay’s Tableau économique”) takes us back
to the Physiocrats. There was good reason for this arrangement of the
material. Though Adam Smith’s theory, as Marx’s comprehensive analysis
shows, represented as a whole a considerable step forward in the
development of bourgeois political economy, in his analysis of the
process of reproduction Smith takes a step backwards in comparison with
the Physiocrats. Marx’s arrangement of the material indicates the zigzag
course of development of classical bourgeois political economy, its
forward movement in the treatment of particular questions and its
backward movement in the treatment of others.

Two short chapters on Necker and Linguet give an analysis of two
early attempts to portray the antagonistic nature of the two classes
under capitalism.

The appendices to Part I contain the historico-critical essays and
notes from notebooks V, XX, XXI, XXII, XXIII and the cover of XIII.
Appendices 1-7 contain characterisations of the economic views of
Hobbes, Petty, Locke, North, Berkeley, Hume and Massie. In these views
Marx discerns the rudiments of the labour theory of value, and of the
doctrine of capital and of interest. Appendices 8-10 give supplementary
material on the Physiocratic school. Appendix 11 contains a critique of
the apologetic conception of the productiveness of all trades — a
conception that is widespread in contemporary bourgeois political
economy. Appendix 12 is a lengthy theoretical essay from notebook XXI of
the manuscript, in which Marx elaborates his own view — which is the
only scientific view — of the problems of productive and unproductive
labour. This theoretical essay as it were draws the general conclusions
from the historico-critical analysis of the problem of productive labour
given by Marx in the lengthy Chapter IV of the main text. Finally, we
print in Appendix 13 the draft plans for Parts I and III of Capital.
They are very important for an understanding of the history of how Capital
took shape; moreover, they contain formulations of certain themes which
relate to its historico-critical part.

In the second part of Theories of Surplus-Value (chapters
VIII-XVIII, notebooks X-XIII) the critical analysis of Ricardo’s
doctrine holds the central place. Along with this there is an analysis
of Adam Smith’s theory of cost-price and of rent. In his analysis of
Ricardo’s system, Marx shows that it contains a number of faulty
premises which owed their origin to Smith. In this connection, Marx
subjects the corresponding views of Smith to special scrutiny.

In conformity with the arrangement of the material in Marx’s
manuscript, the second part begins with the lengthy “excursus”
dealing with Rodbertus’s theory of rent (Chapter VIII). The fact that
the concept of absolute rent was altogether missing in Ricardo’s theory
of rent constituted in Marx’s view its principal defect. Marx therefore
prefaces his analysis of Ricardo’s theory with an extensive examination
of Rodbertus’s attempts to develop this concept. In this connection,
Marx substantiates his own theory of absolute rent.

The second “excursus” (Chapter IX) is a compressed
historical sketch of the development of views on differential rent. Marx
here lays bare the class roots of the various theories on this question.
In addition, Marx gives in this chapter a profound analysis of the basic
premises of the theory of rent, and reveals the close connection between
the theory of rent and the theory of value, showing how errors in the
theory of value lead to erroneous conclusions in the theory of rent.

These two “digressions” in this way prepare the ground for
the thorough-going analysis of Ricardo’s theory contained in chapters X-XVIII.

While stressing Ricardo’s great theoretical merits, Marx at the same
time underlines the defects of his method in principle — Ricardo’s
inability to link the law of the average rate of profit with the law of
value, the presence of vulgar elements in his theory of profit, his
confusion of the process of formation of market value with the process
of equalisation of the average rate of profit, his confusion of the laws
of surplus-value with the laws of profit, and so on. All these defects,
as Marx shows, are also evident in Ricardo’s theory of rent. Criticising
this theory, Marx develops his own theory of rent, embracing both the
theory of absolute rent and the theory of differential rent.

Chapters XV, XVI and XVII contain a critical analysis of Ricardo’s
views on surplus-value, profit and accumulation. In Chapter XVII Marx
counterposes the genuinely scientific understanding of crises as a
necessary outcome of the internal contradictions of capitalism to
Ricardo’s mistaken views regarding the nature of crises. Chapter XVIII
is a critique of Ricardo’s views on the question of gross and net
revenue, and also of his views on the economic consequences of the
introduction of machinery.

Thus the critical analysis of Ricardo’s doctrine which Marx makes in
the second part of Theories of Surplus-Value embraces all aspects
of Ricardo’s system, showing his scientific merits and at the same time
bringing out the theoretical errors and class limitations of his views.

Marx’s short supplementary notes, written on the covers of notebooks
XI and XIII, are given as appendices to Part II. They contain brief
observations by Marx on particular historical questions connected with
the theory of capital and of rent.

Part III of Theories of Surplus-Value (chapters XIX-XXIV,
notebooks XIII-XV and XVIII) deals in the main with the dissolution of
the Ricardian school and the economic views of the English socialists
whom Marx spoke of as “the proletarian opposition based on
Ricardo”.

In Parts I and II Marx demonstrated how bourgeois political economy
was vulgarised in relation only to particular questions; in Part III,
however, he shows how, with the sharpening of the class struggle between
the bourgeoisie and the proletariat, the process of vulgarisation lays
hold of the very foundations of political economy, its initial
principles, its essential categories.

In the lengthy chapter on Malthus (Chapter XIX) Marx exposes the
absurdity and profoundly reactionary character of the Malthusian defence
of extravagance by the unproductive classes which he glorifies as a
means of avoiding overproduction. In this chapter, as in other places in
his work, Marx brands Malthus as “a shameless sycophant of the
ruling classes”, who falsified science in the interests of the
landed aristocracy and the most reactionary elements of the bourgeoisie.

Marx shows that Ricardo’s successors also took a step backward on the
basic questions of political economy; they in fact more and more openly
renounced all the valuable elements in Ricardo’s system (Chapter XX). He
points to the denial by Torrens that the labour theory of value is
applicable to capitalist economy, and shows that James Mill returned to
the vulgar conception of supply and demand in the question of wages.
Marx exposes the return to this conception also in the case of Wakefield
and Stirling.

This process of dissolution of the Ricardian school reaches its
completion with McCulloch, whose cynical apologetics for the capitalist
mode of production were most closely linked with “unscrupulous
eclecticism” in the sphere of theory. Marx shows that the
distortion of the concept of labour by McCulloch, who extended it to
natural processes, meant in fact the complete abandonment of the labour
theory of value.

Marx detects deeply reactionary features also in the polemical essays
against Ricardo written by English bourgeois economists of the 1820s, in
their denial of the objective character of the laws of political
economy, their confusion of value with price, and their abandonment of
even the category of value.

In Chapter XXI Marx analyses the economic views put forward by the
“proletarian opposition based on Ricardo” (Havenstone,
Hodgskin and others). Their merit, Marx points out, was that they
strongly emphasised the capitalist exploitation of the workers, their
view that profit, rent and interest were the surplus-labour of the
workers, their polemics against the apologetic theory that capital was
productive and against the conception that the capitalists accumulated
means of subsistence for the workers.

Along with this, Marx traced the theoretical errors in the economic
views of the socialist adherents of Ricardo: their underestimation of
the significance of materialised, past labour; their incorrect idea of
the process of reproduction in capitalist society; their lack of
comprehension of the inner connection between the fetishisation of
capital and the real relations which of necessity give birth to this
fetishisation, and so on. Marx shows that these socialist adherents of
Ricardo were unable to pass beyond the bourgeois premises of Ricardo’s
theory, to reconstruct its very foundations.

Chapters XXII, XXIII and XXIV are devoted to a critical analysis of
the ideas of Ramsay, Cherbuliez and Richard Jones. Marx notes that they
attempt to differentiate between constant and variable capital and that
in this connection they conjecture on the significance of the organic
composition of capital. In his critical analysis of their views Marx
shows how the limits of their bourgeois horizon made it impossible for
these economists to develop the germs of correct ideas which in their
minds were combined with vulgar conceptions of capital and the rate of
profit.

The main text of Theories of Surplus-Value ends with the
analysis of the views of Jones. In the plan or table of contents written
by Marx on the cover of notebook XIV, after the chapter “Richard
Jones” come the words “(End of this Part 5)” (see p. 38
of the present volume).

There is a long appendix to Part III of Theories of Surplus-Value,
entitled “Revenue and Its Sources. Vulgar Political Economy”.
The main theme of this section, which fills the second half of notebook
XV, is the problem of revenue and its sources. But along with this Marx
also lays bare the class and gnosiological roots of vulgar political
economy, which clings to the outward semblance of the fetishised forms
of revenue and its sources, and builds on them its apologetic
“theories”. Marx brings out the essential difference between
classical and vulgar political economy. In passing, Marx criticises also
the economic views of representatives of vulgar socialism. This section,
therefore, although written by Marx not so much from the historical as
from the theoretical point of view, bears a direct relation to the
historico-critical studies in Part III of Theories of Surplus-Value,
and so must be included in it as an appendix to Part III. Later on Marx
wrote that the last, historico-critical volume of Capital would
contain a special and comprehensive chapter on the representatives of
vulgar political economy (see Marx’s letter to Kugelmann, July 11,
1868).

* * *

Marx formulated the essential conclusions from his deep and
comprehensive analysis of the history of bourgeois political economy, in
concise and generalised form, in the Afterward to the second edition of
Volume I of Capital (January 1873): In so far as it is bourgeois
“Political Economy can remain a science only so long as the class
struggle is latent or manifests itself only in isolated phenomena.”
He wrote of classical bourgeois political economy in England that it
“belongs to the period in which the class struggle was as yet
undeveloped”. With the development of the class struggle between
the bourgeoisie and the proletariat the character of bourgeois political
economy undergoes a sharp change. From the time of the conquest of
political power by the bourgeoisie in France and England “the class
struggle, practically as well as theoretically, took on more and more
outspoken and threatening forms. It sounded the knell of scientific
bourgeois economy… In place of disinterested inquiries, there were
hired prize-fighters; in place of genuine scientific research, the bad
conscience and the evil intent of apologetic”.

Against the background of this general degradation of bourgeois
political economy the figures of a few economists stood out, who tried,
as Marx says, “to harmonise the political economy of capital with
the claims, no longer to be ignored, of the proletariat”. Such an
attempt to “reconcile the irreconcilable” was made by John
Stuart Mill. Marx notes the complete hopelessness of such attempts,
which remained wholly within the bounds of bourgeois political economy
and bore witness to its decay and bankruptcy. In this connection Marx
strongly emphasises the outstanding significance of “the great
Russian scholar and critic” N. G. Chernyshevsky, who in his Outlines
of Political Economy According to Mill, as Marx says, “has
thrown the light of a master mind” on the bankruptcy of bourgeois
political economy.

Chernyshevsky wrote his critical analysis of John Stuart Mill’s book
in 1860-61, that is, almost at the same time as Marx was at work on his Theories.

Through all of Chernyshevsky’s writings runs the idea of the need to
create a new political economy, which, as opposed to former political
economy which he characterised as “the theory of the
capitalists”, he called quite explicitly “the theory of the
working people”.

To create a new, genuinely scientific political economy, involving a
radical revolutionary upheaval in economic science, was possible only
for the leader and teacher of the revolutionary proletariat — Karl
Marx. And only Marx, constructing the magnificent edifice of Capital
on radically new principles, could build up that scientific history of
all bourgeois political economy which he presented in the historico-critical
part of his work of genius — Theories of Surplus-Value.

* * *

In the imperialist epoch all the contradictions of the capitalist
system reach their greatest intensity, and the class struggle grows
extremely sharp. This is reflected in the most acute form also in the
economic fabrications of the latest apologists of capitalism. In their
efforts to defend the decaying social system of the exploiters which is
doomed to destruction, contemporary bourgeois economists and the
pseudo-socialists who echo their views cling fast to the most
reactionary of the vulgar conceptions which were put forward by their
predecessors in the pre-monopoly epoch of capitalism and were subjected
to annihilating criticism in Marx’s Theories of Surplus-Value.

Thus in contemporary bourgeois literature the old hackneyed thesis,
that every increase in wages leads inevitably to higher prices, still
runs its course. This thesis, the vulgar and antiscientific nature of
which Marx emphasised again and again in Theories of Surplus-Value,
is now used to justify the bourgeoisie’s attack on the living standards
of the working class.

Contemporary bourgeois economists (as for example Keynes, who made a
sensation with his “anti-crisis” projects, and his followers)
shamelessly repeat the reactionary idea of Malthus, exposed by Marx, of
the salutary role of the unlimited growth of unproductive consumption as
a means to fight economic crises. Praise for wasteful unproductive
consumption in the conditions of today sounds particularly ominous: it
brings to the fore that form of unproductive consumption which is linked
with the preparation of a new world war and which consumes an
ever-growing share of the budgets of capitalist states. Present-day
bourgeois literature, especially American, preaches in every way the
“theory”, that only increased armaments orders, and in the
final account war itself, can avert economic crises of overproduction.

Malthus’s population theory — routed by Marx in Theories of
Surplus-Value and in other works — is also used to justify
imperialist wars. Contemporary American and British Malthusians, (for
example, Vogt in the U.S.A. and Huxley in England) preach the cannibal
“doctrine” that only a war of annihilation can establish the
appropriate “balance” between the number of people on the
earth and the means of subsistence at their disposal. They declare that
a high death-rate is a salutary factor for civilisation, and hold up as
an example to all nations those countries where the death-rate reaches
particularly high proportions.

In fashioning their reactionary anti-scientific conceptions bourgeois
economists of today rely on the outworn theories, long since exposed by
Marxism, of the old vulgar political economy fabricated in the first
half of the nineteenth century. They also reject the labour theory of
value, and strive to replace it with vulgar “theories” of
utility, demand and supply, costs of production, and so on. They also
take their stand on the famous “trinitarian formula”,
according to which rent is determined by nature, interest by capital,
and wages by labour. Like all preachers of a “general harmony”
in capitalist society who preceded them, they too deny the inevitability
of capitalist crises, which are the necessary outcome of the internal
contradictions of capitalism.

In Theories of Surplus-Value Marx subjected all these
apologist subterfuges of vulgar political economy to devastating
criticism. This great work of Marx has for that reason outstanding
importance not only for understanding the history of bourgeois political
economy, but also for the struggle against the present-day
representatives of bourgeois reaction, who try to revive long-routed
pseudo-scientific conceptions in order to use them in their dirty trade
of justifying and defending the inhuman system of imperialism, that last
stage of the capitalist system which has outlived its time.

Institute of Marxism-Leninism,
C.C. C.P.S.U.


[Contents of the Manuscript Theories of Surplus-Value]

||VI-219b| Contents of notebook VI:

5. Theories of Surplus-Value

(a) Sir James Steuart

(b) The Physiocrats

(c) Adam Smith |VI-219b||

||VII-272b| [Contents of notebook VII]

5. Theories of Surplus-Value

(c) Adam Smith (continuation)

(Inquiry into how it is possible for the annual profit
and wages to buy the annual commodities, which besides
profit and wages also contain constant capital) |VII-272||

||VIII-331b| [Contents of notebook VIII]

5. Theories of Surplus-Value

(c) Adam Smith (conclusion) |VIII-331b||

||IX-376b| [Contents of notebook IX]

5. Theories of Surplus-Value

(c) Adam Smith. Conclusion

(d) Necker |IX-376b||

||X-421c| [Contents of notebook X]

5. Theories of Surplus-Value

Digression. Quesnay’s Tableau économique

(e) Linguet

(f) Bray

(g) Herr Rodbertus. Digression. New theory of rent: |X-421c||

||XI-490a| [Contents of notebook XI]

5. Theories of Surplus-Value

(g) Rodbertus

Digression. Note on the history of the discovery of the so-called Ricardian law

(h) Ricardo

Ricardo’s and Adam Smith’s theory of cost-price (refutation)

Ricardo’s theory of rent

Tables, with elucidation, of differential rent |XI-490||

||XII-580b| [Contents of notebook XII]

5.Theories of Surplus-Value

(h) Ricardo

Table, with elucidation, of differential rent

(Observations on the influence of the change in value of
means of subsistence and raw material — therefore also
in the value of machinery—on the organic composition
of capital)

Ricardo’s theory of rent

Adam Smith’s theory of rent

Ricardo’s theory of surplus-value

Ricardo’s theory of profit |XII-580b||

||XIII-670a| [Contents of notebook XIII]

5. Theories of Surplus-Value, etc.

(h) Ricardo

Ricardo’s theory of profit

Ricardo’s theory of accumulation. Critique of this
(development of crises from the basic form of capital)

Ricardo’s Miscellanea. Conclusion of Ricardo (John
Barton)

(i) Malthus |XIII-670a||

||XIV-771a| [Contents of
notebook XIV and plan of further chapters of Theories of
Surplus-Value]

5. Theories of Surplus-Value

(i) Malthus

(k) Decline of the Ricardian school (Torrens, James Mill, Prevost, polemical writings, McCulloch,
Wakefield, Stirling, John Stuart Mill)

(l) Adversaries of the economists

(Bray as adversary of the economists)

(m) Ramsay

(n) Cherbuliez

(o) Richard Jones. (End of this Part 5)

Episode: Revenue and its sources |XIV-771a||

||XV-862a| [Contents of notebook XV]

5. Theories of Surplus-Value

1. Proletarian opposition on the basis of Ricardo

2. Ravenstone. Conclusion

3. [and] 4. Hodgskin

So-called amassment as a mere phenomenon of circulation (Stocks, etc.—circulation reservoirs)

(Compound interest; fall in the rate of profit based on this)

Vulgar political economy

(Interest-bearing capital. Existing wealth in relation to the movement of production)

(Interest-bearing capital and commercial capital in relation to industrial capital. Older forms. Derivative forms)

(Development of interest-bearing capital on the basis of capitalist production)

(Usury. Luther, etc.). |XV-862a||


## [General Observation]

||VI-220| All economists share
the error of examining surplus-value not as such, in its
pure form, but in the particular forms of profit and
rent. What theoretical errors must necessarily arise
from this will be shown more fully in Chapter III, in the
analysis of the greatly changed form which surplus-value
assumes as profit.

## [Chapter I] Sir James Steuart

### [Distinction Between “Profit Upon Alienation” and the Positive Increase of Wealth]

Before the Physiocrats, surplus-value — that is, profit in the form of profit — was explained purely from exchange, the sale of the commodity above its value.
Sir James Steuart on the whole did not get
beyond this restricted view; he must rather be regarded as the man who
reproduced it in scientific form. I say “in scientific
form”. For Steuart does
not share the illusion that the surplus-value which accrues to the individual
capitalist from selling the commodity above its value is a creation of new wealth.
He distinguishes therefore between positive profit and
relative profit.

“Positive profit, implies
no loss to any body;
it results from an augmentation of labour, industry, or ingenuity,
and has the effect of swelling or augmenting the public good …
Relative profit, is what implies a loss
to some body; it marks a vibration of the balance of wealth between parties,
but implies no addition to the general stock …
The compound is easily understood; it is that species of
profit …, which is partly relative,
and partly positive … both kinds may subsist inseparably
in the same transaction.” (Principles of Political Economy, Vol. I,
The Works of Sir James Steuart,
etc., ed. by General Sir James Steuart, his son, etc., in 6 vols., London, 1805,
pp. 275-76.)

Positive profit arises from “augmentation of labour, industry and
ingenuity”. How it arises from this Steuart makes no attempt to explain.
The further statement that the effect of this profit is to augment
and swell “the public good” seems
to indicate that Steuart means by it nothing but the greater mass of
use-values produced in consequence of the development of the productive powers
of labour, and that he thinks of this positive profit as quite distinct from
capitalists’ profit—which always presupposes an increase of exchange-value.
This interpretation is fully confirmed by his further exposition. He says to wit:

“In the price of goods, I consider two things
as really existing, and quite different from […] another;
[…] the real value of the commodity,
and the profit upon alienation” (l.c., p. 244).

The price of goods therefore comprises
two elements that are completely different from each other;
firstly their real value, secondly,
the profit upon alienation, the profit realised
through their transfer to another person, their sale.

| This profit upon
alienation therefore arises from the price of the goods
being greater than their real value, or from the goods being
sold above their value. Gain on the one side
therefore always involves loss on the other. No
addition to the general stock is created. Profit, that
is, surplus-value, is relative and resolves itself into
“a vibration of the balance of wealth between
parties”. Steuart himself rejects the idea that
surplus-value can be explained in this way. His theory
of “vibration of the balance of wealth between
parties”, however little it touches the nature and
origin of surplus-value itself, remains important in
considering the distribution of surplus-value among
different classes and among different categories such as
profit, interest and rent.

That Stuart limits all profit of the
individual capitalist to this “relative profit”, profit upon alienation, is
shown by the following:

The “real value”, he says, is determined by the
“quantity” of labour, which “upon an average, a workman of the country in
general may perform … in a day, a week, a month”. Secondly: “the value of the workman’s subsistence and necessary expense, both for supplying his personal
wants, and … the instruments belonging to his profession,
which must […] taken upon […] average as above …”
Thirdly: “… the values of the materials …” (l.c., pp.
244-45). “These three articles
being known, the price of manufacture is determined. It cannot be lower than
the amount of all the three, that is, than the real value; whatever is
higher, is the manufacturer’s profit. This will […] be
in proportion to demand, and therefore will fluctuate according
to circumstances” (l.c., p. 245). “Hence appears the necessity of a great demand,
in order to promote flourishing manufactures … the industrious […] regulate
their living and expense according to their certain profit” (l.c., p. 246).

From this it is clear that: The profit
of the “manufacturer”, of the individual capitalist, is always relative profit,
always profit upon alienation, always derived from the excess of the price of
the commodity over its real value, from its sale above its value. If
therefore all commodities were sold at their value, no profit would exist.

Steuart wrote a special chapter on this; he examines in detail:

“How profits consolidate into prime cost” (l.c., Vol.
III, p. 11sq.).

Steuart on the one hand rejects the conception of the
Monetary and Mercantile systems, according to which the sale
of commodities above their value, and the profit resulting
therefrom, creates surplus-value, a positive increase of
wealth.[1]
On the other hand he holds to their
view that the profit of the individual capital is nothing
but this excess of the price over the | value, the profit upon
alienation. This however according to him is only
relative, the gain on the one side being compensated
by the loss on the other, and consequently this movement is
nothing more than “a vibration of the balance of
wealth between parties”.

In this respect Steuart is therefore the rational
expression of the Monetary and Mercantile systems.

His service to the theory of capital is that he shows how
the process of separation takes place between the conditions
of production, as the property of a definite class, and
labour-power. He gives a great deal of attention to
this genesis of capital — without as yet seeing
it directly as the genesis of capital, although he sees it
as a condition for large-scale industry. He examines
the process particularly in agriculture; and he rightly
considers that manufacturing industry proper only came into
being through this process of separation in
agriculture. In Adam Smith’s writings this process of
separation is assumed to be already completed.

(Steuart’s book [appeared in] 1767 in London, Turgot’s
[Réflexions sur la formation et la distribution des
richesses was written in] 1766, Adam Smith’s [An
Inquiry into the Nature and Causes of the Wealth of
Nations] 1775.)

Author’s Footnotes

1
Even the Monetary system, however, thinks of this profit as
arising not within a country, but only in exchange with
other countries In this it remains stuck in the Mercantile
system [which assumed] that this value takes the form of
money (gold and silver) and the surplus-value is therefore
expressed in the balance of trade, which is settled with
money.


## [Chapter II] The Physiocrats

### [1. Transfer of the Inquiry into the Origin of Surplus-Value from the Sphere of Circulation into the Sphere of Direct Production. Conception of Rent as the Sole Form of Surplus-Value]

The analysis of capital, within the bourgeois
horizon, is essentially the work of the Physiocrats.
It is this service that makes them the true fathers of
modern political economy. In the first place, the
analysis of the various material components in which
capital exists and into which it resolves itself in the
course of the labour-process. It is not a reproach to
the Physiocrats that, like all their successors, they
thought of these material forms of existence — such as
tools, raw materials, etc. — as capital, in isolation
from the social conditions in which they appear in
capitalist production; in a word, in the form in which they
are elements of the labour-process in general, independently
of its social form — and thereby made of the
capitalist form of production an eternal, natural form of
production. For them the bourgeois forms of production
necessarily appeared as natural forms. It was their
great merit that they conceived these forms as physiological
forms of society: as forms arising from the natural
necessity of production itself, forms that are independent
of anyone’s will or of politics, etc. They are
material laws, the error is only that the material law of a
definite historical social stage is conceived as an abstract
law governing equally all forms of society.

In addition to this analysis of the material elements of
which capital consists within the labour-process, the
Physiocrats established the forms which capital assumes in
circulation (fixed capital, circulating capital, even though
as yet they give them other names), and in general the
connection between the process of circulation and the
reproduction process of capital. We shall come back to
this in the chapter on circulation.

In these two principal points Adam Smith inherited the
legacy of the Physiocrats. His service — in this
connection — is limited to fixing the
abstract categories, to the greater consistency of the
baptismal names which he gave to the distinctions made by
the Physiocrats in their analysis.

| As we have seen, the
basis for the development of capitalist production is, in
general, that labour-power, as the commodity
belonging to the workers, confronts the conditions of
labour as commodities maintained in the form of capital and
existing independently of the workers. The
determination of the value of labour-power, as a
commodity, is of vital importance. This value is
equal to the labour-time required to produce the means of
subsistence necessary for the reproduction of labour-power,
or to the price of the means of subsistence necessary for
the existence of the worker as a worker. It is only
on this basis that the difference arises between the
value of labour-power and the value which
that labour-power creates — a difference
which exists with no other commodity, since there is no
other commodity whose use-value, and therefore also the use
of it, can increase its exchange-value or the
exchange-values resulting from it.

Therefore the foundation of modern political economy,
whose business is the analysis of capitalist production, is
the conception of the value of labour-power as
something fixed, as a given magnitude — as indeed it
is in practice in each particular case. The minimum
of wages therefore correctly forms the pivotal point of
Physiocratic theory. They were able to establish this
although they had not yet recognised the nature of value
itself, because this value of labour-power is
manifested in the price of the necessary means of
subsistence, hence in a sum of definite use-values.
Consequently, without being in any way clear as to the
nature of value, they could conceive the value of
labour-power, so far as it was necessary to their inquiry,
as a definite magnitude. If moreover they made the
mistake of conceiving this minimum as an unchangeable
magnitude — which in their view is determined entirely
by nature and not by the stage of historical development,
which is itself a magnitude subject to fluctuations —
this in no way affects the abstract correctness of their
conclusions, since the difference between the value of
labour-power and the value it creates does not at all depend
on whether the value is assumed to be great or small.

The Physiocrats transferred the inquiry into the origin
of surplus-value from the sphere of circulation into the
sphere of direct production, and thereby laid the foundation
for the analysis of capitalist production.

Quite correctly they lay down the fundamental
principle that only that labour is productive which
creates a surplus-value, in whose product therefore a
higher value is contained than the sum of the values
consumed during the production of this product. Since
the value of raw and other materials is given, while the
value of the labour-power is equal to the minimum of wages,
this surplus-value can clearly only consist in the excess of
labour which the labourer returns to the capitalist over and
above the quantity of labour that he receives in his
wage. But it does not appear in this form with the
Physiocrats, because they have not yet reduced value in
general to its simple substance — the quantity of
labour or labour-time.

| Their method of
exposition is, of course, necessarily governed by their
general view of the nature of value, which to them is not a
definite social mode of existence of human activity
(labour), but consists of material things — land,
nature, and the various modifications of these material
things.

The difference between the value of labour-power
and the value created by it — that is, the
surplus-value which the purchase of labour-power secures
for the user of labour-power — appears most palpably,
most incontrovertibly, of all branches of
production, in agriculture, the primary branch
of production. The sum total of the means of
subsistence which the labourer consumes from one year to
another, or the mass of material substance which he
consumes, is smaller than the sum total of the means of
subsistence which he produces. In manufacture the
workman is not generally seen directly
producing either his means of subsistence or the surplus in
excess of his means of subsistence. The process is
mediated through purchase and sale, through the various
acts of circulation, and the analysis of value in general
is necessary for it to be understood. In agriculture
it shows itself directly in the surplus of use-values
produced over use-values consumed by the labourer, and can
therefore be grasped without an analysis of value in
general, without a clear understanding of the nature of
value. Therefore also when value is reduced to
use-value, and the latter to material substance in
general. Hence for the Physiocrats agricultural
labour is the only productive labour, because it is
the only labour that produces a surplus-value, and
rent is the only form of surplus-value which
they know. The workman in industry does not increase
the material substance; he only alters its form. The
material — the mass of material substance — is
given to him by agriculture. It is true
that he adds value to the substance, not through his
labour, but through the costs of production of his labour:
through the total means of subsistence which he consumes
during his labour, equivalent to the minimum of wages,
which he receives from agriculture. Because
agricultural labour is conceived as the only productive
labour, the form of surplus-value which distinguishes
agricultural labour from industrial labour, rent, is
conceived as the only form of surplus-value.

Profit on capital in the true sense, of which rent
itself is only an offshoot, therefore does not exist for the
Physiocrats. Profit is seen by them as only a kind of
higher wages paid by the landowners, which the capitalists
consume as revenue (and which therefore enters into their
costs of production in the same way as the minimum wages of
the ordinary workmen); this increases the value of the raw
material, because it enters into the consumption costs which
the capitalist, [the] industrialist, consumes while he is
producing the product, transforming the raw material into a
new product.

Surplus-value in the form of interest on money
— another branch of profit — is consequently
declared by one section of the Physiocrats, such as
Mirabeau the elder, to be usury and contrary to
nature. Turgot on the other hand derives his
justification of it from the fact that the money capitalist
could buy land, that is, rent, and that therefore his money
capital must bring him in as much surplus-value as he would
receive if he converted it into landed property. This
means therefore that interest too is not newly created
value, not surplus-value; it only explains why a part of
the surplus-value gained by the landowners finds its way to
the money capitalists in the form of interest, just as it
is explained on other grounds | why a part of this
surplus-value finds its way to the industrial capitalist in
the form of profit. Because agricultural
labour is the only productive labour, the only labour
that creates surplus-value, the form of
surplus-value which distinguishes agricultural labour
from all other branches of labour, rent, is the
general form of surplus-value. Industrial
profit and interest are merely different categories into
which rent is divided and, in certain portions, passes from
the hands of the landowners into the hands of other
classes. This is the direct opposite to the view held
by later economists beginning with Adam Smith, because they
rightly consider industrial profit to be the
form in which surplus-value is originally
appropriated by capital, hence as the original general form
of surplus-value — they present interest
and rent as mere offshoots of industrial profit, which is
distributed by the industrial capitalists to various
classes, who are co-owners of surplus-value.

In addition to the reason already stated — that
agricultural labour is the labour in which the creation of
surplus-value appears in material and tangible form, and
apart from the process of circulation — there were a
number of other considerations which explain the standpoint
of the Physiocrats.

First, because in agriculture rent appears as a
third element, as a form of surplus-value which is not found
in industry or merely has a transient existence. It
was surplus-value over and above surplus-value (profit), and
so the most palpable and most conspicuous form of
surplus-value, surplus-value raised to the second power.

“By means of agriculture,” as
Karl Arnd, the home-bred economist, says in Die
naturgemässe Volkswirtschaft, etc. (Hanau,
1845, pp. 461-62), “a value is created — in the
rent of land — which is not to be met with in industry
and trade; a value which remains over when the labour and
capital employed have been completely replaced.”

Secondly: leaving foreign trade out of account
— as the Physiocrats rightly did and had to do in an
abstract study of bourgeois society — it is clear that
the number of workmen engaged in manufacture, etc., and
completely detached from agriculture — the “free
hands”, as Steuart calls them — is determined by
the mass of agricultural products which the farm labourers
produce in excess of their own consumption.

“It is obvious, that the relative
numbers of those persons who can be maintained without
agricultural labour, must be measured wholly by the
productive powers of the cultivators” (Richard Jones,
On the Distribution of Wealth, London, 1831,
pp. 159-60).

As agricultural labour thus forms the natural basis (on
this, see an earlier notebook) not only for surplus-labour
in its own sphere, but also for the independent existence of
all other branches of labour, and therefore also for the
surplus-value created in them, it is clear that it was bound
to be considered the creator of surplus-value, so long as
the substance of value was regarded as definite, concrete
labour, and not abstract labour with its measure,
labour-time.

Thirdly. All surplus-value, not only relative
but absolute, depends on a given productivity of
labour. If the productivity of labour had reached
only such a stage of development that a man’s labour-time
no more than sufficed to keep him alive, to
produce and reproduce his own means of subsistence, then
there would be no surplus-labour and no surplus-value, and
there would be no difference at all between the value of
labour-power and the value which it creates. The
possibility of surplus-labour and of surplus-value
therefore arises from a given productivity of labour, a
productivity which enables labour-power to create more than
its own value, to produce more than the needs dictated by
its life process. And indeed this productivity, this
level of productivity which is presupposed as the
starting-point, must first — as we saw in the
second point above — make its appearance in
agricultural labour. It appears therefore as a
gift of nature, a productive power of nature.
Here, in agriculture, from the very beginning there is a
large measure of co-operation of the forces of nature
— the increase of human labour-power through the use
and exploitation of the forces of nature working
automatically. This utilisation of the forces of
nature on a large scale appears in manufacture only with
the development of large-scale industry. A definite
stage in the development of agriculture, whether in the
country concerned or in other countries, forms the basis
for the development of capital. Up to this point
absolute surplus-value coincides with relative.
(Buchanan — a great adversary of the
Physiocrats — makes this point even against Adam
Smith, when he tries to show that agricultural development
preceded the emergence of modern town industry).

Fourthly. Since it is the great and specific
contribution of the Physiocrats that they derive value and
surplus-value not from circulation but from production, they
necessarily begin, in contrast to the Monetary and
Mercantile system, with that branch of production which can
be thought of in complete separation from and independently
of circulation, of exchange; and which presupposes exchange
not between man and man but only between man and nature.

### [2. Contradictions in the System of the Physiocrats: the Feudal Shell of the System and Its Bourgeois Essence; the Twofold Treatment of Surplus-Value]

Hence the contradictions in the Physiocratic system.

It is in fact the first system which analyses capitalist
production, and presents the conditions within which
capital is produced, and within which capital produces, as
eternal natural laws of production. On the other
hand, it has rather the character of a bourgeois
reproduction of the feudal system, of the dominion of
landed property; and the industrial spheres within which
capital first develops independently are presented as
“unproductive” branches of labour, mere
appendages of agriculture. The first condition for
the development of capital is the separation of landed
property from labour — the emergence of land, the
primary condition of labour, as an independent force, a
force in the hands of a separate class, confronting the
free labourer. The Physiocrats therefore present the
landowner as the true capitalist, that is, the appropriator
of surplus-labour. Feudalism is thus portrayed and
explained from the viewpoint of bourgeois production;
agriculture is treated as the branch of production in which
capitalist production — that is, the production of
surplus-value — exclusively appears. While
feudalism is thus made bourgeois, bourgeois society is
given a feudal semblance.

This semblance deceived Dr. Quesnay’s adherents among
the nobility, such as the crotchety and patriarchal
Mirabeau the elder. Among the later
representatives | of the
Physiocrats, especially Turgot, this illusion
disappears completely, and the Physiocratic system is
presented as the new capitalist society prevailing within
the framework of feudal society. This therefore
corresponds to bourgeois society in the epoch when the
latter breaks its way out of the feudal order.
Consequently, the starting-point is in France, in a
predominantly agricultural country, and not in England, a
predominantly industrial, commercial and seafaring
country. In the latter country attention was
naturally concentrated on circulation, on the fact that the
product acquires value, becomes a commodity only when it
becomes the expression of general social labour,
money. In so far, therefore, as the question
concerned not the form of value, but the amount of value
and the increase of value, profit upon expropriation
— that is, relative profit as Steuart describes it
— is what catches the eye. But if the creation
of surplus-value in the sphere of production itself is what
has to be established, it is necessary first of all to go
back to that branch of production in which surplus-value is
found independently of circulation — that is,
agriculture. The initiative was therefore taken in a
predominantly agricultural country. Ideas related to
those of the Physiocrats are to be found in fragmentary
form in older writers who preceded them, partly in France
herself, for example, Boisguillebert. But it is only
with the Physiocrats that those ideas develop into an
epoch-making system.

The agricultural labourer, depending on the minimum of
wages, the strict nécessaire,[1]
reproduces more than this strict nécessaire,
and this more is rent, surplus-value, which is
appropriated by the owners of the fundamental condition of
labour — nature. So what they say is not: the
labourer works more than the labour-time required for the
reproduction of his labour-power; the value which he
creates is therefore greater than the value of his
labour-power; or the labour which he gives in return is
greater than the quantity of labour which he receives in
the form of wages. But what they say is: the amount
of use-values which he consumes during the period of
production is smaller than the amount of use-values which
he creates, and so a surplus of use-values is left
over. Were he to work only for the time required to
reproduce his own labour-power, there would be nothing
over. But the Physiocrats only stuck to the point
that the productivity of the earth enables the labourer, in
his day’s labour, which is assumed to be a fixed quantity,
to produce more than he needs to consume in order to
continue to exist. The surplus-value appears
therefore as a gift of nature, through whose
co-operation a definite quantity of organic matter —
plant seeds, a number of animals — enables labour to
transform more inorganic matter into organic.

On the other hand, it is taken for granted that the
landowner confronts the labourer as a capitalist. He
pays for the labour-power, which the labourer offers to him
as a commodity, and he receives in return not only an
equivalent, but appropriates for himself the enlarged value
arising from the use of this labour-power. The
alienation of the material condition of labour from
labour-power itself is presupposed in this exchange.
The starting-point is the feudal landowner, but he comes on
to the stage as a capitalist, as a mere owner of
commodities, who makes profitable use of the goods
exchanged by him for labour, and gets back not only their
equivalent, but a surplus over this equivalent, because he
pays for the labour-power only as a commodity. He
confronts the free labourer as an owner of
commodities. In other words, this landowner is in
essence a capitalist. In this respect too the
Physiocratic system hits the mark, inasmuch as the
separation of the labourer from the soil and from the
ownership of land is a fundamental condition | for capitalist production and
the production of capital.

Hence the contradictions in this system: it was the
first to explain surplus-value by the appropriation
of the labour of others, and in fact to explain
this appropriation on the basis of the exchange of
commodities; but it did not see that value in general is a
form of social labour and that surplus-value is
surplus-labour. On the contrary, it conceived value
merely as use-value, merely as material substance, and
surplus-value as a mere gift of nature, which returns to
labour, in place of a given quantity of organic material, a
greater quantity. On the one hand, it stripped rent
— that is, the true economic form of landed property
— of its feudal wrapping, and reduced it to mere
surplus-value in excess of the labourer’s wage. On
the other hand, this surplus-value is explained again in a
feudal way, as derived from nature and not from society;
from man’s relation to the soil, not from his social
relations. Value itself is resolved into mere
use-value, and therefore into material substance. But
again what interests [the Physiocrats] in this material
substance is its quantity — the excess of the
use-values produced over those consumed; that is, the
purely quantitative relation of the use-values to each
other, their mere exchange-value, which in the last resort
comes down to labour-time.

All these are contradictions of capitalist production as
it works its way out of feudal society, and interprets
feudal society itself only in a bourgeois way, but has not
yet discovered its own peculiar form — somewhat as
philosophy first builds itself up within the religious form
of consciousness, and in so doing on the one hand destroys
religion as such, while on the other hand, in its positive
content, it still moves only within this religious sphere,
idealised and reduced to terms of thought.

Hence also, in the conclusions which the Physiocrats
themselves draw, the ostensible veneration of landed
property becomes transformed into the economic negation of
it and the affirmation of capitalist production. On
the one hand, all taxes are put on rent, or in other words,
landed property is in part confiscated, which is what the
legislation of the French Revolution sought to carry
through and which is the final conclusion of the fully
developed Ricardian modern political economy. By
placing the burden of tax entirely on rent, because it
alone is surplus-value — and consequently any
taxation of other forms of income ultimately falls on
landed property, but in a roundabout way, and therefore in
an economically harmful way, that hinders production
— taxation and along with it all forms of State
intervention, are removed from industry itself, and the
latter is thus freed from all intervention by the
State. This is ostensibly done for the benefit of
landed property, not in the interests of industry but in
the interests of landed property.

Connected with this is laissez faire, laissez
aller[2]; unhampered free competition, the
removal from industry of all interference by the State,
monopolies, etc. Since industry [as the Physiocrats
see it] creates nothing, but only transforms values given
it by agriculture into another form; since it adds no new
value to them, but returns the values supplied to it,
though in altered form, as an equivalent; it is naturally
desirable that this process of transformation should
proceed without interruptions and in the cheapest way; and
this is only realised through free competition, by leaving
capitalist production to its own devices. The
emancipation of bourgeois society from the absolute
monarchy set up on the ruins of feudal society thus takes
place only in the interests of the feudal landowner
transformed into a capitalist | and bent solely on
enrichment. The capitalists are only capitalists in
the interests of the landowner, just as political economy
in its later development would have them be capitalists
only in the interests of the working class.

It can be seen therefore how little the modern
economists, [such as] Herr Eugéne Daire (who published
the works of the Physiocrats together with his prize essay
on them), have understood the Physiocrats when they treat
their specific theories — of the exclusive
productivity of agricultural labour, of rent as the only
surplus-value, and of the landowners’ pre-eminent status in
the system of production — as if they had no
connection and were only fortuitously associated with their
proclamation of free competition, the principle of
large-scale industry, of capitalist production. At
the same time it is understandable how the feudal semblance
of this system, in the same way as the aristocratic tone of
the Enlightenment, was bound to win a number of feudal
lords as enthusiastic supporters and propagandists of a
system which, in its essence, proclaimed the rise of the
bourgeois system of production on the ruins of the
feudal.

### [3. Quesnay on the Three Classes in Society. Further Development of Physiocratic Theory with Turgot: Elements of a Deeper Analysis of Capitalist Relations]

We will now examine a number of passages,
partly to elucidate and partly in support of the theses
advanced above.

With Quesnay himself, in the Analyse du
Tableau économique the nation consists of three
classes of citizens:

“the productive
class” (agricultural labourers), “the
class of landowners and the sterile class”
(“all the citizens occupied with other services and
with other labours than those of agriculture”)
(Physiocrates, etc., édition Eugéne Daire,
Paris, 1846, 1 partie, p. 58).

Only the agricultural labourers, not the landowners,
appear as a productive class, as a class which creates
surplus-value. The importance of this class of
landowners, which is not “sterile”, because it
is the representative of “surplus-value”, does
not rest on its being the creator of surplus-value, but
exclusively on the fact that it appropriates
surplus-value.

[With] Turgot [the Physiocratic system is] most
fully developed. In some passages in his writings the
pure gift of nature is presented as surplus-labour,
and on the other hand the necessity for the labourer to
yield up what there is in excess of his necessary wage [is
explained] by the separation of the labourer from the
conditions of labour, and their confronting him as the
property of a class which uses them to trade with.

The first reason why agricultural labour alone is
productive is that it is the natural basis and
pre-condition for the independent pursuit of all other
forms of labour.

“His” (the husbandman’s)
“labour, in the sequence of the labours divided among
the different members of the society, retains the same
primacy … as the labour which provided his own food
had among the different kinds of labour which, when he
worked alone, he was obliged to devote to his different
kinds of wants. We have here neither a primacy of
honour nor of dignity; it is one of physical
necessity … What his labour causes the
land to produce beyond his personal wants is the only fund
for the wages which all the other members of the society
receive in exchange for their labour. The latter, in
making use of the price of this exchange to buy in their
turn the products of the husbandman, only return to
him” (as matter) “exactly what they have
received from him. We have here a very essential
difference | between
these two kinds of labour” (Réflexions sur la
formation et la distribution des richesses
(1766). Turgot, Oeuvres, édition Daire,
t. I, Paris, 1844, pp. 9-10).

How then does surplus-value arise? It does not
arise from circulation, but it is realised in
circulation. The product is sold at its value, not
above its value. There is no excess of price
over value. But because it is sold at its value, the
seller realises a surplus-value. This is only
possible because he has not himself paid in full for the
value which he sells, that is, because the product contains
a portion of value which has not been paid for by the
seller, which he has not offset by an equivalent. And
this is the case with agricultural labour. The seller
sells what he has not bought. Turgot at first
presents this unbought element as a pure gift of
nature. We shall see, however, that in his
writings this pure gift of nature becomes imperceptibly
transformed into the surplus-labour of the labourer which
the landowner has not bought, but which he sells in the
products of agriculture.

“As soon as the labour of the
husbandman produces more than his wants, he can with
this superfluity that nature accords him as a pure
gift over and above the wages of his toil, buy the
labour of the other members of the society. The
latter, in selling it to him gain only their livelihood;
but the husbandman gathers, beyond his subsistence, a
wealth which is independent and disposable, which he has
not bought and which he sells. He is, therefore,
the sole source of the riches, which, by their circulation,
animate all the labours of the society, because he is
the only one whose labour produces over and above the wages
of labour” (l.c., p. 11).

In this first conception we have, to begin with, the
essence of surplus-value — that it is value realised
in sale, without the seller having given an equivalent for
it, without his having bought it. Unpaid
value. But in the second place this is conceived
as a pure gift of nature, this excess over the wage of
labour; because after all it is a gift of nature, it
depends on the productivity of nature that the labourer is
able to produce in his day’s labour more than is necessary
for the reproduction of his labour-power, more than the
amount of his wages. In this first conception the
total product is still appropriated by the labourer
himself … And this total product is divided into
two parts. The first forms his wages; he is presented
as his own wage-labourer, who pays himself the part of the
product that is necessary for the reproduction of his
labour-power, for his subsistence. The second part,
which is the excess over the first, is a gift of
nature and forms surplus-value. The nature of this
surplus-value, of this pure gift of nature, will however
take clearer shape, when the premise of the proprietor who
cultivates his land is abandoned and the two parts of the
product, wages and surplus-value, accrue to different
classes, the one to the wage-worker, the other to the
landowner.

The formation of a class of wage-labourers, whether in
manufacture or in agriculture itself — at
first all manufacturiers[3] appear only as
stipendiés,[4] wage-labourers of the cultivating
proprietor — requires the separation of the conditions
of labour from labour-power, and the basis for this
separation is that the land itself becomes the private
property of one part of society, so that the other part is
cut off from this objective condition for making use of its
labour.

“In the early stages there was no
need to distinguish the proprietor from the cultivator
… In this early time, as every industrious man
would find as much land as he | wished, he could not be
tempted to work for others … But in the
end all land found its master, and those who could not have
properties had at first no other resource than that of
exchanging the labour of their arms, in the
employment of the stipendiary class” (i.e., the
class of artisans, of all non-agricultural labourers)
“for the superfluous portion of the produce of the
cultivating proprietor” (l.c., p. 12).

The cultivating proprietor with the
considerable surplus which the land gave to his labour,
could “pay men to cultivate his land; and for men who
live on wages, it was as good to earn them in this business
as in any other. Thus ownership of land had to be
separated from the labour of cultivation, and soon it
was … The landowners began to shift the
labour of cultivating the soil on to the
wage-labourers” (l.c., p. 13).

In this, way, therefore, the relation between capital and
wage-labour arises in agriculture itself. It first
arises when a number of people find themselves cut off from
ownership of the conditions of labour — above all from
the land — and have nothing to sell but their labour
itself.

For the wage-labourer, however, who can no longer produce
commodities, but must sell his labour itself, the
minimum of wages, the equivalent of the necessary
means of subsistence, necessarily becomes the law which
governs his exchange with the owner of the conditions of
labour.

“The mere workman who has only his
arms and his industry, has nothing unless he succeeds in
selling his labour to others … In every kind
of work it cannot fail to happen, and as a matter of fact it
does happen, that the wages of the workman are limited to
what is necessary to procure him his subsistence”
(l.c., p. 10).

Then as soon as wage-labour has arisen, “the
produce of land is divided into two parts: the one includes
the subsistence and the profits of the husbandman, which are
the reward of his labour and the condition upon which be
undertakes to cultivate the field of the proprietor.
What remains is that independent and disposable part which
the land gives as pure gifts to him who cultivates
it, over and above his advances and the wages of his
trouble; and this is the portion of the proprietor, or the
revenue with which the latter can live without labour and
which he uses as he will” (l.c., p. 14).

This pure gift of the land, however, is now
already defined as a gift which it gives to him “who
cultivates it”, and thus as a gift which it makes to
labour; as the productive power of labour applied to the
land, a productive power which labour possesses through
using the productive power of nature and which it thus
derives from the land — but it derives it from the
land only as labour. In the hands of the landowner,
therefore, the surplus appears no longer as a “gift of
nature”, but as the appropriation — without an
equivalent — of another’s labour, which through the
productivity of nature is enabled to produce means of
subsistence in excess of its own needs, but which, because
it is wage-labour, is restricted to appropriating for
itself, out of the product of the labour, only “what
is necessary to procure him” [i. e., the worker]
“his subsistence”.

“The cultivator produces
his own wages, and, in addition, the revenue which
serves to pay the whole class of artisans and other
stipendiaries… The proprietor has nothing
except through the labour of the cultivator”
(therefore not through a pure gift of nature); “he
receives from him his |
subsistence and that wherewith he pays the labours of other
stipendiaries … the cultivator has need of the
proprietor only by virtue of conventions and laws
…” (l.c., p. 15).

Thus in this passage surplus-value is explicitly stated
to be the part of the cultivator’s labour which the
proprietor appropriates to himself without giving any
equivalent, and he sells the product of his labour,
therefore, without having bought it. Only what Turgot
has in mind is not exchange-value as such, the labour-time
itself, but the surplus of products which the cultivator’s
labour supplies to the proprietor over and above his own
wages; which surplus of products, however, is only the
embodiment of the amount of time which he works gratis for
the proprietor in addition to the time which he works for
the reproduction of his wages.

We see thus how, within the limits of agricultural
labour, the Physiocrats have a correct grasp of
surplus-value; they see it as a product of the
wage-labourer’s labour, although they in turn conceive this
labour in the concrete forms in which it appears in
use-values.

The capitalist exploitation of agriculture —
“leasing or letting of land” — is, it may
be noted in passing, described by Turgot as “the most
advantageous method of all, but it presupposes a land that
is already rich” (l.c., p. 21).

<In considering surplus-value it is necessary to turn
from the sphere of circulation to the sphere of
production. That is to say, to deduce
surplus-value not simply from the exchange of commodity for
commodity, but from exchange as it occurs within production,
between the owners of the conditions of labour and the
labourers themselves. These too confront each other as
owners of commodities, and consequently there is no
assumption here of production independent of
exchange.>

<In the Physiocratic system the proprietors
[landowners] are the salariants,[5] labourers and
manufacturers in all other branches of industry being
wage-labourers or stipendiaries. Consequently also the
governing and the governed.>

Turgot analyses the conditions of labour as follows:

“In every craft, it is necessary that
the workman should have tools in advance, that he should
have a sufficient quantity of the materials upon which he
has to labour; it is necessary that he should subsist while
waiting for the sale of his finished goods” (l.c.,
p. 34).

All these advances, these conditions on which alone
labour can be performed, which are therefore
preconditions of the labour-process, are originally
provided gratis by the land:

It is the land which “has provided
the first fund of advances prior to all cultivation”,
in fruits, fish, game, etc., in tools such as tree branches,
stones, in domestic animals, which multiply through the
process of procreation, and moreover each year yield
products in “milk, fleeces, hides and other materials,
which, with the wood obtained in the forests, have formed
the first fund for the works of industry” (l.c.,
p. 34).

Now these conditions of labour, these advances to labour
become capital as soon as they have to be advanced to
the labourer by a third person, and this is the case from
the moment when the labourer owns nothing but his
labour-power itself.

“When a large part of the
society had only their arms to maintain them, it was
necessary that those who thus lived on wages should begin by
having something in advance, either to procure the
materials upon which to labour or to maintain them while
waiting for the payment of their wages” (l.c.,
pp. 37-38).

| Turgot defines
“capitals” as “accumulated movable
values” (l.c., p. 38). Originally the proprietor
or cultivator pays wages directly each day and supplies the
material, for example, to the spinner of flax. As
industry develops, larger advances and continuity of the
process of production are necessary. This is then
undertaken by the possessor of capital. In the price
of his products he must recover all his advances and
a profit equal to

“what his money would have been worth
to him if he had employed it in the purchase of an
estate”, besides his wages, “for doubtless, if
the profit. were the same, he would have preferred to live
without any exertion on the revenue of the land he could
have acquired with the same capital” (l.c.,
pp. 38-39).

The “stipendiary industrial class” is itself
subdivided “into capitalists, entrepreneurs and simple
workers”, etc. (p. 39). Agricultural
entrepreneurs are in the same position as these [industrial]
entrepreneurs. They must similarly get all their
advances replaced, along with the profit as shown above.

“All this must first be deducted from
the price of the products of the earth; the surplus
serves the cultivator for payment the proprietor for the
permission he has given him to make use of his field for
setting his enterprise on foot. This is the price of
the lease, the revenue of the proprietor, the net
produce; for all the land produces, up to the amount
that replaces the advances of every kind and the profits of
the person who has made the advances, cannot be regarded as
a revenue, but only as the return of the expenses of
cultivation; when one considers that, if the cultivator
did not get them back, he would take care not to employ his
resources and his toil in cultivating the field of
another” (l.c., p. 40).

Finally:

“Although capitals are partly formed
by saving from the profits of the working classes, yet, as
these profits always come from the earth — inasmuch as
they are all paid either from the revenue, or as part of the
expenditure which serves to produce the revenue — it
is evident the capitals come from the land just as much as
the revenue does; or, rather, that they are nothing but the
accumulation of the part of the values produced by the land
that the proprietors of the revenue, or those who share it
with them, can lay by every year without using it, for the
satisfaction of their wants” (l.c., p. 66).

It is quite right, that if rent is the only
surplus-value, accumulation takes place only from
rent. What the capitalists accumulate apart from rent,
they pinch from their wages (their revenue, destined for
their consumption — since this is how profit is
defined).

As profit, like wages, is reckoned in with the costs of
cultivation, and only the surplus forms the revenue of the
proprietor, the latter — in spite of the honourable
status given him — is in fact excluded from the costs
of cultivation (and thereby from being an agent of
production), just as with the Ricardians.

The emergence of the Physiocrats was connected both with
the opposition to Colbertism and, in particular, with the
hullabaloo over the John Law system.

### [4. Confusion of Value with Material Substance (Paoletti)]

| The confusion of
value with material substance, or rather the equating of
value with it, and the connection between this view and the
whole outlook of the Physiocrats, comes clearly to light in
the following extracts from Ferdinando Paoletti: I veri
mezzi di render felici le societá (in part directed
against Verri, who in his Meditazioni sulla Economia
politica (1771), had attacked the Physiocrats).
(Paoletti of Toscana, op. cit., t. XX, [published by]
Custodi, Parte moderna.)

“Such a multiplication of
matter” as are the products of the earth
“has certainly never taken place through industry, nor
is it possible. This gives matter only form, it only
modifies it; consequently nothing is created by
industry. But, the objection may be raised, industry
gives matter form, and consequently it is productive; even
if this is not a production of matter, it is nevertheless
one of form. Very well, then, I won’t contest
this. But that is not creation of wealth; on the
contrary, it is nothing but an expense …
Political economy presupposes, and takes as the object of
its investigation, material and real production, which is
found only in agriculture, since this alone multiplies the
substances and products which form wealth …
Industry buys raw materials from agriculture, in order to
work them up; its labour — as we have already said
— gives these raw materials only a form, but it adds
nothing to them and does not multiply them”
(pp. 196-97). “Give the cook a measure of peas, with
which he is to prepare your dinner; he will put them on the
table for you well cooked and well dished up, but in the
same quantity as he was given, but on the other band give
the same quantity to the gardener for him to put into the
ground; he will return to you, when the right time has come,
at least fourfold the quantity that he had been given.
This is the true and only production” (p. 197).
“Things receive value through the needs of men.
Therefore the value or the increase of value of commodities
is not the result of industrial labour, but of the
labourers’ outlays” (p. 198). “Hardly has
a new manufacture of any kind made its appearance, but it
immediately spreads within and outside the country; and see!
very soon competition from other industrialists and
merchants brings the price down to its correct level, which
… is determined by the value of the raw material and
the costs of the labourers’ maintenance”
(pp. 204-05).

### [5. Elements of Physiocratic Theory in Adam Smith]

Agriculture is the first of all branches of industry to
use the forces of nature on a considerable scale.
Their use in manufacturing industry becomes apparent only at
a higher stage of industrial development. The
following quotation shows how, in this connection, Adam
Smith still reflects the prehistory of large-scale industry
and for this reason upholds the Physiocratic point of view,
and how Ricardo answers him from the standpoint of modern
industry.

| In Book II, Ch. V [of
his An Inquiry into the Nature and Causes of the Wealth
of Nations], Adam Smith says with reference to the rent
of land:

“It is the work of nature which
remains after deducting or compensating every thing which
can be regarded as the work of man. It is seldom less
than a fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour
employed in manufactures can ever occasion so great a
reproduction. in them nature does nothing; man does
all; and the reproduction must always be in proportion
to the strength of the agents that occasion it” [Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations … By I. R. McCulloch, Vol. II,
Edinburgh, 1828, p. 147.]

On which Ricardo comments [in his On the Principles of
Political Economy, and Taxation], 2nd edition, 1819,
note to pp. 61-62:

“Does nature nothing for man in
manufactures? Are the powers of wind and water, which
move our machinery, and assist navigation, nothing?
The pressure of the atmosphere and the elasticity of steam,
which enable us to work the most stupendous engines —
are they not the gifts of nature? to say nothing of the
effects of the matter of heat in softening and melting
metals, of the decomposition of the atmosphere in the
process of dyeing and fermentation. There is not a
manufacture which can be mentioned, in which nature does not
give her assistance to man, and give it too, generously and
gratuitously.”

[An anonymous author emphasises] that the Physiocrats
regarded profit as only a deduction from rent:

For instance, “say they,[6] of the
price of a piece of lace, one part merely replaces what the
labourer consumed, and the other part is only transferred
from one man’s pocket <i.e., that of the landlord>
to another’s” (An Inquiry into those Principles,
respecting the Nature of Demand and the Necessity of
Consumption, lately advocated by Mr. Malthus, etc.,
London, 1821, p. 96).

The view of Adam Smith and his followers that the
accumulation of capital is due to personal stinting and
saving and self-denial of the capitalists also originates
from the view of the Physiocrats that profit (including
interest) is merely revenue for the consumption of the
capitalists. They could say this because they only
regarded land rent as the true economic, so to speak
legitimate, source of accumulation.

“He,” says Turgot, i.e., the
husbandman, “is the only one whose labour produces
over and above the wages of labour” (Turgot,
l.c., p. 11).

Here the entire profit is thus reckoned in with the
wages of labour.

“The cultivator creates over and above that
restitution” (of his own wages) “the revenue of
the proprietor; and the artisan creates no revenue, either
for himself or for others” (l.c., p. 16).
“All the land produces up to the amount that replaces
the advances of every kind and the profits of the person who
has made the advances, cannot be regarded as a
revenue, but only as the return of the expenses of
cultivation” (l.c., p. 40).

Adolphe Blanqui, Histoire de l’économie
politique, Brussels, 1839, says [of the Physiocrats] on
p. 139:

[They were of the opinion that]
“Labour applied to the cultivation of the soil
produced not only the wherewithal to maintain the labourer
throughout the entire duration of the task, but also on
excess of value” (surplus-value) “which
could be added to the mass of already existing wealth.
They called this excess the net product”.
(Thus they conceive surplus-value in the form of the
use-values in which it appears.) “The net
product had necessarily to belong to the owner of the land
and constituted in his hands a revenue fully at his
disposal. What then was the net product of the other
industries? … Manufacturers, merchants,
workmen, all were the employees, the stipendiaries of
agriculture, sovereign creator and dispenser of all
wealth. The products of the labour of these latter
represented in the system of the Economists only the
equivalent of what they had consumed during the task, so
that after their work was completed, the sum total of wealth
was absolutely the same as before, unless the workmen or
the masters had placed in reserve, that is to say s a
v e d, what they had the right to consume. Thus,
then, labour applied to the soil was the only labour
productive of wealth, and labour in other industries was
regarded as s t e r i l e, because no increase in
the general capital resulted from it.”

<Thus the Physiocrats saw the production of
surplus-value as the essence of capitalist production.
It was this phenomenon that they had to explain. And
it remained the problem, after they had eliminated the
profit upon alienation of the Mercantile system.

“In order to acquire money,”
says Mercier de la Riviére, “one must buy
it, and, after this purchase, one is no richer than one was
before; one has simply received in money the same value that
one has given in commodities” (Mercier de la
Riviére, L’Ordre naturel et essentiel des
sociétés politiques, t. II, p. 338).

This holds good both for | purchase and for sale, as also
for the whole metamorphosis of the commodity, or for the
result of the exchange of different commodities at their
value, that is, the exchange of equivalents. Whence,
therefore, comes surplus-value? That is, whence comes
capital? That was the problem for the
Physiocrats. Their error was that they confused the
increase of material substance, which because of the
natural processes of vegetation and generation distinguishes
agriculture and stock-raising from manufacture, with the
increase of exchange-value. Use-value was their
starting-point. And the use-value of all commodities,
reduced, as the scholastics say, to a universal, was the
material substance of nature as such, whose increase in the
same form occurs only in agriculture.>

Germain Garnier, the translator of Adam Smith and himself
a Physiocrat, correctly expounds their theory of
savings, etc. First he says that manufacture, as
the Mercantilists maintained of all production, can
only produce surplus-value through the profit of
expropriation, by selling commodities above their value, so
that only a new distribution of values created takes place,
but no new addition to the created values.

“The labour of artisans and
manufacturers, opening no new source of wealth, can only
be profitable through advantageous exchanges, and has
only a purely relative value, a value which will not be
repeated if there is no longer the opportunity to gain on
the exchanges” (his translation Recherches sur
la nature et les causes de la richesse des nations,
t. V, Paris, 1802, p. 266). Or the savings
which they make, the values which they secure over and above
those which they expend, must be stinted from their own
consumption. “The labour of artisans and
manufacturers, though only able to add to the general amount
of the wealth of society the savings made by the
wage-labourers and the capitalists, may well tend by these
means to enrich society” (l.c., p. 266).

And in greater detail: “The labourers
in agriculture enrich the State by the very product of their
labour: labourers in manufactures and commerce, on the
contrary, cannot enrich it otherwise than through savings
on their own consumption. This assertion of the
Economists is a consequence of the distinction which they
have established, and appears to be quite
incontestable. indeed, the labour of artisans and
manufacturers cannot add anything else to the value of the
material than the value of their own labour, that is to say,
the value of the wages and profits which this labour should
have earned, at the rates actually current in the country
| for the one and the
other. For these wages, whether they be small or
large, are the reward of labour; they are what the labourer
has the right to consume and is presumed to consume; because
it is only in consuming them that he can enjoy the fruits of
his labour, and this enjoyment is all that in reality
constitutes his reward. Similarly profits, whether
they he high or low, are also regarded as the daily and
continuous consumption of the capitalist, who is naturally
presumed to proportion his enjoyments to the revenue that
his capital gives him. Thus unless the workman
curtails a part of the comforts to which he has the right in
accordance with the current rate of wages assigned to his
labour; unless the capitalist resigns himself to saving
a part of the revenue which his capital brings him, both the
one and the other will consume, in proportion as the piece
of work is completed, the whole value resulting from this
work. The total quantity of the wealth of society will
then be, after their labour is over, the same as it was
before, unless they have saved a part of
what they had the right to consume and what they could
consume without being charged with wasting; in which case
the total quantity of the wealth of society will have been
increased by the whole value of these savings.
Consequently it is correct to say that the agents of
manufacture and commerce can only add to the total
quantity of wealth existing in society by their privations
alone” (l.c., pp. 263-64).

Garnier is also quite correct in noting that Adam Smith’s
theory of accumulation through savings rests on this
Physiocratic foundation. (Adam Smith was strongly
infected by the Physiocrats, as he nowhere shows more
strikingly than in his critique of the Physiocrats).
Garnier says:

“Finally, if the Economists have
maintained that manufacturing and commercial industry can
only add to the national wealth by privations, Smith has
likewise said that industry would be practised in vain, and
the capital of a country would never grow larger, unless the
economy augmented it by its savings” (Book II, Ch.
3). “Smith is therefore in full agreement with
the Economists” and so on (l.c., p. 270).

### [6. The Physiocrats as Partisans of Large-Scale Capitalist Agriculture]

| Among the immediate
historical circumstances which facilitated the spread of
Physiocratic theory and even its emergence, Adolphe Blanqui,
in the work already mentioned, adduces:

“Of all the values which shot up in
the feverish atmosphere of the system” (Law’s),
“nothing remained except ruin, desolation and
bankruptcy. Landed property alone did not go
under in the storm.” <For this reason Herr
Proudhon, in Philosophie de la Misére, puts
landed property only after credit.> “It even
improved its position by changing hands and by being
subdivided on a large scale, perhaps for the first
time since feudalism” (l.c., p. 138). In
particular, “The innumerable changes of ownership
which were effected under the influence of the system, began
the process of parcelling out property … Landed
property arose for the first time from the condition of
torpor in which the feudal system had kept it for so
long. This was a real awakening for agriculture
… It” (the land) “passed now from
out of a condition of mortmain and came into
circulation” (l.c., pp. 137-38).

Turgot as well as Quesnay and his other adherents
also want capitalist production in agriculture.
Thus Turgot:

“The leasing or letting of land
… this latter method” (large-scale agriculture,
based on the modern system of leases) “is the most
advantageous of all, but it presupposes a country that is
already rich” (see Turgot, l.c., p. 21).

And Quesnay in his Maximes générales du
gouvernement économique d’un royaume agricole:

“The pieces of land which are
employed in growing grain should as far as possible he
joined together in large-scale farms which can be managed by
rich farmers” (i.e., capitalists) “since the
expenses for the maintenance and repair of the buildings are
smaller and therefore the costs are correspondingly much
lower and the net product much greater in the case of large
agricultural undertakings than in the case of
small.”

In the same passage Quesnay admits that the increased
productivity of agricultural labour accrues to the
“net revenue”, and therefore in the first place
to the landowner, i. e., the owner of surplus-value, and
that the relative increase of the latter arises not from the
land but from the social and other arrangements for raising
the productivity of labour. | For he says in the same
place:

“Every advantageous” <i.e.,
advantageous to the net product> “economy in
labour which can be accomplished with the aid of animals,
machines, water-power and so on, will be of benefit to the
population,” etc.

At the same time Mercier de la Riviére (l.c., t. II,
p. 407) has an inkling that surplus-value at least in
manufacture has something to do with the manufacturing
workers themselves. (Turgot extended this to all
production, as already mentioned.) In the passage
cited he exclaims:

“Moderate your enthusiasm, ye blind
admirers of the false products of industry. Before ye
extol its miracles, open your eyes and see how many live in
poverty or at least, in need, among those producers who
understand the art of converting 20 sous into the value of a
thousand écus. Who then benefits by this
enormous increase in value? What do you say!
Comforts are unknown to those through whose hands it is
accomplished. Take warning then by this
contrast!”

### [7. Contradictions in the Political Views of the Physiocrats. The Physiocrats and the French Revolution]

[There were] contradictions in the system of the
Economists, taken as a whole. Among others, Quesnay
was for the absolute monarchy.

“There must be only one supreme
power… The system of opposing forces in a
government is ruinous. It merely indicates discord
among the great and the suppression of the small
people” (in the above-mentioned Maximes
générales, etc.).

Mercier de la Riviére [says]:

By the very fact “that man is
intended to live in a community, he is intended to live
under a despotism” ([L’Ordre naturel et essentiel
des sociétés politiques], t. I, p. 281).

And to crown all the “Friend of the
People”, the Marquis de Mirabeau —
Mirabeau the Elder! It was precisely this school, with
its laissez faire, laissez aller, that overthrew
Colbertism and all forms of government interference in the
activities of bourgeois society. It allowed the State
to live on only in the pores of this society, as Epicurus
placed his gods in the pores of the world! The
glorification of landed property in practice turns into the
demand that taxes should be put exclusively on ground-rent,
[and this implies] the virtual confiscation of landed
property by the State, just as with the radical section of
the Ricardians. The French Revolution, in spite of the
protests of Roederer and others, accepted this taxation
theory.

Turgot himself [was] the radical bourgeois minister who
prepared the way for the French Revolution. For all
their sham feudal pretences the Physiocrats were working
hand in hand with the Encyclopaedists! 160; |

| Turgot sought to
anticipate the measures of the French Revolution. By
the edict of February 1776 he abolished the
guilds. (This edict was revoked three months after it
was promulgated.) Similarly he annulled the
road-making corvée des paysans[7] He tried
to introduce the single tax on rent of land.

| We shall come back
again later to the great service rendered by the Physiocrats
respecting the analysis of capital.

Meanwhile just this point: surplus-value (according to
them) is due to the productivity of a special kind of
labour, agricultural labour. And on the whole this
special productivity is due to nature itself.

In the Mercantile system, surplus-value is only relative
— what one wins, the other loses: profit upon
alienation or oscillation of wealth between different
parties. So that within a country, if we consider the
total capital, no creation of surplus-value in fact takes
place. It can only arise in the relations between one
nation and other nations. And the surplus realised by
one nation as against the other takes the form of money (the
balance of trade), because it is precisely money that is the
direct and independent form of exchange-value. In
opposition to this — for the Mercantile system in fact
denies the creation of absolute surplus-value — the
Physiocrats seek to explain absolute surplus-value: the
net product. And since the net product is fixed
in their minds as use-value, agriculture [is for them]
the sole creator of it.

### [8. Vulgarisation of the Physiocratic Doctrine by the Prussian Reactionary Schmalz]

One of the most naïve representatives of Physiocratic
theory — how far removed he is from Turgot! — is
the old smeller-out of demagogues and royal
Prussian Privy Councillor Schmalz. For instance:

“If nature pays him” (the
lessor of the land, the landowner) “even double the
legal interests, on what plausible ground could anyone
dare to deprive him of it?” (Économie
politique, traduit par Henri Jouffroy,
etc., t. I. Paris, 1826, p. 90.)

The minimum of wages is so formulated by the Physiocrats
that the consumption (or expenditure) of the labourers is
equal to the wage that they receive. Or as Herr
Schmalz puts it in a general way:

“The average wage in a trade is
equal to the average of what a man in this trade consumes
during the time of his labour” (l.c., p. 120).

“Rent of land is the one and
only element of the national revenue; | and interest on capitals
employed and the wages of all kinds of labours only make the
product of this rent pass and circulate through everyone’s
hands” (l.c., pp. 309-10).

“The utilisation of the land, its
faculty, its capacity for the annual reproduction of rent,
is all that constitutes the national wealth” (l.c.,
p. 310). “If we go back to the foundations, to
the first elements of the value of all objects,
whatsoever they may be, we are forced to recognise that
this value is nothing other than that of the simple products
of nature; that is to say, although labour may have given a
new value to these objects and raised their price, this new
value, or this price, is only made up nevertheless of the
total values put together of all the natural products which,
because of the new form that labour has given them, have
been destroyed, consumed, or used by the labourer in one way
or another” (l.c., p. 313).

“This kind of labour” (agriculture proper)
“being the only labour that contributes to the
production of new b o d i e s, it is therefore the
only labour that can, up to a certain point, be considered
productive. As for labours in working up material or
in industry … they simply give a new form to bodies
which nature has produced” (l.c., pp. 15-16).

### [9. An Early Critique of the Superstition of the Physiocrats in the Question of Agriculture (Verri)]

Against the superstition of the Physiocrats.

Verri (Pietro): Meditazioni sulla Economia
politica. (First printed 1771), t. XV. [Published
by] Custodi, Parte moderna.

“All the phenomena of the universe,
whether produced by the hand of man or through the universal
laws of physics, are not actual new creations, but
merely a modification of matter. Joining
together and separating are the only elements
which the human mind always finds on analysing the concept
of reproduction; and it is just the same with the
reproduction of value and of wealth, when
earth, air and water in the fields are transformed into
corn, or when the hand of man transforms the secretions of
an insect into silk, or some pieces of metal are arranged to
make the mechanism of a watch” (pp. 21-22).
Further: The Physiocrats call “the class of
manufacturing labourers sterile, because in their
view the value of manufactured products is equal to the
raw material plus the means of subsistence which the
manufacturing labourers consume during the time of
manufacture” (l.c., p. 25).

| On the other hand,
Verri calls attention to the constant poverty of the
agricultural population in contrast to the progressive
enrichment of the artisans, and then goes on to say:

“This proves that the artisan, in the price which
he receives, gets not only the replacement of his outlay
on consumption, but a certain sum over and above that; and
this sum is a new quantity of value created in the
annual production” (l.c., p. 26). “The
newly-created value is therefore that part of the price of
the agricultural or industrial products which they yield
over and above the original value of the materials and
the necessary outlays on consumption while they are being
worked up. In agriculture the seed and the consumption
of the husbandman must be deducted, as in manufacture the
raw material and the consumption of the industrial workman;
and every year new value is created, to the amount
of the balance that remains” (l.c., pp. 26-27).

Editors’ Footnotes

1 The most indispensable, the absolutely
necessary. — Ed.

2 Lit.: let go, let act (let people act
as they choose); demanding that the Government should not
interfere in the economic life of the country. —
Ed

3

4

5

6

7


## [Chapter III] Adam Smith

### [1. Smith’s Two Different Definitions of Value; the Determination of Value by the Quantity of Labour Expended Which Is Contained in a Commodity, and Its Determination by the Quantity of Living Labour Which Can Be Bought in Exchange for This Commodity]

[See Adam Smith Archive.]

Adam Smith, like all economists worth speaking of, takes
over from the Physiocrats the conception of the average
wage, which he calls the natural price of wages.

“A man must always live by his work,
and his wages must at least be sufficient to maintain
him. They must even upon most occasions be somewhat
more, otherwise it would be impossible for him to bring up a
family, and the race of such workmen could not last beyond
the first generation.” ([Adam Smith, Wealth of
Nations, Oxford University Press, London, 1928. Vol. I,
p. 75, Garnier] t. 1, l. I, ch. VIII, p. 136.*)

Adam Smith expressly states that the development of the
productive powers of labour does not benefit the labourer
himself. He says (1. I, ch. VIII [An Inquiry into
the Nature and Causes of the Wealth of Nations]
edit. McCulloch, London, 1828):

“The produce of labour constitutes
the natural recompense or wages of labour. In that
Original state of things, which precedes both the
appropriation of land and the accumulation of
stock, the whole produce of labour belongs to the
labourer. He has neither landlord nor master to share
with him. Had this state continued, the wages of
labour would have augmented with all those improvements
in its productive powers, to which the division of
labour gives occasion. All things would gradually
have become cheaper.” ‹At any rate all those
things requiring a smaller quantity of labour for their
reproduction, but they “would” not only have
become cheaper; they have, in point of fact, become
cheaper.› “They would have been produced by a
smaller quantity of labour; and as the commodities produced
by equal quantities of labour would naturally in this state
of things be exchanged for one another, they would have been
purchased likewise with | the produce of a smaller
quantity […] But this original state of things, in
which the labourer enjoyed the whole produce of his own
labour, could not last beyond the first introduction of
the appropriation of land and the accumulation of
stock. It was at an end, therefore, long before
the most considerable improvements were made in the
productive powers of labour, and it would be to no purpose
to trace further what might have been its effects upon the
recompense or wages of labour” (Vol. I,
pp. 107–09).

Here Adam Smith very acutely notes that the really great
development of the productive power of labour starts only
from the moment when it is transformed into wage-labour, and
the conditions of labour confront it on the one hand as
landed property and on the other as capital. The
development of the productive power of labour thus begins
only under conditions in which the labourer himself can no
longer appropriate its result. It is therefore quite
useless to investigate how this growth of productive powers
might have influenced or would influence
“wages”, taken here as equal to the product of
labour, on the hypothesis that the product of labour (or the
value of this product) belonged to the labourer himself.

Adam Smith is very copiously infected with the
conceptions of the Physiocrats, and often whole strata run
through his work which belong to the Physiocrats and are in
complete contradiction with the views specifically advanced
by him. This is so, for example, in the theory of
rent, etc. For our present purpose we can completely
disregard these passages in his writings, which are not
characteristic of himself, but in which he is a mere
Physiocrat.

In the first part of this work, when dealing with the
analysis of the commodity, I have already pointed out
Adam Smith’s inconsistency in his treatment of how
exchange-value is determined. In particular, [I have
shown] how he sometimes confuses, and at other times
substitutes, the determination of the value of
commodities by the quantity of labour required for
their production, with its determination by the quantity of
living labour with which commodities can be bought, or, what
is the same thing, the quantity of commodities with which a
definite quantity of living labour can be bought. Here
he makes the exchange-value of labour the measure for
the value of commodities. In fact, he makes
wages the measure; for wages are equal to the
quantity of commodities bought with a definite quantity of
living labour, or to the quantity of labour that can be
bought by a definite quantity of commodities. The
value of labour, or rather of labour-power, changes, like
that of any other commodity, and is in no way specifically
different from the value of other commodities. Here
value is made the measuring rod and the basis for the
explanation of value—so we have a vicious circle.

From the exposition that follows, however, it will be
seen that this vacillation and this jumbling up of
completely heterogeneous determinations of value do not
affect Smith’s investigations into the nature and origin of
surplus-value, because in fact, without even being aware of
it, whenever he examines this question, he keeps firmly to
the correct determination of the exchange-value of
commodities —that is, its determination by the
quantity of labour or the labour-time expended on
them. |

||VII-283a| <Many examples can be given to show
how often in the course of his work, when he is explaining
actual facts, Smith treats the quantity of labour contained
in the product as value and determining value. Some of
these are quoted by Ricardo. His whole doctrine
of the influence of the division of labour and improved
machinery on the price of commodities is based on it.
Here one passage will be enough to cite. In ch. XI,
l. I Adam Smith speaks of the cheapening of many manufactured
goods in his time, as compared with earlier centuries, and
he concludes with the words:

“It cost a greater quantity of labour
||283b| to bring the goods to
market. When they were brought thither, therefore,
they must have purchased, or exchanged for the price, of a
greater quantity.” ([Wealth of Nations,
O.U.P. edition, Vol. I, p. 284], [Garnier] t. II,
p. 156).//|VII-283b||

||VI-245| Secondly, however, this contradiction
in Adam Smith and his passing from one kind of explanation
to another is based upon something deeper, which Ricardo, in
exposing this contradiction, overlooked or did not rightly
appreciate, and therefore also did not solve. Let us
assume that all workers are producers of commodities, and
not only produce their commodities but also sell them.
The value of these commodities is determined by the
necessary labour-time contained in them. If therefore
the commodities are sold at their value, the labourer buys
with one commodity, which is the product of twelve hours’
labour-time, another twelve hours’ labour-time in the form
of another commodity, that is to say, twelve hours’
labour-time which is embodied in another use-value.
The value of his labour is therefore equal to the value of
his commodity; that is, it is equal to the product of twelve
hours’ labour-time. The selling and buying again, in a
word, the whole process of exchange, the metamorphosis of
the commodity, alters nothing in this. It alters only
the form of the use-value in which this twelve hours’
labour-time appears. The value of labour is therefore
equal to the value of the product of labour. In the
first place, equal quantities of materialised labour are
exchanged in the commodities—in so far as they are
exchanged at their value. Secondly, however, a certain
quantity of living labour is exchanged for an equal quantity
of materialised labour, because, firstly, the living labour
is materialised in a product, a commodity, which belongs to
the labourer, and secondly, this commodity is in turn
exchanged for another commodity which contains an equally
large quantity of labour. In fact, therefore, a
certain quantity of living labour is exchanged for an equal
amount of materialised labour. Thus it is not only
commodity exchanging for commodity in the proportion in
which they represent an equal quantity of materialised
labour-time, but a quantity of living labour exchanging for
a commodity which represents the same quantity of labour
materialised.

On this assumption the value of labour (the quantity of
commodities which can be bought with a given quantity of
labour, or the quantity of labour which can be bought with a
given quantity [of commodities]) could serve as the measure
of the value of a commodity just as well as the quantity of
labour contained in it, since the value of labour always
represents the same quantity of materialised labour as the
living labour requires for the production of this commodity;
in other words, a definite quantity of living labour-time
would always command a quantity of commodities which
represents an equal amount of materialised
labour-time. But in all modes of production—and
particularly in the capitalist mode of production —in
which the material conditions of labour belong to one or
several classes, while on the other hand nothing but
labour-power belongs to another class, the working class,
what takes place is the opposite of this. The product
or the value of the product of labour does not belong to the
labourer. A definite quantity of living labour does
not command the same quantity of materialised labour, or a
definite quantity of labour materialised in a commodity
commands a greater quantity of living labour than is
contained in the commodity itself.

But as Adam Smith quite correctly takes as his
starting-point the commodity and the exchange of
commodities, and thus the producers initially confront each
other only as possessors of commodities, sellers of
commodities and buyers of commodities, he therefore
discovers (so it seems to him) that in the exchange between
capital and wage-labour, | materialised labour and
living labour, the general law at once ceases to apply, and
commodities (for labour too is a commodity in so far as it
is bought and sold) do not exchange in proportion to the
quantities of labour which they represent.
Hence he concludes that labour-time is no longer the
immanent measure which regulates the exchange-value of
commodities, from the moment when the conditions of labour
confront the wage-labourer in the form of landed property
and capital. He should on the contrary, as Ricardo
rightly points out, have drawn the opposite conclusion, that
the expressions “quantity of labour” and
“value of labour” are now no longer identical,
and that therefore the relative value of commodities,
although determined by the labour-time contained in them, is
not determined by the value of labour, since that was only
correct so long as the latter expression remained identical
with the former. Later on, when we deal with Malthus,
we can show how wrong and absurd it would be, even when the
labourer appropriated his own product, i.e., the value of
his own product, to make this value or the value of labour
the measure of value, in the same sense in which labour-time
or labour itself is the measure of value and the
value-creating element. For even in that case the
labour which can be bought with a commodity cannot serve as
a measure in the same sense as the labour contained in
it. One would be merely an index to the other.

In any case Adam Smith feels the difficulty of deducing
the exchange between capital and labour from the law that
determines the exchange of commodities, since the former
apparently rests on quite opposite and contradictory
principles. And indeed the contradiction could not be
solved so long as capital was set directly against labour
instead of against labour-power. Adam Smith was well
aware that the labour-time expended on the reproduction and
maintenance of labour-power is very different from the
labour which it [i.e., labour-power] itself can
perform. Thus he himself quotes from Cantillon’s
Essai sur la nature du commerce:

“The labour of an able-bodied slave,
the same author adds, is computed to be worth double his
maintenance; and that of the meanest labourer, he thinks,
cannot be worth less than that of an able-bodied
slave” ([Wealth of Nations, O.U.P. edition,
Vol. I, p. 75], [Garnier] t. I, l. I, ch. VIII,
p. 137).

On the other hand it is strange that Adam Smith did not
grasp how little the objection he raises has to do with the
law that determines the exchange of commodities for each
other. That commodities A and B exchange in proportion
to the labour-time contained in them is in no way upset by
the proportions in which the producers A or B divide the
products A and B, or rather their value, between
themselves. If a part of A goes to the landowner,
another to the capitalist, and a third part to the labourer,
no matter what the share of each may be, this does not alter
the fact that A itself exchanges with B according to its
value. The relation between the labour-time contained
in commodities A and B is in no way affected by how the
labour-time contained in A and B is appropriated by various
persons. “When the exchange of broadcloth for
linen has been accomplished, the producers of broadcloth
will share in the linen in a proportion equal to that in
which they previously shared in the broadcloth” ([Karl
Marx], Misére de la Philosophie, p.
29). It is this, too, that later the Ricardians
rightly maintained against | Adam Smith. Thus the
Malthusian John Cazenove says:

“… Interchange and
Distribution distinct from each other. …* The circumstances
which affect the one do not always affect the other.
For instance, a reduction in the cost of producing any
particular commodity will alter its relation to all others;
but it will not necessarily alter its own distribution, nor
will it in any way affect theirs. Again, a general
reduction in the value of commodities affecting them all
alike will not alter their relation to each other.
It might or might not affect their distribution” (John
Cazenove: Preface to his edition of Malthus’s Definitions
in Political Economy, London, 1853, [p. VI]).

But since the “distribution” of the value of
the product between capitalist and worker is itself based on
an exchange between commodities —commodities and
labour-power —Adam Smith is justifiably
startled. The fact that he had also made the value of
labour, or the extent to which a commodity (or money) can
purchase labour, the measure of value, has a disturbing
effect on Smith’s argument when he comes to the theory of
prices, shows the influence of competition on the rate of
profit, etc.; it deprives his work of all unity, and even
excludes a number of essential questions from his
inquiry. As we shall soon see, however, it did not
affect his exposition of surplus-value in general,
because here he keeps consistently to the correct
determination of value by the labour-time expended in
different commodities.

So now to his treatment of the question.

But first we must mention one other circumstance.
Adam Smith mixes up different things. First he states
in Book I, Ch. V:

“Every man is rich or poor according
to the degree in which he can afford to enjoy the
necessaries, conveniences and amusements of human
life. But after the division of labour has once
thoroughly taken place, it is but a very small part of these
with which a man’s own labour can supply him. The far
greater part of them he must derive from the labour of
other people, and he must be rich or poor
according to the quantity of that labour which he
can command, or which he can afford to purchase. The
value of any commodity, therefore, to the person who
possesses it, and who means not to use or consume it,
himself, but to exchange it for other commodities, is
equal to the quantity of labour which it enables him
to purchase or command. Labour, therefore, is the
real measure of the exchangeable value of all
commodities” ([Wealth of Nations,
O.U.P. edition, Vol. I, pp. 32–33], [Garnier] t. I, pp. 59
to 60).

Further: “They” (the goods)
“contain the value of a certain quantity of labour,
which we exchange |
for what is supposed at the time to contain the value of
an equal quantity… It was not by gold or by
silver, but by labour, that all the wealth of the world was
originally purchased; and its value, to those who possess
it, and who want to exchange it for some new productions, is
precisely equal to the quantity of labour which it can
enable them to purchase or command” ([ibid., p. 33],
[Garnier] l. I, ch. V, pp. 60–61).

Finally: “Wealth, as Mr. Hobbes says, is
power. But the person who either acquires, or
succeeds to a great fortune, does not necessarily acquire or
succeed to any political power, either civil or
military… The power which that possession
immediately and directly conveys to him, is the power of
purchasing a certain command over all the labour, or over
all the produce of labour which is then in the
market” ([Ibid.], [Garnier] i.e., p. 61).

It can be seen that in all these passages Adam Smith
confuses the labour of other people with the
produce of this labour. The exchange-value of
the commodity which anyone possesses consists —after
the division of labour—in the commodities belonging to
someone else which he can buy, i.e., in the quantity of
someone else’s labour which is contained in them, the
quantity of someone else’s materialised labour. And
this quantity of the labour of others is equal to the
quantity of labour that is contained in his own
commodity. As he expressly says:

“They” (the goods)
“contain the value of a certain quantity of labour,
which we exchange for what is supposed at the time to
contain the value of an equal quantity.”

Its emphasis here is on the change brought about by the
division of labour: that is to say, that wealth no
longer consists in the product of one’s own labour, but in
the quantity of the labour of others which this product
commands, the social labour which it can buy, the quantity
of which is determined by the quantity of labour it itself
contains. In fact, only the concept of exchange-value
is here involved —that my labour now counts only as
social labour, and consequently its product determines my
wealth by its command over an equal quantity of social
labour. My commodity, which contains a definite
quantity of necessary labour-time, gives me command over all
other commodities of equal value, and therefore over an
equal quantity of the labour of others realised in other
use-values. The emphasis here lies on the
equalisation, brought about through the division of labour
and exchange-value, of my labour with the labour of
others, in other words, with social labour (the fact
that my labour too, or the labour contained in my
commodities, is already socially determined, and has
fundamentally changed its character, escapes Adam), and not
at all on the difference between materialised labour
and living labour, and the specific laws of their
exchange. In fact, Adam Smith is here saying nothing
more than that the value of commodities is determined by the
labour-time contained in them, and that the wealth of the
owner of commodities consists in the quantity of social
labour at his disposal.

However, the equating here of labour and
product of labour |
in fact provides the first occasion for the confusion
between the determination of the value of commodities by the
quantity of labour contained in them, and the determination
of their value by the quantity of living labour that they
can buy, in other words, their determination by the value of
labour. When Adam Smith says:

“His fortune is greater or less,
precisely in proportion to the extent of this power, or to
the quantity of either of other men’s labour, or, what is
the same thing” (here is the false identification)
“of the produce of other men’s labour, which it
enables him to purchase”. ( [Wealth of
Nations, O.U.P. edition, Vol. I, p. 33], [Garnier] l.c.,
p. 61.)

He might just as well have said: it is in proportion to
the quantity of social labour contained in his own commodity
or fortune; as indeed he also says:

“They” (the goods)
“contain the value of a certain quantity of labour,
which we exchange for what is supposed at the time [to
contain] the value of an equal
quantity.”

(The word value is here superfluous and
meaningless.) The false conclusion emerges already in
this Chapter V, when for example he says:

“Labour alone, therefore, never
varying in its own value, is alone the ultimate and
real standard by which the value of all commodities can at
all times and places he estimated and compared”
([ibid., p. 36], [Garnier] l.c., p. 66).

What is true of labour itself and consequently of its
measure, labour-time —that the value of commodities is
always proportionate to the labour-time realised in them, no
matter how the value of labour may change —is
here claimed for this changing value of labour itself.

Here Adam Smith is examining only commodity exchange in
general: the nature of exchange-value, of the division of
labour and of money. The parties to the exchange still
confront each other only as owners of commodities.
They buy the labour of others in the form of a commodity,
just as their own labour appears in the form of a
commodity. The quantity of social labour which they
command is therefore equal to the quantity of labour
contained in the commodity with which they themselves make
the purchase. But when in the following chapters he
comes to the exchange between materialised labour and living
labour, between capitalist and worker, and then
stresses that the value of the commodity is now no
longer determined by the quantity of labour it itself
contains, but by the quantity —which is different from
this —of living labour of others which it can command,
i.e., buy, he is not in fact saying by this that commodities
themselves no longer exchange in proportion to the
labour-time they contain; but that the increase of
wealth, the increase of the value contained in the
commodity, and the extent of this increase, depends upon the
greater or less quantity of living labour which the
materialised labour sets in motion. And put in this
way it is correct. Smith, however, remains unclear on
this point.

### [2. Smith’s General Conception of Surplus-Value. The Notion of Profit, Rent and Interest as Deductions from the Product of the Worker’s Labour]

| In Chapter VI of
Book I Adam Smith passes on from those relations in which it
is assumed that the producers confront one another only as
sellers and possessors of commodities to the relations of
exchange between those who possess the conditions of labour
and those who possess labour-power alone.

“In that early and rude state of
society which precedes both the accumulation of stock and
the appropriation of land, the proportion between the
quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can
afford any rule for exchanging them for one
another… It is natural that what is usually the
produce of two days’ or two hours’ labour, should be worth
double of what is usually the produce of one day’s or one
hour’s labour” ([ibid., p. 52] t. I, ch. VI. pp. 94–95,
Garnier).

That is to say, the labour-time necessary to produce
different commodities determines the proportion in which
they exchange for one another, or their
exchange-value.

“In this state of things, the whole
produce of labour belongs to the labourer; and the quantity
of labour commonly employed in acquiring or producing any
commodity, is the only circumstance which can regulate the
quantity of labour which it ought commonly to purchase,
command, or exchange for” ([ibid., p. 53], [Garnier]
l.c., p. 96).

Consequently, on this assumption the labourer is a mere
seller of commodities, and one commands the labour of
another only in so far as he buys the other’s commodity with
his commodity. He thus commands with his commodity
only so much of the other’s labour as is contained in his
own commodity, since both exchange only commodities against
each other, and the exchange-value of the commodities is
determined by the labour-time or quantity of labour they
contain.

But, Adam continues:

“As soon as stock has accumulated
in the hands of particular persons, some of them will
naturally employ it in setting to work industrious people,
whom they will supply with materials and subsistence, in
order to make a profit by the sale of their work, or by what
their labour adds to the value of the materials”
([ibid., p. 53], [Garnier] l.c., p. 96).

Stop, before we follow the passage further. In the
first place, whence come the “industrious
people” who possess neither means of subsistence nor
materials of labour—people who are hanging in mid
air? If we strip Smith’s statement of its naïve
phrasing, it means nothing more than: capitalist production
begins from the moment when the conditions of labour belong
to one class, and another class has at its disposal only
labour-power. This separation of labour from the
conditions of labour is the precondition of capitalist
production.

Secondly, however, what does Adam Smith mean when he says
that the employers of labour set labourers to work
“in order to make a profit by the sale of their
work, or by what their labour | adds to the value of the
materials”?

Does he mean by this that the profit comes from the
sale, that the commodity is sold above its
value —that is, what Steuart calls profit upon
alienation, which is nothing but a vibration of wealth
between parties?* Let
him answer for himself.

“In exchanging the complete
manufacture either for money, for labour,”
(here again is a source of new error) “or for other
goods, over and above what may be sufficient to pay the
price of the materials, and the wages of the workmen,
something must be given for the profits of the
undertaker of the work, who hazards his stock in this
adventure” ([ibid., p. 53], [Garnier], l.c.).

We shall return to this “hazarding” later
(see notebook VII, p. 173) in the chapter on the apologetic
accounts of profit.29 This something given for the
profits of the undertaker, when the complete work is
exchanged, does it come from the sale of the commodity above
its value, is it Steuart’s profit upon alienation?

“The value,” Adam
continues immediately, “which the workmen add
to the materials, therefore, resolves itself in
this case” (when capitalist production has begun)
“into two parts, of which the one pays their wages,
the other the profits of their employer upon the whole stock
of materials and wages which he advanced”
([ibid., p. 53], [Garnier] l.c., pp. 96–97).

Here therefore Adam Smith explicitly states: the profit
which is made on the sale of the complete manufacture
originates not from the sale itself, not from the
sale of the commodity above its value, is not profit
upon alienation. The value, that is, the quantity of
labour which the workmen add to the material, falls rather
into two parts. One pays their wages or is paid for
through their wages. By this transaction the workmen
give in return only as much labour as they have received in
the form of wages. The other part forms the profit of
the capitalist, that is, it is a quantity of labour which he
sells without having paid for it. If therefore he
sells the commodity at its value, that is, for the
labour-time contained in it, in other words if he exchanges
it for other commodities in accordance with the law of
value, then his profit originates from the fact that he has
not paid for a part of the labour contained in the
commodity, but has nevertheless sold it. Adam
Smith has thereby himself refuted the idea that the
circumstance that the whole product of his labour no longer
belongs to the labourer, that he is obliged to share it or
its value with the owner of capital, invalidates the law
that the proportion in which commodities exchange for each
other, or their exchange-value, is determined by the
quantity of labour-time materialised in them. Indeed,
on the contrary, he traces the profit of the capitalist
precisely to the fact that he has not paid for a part of the
labour added to the commodity, and it is from this that his
profit on the sale of the commodity arises. We shall
see how further on Adam Smith even more explicitly derives
profit from the labour performed by the workman over and
above the quantity of labour with which he pays for
his wages, that is to say, replaces it by an
equivalent. Thereby he has recognised the true origin
of surplus-value. At the same time he has expressly
stated that it does not arise from the | advanced funds, whose value
—however useful they may be in the real labour-process
—merely reappears in the product; but that it arises
exclusively from the new labour which the workmen add to
the materials in the new process of production, in which
those funds figure as means of labour or instruments of
labour.

On the other hand, the phrase “in exchanging the
complete manufacture either for money, for labour, or
for other goods— “is wrong (and arises from the
confusion mentioned earlier).

If he exchanges the commodity for money or for a
commodity, his profit arises from his selling more labour
than he has paid for, from the fact that he does not
exchange an equal quantity of materialised labour for an
equal quantity of living labour. Adam Smith therefore
must not put the exchange either for money or for other
goods on the same footing as the exchange of the complete
manufacture for labour. For in the first exchange the
surplus-value originates from the fact that the commodities
are exchanged at their value, for the labour-time contained
in them, which however is in part unpaid for.
Here it is assumed that the capitalist does not exchange an
equal quantity of past labour for an equal quantity of
living labour; that the quantity of living labour
appropriated by him is greater than the quantity of living
labour he has paid for. Otherwise the workman’s wage
would be equal to the value of his product. The profit
on the exchange of the complete manufacture for money or
commodities, if they are exchanged at their value, arises
therefore from the fact that the exchange between the
complete manufacture and the living labour is subject to
other laws; that no equivalents are exchanged here.
These cases, therefore, must not be lumped together.

Profit is consequently nothing but a deduction from the
value which the workmen have added to the material of
labour. They add to the material, however, nothing but
a new quantity of labour. The workman’s labour-time
therefore resolves itself into two parts: one for which he
has received an equivalent, his wages, from the capitalist;
the other which he gives to him gratis and which constitutes
the profit. Adam Smith rightly points out that
only the part of the labour (value) which the workman newly
adds to the material resolves itself into wages and profit,
that is to say, the newly-created surplus-value in itself
has nothing to do with the part of the capital which has
been advanced (as materials and instruments).

Adam Smith, who has thus reduced profit to the
appropriation of the unpaid labour of others, at once goes
on to say:

“The profits of stock, it may perhaps
be thought, are only a different name for the wages of a
particular sort of labour, the labour of inspection and
direction” ([ibid., p. 53], [Garnier] p. 97).

And he refutes this false view of the labour of
superintendence. We shall return to this later, in
another chapter. Here it is only important to stress
that Adam Smith very clearly recognises, brings out and
expressly emphasises the contradistinction between his view
of the origin of profit and this apologist view. After
pointing out this contradistinction he proceeds:

| “In this state
of things the whole produce of labour does not always belong
to the labourer. He must in most cases share it with
the owner of the stock which employs him.
Neither is the quantity of labour commonly employed in
acquiring or producing any commodity, the only circumstance
which can regulate the quantity which it ought commonly to
purchase, command or exchange for. An additional
quantity, it is evident, must be due for the profits of
the stock which advanced the wages and furnished the
materials of that labour” ([ibid., pp. 54–55],
[Garnier] l.c., p. 99).

This is quite correct. Given capitalist production,
materialised Labour—in the form of money or
commodity—always purchases, besides the quantity of
labour which it itself contains, an “additional
quantity” of living labour “for the profits of
the stock”; which however in other words means nothing
but that it appropriates for nothing, appropriates without
paying for it, a part of the living labour. Adam Smith
is superior to Ricardo in that he so strongly emphasises how
this change begins with capitalist production. On the
other hand, he is inferior to Ricardo in that he is never
able to free himself from the viewpoint —though it is
one he himself refuted by his own analysis —that
through this changed relation between materialised labour
and living labour a change takes place in the determination
of the relative value of commodities, which in relation to
each other represent nothing but materialised labour, given
quantities of realised labour.

After thus presenting surplus-value in the one form, the
form of profit, as part of the labour which the worker
performs over and above the part of the labour which pays
his wages, he does the same with the other form of
surplus-value, rent of land. One of the
objective conditions of labour alienated from labour, and
therefore confronting it as other men’s property, is
capital; the other is the land itself, the
land as landed property. Therefore after
dealing with the owner of capital, Adam Smith
continues:

“As soon as the land of any country has all become
private property, the landlords, like all other men,
love to reap where they never sowed, and demand a
rent even for its natural produce…
He” (the labourer) “must give up to the landlord
a portion of what his labour either collects or
produces. This portion, or, what comes to the same
thing, the price of this portion, constitutes the rent of
land” ([ibid., p. 55], [Garnier], l.c.,
pp. 99–100).

Like industrial profit proper, rent of land is only a
part of the labour which is added by the labourer to the
materials and which he gives up, hands over to the
owner of the land without being paid for it; hence, only a
part of the surplus-labour performed by him over and above
the part of the labour-time which he works to pay his wages
or to return an equivalent for the labour-time contained in
his wages.

Thus Adam Smith conceives surplus-value—that
is, surplus-labour, the excess of labour performed and
realised in the commodity over and above the paid
labour, the labour which has received its equivalent in the
wages —as the general category, | of which profit in the strict
sense and rent of land are merely branches.
Nevertheless, he does not distinguish surplus-value as such
as a category on its own, distinct from the specific forms
it assumes in profit and rent. This is the source of
much error and inadequacy in his inquiry, and of even more
in the work of Ricardo.

Another form in which surplus-value appears is
interest on capital, interest on money. But
this “interest on money is always”, Adam
Smith says in the same chapter, “a derivative
revenue, which, if it is not paid from the profit
which is made by the use of the money, must be paid from
some other source of revenue” (therefore either rent
or wages. In the latter case, assuming the average
wage, it does not originate from surplus-value but is a
deduction from the wage itself or—and in this form, as
we shall later have occasion to see, it appears in
undeveloped capitalist production —it is only another
form of profit) “unless perhaps the borrower is a
spendthrift, who contracts a second debt in order to pay the
interest of the first” ([ibid., p. 581, [Garnier],
l. c., pp. 105–06). Interest is therefore either a
part of the profit made with the capital lent; in
this case it is only a secondary form of profit itself, a
branch of profit, and thus only a further division between
different persons of the surplus-value appropriated in the
form of profit. Or it is paid out of rent. In
which case the same holds good. Or the borrower pays
the interest out of his own or someone else’s capital.
In which case it in no way constitutes surplus-value, but is
merely a different distribution of existing wealth,
vibration of the balance of wealth between parties, as in
profit upon alienation. Excluding the latter case,
when interest is not in any way a form of surplus-value (and
excluding the case where it is a deduction from the wage or
itself a form of profit; Adam Smith does not mention this
latter case), interest is therefore only a secondary form of
surplus-value, a mere part of profit or of rent (affecting
merely their distribution), and therefore also is nothing
but a part of unpaid surplus-Labour.

“The stock which is lent at interest
is always considered as a capital by the
lender. He expects that in due time it is to be
restored to him, and that in the meantime the borrower is to
pay him a certain annual rent for the use of it. The
borrower may use it either as a capital, or as a
stock reserved for immediate consumption. If he
uses it as a capital, he employs it in the maintenance of
productive labourers, who reproduce the value with a
profit. He can, in this case, both restore the
capital and pay the interest without alienating or
encroaching upon any other source of revenue. If he
uses it as a stock reserved for immediate consumption, he
acts the part of a prodigal, and dissipates in the
maintenance of the idle, what was destined for the support
of the industrious. He can, in this case, neither
restore the capital nor pay the interest, without either
alienating or encroaching upon some other source of revenue,
such as the property or […] rent of land”
(Vol. II, b. II, ch. IV, p. 127 edit.
McCulloch).

 Thus whoever borrows money, which here means
capital, either uses it himself as capital, and makes a
profit with it. In this case the interest which he
pays to the lender is nothing but a part of the profit under
a special name. Or he consumes the borrowed
money. Then he increases the wealth of the lender by
reducing his own. What takes place is only a different
distribution of the wealth that passes from the hand of the
spendthrift into that of the lender, but there is no
generation of surplus-value. In so far therefore as
interest in any way represents surplus-value, it is nothing
but a part of profit, which itself is nothing but a definite
form of surplus-value, that is, unpaid labour.

Finally, Adam Smith observes that in the same way all
incomes of persons who live on the proceeds of taxes are
paid either from wages, and are therefore a deduction from
wages themselves; or have their source in profit and rent,
thus representing only claims whereby various social strata
share in the consumption of profit and rent, which
themselves are nothing but different forms of
surplus-value.

“All taxes, and all the revenue which
is founded upon them, all salaries, pensions, and annuities
of every kind, are ultimately derived from some one or other
of those three original sources of revenue, and are paid
either immediately or mediately from the wages of labour,
the profits of stock, or the rent of land ([Wealth of
Nations, O.U.P. edition, p. 53], [Garnier] I, ch. VI,
p. 106).

Thus interest on money, along with taxes or revenues
derived from taxes—in so far as they are not
deductions from wages themselves —are merely shares in
profit and rent, which are themselves in turn reducible to
surplus-value, that is, unpaid labour-time.

This is Adam Smith’s general theory of surplus-value.

In yet another passage Adam Smith sums up his views on
the whole question, making it all the more clear how far he
is from even attempting in any way to prove that the value
added by the labourer to the product (after deducting the
costs of production, the value of raw materials and of the
instruments of labour) is no longer determined by the
labour-time contained in the product, because the labourer
does not himself appropriate this value in full, but has to
share it—the value or the product—with the
capitalist and the landowner. The way in which the
value of a commodity is distributed among the producers of
this commodity naturally alters nothing in the nature of
this value or in the relative value of commodities to one
another.

“As soon as land becomes private
property, the landlord demands a share of almost all the
produce which the labourer can either raise, or collect from
it. His rent makes the first deduction from the
produce of the labour which is employed upon land.
It seldom happens that the person who tills the ground has
wherewithal to maintain himself till he reaps the
harvest. His maintenance is generally advanced to him
from the stock of a master, the farmer who employs him, and
who would have no interest to employ him, unless he was to
share in the produce of his labour, or unless his stock was
to be replaced to him with a profit. This profit
makes a second deduction | from the […]
labour which is employed upon land. The produce of
almost all other labour is liable to the like deduction
of profit. In all arts and manufactures the
greater part of the workmen stand in need of a master to
advance them the materials of their work, and their wages
and maintenance till it be completed. He shares in
the produce of their labour, or in the value which it adds
to the materials upon which it is bestowed; and in this
share consists his profit” ( [McCulloch edition ]
Vol. I, b. I, ch. VIII, pp. 109–10).

Here therefore Adam Smith in plain terms describes rent
and profit on capital as mere deductions from the
workman’s product or the value of his product, which is
equal to the quantity of labour added by him to the
material. This deduction however, as Adam Smith has
himself previously explained, can only consist of that part
of the labour which the workman adds to the materials, over
and above the quantity of labour which only pays his wages,
or which only provides an equivalent for his wages; that is,
the surplus-labour, the unpaid part of his labour.
(Therefore, incidentally, profit and rent or capital and
landed property can never be a source of value.)

### [3. Adam Smith’s Extension of the Idea of Surplus-Value to All Spheres of Social Labour]

We see the great advance made by Adam Smith beyond the
Physiocrats in the analysis of surplus-value and hence of
capital. In their view, it is only one definite kind
of concrete labour—agricultural labour —that
creates surplus-value. Therefore what they examine is
the use-value of labour, not labour-time, general social
labour, which is the sole source of value. In this
special kind of labour, however, it is nature, the
land, which in fact creates the surplus-value, consisting in
an increase of (organic) matter—the excess of the
matter produced over the matter consumed. They see it,
however, still in quite a restricted form and therefore
distorted by fantastic ideas. But to Adam Smith, it is
general social labour—no matter in what use-values it
manifests itself—the mere quantity of necessary
labour, which creates value. Surplus-value, whether it
takes the form of profit, rent, or the secondary form of
interest, is nothing but a part of this labour, appropriated
by the owners of the material conditions of labour in the
exchange with living labour. For the Physiocrats,
therefore, surplus-value appears only in the form of rent of
land. For Adam Smith, rent, profit and interest are
only different forms of surplus-value.

When I speak of surplus-value, in relation to the total
sum of capital advanced, as profit on capital, this
is because the capitalist directly engaged in production
directly appropriates the surplus-labour, no matter
under what categories he has subsequently to share this
surplus-value with the landowner or with the lender of
capital. Thus the farmer pays the landowner
directly. And the manufacturer, out of the
surplus-value he has appropriated, pays rent to the owner of
the land on which the factory stands, and interest to the
capitalist who has advanced capital to him.

| <There are now
still to be examined: 1. Adam Smith’s confusion
of surplus-value with profit; 2. his views on
productive labour; 3. how he makes rent and profit
sources of value, and his false analysis of the
“natural price” of commodities, in which the
value of raw materials and instruments is not supposed to
have a separate existence, and therefore not to be
considered, apart from the price of the three sources of
revenue.

### [4. Smith’s Failure to Grasp the Specific Way in Which the Law of Value Operates in the Exchange between Capital and Wage-Labour]

Wages or the equivalent with which the capitalist buys
the temporary disposal of labour-power are not a commodity
in its immediate form, but the commodity metamorphosed,
money, the commodity in its independent form as
exchange-value, as the direct materialisation of social
labour, of labour-time in general. With this money the
labourer naturally buys commodities at the same price as any
other possessor of money <disregarding here such details
as, for example, that he buys on less favourable conditions
and in worse circumstances, etc. He faces the
seller of commodities as does every other possessor of
money—as a buyer. He enters commodity
circulation itself not as a labourer, but as pole Money
facing pole Commodity, as possessor of commodity in its
general, always exchangeable form. His money is once
more transformed into commodities, which are to serve him as
use-values, and in this process he buys commodities at the
current market-price—generally speaking, at their
value. In this transaction he carries through only the act
M—C, which indicates a change of form, but, as a
general rule, by no means a change in magnitude of
value. Since however, by his labour materialised in
the product, he has added not only as much labour-time as
was contained in the money he received, he has paid not only
an equivalent but has given surplus-labour
gratis—which is precisely the source of the
profit—he has thus in fact (the mediating
process, the sale of his labour-power, is not relevant when
we are dealing with the result) given a higher value than
the value of the sum of money which forms his wages.
In return, he has bought with more labour-time the quantity
of labour realised in the money which comes to him as
wages. It can therefore be said that in the same way
he has indirectly bought all the commodities into which the
money (which is only the independent expression of a
definite quantity of social labour-time) he received is
converted with more labour-time than they contain, although
he buys them at the same price as any other buyer or
possessor of a commodity in its first transformation.
Conversely, the money with which the capitalist buys labour
contains a smaller quantity of labour, less labour-time,
than the quantity of labour or labour-time of the workman
contained in the commodity produced by him. Besides
the quantity of labour contained in this sum of money which
forms the wage, the capitalist buys an additional quantity
of labour for which he does not pay, an excess over the
quantity of labour contained in the money he pays out.
And it is precisely this additional quantity of labour which
constitutes the surplus-value created by capital.

But as the money | with
which the capitalist buys labour (in the actual result, even
though mediated through exchange not with labour directly,
but with labour-power) is nothing other than the transmuted
form of all other commodities, their independent
existence as exchange-value, it can equally well be said
that all commodities in exchange with living labour buy more
labour than they contain. It is precisely this more that
constitutes surplus-value.

It is Adam Smith’s great merit that it is just in the
chapters of Book I (chapters VI, VII, VIII) where he passes
from simple commodity exchange and its law of value to
exchange between materialised and living labour, to exchange
between capital and wage-labour, to the consideration of
profit and rent in general—in short, to the origin of
surplus-value—that he feels some flaw has
emerged. He senses that somehow—whatever the
cause may be, and he does not grasp what it is—in the
actual result the law is suspended: more labour is exchanged
for less labour (from the labourer’s standpoint), less
labour is exchanged for more labour (from the capitalist’s
standpoint). His merit is that he emphasises—and
it obviously perplexes him—that with the
accumulation of capital and the appearance of
property in land—that is, when the conditions of
labour assume an independent existence over against labour
itself—something new occurs, apparently (and actually,
in the result) the law of value changes into its
opposite. It is his theoretical strength that he feels
and stresses this contradiction, just as it is his
theoretical weakness that the contradiction shakes his
confidence in the general law, even for simple commodity
exchange; that he does not perceive how this contradiction
arises, through labour-power itself becoming a commodity,
and that in the case of this specific commodity its
use-value—which therefore has nothing to do with its
exchange-value—is precisely the energy which creates
exchange-value. Ricardo is ahead of Adam Smith in that
these apparent contradictions—in their result real
contradictions—do not confuse him. But he is
behind Adam Smith in that he does not even suspect that this
presents a problem, and therefore the specific
development which the law of value undergoes with the
formation of capital does not for a moment puzzle him or
even attract his attention. We shall see later how
what was a stroke of genius with Adam Smith becomes
reactionary with Malthus as against Ricardo’s
standpoint.

Naturally, however, it is at the same time this deep
insight of Adam Smith’s that makes him irresolute and
uncertain, cuts the firm ground from under his feet, and
prevents him—in contrast to Ricardo—from
reaching a consistent and comprehensive theoretical view of
the abstract, general foundations of the bourgeois
system.

| The above-quoted
statement by Adam Smith that the commodity buys more labour
than it contains, or that labour pays a higher value for the
commodity than the latter contains, is thus formulated by
Hodgskin:

“Natural or necessary
price* means
[…] the whole quantity of labour nature
requires from man, that he may produce any
commodity… Labour was the original, is now and
ever will be the only purchase money in dealing with
nature… Whatever quantity of labour may be
requisite to produce any commodity, the labourer must
always, in the present state of society, give a great deal
more labour to acquire and possess it than is requisite to
buy it from nature. Natural price thus** increased to the labourer is
social price … we must always attend to the
difference between natural and social price***” (Thomas
Hodgskin, Popular Political Economy, etc., London,
1827, pp. 219–20).

In this presentation Hodgskin reproduces both what is
correct and what is confused and confusing in Adam Smith’s
view.

### [5. Smith’s Identification of Surplus-Value with Profit. The Vulgar Element in Smith’s Theory]

We have seen how Adam Smith explains surplus-value
in general, of which the rent of land and profit are only
different forms and component parts. As he presents
it, the part of capital which consists of raw material and
means of production has nothing directly to do with the
creation of surplus-value. The latter arises
exclusively from the additional quantity of labour which the
labourer gives over and above the part of his labour
which forms only the equivalent for his wages.
Therefore it is only that part of the capital advanced which
consists in wages from which surplus-value directly arises,
since it is the only part of capital which not only
reproduces itself but produces an overplus. In profit,
on the other hand, the surplus-value is calculated on the
total amount of capital advanced, and besides this
modification other new complications arise through the
equalisation of profits in the various spheres of production
of capital.

Because Adam makes what is in substance an analysis of
surplus-value, but does not present it explicitly in the
form of a definite category, distinct from its special
forms; he subsequently mixes it up directly with the further
developed form, profit. This error persists with
Ricardo and all his disciples. Hence arise
(particularly with Ricardo, all the more strikingly because
he works out the fundamental law of value in more systematic
unity and consistency, so that the inconsistencies and
contradictions stand out more strikingly) a series of
inconsistencies, unresolved contradictions and fatuities,
which the Ricardians (as we shall see later in the section
on profit) attempt to solve with phrases in a scholastic
way. Crass empiricism turns into false
metaphysics, scholasticism, which toils painfully to deduce
undeniable empirical phenomena by simple formal abstraction
directly from the general law, or to show by cunning
argument that they are in accordance with that law. At
this point where we discuss Adam Smith we will give an
example, because the confusion creeps in immediately not
when he is dealing specifically with profit or
rent—those particular forms of surplus-value—but
where he is thinking of them only as forms of surplus-value
in general, as deductions from the labour bestowed by
the labourers upon the materials.

| After Adam Smith has
said, in Book I, Chapter VI, “The value which the
workmen add to the materials, therefore, resolves
itself in this case into two parts, of which the one pays
their wages, the other the profits of their employer upon
the whole stock of materials and wages which he
advanced”, he continues: “He” (the
entrepreneur) “could have no interest to employ them,
unless he expected from the sale of their work something
more than what was sufficient to replace his stock to him;
and he could have no interest to employ a great stock rather
than a small one, unless his profits were to bear some
proportion to the extent of his stock” [ibid.,
p. 53].

We note first: surplus-value, the overplus which the
entrepreneur makes over and above the amount of value
required to replace his stock, is reduced by Adam Smith to
that part of the labour which the workmen add to the
materials over and above the quantity that pays their
wages—thus making this overplus arise purely from the
part of the capital which is laid out in wages. Then,
however, he immediately conceives this overplus in the form
of profit—that is, he thinks of it not in relation to
the part of the capital from which it arises, but as an
overplus over the total value of the capital advanced,
“upon the whole stock of materials and wages which he
advanced”. (It is oversight that the means of
production are here left out of account). He therefore
conceives surplus-value directly in the form of
profit. Hence the difficulties that soon appear.

The capitalist, Adam Smith says, “could have no
interest to employ them, unless he expected from the sale of
their work something more than what was sufficient to
replace his stock to him”.

Once capitalist relations are assumed, this is quite
correct. The capitalist does not produce in order to
satisfy his needs with the product; he produces with
absolutely no direct regard for consumption. He
produces in order to produce surplus-value. But this
premise—which amounts to no more than that, capitalist
production being assumed, the capitalist produces for the
sake of surplus-value—is not made use of by Adam Smith
to explain surplus-value, as some of his silly
disciples subsequently did; that is to say, he does not
explain the existence of surplus-value by the interests of
the capitalist, by his desire for surplus-value. On
the contrary, he has already derived surplus-value from the
value which the workmen add to the materials over and above
the value which they add in exchange for the wages they have
received. But then he goes on at once: “the capitalist
would have no interest to employ a great stock rather than a
small one, unless his profits were to bear some proportion
to the extent of the stock advanced.” Here profit is no
longer explained by the nature of surplus-value, but by the
“interest” of the capitalist. Which is
downright silly.

Adam Smith does not sense that, by thus directly
confusing surplus-value with profit and profit with
surplus-value, he is upsetting the law of the origin of
surplus-value which he has just established. | If surplus-value is only the
part of the value (or of the quantity of labour)
added by the workman in excess of the part
that he adds to the materials to replace the wages, why
should that second part grow as the direct result of the
value of the capital advanced being in one case greater than
in the other? The contradiction becomes even clearer
in the example which Adam Smith himself gives immediately
following on this, in order to refute the view that profit
is wages for the so-called labour of superintendence.

For he says:

“They” (the profits of stock)
“are, however, altogether different” (from
wages), “are regulated by quite different principles,
and bear no proportion to the quantity, the hardship, or the
ingenuity of this supposed labour of inspection and
direction. They are regulated altogether by the
value of the stock employed, and are greater or smaller
in proportion to the extent of this stock. Let us
suppose, for example, that in some particular place,
where the common annual profits of manufacturing
stock are ten per cent there are two different
manufactures, in each of which twenty workmen are employed,
at the rate of fifteen pounds a year each, or at the expense
of three hundred a year in each manufactory. Let us
suppose, too, that the coarse materials annually wrought up
in the one cost only seven hundred pounds, while the finer
materials in the other cost seven thousand. The
capital annually employed in the one will, in this case,
amount only to one thousand pounds; whereas that employed in
the other will amount to seven thousand three hundred
pounds. At the rate of ten per cent, therefore, the
undertaker of the one will expect a yearly profit of about
one hundred pounds only; while that of the other will expect
about seven hundred and thirty pounds. But though
their profits are so very different, their labour of
inspection and direction may be either altogether or very
nearly the same” ([ibid., pp. 53–54], [Garnier]
l.c.).

From surplus-value in its general form we come straight
to a general rate of profit, which has nothing directly to
do with it. But let us pass on! In both
manufactories twenty workmen are employed; in both their
wages are the same, £300. Proof therefore that
it is not perhaps a case of a higher kind of labour being
employed in one as compared with the other, so that one
hour’s labour and therefore also one hour’s surplus-labour
would in one be equal to several hours’ surplus-labour in
the other. On the contrary, the same average labour is
assumed in both, as the equality of their wages shows.
How then can the surplus-labour which the workers add,
beyond the price of their wages, be worth seven times as
much in one factory as in the other? Or why should the
workers in one factory, because the materials they work up
in it are seven times as costly as in the other, provide
seven times as much surplus-labour as in the other, although
in both factories they receive the same wages, and therefore
work the same time to reproduce | their wages?

The seven times greater profit in the one manufactory as
compared with the other—or in general the law of
profit, that it is in proportion to the magnitude of the
capital advanced—thus prima facie contradicts
the law of surplus-value or of profit (since Adam Smith
treats the two as identical) that it consists purely of the
unpaid surplus-labour of the workmen. Adam Smith puts
this down with quite naïve thoughtlessness, without the
faintest suspicion of the contradiction it presents.
All his disciples— since none of them considers
surplus-value in general, as distinct from its determinate
forms—followed him faithfully in this. With
Ricardo, as already noted, it merely comes out even more
strikingly.

As Adam Smith resolves surplus-value not only into profit
but also into the rent of land—two particular kinds of
surplus-value, whose movement is determined by quite
different laws—he should certainly have seen from this
that he ought not to treat general abstract form as directly
identical with any of its particular forms. With all
later bourgeois economists, as with Adam Smith, lack of
theoretical understanding needed to distinguish the
different forms of the economic relations remains the rule
in their coarse grabbing at and interest in the empirically
available material. Hence also their inability to form
a correct conception of money, in which what is in question
is only various changes in the form of exchange-value, while
the magnitude of value remains unchanged.

### [6. Smith’s Erroneous View of Profit, Rent of Land and Wages as Sources of Value]

Lauderdale, in Recherches sur la nature et
l’origine de la richesse publique (traduit par Lagentie de
Lavaïsse, Paris, 1808), raises the objection to
Adam Smith’s exposition of surplus-value—which he says
corresponds with the views already advanced by
Locke—that according to it capital is not an original
source of wealth, as Smith makes out, but only a derivative
source. The relevant passages run:

“‘Above a century ago,
Mr. Locke stated pretty nearly the same opinion” (as
Adam Smith)… ‘“‘Money’,
he said, ‘is a barren thing and produces nothing; but
by compact transfers that profit that was the reward of one
man’s labour into another man’s pocket’”
(Lauderdale, p. 116).

“If this, however, was a just and
accurate idea of the profit of capital, it would follow that
the profit of stock must be a derivative, and not an
original source of revenue; and capital could not therefore
he considered as a source of wealth, its profit being only a
transfer from the pocket of the labourer into that of the
proprietor of stock” (pp. 157–58). (l.c.,
p. 116–17)*
[Lauderdale, James Maitland, An Inquiry into the
Nature and Origin of Public Wealth…,
Edinburgh and London, 1804, pp. 157–58].

In so far as the value of the capital reappears in the
product, it cannot be called a “source of
wealth”. Here it is only as accumulated labour,
as a definite quantity of materialised labour, that it adds
its own value to the product.

Capital is productive of value only as a relation,
in so far as it is a coercive force on wage-labour,
compelling it to perform surplus-labour, or spurring on the
productive power of labour to produce relative
surplus-value. In both cases it only produces value as
| the power of labour’s
own material conditions over labour when these are alienated
from labour; only as one of the forms of wage—labour
itself, as a condition of wage—labour. But in
the sense commonly used by economists, as stored up labour
existing in money or commodities, capital—like all
conditions of labour, even the unpaid natural
forces—functions productively in the labour-process,
in the production of use-values, but it is never a source of
value. It creates no new value, and only adds
exchange-value to the product at all in so far as it has
exchange-value, that is to say, only in so far as it itself
consists in materialised labour-time, so that labour is the
source of its value.

Lauderdale is right in this respect—that Adam
Smith, after explaining the nature of surplus-value and of
value, wrongly presents capital and land as independent
sources of exchange-value. They are sources of revenue
for their owners in so far as they are titles to a certain
quantity of surplus-labour, which the labourer must perform
over and above the labour-time required to replace his
wages. Thus Adam Smith says for example:

“Wages, profit, and rent, are the three
original sources of all revenue, as well as of all
exchangeable value” ([Wealth of Nations,
O.U.P. edition, p. 57], [Garnier], l. I, ch. VI).

Just as it is true that they are the three original
sources of all revenue, so it is false that they also are
the three original sources of all exchangeable value,
since the value of a commodity is exclusively determined by
the labour-time contained in it. After just presenting
rent and profit as mere deductions from the value or from
the labour added by the workman to the raw material, how can
Adam Smith call them original sources of exchangeable
value? (They can only be that in the sense that they
set in motion the original source, that is to say, that they
compel the workman to perform surplus-labour.) In so far as
they are titles (conditions) for the appropriation of a part
of the value, that is, of the labour materialised in the
commodity, they are sources of income for their
owners. But the distribution or appropriation of value
is certainly not the source of the value that is
appropriated. If this appropriation did not take
place, and the workman received the whole product of his
labour as his wage, the value of the commodities produced
would be just the same as before, although it would not be
shared with the landowner and the capitalist.

The fact that landed property and capital are sources of
income for their owners, that is, give them the power to
appropriate a part of the values created by labour, does not
make them sources of the value which they appropriate.
But it is equally wrong to say that wages are an original
source of exchangeable value, although wages, or rather the
continuous sale of labour-power, is a source of income for
the labourer. It is the labour and not the wages of
the labourer that creates value. Wages are only
already existing value, or if we consider the whole of
production, the part of the value created by the labourer
which he himself appropriates; but this appropriation does
not create value. His wages can therefore rise or fall
without this affecting the value of the commodity produced
by him. |

| <The following
quotation should be added to what has been said above in
regard to Adam Smith making the categories in which the
value of the commodity is appropriated into sources of this
value: After he has refuted the view that profit is only
another name for the wages of the capitalist, or wages of
labour of superintendence, he concludes:

“In the price of
commodities, therefore, the profits of stock
constitute a component part altogether different from
the wages [of labour], and regulated by quite different
principles” ([ibid., p. 54], [Garnier ] b. I, ch. VI,
p. 99).

Adam Smith has just shown that the value added by the
workmen to the materials is divided between them and the
capitalists in the form of wages and profit; labour is
therefore the only source of value, and the price of
wages and the price of profits arise out of this source of
value. But these prices themselves are not a source
of value.// |

### [7. Smith’s Dual View of the Relationship between Value and Revenue. The Vicious Circle of Smith’s Conception of “‘Natural Price” as the Sum of Wages, Profit and Rent]

| Here we will leave
entirely out of account how far Adam Smith regards rent as a
constituent element of the price of commodities. For
our present inquiry this question is all the more
unimportant because he treats rent just as he treats profit,
as a mere part of surplus-value, a deduction from the labour
added by the labourer to the raw material, and consequently
| in fact also as a
deduction from profit, inasmuch as the total unpaid
surplus-labour is directly appropriated by the
capitalist in his relations with labour; it does not matter
under what categories he may later have to share this
surplus-value with owners of the conditions of
production—the landowner or the lender of
capital. For the sake of simplicity we shall therefore
speak only of wages and profit as the two categories into
which newly-created value is divided.

Let us assume that twelve hours of labour-time are
materialised in a commodity (leaving out of account
the value of the raw material and instruments of labour
consumed in it.) We can express its value as such only in
money. Let us therefore assume that twelve
hours of labour-time are likewise materialised in five
shillings. Thus the value of the commodity is five
shillings. By the natural price of commodities Adam
Smith understands nothing but their value expressed in
money. (The market-price of the commodity, of course,
stands either above or below its value. Indeed, as I
shall show later, even the average price of commodities is
always different from their value. Adam
Smith, however, does not deal with this in his discussion of
natural price. Moreover, neither the market-price nor
still less the fluctuations in the average price of
commodities can be comprehended except on the basis of an
understanding of the nature of value.)

If the surplus-value contained in the commodity is twenty
per cent of its total value, or what amounts to the same
thing, twenty-five per cent of the necessary labour
contained in it, then this value of five shillings, the
natural price of the commodity, can be resolved into four
shillings wages and one shilling surplus-value (which here
we will call profit, following Adam Smith). It would
be correct to say that the magnitude of value of the
commodity determined independently of wages and profit, or
its natural price, can be resolved into four shillings wages
(the price of the labour) and one shilling profit (the price
of the profit). But it would be wrong to say that the
value of the commodity arises from adding together or
combining the price of the wages and the price of the profit
which are regulated independently of the value of the
commodity. If this were the case there would be
absolutely no reason why the total value of the commodity
should not be 8 shillings, 10 shillings, etc., according to
whether one assumes the wages to be 5 shillings and the
profit 3 shillings, and so on.

When Adam Smith is examining the “natural
rate” of wages or the “natural price” of
wages, what guides his investigation? The natural
price of the means of subsistence required for the
reproduction of labour-power. But by what does he
determine the natural price of these means of
subsistence? In so far as he determines it at all, he
comes back to the correct determination of value, namely,
the labour-time required for the production of these means
of subsistence. But when he abandons this correct
course, he falls into a vicious circle. By what is the
natural price of the means of subsistence determined, which
determine the natural price of wages? By the natural
price of “wages”, of “profit”, of
“rent”, which constitute the natural price of
those means of subsistence as of all commodities. And
so in infinitum. The twaddle about the law of
demand and supply of course does not help us out of this
vicious circle. For the “natural price” or
the price corresponding to the value of the commodity is
supposed to exist just when demand meets supply, that is,
when the price of the commodity does not stand above or
below its value as a result of fluctuations in demand and
supply; when, in other words, the cost-price of
the commodity (or the value of the commodity supplied by the
seller) is also the price which the demand pays.

| But as we have said:
In investigating the natural price of wages Adam Smith in
fact falls back—at least in certain passages—on
the correct determination of the value of the
commodity. On the other hand, in the chapter dealing
with the natural rate or the natural price of profit he gets
bogged down, so far as the real problem is concerned, in
meaningless commonplaces and tautologies. In fact, at
first it was the value of the commodity which he saw as
regulating wages and profit and rent. Then however he
sets to work the other way round (which was closer to what
empirical observation showed and to everyday ideas), and now
the natural price of commodities is supposed to be
calculated and discovered by adding together the natural
prices of wages, profit and rent. It is one of
Ricardo’s chief merits that he put an end to this
confusion. We shall return to this point briefly when
we are dealing with him.

Here there is only this further point to be noted: the
given magnitude of value of the commodity, serving as
a fund for the payment of wages and profit, appears
empirically to the industrialist in the form that a definite
market-price for the commodity holds good for a shorter or
longer time, in spite of all fluctuations in wages.

It is necessary therefore to call attention to this
peculiar train of thought in Adam Smith’s book: first the
value of the commodity is examined, and in some passages
correctly determined—so correctly determined that he
traces out in general form the origin of surplus-value and
of its specific forms, hence deriving wages and profit from
this value. But then he takes the opposite course, and
seeks on the contrary to deduce the value of commodities
(from which he has deduced wages and profit) by adding
together the natural prices of wages, profit and rent.
It is this latter circumstance that is responsible for the
fact that he nowhere correctly explains the influence of
oscillations of wages, profit, etc., on the price of
commodities—since he lacks the basis [for such an
explanation]. |VI-265||

|VIII-364|| <Adam
Smith, Value and Its Component Parts. Smith’s
erroneous conception, see above, which he [develops] in
spite of his originally correct view, is shown also in the
following passage:

“Rent … enters into the
composition of the price of commodities in a
different way from wages and profit. High or low wages
and profit are the causes of high or low price; high or
low rent is the effect of it” (Wealth
of Nations, b. I, ch. XI, [O.U.P. edition, p. 165]).
|VIII-364||

### [8. Smith’s Error in Resolving the Total Value of the Social Product into Revenue. Contradictions in His Views on Gross and Net Revenue]

||VI-265| We come to
another point, which is linked with the analysis of the
price or value of the commodity (since the two are here
still assumed to be identical). Let us assume that
Adam Smith has calculated correctly—that is to say,
the value of the commodity being given, he has correctly
resolved it into the constituent parts in which this value
is distributed among the various agents of
production—but has not on the contrary tried to deduce
value from the price of these constituent parts. Thus
we shall leave this aside and also the one-sided way in
which wages and profit are presented only as forms of
distribution, and hence both as revenues in the same sense
that their owners can consume. Apart from all this,
Adam Smith himself raises a question, and this again shows
his superiority over Ricardo—not that he finds the
right solution to the question he raises, but that he raises
it at all. | What
Adam Smith says is:

“These three parts” (wages,
profit and rent) “seem either immediately or
ultimately to make up the whole price of
corn.”

(Of all commodities, Adam Smith here takes corn, because
in some commodities rent does not enter into the price as a
constituent part.)

“A fourth part, it may be
thought, is necessary for replacing the stock of the farmer,
or for compensating the wear and tear of his labouring
cattle, and other instruments of husbandry. But it
must be considered, that the price of an instrument of
husbandry, such as a labouring horse, is itself made up of
the same three parts; the rent of the land upon which he is
reared, the labour of tending and rearing him, and
the profits of the farmer, who advances both the rent of
this land, and the wages of this labour.”

<Here profit appears as the primary form, which also
includes rent.

“Though the price of the corn,
therefore, may pay the price as well as the maintenance of
the horse, the whole price still resolves itself,
either immediately or ultimately, into the same three parts
of rent, labour and profit” ([Wealth of
Nations, O.U.P. edition, p. 56], [Garnier] b. I,
ch.VI).

(Here it is perfectly preposterous that all of a sudden
he says labour instead of wages, while he does not put
landed property or capital for rent and profit.)

But was it not equally obviously necessary to consider
that just as the farmer included the price of the horse and
the plough in the price of the corn, the horse breeder or
the plough maker from whom the farmer bought the horse and
the plough, would include in the price of the horse and the
plough the price of the instruments of production (in the
case of the former, perhaps another horse) and of raw
materials such as feeding stuffs and iron, whereas the fund
from which the horse breeder and plough maker paid
wages and profit (and rent) consisted only in the new labour
which they added in their sphere of production to the
amount of value present in their constant capital?
Since therefore Adam Smith admits, in relation to the
farmer, that the price of his corn includes, besides the
wages, profit and rent paid by him to himself and others,
also a fourth constituent part which is different from
these—the value of the constant capital he has
used up, such as horses, agricultural implements,
etc.—this must also hold good for the horse breeder
and the manufacturer of agricultural implements; and it is
of no avail for Adam Smith to send us from pillar to
post. Incidentally, the example of the farmer is
peculiarly unhappily chosen for sending us from pillar to
post, for in this case the items of constant capital include
one that does not at all need to be bought from somebody
else, namely the seed; and does this constituent part of the
value resolve itself into wages, profit or rent for
anybody?

But for the present let us proceed, and see whether Smith
sticks to his view that the value of every commodity is
resolvable into one or all of the sources of revenue: wages,
profit, rent; and can therefore, being destined for
consumption, be devoured or at any rate used up in one way
or another for personal use (not industrial
consumption). First | another preliminary
point. In the case for example of gathering berries
and such like it can be assumed that their value consists
entirely of wages, although here also as a rule some
appliances, such as baskets and so on, are required as means
of labour. But examples of this kind are quite
irrelevant here, where we are dealing with capitalist
production.

To start with, once more the repetition of the view
expressed in Book I, Chapter VI; Book II, Chapter II,
(b. II, Garnier pp. 212–13) states:

“It has been shown … that
the price of the greater part of commodities resolves
itself into three parts, of which one pays the wages of the
labour, another the profits of the stock, and a third the
rent of the land” [Wealth of Nations, O.U.P.
edition, p. 313].

According to this, the whole value of any commodity
resolves itself into revenue, and therefore falls to the
share of one or another of the classes which live on this
revenue, as a fund for consumption. Now since the
total production of a country, each year for example,
consists solely of the total of the values of the
commodities produced, and since the value of each single one
of these commodities is resolved into revenues, so also must
their sum, the annual product of labour, the gross revenue,
be consumable annually in this form. And so
immediately after this passage Smith himself raises the
point:

“Since this is the case, it has been
observed, with regard to every particular ‘commodity,
taken separately, it must be so with regard to all
the commodities which compose the whole annual produce of
the land and labour of every country, taken complexly.
The whole price or exchangeable value of the annual
produce, must resolve itself into the same three parts, and
be parcelled out among the different inhabitants of the
country, either as the wages of their labour, the profits of
their stock, or the rent of their land” ([ibid.,
p. 313], [Garnier] l.c., p. 243).

This is in fact the necessary consequence. What is
true of the individual commodity is necessarily true of the
total sum of commodities. But quod non,* says Adam. He goes
on:

“But though the whole value of the
annual produce of the land and labour of every country is
thus divided among, and constitutes a revenue to, ‘its
different inhabitants; yet, as in the rent of a private
estate, we distinguish between the gross rent and the
neat rent, so may we likewise in the revenue of
oil the inhabitants of a great country”
([ibid., p. 313], [Garnier] l.c., p. 213).

(But stop! Above he told us the direct opposite: in
the case of the individual farmer we can distinguish a
fourth part into which the value of his wheat for example
resolves itself, namely the part which merely replaces the
constant capital used up. This is directly true
for the individual farmer. But when we go further into
it, what is constant capital for him resolves itself at an
earlier point, in another person’s hand before it became
capital in his, into wages, profit, etc., in a word, into
revenue. Therefore if it is true that commodities,
considered in the hands of an individual producer, contain
one part of the value which does not form revenue, then it
is untrue for “all the inhabitants of a great
country”, because what in one person’s hand is
constant capital derives its value from the fact that it
came from another person’s hand as the aggregate price of
wages, profit and rent. Now he says the direct
opposite.)

Adam Smith continues:

| “The
gross rent of a private estate comprehends whatever
is paid by the farmer; the neat rent, what remains
free to the landlord, after deducting the expense of
management, of repairs, and all other necessary
charges; or what, without hurting his estate, he can
afford to place in his stock reserved for immediate
consumption, or to spend upon his table,” etc.
… “His real wealth is in proportion, not to his
gross, but to his neat rent” [ibid.,
pp. 313–14].

(In the first place, Smith brings in here something
improper. What the farmer pays as rent to the
landowner, just as what he pays as wages to the labourers,
is like his own profit, part of the value or price of the
commodity, which resolves itself into revenue. The
question is however whether the commodity contains yet
another constituent part of its value. He admits this
here. As he should admit it in the case of the farmer, but
that should not pre-vent the latter’s corn (i.e., the price
or exchange-value of his corn) from being resolvable merely
into revenue. Secondly, a note in passing. The
real wealth of which an individual farmer, considered as a
farmer, can dispose, depends on his profit. But
on the other hand, as owner of commodities he can sell the
whole farm, or if the laud does not belong to him, he can
sell all constant capital there is on it such as draught
cattle, agricultural implements, etc. The value which
he can realise in this way, therefore the wealth at his
disposal, is conditioned by the value, that is the size of
the constant capital belonging to him. However, he can
only sell this again to another farmer, in whose hands it is
not disposable wealth but constant capital. So we are
still just where we were.)

“The gross revenue of all the inhabitants of
a great country comprehends the whole annual produce
of their land and labour” (previously we were told
that this total—that is its value—resolves
itself into wages, profits and rents, nothing but different
forms of net revenue); “the neat revenue, what
remains free to them, after deducting the expense of
maintaining, first, their fixed, and, secondly, their
circulating capital”; (so he now deducts
instruments of labour and raw materials); “or what,
without encroaching upon their capital, they can place in
their stock reserved for immediate
consumption.” (So now we learn that the price ox
exchangeable value of the total stock of commodities, just
as in the case of the individual capitalist, so also for the
whole country, is resolvable into a fourth part which does
not form a revenue for anyone and cannot be resolved into
wages, profit or rent.)

“The whole expense of maintaining the
fixed capitol must evidently be excluded from the
neat revenue of the society. Neither the materials
necessary for supporting their useful machines and
instruments of trade, their profitable buildings, etc., nor
the produce of the labour necessary for fashioning
those materials into the proper form, can ever make any part
of it. The price of that labour may
indeed make a part of it; as the workmen so employed may
place the whole value | of their wages in their
stock reserved for immediate consumption. But in
other sorts of labour, both the price and the produce go
to this stock; the price to that of the workmen, the
produce to that of other people, whose subsistence,
conveniences, and amusements, are augmented by the labour of
those workmen” ([Wealth of Nations,
O.U.P. edition, p. 314], [Garnier] l.c., pp. 214–15).*

Here Adam Smith once more shies away from the question
which he has to answer—the question concerning the
fourth part of the total price of the commodity, which is
not resolved into either wages, profit or rent. First
something that is quite wrong: with makers of machinery, as
with all other industrial capitalists, the labour which
fashions the raw materials of the machine, etc., into the
proper form in fact consists of necessary and
surplus-labour, and therefore resolves itself not only into
the wages of the workmen, but also into the profit of the
capitalist. But the value of the materials and the
value of the instruments with which they are fashioned by
the workmen into the proper form, is resolvable into neither
the one nor the other. That products which are
destined by their nature not for individual consumption but
for industrial consumption do not enter into the stock
reserved for immediate consumption, has nothing at all to do
with it. Seed, for example (that portion of the corn
which serves for sowing), by its nature could also enter
into the stock for consumption; but by its economic function
it must enter into the stock for production. But
furthermore it is quite wrong to say with regard to the
products destined for individual consumption that both the
full price and the product enter into the stock for
consumption. Linen, for example, when not used for
sail-cloth or other productive purposes, all goes as a
product into consumption. But not its price, for one
part of this price replaces the Linen yarn, another part
looms and so on, and only a part of the price of the linen
is converted into revenue of any kind.

Just now Adam told us that the materials necessary for
machines, profitable buildings, etc. “can never make
any part of this neat revenue”, any more than the
machines and so on fashioned from them can; presumably,
therefore, they form a part of the gross revenue.
Shortly afterwards, [Garnier] l. c., Chapter II of Book II,
p. 220, he says on the contrary:

“The machines and instruments of
trade, etc., which compose the fixed capital either
of an individual or of a society, make no part either of
the gross or of the neat revenue of either: so
money…” [ibid., p. 317].

Adam’s twistings and turnings, his contradictions and
wanderings from the point, prove that, once he had made
wages, profit and rent the constituent component parts of
exchangeable value or of the total price of the product, he
had got himself stuck in the mud and had to get stuck.

### [9. Say as Vulgariser of Smith’s Theory. Say’s Identification of the Social Gross Product with the Social Revenue. Attempts to Draw a Distinction between Them by Storch and Ramsay]

Say, who tries to hide his dull superficiality by
repeating in absolute general phrases Smith’s
inconsistencies and blunders, says:

“If we consider a nation as a whole,
it has no net product; for since the products have
only a value equal to the costs of their production,
when these costs are deducted, the whole value
of the products is deducted… The
annual revenue is the gross revenue”
[Jean-Baptiste Say]. (Traité d’économie
politique…, Troisième édition,
Paris, 4811, t. II, p. 469.)

The value of the total annual products is equal to the
quantity of labour-time materialised in them. | If this aggregate value is
deducted from the annual product, then in fact, so far as
value is concerned, there remains no value, and by this
deduction both the net revenue and the gross revenue have
come to a final end. But Say thinks that the annually
produced values are annually consumed. Hence for the
whole nation there is no net product but only a gross
product. In the first place, it is not true that the
annually produced values are annually consumed. This
is not the case for a large part of the fixed capital.
A large part of the annually produced values enters into the
labour-process without entering into the process of the
formation of value, that is to say without their total value
being annually consumed. But in the second place: a
part of the annual consumption of values consists of values
that are used not as the stock for consumption, but as means
of production, and which are returned to production (either
in the same form or in the form of an equivalent), just as
they originated in production. The second part
consists of the values which can enter into individual
consumption over and above the first part. These form
the net product.

Storch says of this trash of Say’s:

“It is […] evident that the
value of the annual product is divided partly into capital
and partly into profits, and that each of these parts of
the value of the annual product goes regularly to purchase
the product needed by the nation, as much for the
purpose of preserving its capital as for renewing its
consumable stock” (Storch, Cours
d’économie politique, t. V:
Considérations sur la nature du revenu
national, Paris, 1824, pp. 134–35). “Let us
then imagine a family which through its own labour is
self-sufficing in all its needs, such as there are so many
examples of in Russia .., is the revenue of such a
family equal to the gross product coming from its land, its
capital and its industry? Can it live in its barns or
its stables, eat its seed and forage, clothe itself with its
labouring cattle, amuse itself with its agricultural
implements? According to Mr. Say’s thesis, all these
questions would have to be answered in the
affirmative” (l.c., pp. 135–36). “Mr. Say
[…] regards the gross product as the revenue of
society; and from this he concludes that society can consume
a value equal to this product” (l.c., p. 145).
“The (net) revenue of a nation is not the excess of
values produced over the totality of values consumed
(as Say, the author, imagines it to be), but only [the
excess of values produced] over the values consumed in
order to produce.” Therefore, “if a nation
consumes all this excess in the year it is produced, it
consumes all its (net) revenue ” (l.c., p. 146).
“If it is admitted that the revenue of a nation is
equal to its gross product, so that no capital is to
he deducted, then it must also he admitted that this nation
may consume unproductively the entire value of its annual
product, without in the least reducing its future
revenue” (l.c., p. 147). “…
the products which represent the [constant]
capital of a nation are not consumable” (l.c.,
p. 150).

Ramsay (George)—An Essay on the Distribution of
Wealth (Edinburgh, 1836)—remarks on the same
subject, namely, Adam Smith’s fourth part of the total
price, or what I call constant capital as distinct from the
capital laid out in wages:

“Mr. Ricardo,” he says, “[…seems
to…] consider the whole produce as divided between
wages and profits, forgetting the part necessary for
replacing fixed capital” (p. 174, note).

By “fixed capital” Ramsay in fact means not
only instruments of production, etc., but also the raw
material—in short, what I call constant capital within
each sphere of production. When Ricardo speaks of the
division of the product into profit and wages, he always
assumes that the capital advanced to production itself and
consumed in it has been deducted. Nevertheless, on the
main issue Ramsay is right. Because Ricardo does not
make any further examination at all of the constant part of
capital, and pays no attention to it, he makes gross errors
and in particular confuses profit with surplus-value,
besides errors in investigating oscillations in the rate of
profit and so on.

Let us hear now what Ramsay himself says:

“In what manner is a comparison to be
instituted between the product and * the stock expended upon it?…**. With regard to
a whole nation … it is evident that all the various
elements of the stock expended must be reproduced in some
employment or another, otherwise the industry of the country
could not go on as formerly. The raw material of
manufactures, the implements used in them, as also in
agriculture, the extensive machinery engaged in the former,
the buildings necessary for fabricating or storing the
produce, must all he parts of the total return of a country,
as well as of the advances of*** […] its
master-capitalists. Therefore, the quantity of the
former may be compared with that of the latter, each article
being supposed placed as it were beside that of a similar
kind” (l.c., pp. 137–39). Now as regards the
individual capitalist, since he does not replace his
outgoings in kind, “by far the greater number must be
obtained by exchange, a certain portion of the product being
necessary for this purpose. Hence each individual
master-capitalist comes to look much more to the
exchangeable value of his**** product than to its quantity” (l.c.,
pp. 145–46). “The more the value of the
product exceeds the value of the capital
advanced, the greater will be his**** profit. Thus, then, will he
estimate it, by comparing value with value, not quantity
with quantity… Profit […] must rise or
fall exactly as the proportion of the gross produce, or of
its value, required to replace necessary
advances, falls or rises […] the rate of profit
must depend immediately upon two circumstances*****; first, the
proportion of the whole produce which’ goes to the
labourers; secondly, the proportion which must be set apart
for replacing, either in kind or by exchange, the fixed
capital” (l.c., pp. 146–48, passim).

<What Ramsay here says on the rate of profit has to be
considered in Chapter III, on profit. It is important
that he rightly lays stress on this element. On the
one hand what Ricardo says is correct—that the
cheapening of commodities which form constant capital (which
Ramsay calls fixed capital) always depreciates a part of the
existing capital. This is especially true of fixed
capital proper—machinery, etc. It is of no
advantage to the individual capitalist that the
surplus-value rises in relation to the total capital, if the
rise in this rate has been due to a fall in the total value
of his constant capital (which he already had before the
depreciation). But this is true only to a very small
extent for that part of the capital which consists of raw
materials or completed commodities (which do not form part
of the fixed capital). The existing amount of these
that can be depreciated in this way is always only an
insignificant magnitude compared with the total
production. It holds good for each capitalist only to
a slight extent for that part of his capital expended as
circulating capital. On the other hand—since the
profit is equal to the proportion of the surplus-value to
the total advanced capital, and since the quantity of labour
that can be absorbed depends not on the value but on the
quantity of raw materials and on the efficiency of the means
of production—not on their exchange-value but on their
use-value—it is clear that the greater the
productivity of industry in the branches whose | product enters into the
formation of constant capital, the smaller the outlay of
constant capital required to produce a given quantity of
surplus-value; consequently the greater the proportion of
this surplus-value to the whole advanced capital, and
therefore the higher the rate of profit for a given amount
of surplus-value.//

(What Ramsay considers doubly—replacement of
product by product in the process of reproduction for the
whole country, and replacement of value by value for the
individual capitalist —are two aspects, both of which,
in relation to the individual capital, must be taken into
account in the circulation process of capital, which is
at the same time its reproduction process.)

Ramsay did not solve the real difficulty which occupied
Adam Smith’s attention and entangled him in all kinds of
contradictions. Put plainly, it is this: The whole
capital (as value) resolves itself into labour, is nothing
but a certain quantity of materialised labour. The
paid labour, however, is equal to the wages of the
labourers, the unpaid labour is equal to the capitalists’
profit. So the whole capital must be resolvable,
directly or indirectly, into wages and profit. Or is
labour somewhere performed which consists neither of wages
nor profit, and merely has the purpose of replacing the
values used up in production which are, however, the
conditions of reproduction? But who performs this
labour, since all labour performed by the labourer is
resolved into two quantities, one which maintains his own
power to produce, and the other which forms the profit of
capital?

### [10. Inquiry into How It Is Possible for the Annual Profit and Wages to Buy the Annual Commodities, Which Besides Profit and Wages Also Contain Constant Capital]

### [(a) Impossibility of the Replacement of the Constant Capital of the Producers of Consumption Goods through Exchange between These Producers]

To rid the problem of any spurious admixture, there is
one more point to mention at the outset. When the
capitalist transforms a part of his profit, of his revenue,
into capital—into means of labour and materials of
labour—both are paid for by that part of the labour
which the labourer has performed gratis for the
capitalist. Here we have a new quantity of labour
forming the equivalent for a new quantity of commodities,
commodities which as use-values consist of means of labour
and materials of labour. This therefore enters into
the accumulation of capital and presents no difficulty; we
have here the growth of the constant capital beyond its
previous limits, or the formation of new constant capital in
excess of the amount of constant capital that already exists
and must be replaced. The difficulty is the
reproduction of the existing constant capital, not
the formation of new constant capital in excess of what has
to be reproduced. The new constant capital obviously
originates in profit, and has existed for a moment in the
form of revenue which is later transformed into
capital. This part of the profit consists of the
surplus labour-time, which, even without the existence of
capital, must constantly be performed by society, in order
to have at its disposal, so to speak, a fund for
development, which the very increase of population makes
necessary.

<There is a good explanation of constant capital, but
only in so far as concerns its use-value, in Ramsay’s work,
p. 166, which runs:

“… be the amount* of the gross
return” (of the farmer, for example) “small or
great, the quantity of it required for replacing what has
been consumed in these different forms, can undergo no
alteration whatsoever.** This quantity must be considered as
constant, so long as production is carried on the
same scale.”//

So we must first start from the fact: new formation of
constant capital—as distinct from the reproduction of
the existing constant capital—flows from profit as its
source; that is, assuming on the one hand that the wages
only suffice for the reproduction of labour-power, and on
the other that the whole surplus-value is embraced under the
category “profit”, since it is the industrial
capitalist who directly appropriates the whole
surplus-value, [irrespective of] to whom and where he has
to surrender some of it later.

<“… the master* […] is the general
distributor of the national revenue** […] who undertakes to pay
[…] to the labourers, the wages […]—to
the” (moneyed) “capitalist, the interest
[…]—to the proprietor, the rent of his
land” (Ramsay, [l.c. I, pp. 218–19).

In calling the whole surplus-value profit, we regard the
capitalist: 1. as the person who immediately appropriates
the whole surplus-value created; 2. as the distributor of
that surplus-value between himself, the moneyed capitalist,
and the proprietor of the soil.//

||VII-273| That this new
constant capital arises from profit however means nothing
but that it is due to a part of the surplus-labour of the
labourers. Just as the savage, in addition to the time
he needs for hunting, must necessarily use some time for
making his bow; or just as in patriarchal agriculture, the
peasant, in addition to the time spent in tilling the soil,
must use a certain quantity of labour-time in producing most
of his implements.

But the question here is: Who is it that labours in order
to replace the equivalent of the constant capital already
expended in production? The part of the labour which
the labourer performs for himself replaces his wages, or,
considered in relation to the whole of production, creates
his wages. On the other hand, his surplus-labour which
forms the profit is in part a consumption fund for the
capitalist, and in part is transformed into additional
capital. But the capitalist does not replace the
capital already used up in his own production out of this
surplus-labour or profit. <Were this the case, the
surplus-value would not be a fund for new capital formation,
but for the maintenance of the old capital.// But the
necessary labour which forms the wages and the
surplus-labour which forms the profit make up the whole
working-day, and no other labour is performed in addition to
these. (The contingency of the capitalist’s labour of
superintendence is included in wages. In this aspect
he is the wage-worker, even though not of another
capitalist, yet of his own capital.) What then is the
source, the labour, that replaces the constant capital?

The part of the capital expended in wages is replaced
(leaving surplus-labour out of account) by new
production. The labourer consumes the wages, but he
adds as much new labour as he has destroyed of old labour;
and if we consider the whole working class, without allowing
the division of labour to confuse us, he reproduces not only
the same value but the same use-values, so that, according
to the productivity of his labour, the same value, the same
quantity of labour, is reproduced in a greater or smaller
quantity of these same use-values.

If we take society at any one moment, there exists
simultaneously in all spheres of production, even though in
very different proportions, a definite constant
capital—presupposed as a necessary condition of
production—that once for all belongs to production and
must be given back to it, as seed must be given back to the
land, It is true that the value of this constant part
can fall or rise, depending on whether the commodities of
which it is composed have to be reproduced at less or
greater cost. This change in value, however,
never alters the fact that in the process of production,
into which it enters as a condition of production, it is a
postulated value which must reappear in the value of the
product. Therefore this change of value of the
constant capital can here be ignored. In all
circumstances it is a definite quantity of past,
materialised labour, which passes into the value of the
product as a determining factor. In order to bring out
more clearly the nature of the problem, let us therefore
assume that the production costs or the value of the
constant part of the capital similarly remain unchanged,
remain constant. It also makes no difference that for
example the whole value of the constant capital may not pass
into the products in a single year, but, as is the case with
fixed capital, only passes into the aggregate products of a
series of years. For the question here centres on that
part of the constant capital which is actually consumed
within the year, and therefore also must be replaced within
the year.

The question of the reproduction of the constant capital
clearly belongs to the section on the reproduction process
or circulation process of capital—which however is no
reason why the kernel of the matter should not be examined
here.

| Let us first take
the labourer’s wages. He receives, then, a certain sum
of money in which say ten hours’ labour are materialised, if
he works 12 hours for the capitalist. These wages are
converted into means of subsistence. These means of
subsistence are all commodities. Assume that the price
of these commodities is equal to their value. But in the
value of these commodities there is one component part which
covers the value of the raw materials they contain and the
means of production used up in them. All the component
parts of the value of these commodities taken together,
contain, however, like the wages spent by the labourer, only
ten hours’ labour. Let us assume that two-thirds of
the value of these commodities consists of the value of the
constant capital they contain, and one-third, on the other
hand, of the labour which has finally made the product into
a finished article for consumption. Thus the labourer,
with his ten hours of living labour, replaces two-thirds of
constant capital and one-third of living labour (added to
the article in the course of the year). If there were
no constant capital in the means of subsistence, the
commodities, which he buys, the raw material in them would
have cost nothing, and no instrument of labour would have
been required to make them. In that case there are two
possibilities. Either the commodities, as before,
would contain ten hours’ labour; then the labourer replaces
ten hours’ living labour by ten hours’ living labour.
Or the same quantity of use-values into which his wages are
converted and which he needed for the reproduction of
his. labour-power would have cost only 3 1/3 hours’
labour (with no instrument of labour and no raw material
which is itself a product of labour). In this
case the labourer has only to perform 3 1/3 hours’ necessary
labour, and his wages would in fact fall to 3 1/3 [hours’]
materialised labour-time.

Let us assume that the commodity is linen: 12 yards (the
actual price does not matter here)=36 shillings or
£1.16.0. Of this, let one-third be labour added,
two-thirds for raw material (yarn) and wear and tear of
machinery. Let the necessary labour-time= 0 hours; the
surplus-labour therefore=2. Let one hour’s labour,
expressed in money,= 1 shilling.
In this case the 12 hours’ labour =12 shillings, wages=10
shillings, profit=2 shillings. Let us assume that
labourer and capitalist spent the whole of their wages and
profit, that is 12 shillings (the total value that has been
added to the raw material and machinery, the whole quantity
of new labour-time materialised in the transformation of
yarn into linen), on linen itself as a consumption
article. (And it is possible that subsequently more
than one labour day will be spent on their own product.) A
yard of linen costs 3 shillings. With the 12 shillings
labourer and capitalist together—adding wages and
profit together—can only buy four yards of
linen. These four yards of linen contain 12 hours’
labour, of which however only 4 are newly-added labour, 8
representing the labour realised in the constant
capital. With the 12 hours’ labour wages and profit
together buy only one-third of their total product, because
two-thirds of this total product consist of constant
capital. The 12 hours’ labour are divisible into 4+8,
of which 4 replace themselves, while 8—independently
of the labour added in the weaving process—replace
such labour as entered into the weaving process in already
materialised form, as yarn and machinery.

In regard to that part of the product, of the commodity,
which exchanges against or is bought by wages and profit as
an article of consumption (or for any other purpose, even
reproduction, for the purpose for which the commodity is
bought makes no difference to the transaction), it is
therefore clear that the part of the value of the product
which is formed by the constant capital is paid for from the
fund of newly-added labour, which is resolved into wages and
profit. How much or how little of constant capital and
how much or how little of the labour added in the last
production process is bought by wages and profit combined,
in what proportions the labour last added and in what
proportions the labour realised in constant capital is paid
for, depends on the original proportions in which they
entered as component parts of value into the finished
commodity. To simplify matters we assume the
proportion of two-thirds labour realised in constant capital
to one-third newly-added labour.

| Now two things are
clear:

First. The proportion we have assumed in the
case of the linen—that is, in the case where labourer
and capitalist realise wages and profit in the commodities
they have themselves produced, when they buy back a part of
their product—this proportion remains the same when
they expend the same quantity of value on other
products. On the assumption that every commodity
contains two-thirds of constant capital and one-third
newly-added labour, wages and profit together could always
only purchase one-third of the product. The 12 hours’
labour=four yards of linen. If these four yards of
linen are transformed into money, then they exist as 12
shillings. If these 12 shillings are retransformed
into some commodity other than linen, they buy a commodity
of the value of 12 hours’ labour, of which 4 are newly-added
labour, 8 labour realised in constant capital.
Consequently, this proportion holds good generally provided
the other commodities contain the same original proportion
of labour last added and of labour realised in constant
capital as linen.

Secondly. If the daily newly-added labour=
12 hours, of these 12 hours only 4 replace
themselves—that is, the living, newly-added labour;
while 8 pay for the labour realised in the constant
capital. But who pays for the 8 hours of living labour
which are not replaced by living labour? It is
precisely the 8 hours of realised labour contained in the
constant capital that are exchanged for the 8 hours of
living labour.

There is not the slightest doubt, therefore, that the
part of the finished commodity which is bought by wages and
profit combined—which together however are nothing but
the total quantity of labour newly added to the constant
capital—is replaced in all its elements: the
newly-added labour contained in this part as well as the
quantity of labour contained in the constant capital.
Further, there is not the slightest doubt that the labour
contained in the constant capital has here received its
equivalent from the fund of living labour newly added to
it.

But now comes the difficulty. The total product
of the 12 hours of weaving labour—and this product
is absolutely different from what this weaving labour has
itself produced—is 12 yards of linen, of the value of
36 hours’ labour or 36s. But wages and profit
together, or the total labour-time of 12 hours can buy back
only 12 of these 36 hours’ labour, or of the total
product only 4 yards, not a piece more. What happens
to the other 8 yards? (Forcade, Proudhon.)

First we note that the 8 yards represent nothing but the
constant capital advanced. It has however been given a
changed form of use-value. It exists as a new product,
no longer as yarn, loom, etc., but as linen. These 8
yards of linen, just like the 4 others which have been
bought by wages and profit, contain—considered as
value—one-third labour added in the weaving process,
and two-thirds pre-existing labour materialised in the
constant capital. In the case of the 4 yards
previously discussed one-third of the newly-added labour
covered the weaving labour contained in these 4 yards, that
is, covered itself; two-thirds of the weaving labour on the
other hand covered the constant capital the 4 yards
contained. But now we have it the other way round: in
the 8 yards of linen, two-thirds of the constant capital
covers the constant capital they contain, and one-third of
the constant capital covers the newly-added labour.

What then happens to the 8 yards of linen, which have
absorbed the value of the whole constant capital which has
been maintained during the 12 hours’ weaving labour, or
which went into the production process, but is now in the
form of a product destined for direct, individual (not
industrial) consumption?

The 8 yards belong to the capitalist. Were he to
consume them himself, besides the two-thirds of a yard
representing his profit, |
then he could not reproduce the constant capital contained
in the 12 hours’ weaving process; in general—with
regard to the capital contained in this 12 hours’
process—he is no longer able to function as a
capitalist. He therefore sells the 8 yards of linen,
transforming them into money to the amount of 24 shillings,
or 24 hours’ labour. But here we come to the
difficulty. To whom does he sell them?
Into whose money does he transform them? But we shall
return to this in a moment. Let us first have a look
at the further process.

When he has transformed into money, sold, converted into
the form of exchange-value, the 8 yards of linen—that
is to say, the part of the value of his product which is
equal to the constant capital he advanced—he buys
again with it commodities of the same kind (with regard to
their use-value) as those which originally composed his
constant capital. He buys yarn and looms and so
on. He divides the 24 shillings between raw materials
and means of production, in the proportions in which these
are required for the manufacture of new linen.

His constant capital is therefore, as a use-value,
replaced by new products of the same labour as that of which
it originally consisted. The capitalist has reproduced
the constant capital. This new yarn, looms, etc.,
however (on the assumption with which we began) likewise
consist of two-thirds of constant capital and one-third of
newly-added labour. While the first 4 yards of linen
(newly-added labour and constant capital) have thus been
paid for exclusively by newly-added labour, these 8 yards of
linen are replaced by their own newly-produced elements of
production, which consist partly of newly-added labour and
partly of constant capital. Hence it seems that at
least a part of the constant capital exchanges for constant
capital in another form. The replacement of the
products is real, because at the same time as the yarn is
being worked up into linen, flax is being worked up into
yarn and flax seed into flax; in the same way, while the
loom is wearing out, a new loom is being made; and
similarly, while the latter is being manufactured, new wood
and iron is being produced. The elements are produced
in one sphere of production at the same time as they are
being worked up in the others. But in all these
simultaneous processes of production, although each
of them represents a higher stage of the product, constant
capital is simultaneously being used up in varying
proportions.

The value of the finished product, the linen,
therefore resolves itself into two parts, of which one
repurchases the simultaneously produced elements of constant
capital, while the other is expended on articles of
consumption. For the sake of simplification no account
is here taken of the retransformation of part of the profit
into capital; that is, as throughout this inquiry, it is
assumed that wages plus profit, or the total of the labour
added to the constant capital, are consumed as revenue.

The only question left is: Who buys the part of the total
product with whose value the elements of constant capital
that have meanwhile been newly produced are again
bought? Who buys the 8 yards of linen? We
assume, in order to leave no loopholes, that it is a type of
linen specially intended for individual consumption, and is
not, like perhaps sail-cloth, for industrial
consumption. Here also the purely intermediary
operations of commerce—so far as they are only
mediatory—must be left completely out of
account. For example, if the 8 yards of linen were
sold to a merchant, and even if they pass through the hands
of not one but twenty merchants and are twenty times bought
and resold, then at the twentieth time they must at last be
sold by the merchant to the actual consumer, who therefore
actually pays the producer or the last, the twentieth
merchant, who as far as the consumer is concerned represents
the first merchant, that is to say, the actual
producer. These intermediary transactions postpone or,
if you like, mediate the final transaction, but they do not
explain it. The question remains exactly the same
whether it is: who buys the 8 yards of linen from the linen
manufacturer, or: | who
buys them from the twentieth merchant into whose hand they
have come through a series of exchanges?

The 8 yards of linen, just as the first 4 yards, must
pass into the fund for consumption. That is to say,
they can only be paid for out of wages and profit, for these
are the only sources of revenue for the producers, who
figure here as the only consumers. The 8 yards of
linen contain 24 hours’ labour. Let us now assume
(taking 12 hours as the generally valid normal working-day)
that labourer and capitalist in two other branches spend
their whole wages and profit on linen, as labourer and
capitalist in the weaving industry have done with their
whole day’s labour (the labourer his 10 hours, the
capitalist the 2 hours’ surplus-value made on his labourer,
that is, on 10 hours). Then the linen weaver would
have sold the 8 yards, the value of his constant
capital for 12 yards would be replaced, and this value could
again be spent on the particular commodities of which the
constant capital consists, because these commodities,
yarn, loom, etc., available on the market, have been
produced at the same time as yarn and loom were being worked
up into linen. The simultaneous production of
yarn and loom as products alongside the production process
into which they enter as products but from which they do not
emerge as products, explains how it is that the part of the
value of the linen equal to the value of the material
worked up into it—[such as yarn], loom,
etc.—can be again transformed into yarn, loom,
etc. If this production of the elements of linen did
not proceed simultaneously with the production of the linen
itself, the 8 yards of linen, even when they have been sold
and transformed into money, could not be retransformed once
more from money into the constant elements of linen.*

On the other hand, however, although there may be new
yarn, new looms, etc., on the market, and therefore
production of new yarn and looms had taken place while
finished yarn and finished loom were being transformed into
linen—in spite of the simultaneous production of yarn
and loom alongside the production of the linen—the 8
yards of linen cannot be retransformed into these material
elements of constant capital for the weaving industry before
they are sold, before they are converted into money.
The continuous real production of the elements of linen,
running side by side with the production of linen itself,
therefore does not yet explain to us the reproduction of the
constant capital, before we know whence comes the fund to
buy the 8 yards of linen, to give them back the form of
money, of independent exchange-value.

In order to solve this last difficulty we have assumed
that B and C—which can stand for shoemaker and
butcher—have spent their total wages and profit, that
is, the 24 hours’ labour-time which they have at their
disposal, entirely on linen. And this gets us over our
difficulty with A, the linen weaver. His whole
product, the 12 yards of linen in which 36 hours’ labour is
materialised, has been replaced by wages and profit
alone—that is, by the whole of the labour-time newly
added to the constant capital in the spheres of production
A, B and C. All the labour-time contained in the
linen, both that already existing in its constant capital
and that newly added in the weaving process, has been
exchanged against labour-time which did not previously exist
as constant capital in any sphere of production, but which
was added simultaneously to the constant capital in the
three production spheres A, B and C, in the last stage of
production.

Though therefore it is still wrong to say that the
original value of the linen was composed of wages and profit
alone—since however it was made up of the value equal
to the total of wages and profit, 12 hours’ weaving, and the
24 hours’ labour which, independently of the weaving
process, was contained in the yarn, loom, in a word, the
constant capital—it would on the other hand be correct
to say that the equivalent of the 12 yards of linen, the
36s, for which they have been sold, is composed of wages and
profit alone; that is, not only the weaving labour but also
the labour contained in yarn and loom are replaced entirely
by newly-added labour, namely 12 hours’ labour in A, 12
hours in B and 12 hours in C.

The value of the commodity sold is itself divided | into newly-added labour (wages
and profit) and pre-existing labour (value of the constant
capital); that is the value for the seller (in fact [the
value] of the commodity). On the other hand, the
purchasing value, the equivalent given by the buyer to the
seller, is made up entirely of newly-added labour, wages and
profit. But as every commodity, before it is sold, is
a commodity for sale and becomes money through a mere change
of form, so every commodity, after it has been sold, would
be made up of other component parts of value than it is
composed of as a buying commodity (as money), which is
absurd. Further: the labour performed by society for
example in one year would not only cover itself—so
that if the total quantity of commodities is divided into
two equal parts, one half of the year’s labour would form an
equivalent for the other half—but the one-third of the
labour, which forms the current year’s labour in the total
labour contained in the annual product, would cover
three-thirds of the labour, would be equal to a magnitude
three times greater than itself. This is still more
absurd.

In the above example we have shifted the difficulty,
pushed it on from A to B and C. But this has only
increased the difficulty, not made it simpler. In
the first place, in dealing with A we had the way out
that 4 yards, containing as much labour-time as had been
added to the yarn, that is, the total wages and profit in A,
were consumed in linen itself, in the product of A’s own
labour. With B and G this is not the case, since they
consume the total labour-time added by them, their total
wages and profit, in the product of sphere A, in linen, and
so not in the product of B or C. They have therefore
to sell not only the part of their product representing the
24 hours’ labour of constant capital, but also the part of
their product which represents the 12 hours’ labour newly
added to the constant capital. B must sell 36 hours’
labour, not only 24 like A. C is in same position as
B. Secondly, in order to see A’s constant
capital, to get it off his hands and transform it into
money, we need the whole newly-added labour not only of B
but also of C. Thirdly, B and C cannot sell any
part of their product to A, since the whole part of A which
constitutes revenue has already been expended in A itself by
the producers of A. Nor can they replace the constant
part of A by any part of their own product, since on the
assumption we have made their products are not production
elements for A but commodities which enter into individual
consumption. The difficulty increases at each further
step.

In order to exchange the 36 hours contained in A’s
product (that is, two-thirds or 24 hours in constant
capital, one-third or 12 hours in newly-added labour)
entirely for labour added to constant capital, A’s wages and
profit—the 12 hours’ labour added in A—one-third
of the product had to be consumed by A itself. The
other two-thirds of the total product=24 hours, represented
the value contained in the constant capital. This
value was exchanged for the total quantity of wages and
profit or newly-added labour in B and C. But in order
that B and C should be able, with the 24 hours in their
products that make up their wages [and profit], to buy
linen, they must sell these 24 hours in the form of their
own products—and in addition to replace the constant
capital they must sell 48 hours of their own products.
They have therefore to sell products of B and C to the
amount of 72 hours, in exchange for the total quantity of
profit and wages in the other spheres D, E, etc.; and this
means (with a normal 12-hour day) that 12’6 hours (=72) or
the labour added in six other spheres of production must be
realised in the products B and C; | that is, the profit and wages
or the total labour added to their respective constant
capital in D, E, F, G, H, I.

In these circumstances the value of the total product of
B+C would be paid for entirely in newly-added labour, that
is, the aggregate wages and profit, in production spheres D,
E, F, G, H, I. But in these six spheres the total
product would then have to be sold (since no part of these
products would be consumed by their producers themselves, as
they have already put their whole revenue into products B
and C), and no part of it could be accounted for within
their own spheres; that is, the product of 6×36 hours’
labour=216, of which 144 represent constant capital and 72
(6×12) newly-added labour. Now in order in turn to
transform the products of D, etc., similarly into wages and
profit, that is, into newly-added labour, all the
newly-added labour in the 18 spheres
K1—K18, that is to say, the
total sum of wages and profit in these 18 spheres, must be
entirely expended on the products of spheres D, E, F, G, H,
I. These 18 spheres K1—K18
would have to sell—since they consumed none of
their products themselves, but had already spent their
entire revenue in the 6 spheres D—I—18×36 hours’
labour or 648 hours’ labour, of which 18×12 or 216 are in
newly-added labour, and 432 in labour contained in the
constant capital. In order therefore to transform this
total product of K1—K18 into the
labour added or total wages and profit in other spheres, the
labour added in the spheres L1—L54
would be required; that is to say, 12×54=648 hours’
labour. Spheres L1—L54, in
order to exchange their total product which is equal to
1,944 hours (of which 648=12×54 is the newly-added labour
and 1,296 hours’ labour is the labour contained in the
constant capital) for newly-added labour, would have to
absorb the newly-added labour of spheres M1
—M162, for 162×12=1,944; these in their
turn must absorb the newly-added labour of spheres N1
—N486 and so on.

This is the beautiful progression in infinitum
which we arrive at if all products are resolved into wages
and profit, newly-added labour—if not only the labour
added in the commodity but also its constant capital have to
be paid for by newly-added labour in another sphere of
production.

In order to convert the labour-time contained in product
A, 36 hours (one-third newly-added labour, two-thirds
constant capital), into newly-added labour, that is, to have
it paid for by wages and profit, we at first assumed that
one-third of the product (whose value is equal to the total
of wages and profit) was consumed or bought—which is
the same thing—by the producers of A themselves.
This was the progress.

1. Production sphere A.
Product=36 hours’ labour. 24 hours’ labour,
constant capital. 12 hours’ labour, newly added.
One-third of the product consumed by the shareholders of the
12 hours, wages and profit, labourer and capitalist.
There remain to be sold two-thirds of the product of A,
equivalent to the 24 hours’ labour contained in the constant
capital.

2. Production spheres
B1–B2. Product=72
hours’ labour; of which 24, labour added, 48,
constant capital. They buy with it the two-thirds of
A’s product, replacing the value of A’s constant
capital. But they have now to sell the 72 hours’
labour, of which the value of their total product
consists.

3. Production spheres
C1–C6. Product=216
hours’ labour; of which 72 added labour (wages and
profit). They buy with it the entire product of
B1—B2. But they have now to sell
216, of which 144 are constant capital.

| 4.
Production spheres D1–D18
Product=648 hours’ labour, 216 labour added, and
432 constant capital. With the labour added they buy
the total product of production spheres
C1–C6=216.
But they have to sell 648.

5. Production spheres
E1–E54. Product=1,944
hours’ labour; 648 labour added and 1,296 constant
capital. They buy the total product of
production spheres D1–D18.
But they have to sell 1,944.

6. Production spheres
F1–F162.
Product=5,832, of which 1,944 added labour and 3,888
constant capital. With the 1,944 they buy the product
of E1–E54. They have to
sell 5,832.

7. Production spheres
G1–G486.

In order to simplify the problem, only one working-day of
12 hours is assumed throughout, in every production sphere,
divided between capitalist and labourer. It does not
solve the problem to increase the number of working-days,
but complicates it needlessly.

So, to get a clearer picture of the law of this
series:

1. A. Product=36 hours. Constant
capital=24 hours. Total of wages and profit or
newly-added labour=12 hours. The latter is
consumed by capital and labour in the form of the product of
A itself. A’s product to be sold, equal to its
constant capital,=24 hours.

2. B1–B2.
We need here two days’ labour, that is, 2 production
spheres, to pay for A’s 24 hours.

Product=2×36, or 72 hours, of which 24 hours labour and
48 constant capital.

Product of B1 and
B2 to be sold=72 hours’ labour, no part of it
consumed in their own spheres.

6. C1–C6.
We need here 6 days’ labour, because 72=12×6, and the
total product of B1—B2 has to be
consumed by the labour added in
C1–C6. Product=6×36=216
hours’ labour, of which 72 newly added, 144 constant
capital.

18. D1–D18. We need
here 18 days’ labour because 216=12×18 so, since there
is two-thirds constant capital per day’s labour, 18×36
is the total product=648 (432 constant capital).

And so on.

The figures 1, 2, [etc.] placed at the beginning of
paragraphs signify the working-days or the different kinds
of labour in different production spheres, as we assumed one
working-day in each sphere.

Therefore: 1. A. Product=36
hours. Added labour 12 hours.
Product to be sold (constant capital)=24
hours.

Or:

1. A. Product to be sold or constant
capital=24 hours. Total product 36
hours. Labour added 12 hours. Consumed in A
itself.

2. B1–B2.
Buys with added labour=24 hours A. Constant
capital 48 hours. Total product 72
hours.

6. C1–C6.
Buys with added labour 72 hours
B1–B2 (=12×6).
Constant capital 144, total product=216.
Etc.

| Therefore:

1. A. Product=3 working-days (36
hours). 12 hours added labour. 24 hours
constant capital.

2. B1–2.
Product=2×3=6 working-days (72
hours). Added labour=12×2=24 hours.
Constant capital=48=2×24 hours.

6. C1–6. Product=3×6
working-days=3×72 hours=216 hours’ labour.
Added labour=6×12 hours (=72). Constant
capital=2×72=144.

18. D1–18
Product=3×3×6 working-days= 3×18
working-days (=54 working-days)=648 hours’ labour.
Added labour=12×18=216. Constant capital=432
hours’ labour.

54. E1–54
Product=3×54 working-days=162 working-days=1,944
hours’ labour. Added labour=54 working-days=648 hours’
labour; 1,296 constant capital.

162. F1–162.
Product=3×162 working-days (=486)=5,832 hours’ labour,
of which 162 working-days or 1,944 hours’ labour are added
labour, and 3,888 constant capital.

486. G1–486.
Product=3×486 working-days, of which 486
working-days or 5,832 hours’ labour are labour added, and
11,664 constant capital.

Etc.

Here we would already have the goodly total of
1+2+6+18+54+162+486 different working-days in different
production spheres= 729 different production spheres, which
already implies a considerably ramified society.

In order to sell the total product of A (where only 12
hours’ labour=1 working-day is added to the constant capital
of 2 working-days, and wages and profit consume their own
product), that is, only the 24 hours’ constant
capital—and moreover to sell it again entirely for
newly-added labour, for wages and profit—we need 2
working-days in B1 and B2 which
however require a constant capital of 4 working-days, so
that the total product of B1–2=6
working-days. These must be all sold, because
from here on it is assumed that each subsequent
sphere does not consume any of its own product, but spends
its profit and wages only on the product of the preceding
spheres. In order to replace these 6 working-days of
the product of B1–2, 6 working-days
are necessary, which however presuppose a constant capital
of 12 working-days. The total product of
C1–6 therefore=18 working-days.
In order to replace these by labour, 18 working-days
D1–18 are necessary, which however presuppose a
constant capital of 36 working-days; so that the product=54
working-days. To replace these, 54 working-days are
needed, E1–54, which presuppose a constant
capital of 108. Product= 162 working-days.
Finally, to replace these, 162 working-days are needed,
which however presuppose a constant capital of 324
working-days; that is, total product 486 working-days.
This is F1–162. Finally, to
replace this product of F1–162, we need 486
working-days (G1–486), which however presuppose a
constant capital of 972 working-days. So the total
product of G1–486=972+486=1,458 working-days.

But now let us assume that with sphere G we reach an end
to the shifting; and | our
progression would soon bring us to an end in any
society. How would the matter stand then? We
have a product comprising 1,458 working-days of which 486
newly-added labour and 972 labour realised in constant
capital. The 486 working-days can then be spent in the
previous sphere F1–162. But what is to buy
the 972 working-days contained in the constant
capital? Beyond G486 there is no new sphere
of production and therefore no new sphere of exchange.
In the spheres that lie behind it, except for
F1–162, there is nothing to be ex-changed.
Moreover, G1–486 has expended all its wages and
profit up to the last centime in F1–162.
Therefore the 972 working-days realised in the total product
of G1–486, which are the equivalent of the
constant capital it contains, remain unsaleable. It
has thus not helped us at all to shift through nearly 800
branches of production the difficulty of the 8 yards of
linen of sphere A, or the 24 hours’ labour, the 2
working-days, representing in its product the value of the
constant capital.

It is no use imagining that the reckoning would have a
different result if perhaps A did not spend its whole wages
and profits in linen, but spent a part of it on the product
of B and C. The limit of the outlays, the hours of
labour added which are contained in A, B, C, can always only
command a labour-time equal to themselves. If they buy
more of one product, then they buy less of the other.
It would only confuse the reckoning, but in no way alter
result.

What then is to be done? In the above calculation
we find:

Working days

Labour added

constant capital

A Product=

3

1

2

B " =

6

2

4

C " =

18

6

12

D " =

54

18

36

E " =

162

54

108

F " =

486

162

324

Total:

729

243

486

(one-third of A’s product consumed by A itself)

If the last 324 working-days ([F’s] constant capital) in
this account were equal to the constant capital which the
farmer replaces for himself, subtracts from his product and
returns to the land—and so has not to be paid for by
new labour—then the account would balance. The
riddle, however, would only be solved because a part of the
constant capital replaces itself.

In fact therefore we have had consumed 243 working-days,
corresponding to the newly-added labour. The value of the
final product, 486 working-days, is equal to the value of
the total constant capital contained in A—F, which is
also 486 working-days. In order to account for this,
we assume 486 days of new labour in G, from which however
the only satisfaction we get is that instead of having to
account for a constant capital of 486 days, | we have to account for a
constant capital of 972 working-days in G’s product, which
is equal to 1,458 working-days (972 constant capital+486
labour). If now we want to get out of our difficulty
by supposing that G works without constant capital, so that
the product is only equal to the 486 days of newly added
labour, the account would of course be cleared; but we would
have solved the problem of who pays for the part of the
value contained in the product which forms the constant
capital, by assuming a case in which the constant capital
equals nil and hence forms no part of the value of the
product.

In order to sell A’s total product entirely for
newly-added labour, in order to resolve it into profit and
wages, the whole of the labour added in A, B and C
must be spent on the labour realised in product
A. Likewise to sell the total product of B+C, all
labour newly added in D1—D18 is
needed. Similarly, to buy the total product of
D1—D18, all labour added in
E1–54. To buy the total product of
E1–54, all labour added in
F1-162. And finally, [to buy]
the total product of F1–162, the total
labour-time added in G1–486. At the end, in
these 486 production spheres represented by
G1–486, the total labour-time added is equal to
the total product of the 162 spheres F, and this total
product which is replaced by labour is as large as the
constant capital in A, B1–2, C1–6,
D1–18, E1–54, F1–162. But
the constant capital of sphere G, twice the size of the
constant capital used in A —F162, is not
replaced and cannot be replaced.

In fact we have found, on our assumption that in all
production spheres the proportion of the newly-added to the
pre-existing labour is 1:2, that always twice [as many]
new production spheres [as all preceding ones taken
together] must use all their new labour to buy the product
of the preceding spheres —the labour added of A and
B1–2, to buy A’s total product; the labour added
of 18 D or D1–18 (2×9), to buy the product of
C1–6, and so on. In short, that twice as
much newly-added labour as the product itself contains is
always needed, so that there must be twice as much
newly-added labour in the last production sphere G as there
actually is, in order to buy the total product. In a
word, we find in the result of G what was already there in
our starting-point A, that the newly-added labour cannot buy
any greater quantity of its own product than it itself
amounts to and that it cannot buy the labour
pre-existing in the constant capital.

It is therefore impossible for the value of the revenue
to cover the value of the total product. But since,
apart from the revenue, no fund exists from which this
product sold by producers to (individual) consumers can be
paid for, it is impossible for the value of the total
product, minus the value of the revenue, ever to be sold,
paid for or (individually) consumed. On the other hand
it is necessary for every product to be sold and paid for at
its price (on the assumption that price is here equal to
value).

For that matter, it might have been foreseen from the
outset that introducing the acts of exchange, sales and
purchases between different commodities or the products of
different production spheres, would not bring us a step
forward. In A, the first commodity, the linen, we had
one-third or ||283a| 12 hours
of newly-added labour and 2×12 or 24 hours of
pre-existing labour in the [constant] capital. Wages
and profit could only repurchase that part of the product of
commodity A—and therefore also of any equivalent of
commodity A in any other product—which is equal to 12
hours’ labour. They could not buy back their own
constant capital of 24 hours, hence they could not
repurchase the equivalent of this constant capital in any
other commodity either.

It is possible for the relation of added labour to
constant capital to be different in commodity B. But
however different the proportion may be of constant capital
to newly-added labour in the various spheres of production,
we can calculate the average, and so say that in the product
of the whole society or of the whole capitalist class, in
the total product of capital, the newly-added labour is
equal to a, the labour pre-existing as constant
capital is equal to b. In other words, the
proportion of 1 : 2 which we assumed in A, the linen, is
only a symbolical expression of a : b and is not
intended to imply anything more than that a definite and
definable relation of some kind or other exists between
these two elements—the living labour added in the
current year or in any other period selected, and the past
labour preexisting as constant capital. If the 12
hours added to the yarn buy not only linen, but for example
linen only to the amount of 4 hours, then they could buy
some other product to the amount of 8 hours, but they could
never buy more than 12 hours altogether; and if they buy
another product to the value of 8 hours, then 32 hours’
linen in all must be sold by A. The example A
therefore holds good for the total capital of the entire
society, and though the problem can be complicated by
introducing the exchange of different commodities, the
problem itself remains unchanged.

Let us assume that A is the total product of society:
then one-third of this total product can be bought by the
producers for their own consumption, bought and paid for
with the total of their wages and their profits, equal to
the total newly-added labour, the amount of their aggregate
revenue. They have no fund with which to pay for, to
buy and consume, the other two-thirds. Just as the
newly-added labour, the one-third which consists of profit
and wages, is itself covered by its own product, or
withdraws only that part of the value of the product which
contains one-third of the total labour, newly-added labour
or its equivalent, so must the two-thirds of pre-existing
labour be covered by its own product. That is to say,
the constant capital remains equal to itself and replaces
itself out of that part of the value which represents the
constant capital in the total product. The exchange
between various commodities, the series of purchases and
sales between different spheres of production, brings about
a change in form only in the sense that the constant
capitals in the various production spheres mutually replace
each other in the proportion in which they were originally
contained in them.

We must now examine this more closely. |283a||

### [(b) Impossibility of Replacing the Whole Constant Capital of society by Means of Exchange between the Producers of Articles of Consumption and the Producers of Means of Production]

||283b| This view—that
the annual product of the country is divided into wages and
profits (rents, interest, etc., included in the
latter)—is expressed by Adam Smith, Book II, Chapter
II, in examining the circulation of money and the credit
system (on this, compare later Tooke), where he
says:

“The circulation of every country may be considered
as divided into two different branches; the circulation of
the dealers with one another, and the circulation between
the dealers and the consumers.” (Garnier explains that
by dealers Adam Smith here means “all traders,
manufacturers, artisans, and so on; in a word, the agents of
the trade and industry of a country”).
“Though the same pieces of money, whether paper or
metal, may be employed sometimes in the one circulation and
sometimes in the other; yet as both are constantly going on
at the same time, each requires a certain stock of
money, of one kind or another, to carry it on, The value
of the goods circulated between the different dealers never
can exceed the value of those circulated between the dealers
and the consumers; whatever is bought by the dealers being
ultimately destined to be sold to the consumers” (
[Wealth of Nations, O.U.P. edition, Vol. I,
pp. 358–59], [Garnier] t. II, b. II, ch. II,
pp. 292–93).

To this, as well as Tooke, we must come back later.

Let us return to our example. The day’s product of
A, a linen weaving factory, was equal to 12 yards=36s.=36
hours’ labour, of which 12 are newly-added labour divisible
into wages and profit, and 24 hours or 2 days equal to the
value of the constant capital, which now however, instead of
the old form of yarn and loom, exists in the form of linen,
but in a quantity of linen equal to 24 hours=24s. In this
there is the same quantity of labour as in the yarn and loom
which it replaces, and with it therefore the same quantity
of yarn and loom can be bought again (on the assumption that
the value of yarn and loom has remained the same, that the
productivity of labour in these branches of industry has not
altered). The spinner and the loom maker must sell the
whole of their year’s or their day’s product (which for our
purpose here is the same thing) to the weaver, for he is the
only person for whom their commodity has use-value. He is
their only consumer.

But if the weaver’s constant capital is equal to 2
working-days (his daily consumed constant capital), then for
one working-day of the weaver there are two working-days of
spinner and machine maker—2 working-days which may
themselves be divided in very different proportions into
labour added and constant capital. But the total daily
product of spinner and machine maker together (assuming that
the machine maker makes only looms)—constant capital
and added labour together— cannot amount to more than
2 days’ labour while that of the weaver, because of the 12
hours’ labour newly added by him, amounts to 3
working-days. It is possible that spinner and machine
maker consume as much living labour-time as the
weaver. Then the labour-time contained in their
constant capital must be smaller. However that may be,
they can in no case use the same quantity of labour
(summa summarum) materialised and living, as the
weaver. It would be possible for the weaver to use
proportionately less living labour-time than the spinner
(the latter for example would certainly use less than the
flax-grower); in that case the excess of his constant
capital over the variable part of his capital must be so
much greater.

| The weaver’s constant
capital thus replaces the entire capital of the spinner and
the loom maker, not only their own constant capital but the
labour newly added in the spinning process and in the
manufacture of machines. The new constant capital
therefore here replaces other constant capitals completely
and, besides that, the total amount of the labour newly
added to them. By the sale of their commodities to the
weaver, spinner and loom maker have not only replaced their
constant capital, but have received payment for their
newly-added labour. His constant capital replaces for
them their own constant capital and realises their revenue
(wages and profit together). In so far as the weaver’s
constant capital replaces for them only their own constant
capital, which they have handed over to him in the forms of
yarn and loom, constant capital in one form has only been
exchanged for constant capital in another form. There
has in fact been no change of value in the constant
capital.

Let us now go further back. The spinner’s product
is divided into two parts, flax, spindles, coal, etc., in a
word his constant capital, and the newly-added labour;
similarly for the machine maker’s total product. When
the spinner replaces his constant capital, he pays not only
for the total capital of the spindle manufacturer, etc., but
also for that of the flax-grower. His constant capital
pays for the one part of their constant capital plus the
labour added. Then as for the flax-grower, his
constant capital—after deducting agricultural
implements, etc.—consists of seed, manure, etc.
We will assume—as in agriculture must always be the
case, more or less directly—that this part of the
farmer’s constant capital is an annual deduction from his
own product, which he must return each year, out of his own
product, to the land —that is, to production
itself. Here we find a part of the constant capital
which replaces itself and is never sold, and therefore also
is never paid for, and is never consumed, never enters into
individual consumption. Seed, etc., are the equivalent
of so much labour-time. The value of the seed, etc.,
enters into the value of the total product; but the same
value, because it is the same amount of products (on the
assumption that the productivity of labour has remained the
same), is also deducted again from the total product and
returned to production, not entering into circulation.

Here we have at least one part of the constant
capital—that which can be regarded as the raw material
of agriculture—which replaces itself. Here
therefore is an important [branch I—the most important
branch in size and in the amount of capital it
contains—of the annual production in which an
important part of the constant capital, the part which
consists of raw materials (apart from artificial
fertilisers, etc.), replaces itself and does not enter into
circulation, and is therefore not replaced by any form of
revenue. Therefore the spinner has not got to repay to
the flax-grower this part of the constant capital (the part
of the constant capital which is replaced and paid for by
the flax-grower himself); nor has the weaver to pay for this
to the spinner, nor the buyer of the linen to the
weaver.

Let us assume that all those who directly or indirectly
participated in the production of the 12 yards of linen (=36
shillings=3 working-days or 36 hours’ labour) were paid in
linen itself. It is clear in the first place that the
producers of the elements of the linen, of the constant
capital of the linen, could not consume their own
product, since these products are produced for
production and do not enter into immediate | consumption. They must
therefore spend their wages and profits on linen—on
the product which finally enters into individual
consumption. What they do not consume in linen, they
must consume in some other consumable product exchanged for
linen. As much (in value) linen is therefore consumed
by others as they consume in other consumable products
instead of linen. It is the same as if they had themselves
consumed it in linen, since as much as they consume in
another product is consumed in linen by the producers of
other products. The whole problem must therefore be
cleared up, without any reference to exchange, by
considering how the 12 yards of linen are divided up between
all the producers who have taken part in its production or
in the production of its elements.

Spinner and loom maker, who we assume also makes spinning
machinery, have added one-third in labour, their constant
capital amounting to two-thirds of yarn and loom, Of the 8
yards of linen (or 24 hours) or 24s., which replace their
total product, they can consequently consume
8/3 [yards], that is,
22/3 [yards] of linen or 8 hours’
labour or 8s. Therefore
51/3yards or 16 hours’ labour remain
to be accounted for.

51/3 yards or 16 hours’ labour
represent the constant capital of the spinner and of the
loom maker. Let us assume that of the spinner’s
constant capital two-thirds is raw material and is spent on
flax; then the flax-grower can consume these two-thirds
entirely in linen, since his constant capital <but here
we take the wear and tear of his implements of labour, etc.,
as equal to nil// is not put into circulation at all; he
has already deducted it and reserved it for
reproduction. He can therefore buy two-thirds of the
51/3 yards of linen or 16
hours’ labour, which is equal to 3 5/9
yards, or 102/3 hours’ labour.
So there remains to be accounted for only
51/3 minus 35/9
yards, or 16 –102/3 hours’
labour, that is, 17/9 yards or
51/3 hours’ labour. These
17/9 yards or
51/3 hours’ labour resolve
themselves into the constant capital of the loom maker and
the total product of the spinning machinery maker, who are
assumed to be one person.

| Therefore once
again:

Weaver

Total product

constant capital

Weaving labour added

consumption

12 yards linen (36s.) (36 hours’ labour)

8 yards (24 hours) (24s.)

12 hours

12 hours 12s.=4 yards

Of the weaver’s
constant capital let
3/4=yarn and 1/4=loom
(means of production in
general). The weaver thus
pays 6 yards or 18 hours to the
spinner and 2 yards or 6 hours to
the machine maker, etc.

Spinner

Machine maker

Total Product

Constant capital

Spinning labour added

Consumption

Total Product

Constant capital

labour added

Consumption

6 yards

4 yards

2 yards

2 yards

2 yards

4/3 yards

2/3 yard

2/3 yard

18s.

12s.

6s.

6s.

6s.

18 hours

12 hours

6 hours

6 hours

Of the 8 which replace the weaver’s constant capital,
therefore, 2 yards(=6s.=6 hours) are consumed by the spinner
2/3 of a yard (2s.=2 hour’s
labour) by the maker of looms, etc.

What remains for us to account for is thus
8–22/3yards=51/3
yards (=16s.=16 hours’ labour). These remaining
51/3 yards (=16s.=16 hours’
labour) are resolved as follows: We assume that in the 4
yards which represent the spinner’s constant capital, that
is, the elements of his yarn, 3/4 is
the equivalent of the flax, and 1/4 of
the spinning machine. The elements of the | spinning machine will be
reckoned in further on with the constant capital of the loom
maker. The two are assumed to be the same person.

Of the 4 yards which replace the spinner’s constant
capital, 3/4=3 yards are therefore
resolved into flax. A considerable part of the
constant capital in the flax, used in its production, has
not however to be replaced; for the flax-grower has already
returned it to the land in the form of seed, manure,
fodder, cattle, etc. Therefore in the part of his
product that he sells, only the wear and tear of his
instruments of labour, etc., has to be included as constant
capital. Here we must rate the labour added at
two-thirds at least and the constant capital to be replaced
at one-third at the most.

Thus:

Total product

Constant capital

Farm labour

Consumable

Flax

3 yards

1 yard

2 yards

2 yards

9s.

3s.

6s.

6s.

9 hours’ labour

3 hours’ labour

6 hours’ labour

6 hours’ labour

Thus what we have still to account for is:

1 yard (3s., 3 hours’ labour), equal to the flax-grower’s
constant capital;

11/3 yards (4s., 4 hours’ labour),
equal to the constant capital for the loom;

finally 1 yard (3s., 3 hours’ labour) for the total
product contained in the spinning machine.

First what the machine maker can consume for the spinning
machine has to be deducted:

Total product

Constant capital

Engineering labour added

Consumable

Spinning machine

1 yard

3s.

3 hours’ labour

2/3 yard

2s.

2 hours’ labour

1/3 yard

1s.

1 hour’s labour

1/3 yard

1s.

1hour’s labour

Moreover, the agricultural machinery, the
flax-grower’s constant capital, has to be divided into its
consumable and other parts:

Total product

Constant capital

Engineering labour

Consumable

Agricultural machine

1 yard

3s.

3 hours’ labour

2/3 yard

2s.

2 hours’ labour

1/3 yard

1s.

1 hour’s labour

1/3 yard

1s.

1hour’s labour

If therefore we put together that part of the total
product which represents machinery, it amounts to 2 yards
for the loom, 1 yard for the spinning machine, 1 yard for the
agricultural machine, 4 yards in all (12s., 12 hours’ labour
or 1/3 of the total product, 12 yards
of linen), Of these 4 yards, the machine maker can consume
2/3 of a yard for the loom,
1/3 for the spinning machine, ditto
1/3 for the agricultural machinery, in
all 11/3 yards.
22/3 yards are left, that is,
4/3 constant capital for the loom,
2/3 for the spinning machine, and
2/3 for the agricultural machine=
8/3=22/3 yards
(=8s.=8 hours’ labour). This therefore forms the
machine builder’s constant capital which has to be
replaced. Of what now does this constant capital
consist? On the one hand, of its raw material, iron,
wood, leather belting; and so on. But on the other
hand, of that part of the machine he works with (which he
may have built himself) which he uses in building machines
and which gets worn out. Let us assume that the raw
material amounts to two-thirds of the constant capital, and
the machine-building machine to one-third. This latter
one-third is to be examined later. The two-thirds for
wood and iron | amount to
two-thirds of the 22/3 yards (or
22/3 yards=8/3
yards=24/9 yards),
1/3 of this=8/9;
therefore
2/3=16/9
yards.

Let us then assume that here [in the production of wood
and iron] machinery is one-third and added labour two-thirds
(since there is nothing for raw material); then two-thirds
of the 16/9 yards replace labour
added, and one-third machinery. Thus what is left
again for machinery is 16/27
yard. The constant capital of the producers of iron
and wood, in short, of the extractive industry, consists
only of instruments of production—which we here call
machinery in general — and not of raw material.

Therefore 8/9 yard for the
machine-building machine, 16/27 yard
for the machinery used by the producers of iron and
wood. So 24/27 +
16/27 = 40/27 =
113/27 yards. This therefore,
has in turn to be put down to the machine builder’s
account.

Machinery. 24/27 of a
yard forms the replacement for the machine building
machine. But this in turn is divided into raw material
(iron, wood, etc.), the part of, the machinery used up in
building the machine-building machine, and labour
added. So, if each of the elements is one-third of the
total, 8/27 of a yard would go for the
labour added, and 16/27 of a yard
would be left for the constant capital to be replaced
in the machine-building machine, that is,
8/27 of a yard for raw material and
8/27 of a yard to replace the part of
the value representing the machinery used up in working up
this raw material (together 16/27 of a
yard).

On the other hand the 16/27 of a
yard, which replace the iron and wood producers’ machinery,
likewise consist of raw material, machinery and labour
added. This last is equal to one-third, that is, equal
to 16/27×3 =
16/81 of a yard, and the constant
capital in this part of the machinery consists of
32/81 of a yard, of which
16/81 is for the raw material,
16/81 to make good the wear and tear
of the machinery.

Thus there remains in the machine builder’s hands, as
constant capital to make good the wear and tear of his
machinery, 8/27 of a yard, with which
he replaces the wear and tear of his machine-building
machine, and 16/81 of a yard for the
wear and tear of the iron and wood producers’ machinery that
has to be replaced.

Apart from this he had, for the replacement of his
constant capital, 8/27 of a yard for
the raw material (contained in the machine-building machine)
and 16/81 for the raw material
contained in the iron and wood producers’ machines. Of
this, however, another two-thirds consist of labour added
and one-third of machinery used up. Therefore
two-thirds of the
24/81+16/81=49/81
is paid for labour, that is,
(262/3)/81. Of this
raw material, |
(131/3)/81 is
again left to replace machinery. This
(131/3)/81 of a
yard therefore comes back to the machinery manufacturer.

Now there would again be in the hands of the latter:
8/27 of a yard for the replacement of
the wear and tear of the machine-building machine,
16/81 to replace the wear and tear of
the iron, etc., producers’ machinery, and
(131/3)/81 for the part of
the value to replace the machinery in the raw material,
iron, etc.

And so we might go on calculating to infinity, with ever
smaller fractions, but never able to divide the 12 yards of
linen without a remainder.

Let us briefly resume the course of our inquiry up to
this point.

We said at the start that in the different spheres of
production there are different proportions as between the
newly-added labour (which partly replaces the variable
capital laid out in wages, and partly forms the profit, the
unpaid surplus-labour) and the constant capital to which
this labour is added. We could however assume an
average proportion, for example, a—labour
added, b—constant capital; or we could assume
that the proportion of the latter to the former is 2 : 1 =
2/3 :
1/3. If this holds
good in each production sphere of capital, we went on, then
the labour added (wages and profit together) in one
particular sphere of production can always only buy
one-third of its own product, since wages and profit
together form only one-third of the total labour-time
realised in the product. But the other two-thirds of
the product, which replace his constant capital, also belong
to the capitalist. If he wishes to continue
production, however, he must replace his constant capital,
that is, retransform two-thirds of his product into constant
capital. To do this, he must sell the two-thirds.

But to whom? We have already deducted the one-third
of the product that can be bought with the total of wages
and profit. If this total represents 1 day’s labour or
12 hours, then the part of the product whose value is equal
to the constant capital represents 2 days’ labour or 24
hours. So we assume that [the second] one-third of the
product is bought by profit and wages in another branch of
production, and the last one-third is bought in turn by
profit and wages in a third branch of production. But
then we have exchanged the constant capital of Product I for
wages and profit exclusively, that is, for newly-added
labour, by making the whole labour added to Products
II and III be consumed in the form of Product I. Of
the six working-days contained in Products II and III, in
both newly-added and pre-existing labour, none has been
replaced or bought by the labour contained in either Product
I or in Products II and III. So we had in turn to make
the producers of other products spend all their labour added
on Products II and III, and so on. Finally we had to
come to a halt at a Product X, in which the labour added was
as much as the constant capital of all the earlier products;
but its own constant capital two-thirds larger, would be
unsaleable. Thus we have not come one step forward
with the problem. In the case of Product X, as in the
case of Product I, the question remains: to whom is the part
of the product sold which replaces the constant
capital? Or is the one-third new labour added to the
product to replace the one-third new labour plus the
two-thirds pre-existing labour contained in the
product? Is one-third to be equal to three-thirds?

So from this it became clear that the shifting of the
difficulty from Product I to Product II, etc., in a word,
merely bringing in to the problem the exchange of
commodities, was of no avail.

| So we had to pose the
question in a different way.

We assumed that the twelve yards of linen (=36s.=36
hours’ labour) were a product containing 12 hours’ labour or
1 working-day of the weaver (necessary labour and
surplus-labour together, that is, the equivalent of the
total of profit and wages), while two-thirds represented the
value of the constant capital, yarn and machinery, etc.,
contained in the linen. We further assumed, in order
to eliminate any recourse to quibbles and intermediate
transactions, that the linen was of a kind destined only for
individual consumption, and therefore could not serve in
turn as raw material for some new product. By this we
assumed that it was a product that had to be paid for from
wages and profit, that it must be exchanged for
revenue. And finally to simplify things we assume that
no part of the profit is reconverted into capital, but that
the whole profit is spent as revenue.

As for the first 4 yards, the first one-third of
the product, equal to the 12 hours’ labour added by the
weaver, we soon settled that. They are resolved into
wages and profit; their value is the same as the value of
the weaver’s total profit and wages. They are
therefore consumed by him and his workmen themselves.
This solution for the four yards is unconditionally
valid. For if profit fit and wages are consumed not in
linen but in some other product, this can only happen
because the producers of some other product consume the part
of it which is consumable by them in linen and not in their
own product. If of the 4 yards of linen, for example,
only 1 is consumed by the linen weaver himself, and 3 yards
in meat, bread, and cloth, then just the same as before, the
value of the 4 yards of linen is consumed by the linen
weavers themselves; only they have consumed
3/4 of this value in the
form of other commodities, while the producers of these
other commodities have consumed in the form of linen the
meat, bread and cloth consumable by them as wages and
profit. <Here, as throughout this inquiry, it is of
course always assumed that the commodity is sold and sold at
its value.//

But now comes the real problem. The weaver’s
constant capital exists now in the form of 8 yards of linen
(=24 hours’ labour=24s.); if he wants to continue
production, he must transform these 8 yards of linen into
money, 24s., and with this 24s, he must buy newly-produced
commodities, to be found on the market, of which his
constant capital consists. To simplify the problem, let it
be assumed that he does not replace his machinery within a
period of years, but that every day, out of the proceeds of
his product, he has to replace in kind the part of the
machinery that is equal to the part of the value of the
machinery worn out each day. He must replace the part
of the product that is equal to the value of the constant
capital it contains with the elements of this constant
capital, or the material conditions of production for his
labour. On the other hand, his product, the linen,
does not enter any other sphere of production as a condition
of production, but passes into individual consumption.
He can therefore replace the part of his product which
represents his constant capital only by exchanging it for
revenue or for the part of the value of the product of other
producers which consists of wages and profit, consequently
of newly-added labour. The problem is thus posed in
its correct form. The question is only: in what
conditions can it be solved?

A difficulty that arose in our first presentation of it
has now been partly overcome. Although in each sphere
of production the labour added is equal to one-third, the
constant capital— on the assumption made—to
two-thirds, this one-third labour added—or the total
value of the revenue (of wages and profit; as already noted
earlier, no account is here taken of the part of the profit
which is again transformed into capital) —is only
consumable in the products of the branches of industry which
work directly for individual consumption. The products
of all other branches of industry can only be consumed as
capital, can only enter into industrial consumption.

| The constant capital
represented by the 8 yards (=24 hours=24s.) consists of yarn
(raw material) and machinery. Let us say
3/4 raw material and
1/4 machinery. (Under raw
material we can here also reckon all auxiliary materials
such as oil, coal, etc. But for the sake of simplicity
it is better to disregard these.) The yarn would cost
18s. or 18 hours’ labour=6 yards; the machinery 6s.=6 hours’
labour=2 yards.

If therefore the
weaver uses his 8 yards to buy yarn for 6 yards and machinery for 2 yards, with
his constant capital of 8 yards he has covered not only the constant capital of
the spinner and the loom manufacturer, but also the labour newly added by them.
A part of what appears as the weaver’s constant capital therefore represents
newly-added labour on the part of the spinner and the machinery manufacturer,
and consequently is for them not capital but revenue.

Of the 6 yards of linen, the spinner can himself consume
one-third=2 yards (equal to the labour newly added, profit
and wages). But 4 yards replace for him only flax and
machinery. Say 3 yards for flax, 1 yard for
machinery. He must pass on the payment for
these. Of the 2 yards the machinery manufacturer can
himself consume two-thirds of a yard; but
4/3 only replace for him iron and
wood, in a word, raw material, and the machinery used for
building the machine. Say, of the
4/3 yards, 1 yard for raw material and
1/3 of a yard for machinery.

Of the 12 yards of linen, we have consumed up to this
point:

first, 4 for the weaver, second, 2 for the spinner, and
third, 2/3 for the machine builder;
together 62/3, So
51/3 remain to be accounted for.
And these 51/3 are distributed as
follows:

The spinner has to replace, out of the value of 4 yards,
3 for flax, 1 for machinery.

The machinery manufacturer has to replace, out of the
value of 4/3 yards, 1 for iron, etc.,
1/3 for machinery (what he has himself
used up in building the machines).

The 3 yards for flax are therefore paid by the spinner to
the flax-grower. In the case of the latter, however,
there is the special feature that a part of his constant
capital (namely, seed, manure, etc., in short all products
of the land which he returns to the land) does not enter at
all into circulation, and consequently does not need to be
deducted from the product that he sells; this product on the
contrary expresses only added labour, and consequently
consists entirely of wages and profit (except for the part
which replaces machinery, artificial fertilisers,
etc.). So let us assume as before that one-third of
the total product is labour added; then 1 yard of the 3
would come under this category. Taking as before for
the 2 other yards that one-quarter is for machinery, that
would be 2/4 yard. The other
6/4, on the other hand, would also be
for labour added, since in this part of the flax-grower’s
product there is no constant capital, which he has already
deducted earlier. So 2 2/4 yards
would go for the flax-grower’s wages and profit. What
remains is 2/4 yard for replacement of
machinery. <Thus of the 5 1/3
yards which we had to consume, 22/4
have gone (5 4/12 – 2
6/12 =2 10/12 =
2 5/6 yards).// This
last 2/4 of a yard would therefore be
used by the flax-grower to buy machinery.

The machinery manufacturer’s account would now stand like
this: of the constant capital for the loom he had laid out 1
yard for iron, etc.; 1/3 of a yard for
the wear and tear of the machine-building machine in
producing the loom.

In addition, however, the spinner buys from the machinery
manufacturer spinning machinery for I yard, and the
flax-grower buys from him agricultural implements for
2/4 of a yard. Of these
6/4 yards, the machinery manufacturer
has to consume 1/3 for labour added,
and to expend 2/3 for the constant
capital laid out in the spinning machine and the
agricultural implements. 6/4
however=18/12. So the machine builder
would have 6/12 of a yard | again for consumption,
12/12 or 1 yard to convert into
constant capital. (Of the 2 5/6
yards not yet consumed, 1/2 yard
therefore has gone. 14/6 yards
are left, or 2 2/6, or 2
1/3 yards.)

Of this yard the machinery manufacturer would have to
expend 3/4 on raw material, iron and
wood, etc., 1/4 to pay to himself for
the replacement of the machine-building machine.

So the total account would now stand like this:

Machinery manufacturer’s constant capital

For the loom: 1 yard for raw material,
1/2 of a yard for wear and tear of
his own machinery.

For spinning machine and
agricultural implements: 3/4
of a yard for raw material, 1/4 of a
yard for wear and tear of his own machinery.

Hence equal to 1 3/4 yards for
raw material,
1/3+1/4 for
wear and tear of his own machinery.

The 13/4 yards or
7/4 yards therefore buy from the iron
and wood manufacturers iron and wood to this value.
7/4=21/12.
But here a new question arises. In the case of the
flax-grower, the raw material which is part of the constant
capital did not enter into the product he sold, because it
had already been deducted. In this case we must
resolve the total product into labour added and
machinery. If we even assumed that here the added
labour was equal to two-thirds of the product, the machinery
one-third, 14/12 would be
consumable. And 7/12 would
remain as constant capital for machinery. This
7/12 would come back to the machinery
manufacturer.

What was left of the 12 yards would then amount to
1/3+1/4 yard,
which the machinery manufacturer would have to pay to
himself for the wear and tear of his own machinery, and
7/12 of a yard, which the iron and
wood manufacturers return to him for machinery. Hence
1/3+1/4 =
4/12+3/12 =
7/12. In addition, the
7/12 returned by the iron and wood
manufacturers. (Together 14/12
=1 2/12 =1
1/6.)

The iron and wood manufacturers’ machinery and
instruments of labour must be bought from the machinery
manufacturer, just as those of the weaver, the spinner and
the flax-grower. Thus of the
7/12 of a yard, let one-third, equal
to 2/12, be labour added. This
2/12 of a yard can therefore also be
consumed. The remaining 5/12
(actually 4/12 and
(2/3)/12, but there’s no need to be so
exact) represents the constant capital contained in the
woodcutter’s axe and the iron manufacturer’s machinery,
3/4 pig-iron, wood, etc., and
1/4 machinery used up. (Of the
14/12 yards
12/12 is left, or 1 yard=3 hours’
labour=3s.) Therefore of the 1 yard,
1/4 of a yard for replacement of the
machine-building machine and 3/4 of a
yard for wood, iron, etc.

Hence for the wear and tear of the machine-building
machine 7/12 of a yard
+1/4 of a yard =
7/12 + 3/12 =
10/12 of a yard. On the other
hand it would now be quite pointless again to resolve the
3/4 of a yard for wood and iron into
their component parts and to return a part of it once more
to the machinery manufacturer, who would return a part of it
again to the iron | and
wood manufacturers. Something would always be left
over and a progression to infinity.

### [(c) Exchange of Capital for Capital between the Producers of Means of Production. Annual Product of Labour and the Product of Labour Newly Added Annually]

Let us then take the problem as it now stands.

10/12 or 5/6
of a yard in value has to be replaced by the machinery
manufacturer himself in the worn-out machine.
3/4 or 9/12 of a
yard represents an equal amount of value in wood and
iron. The machinery manufacturer has given it to the
iron and wood manufacturers, in order to replace his raw
material. We have in hand the residuum of
19/12 or 1 7/12
yards.

The balance of 5/6 of a yard which
the machinery manufacturer keeps for making good his wear
and tear = 15/6,
shillings=15/6 hours’ labour, that is,
2 3/6, or 2
1/2s., or 2 1/2
hours’ labour. The machinery manufacturer cannot
accept any linen for this value; he would himself have to
sell it again, in order with the 2s. 6d. to make good the
wear and tear of his machinery, in a word, to make new
machine-building machines. But to whom is he to sell
it? To producers of other products (other than iron
and wood)? But these producers have consumed in linen
all that they were able to consume in this form. Only
the 4 yards which constitute the weaver’s wages and profit
are exchangeable for other products (apart from those
contained in the constant capital or the labour of which
this capital consists). And we have already accounted
for these 4 yards. Or is he to pay workers with
it? But we have already deducted from his products all
that labour has added to them, and we have taken it as all
consumed in linen,

To put the matter in another way:

The weaver has to replace for machinery

2 yards = 6s. = 6 hours’ labour

The spinner

1 " =
3 " = 3
"

The
flax-grower

2/4 " = 1 1/2 "
= 1 1/2 "

The iron and wood producers

7/12 " = 1 3/4 "
= 1 3/4 "

Total yards expended on machinery or the part of the
value of the linen which consists of machinery

4 1/12yards = 12 1/4 s. = 12 1/4 hours’ labour

To simplify the calculation, say 4 yards=12s.=12 hours’
labour. Of this, for labour (profit and wages)
one-third = 4/3 yards = 1 1/3
yards.

2 2/3 remain for constant
capital. Of this, 3/4 for raw
material, 1/4 for wear and tear of
machinery. 2 2/3 =
8/3 =
32/12. A quarter of this=
8/12.

This 8/12 of a yard for wear and
tear of machinery is all that the machinery manufacturer is
still burdened with. For he pays
24/12 or 2 yards to the iron and wood
manufacturers for raw material.

| It is wrong, then, to
charge the iron and wood manufacturers again for machinery,
since all that they have to replace its machinery, namely
7/12 of a yard, has already been
brought into the machinery manufacturer’s account. In
the latter’s item, the whole of the machinery that they need
for the production of iron and wood has already been
included, and it therefore cannot come a second time into
the reckoning. The last two yards for iron and wood
(the residuum of 2 8/12) consist
therefore entirely of labour, since there is no raw material
used, and can therefore be consumed in linen.

Thus the whole residuum is 8/12 of
a yard or 2/3 of a yard for wear and
tear of the machinery used by the machinery
manufacturer.

The whole problem was partly solved by the fact that the
part of the farmer’s constant capital, which does not
itself consist of labour newly added or in machinery, does
not circulate at all, but is already deducted, replaces
itself in his own production, and therefore also—apart
from the machinery—his whole circulating
product consists of wages and profit and consequently can be
consumed in linen. This was one part of the
solution.

The other part was that what appears in one sphere of
production as constant capital, in other spheres of
production appears as new labour added during the same
year. What in the weaver’s hand appears as constant
capital consists in large part of the revenue of the
spinner, machinery manufacturer, flax-grower and iron and
wood producers (also of the collier, etc.; but for the sake
of simplification this is not brought into it). (This
is so clear that, for example, when the same manufacturer
both spins and weaves, his constant capital seems to be
smaller than that of the weaver and the labour added by him
greater, that is to say, the part of his product which
consists of labour added, revenue, profit and wages.
Thus in the case of the weaver revenue was equal to 4
yards=12s.; constant capital 8 yards=24s. If he both
spins and weaves, his revenue is equal to 6 yards. His
constant capital also equals 6 yards; that is, 2 yards for
loom, 3 yards flax, and I yard spinning machinery.)

Thirdly, however, the solution so far found is that all
producers who supply only raw material or means of
production for the product which finally enters into
individual consumption, cannot consume their
revenue—profit and wages, the [labour] newly
added—in their own product, but they can consume the
part of the value of this product which represents revenue
only in the consumable product, or, what is the same thing,
[they have to exchange it] for a consumable product of other
producers containing the same amount of value. Their
newly-added labour enters into the final product as a
component part of the value, but is only consumed in the
form of the final product, while as a use-value it is
contained in the final product as raw material or machinery
used up.

Hence the part of the problem which now remains to be
solved is reduced to this: What happens to the
2/3 of a yard for the wear and tear
[of the machine-building machine]—not of the machines
used in production, for these represent new labour, that is,
new labour which gives the raw material (which has itself no
raw material that costs anything) the form of new machinery
but— [what happens] to the depreciation of the
machinery manufacturer’s machine-building machine? Or
to put it another way: Under what conditions can the
machinery manufacturer consume the 2/3
of a yard=2s.=2 hours’ labour in linen, and at the same time
replace his machinery? That is the real
question. This takes place in fact. It
necessarily takes place. Hence the problem: how is
this phenomenon to be explained?

| Here we leave
entirely out of account the part of the profit which is
transformed into new capital (both circulating and fixed,
variable and constant capital). It has nothing to do
with our problem, for here new variable capital as well as
the new constant capital are created and replaced by
new labour (a part of the surplus-labour).

So putting this case on one side, the total of labour
newly added, in a year for example, is equal to the total of
profit and wages, i.e., equal to the total of the annual
revenue spent on products which enter into individual
consumption, such as food, clothing, heating,
dwelling-house, furniture, etc.

The total of these products going into consumption is
equal in value to the total labour added annually (to the
total value of the revenue). This quantity of labour must be
equal to the total labour contained in these products, both
the added and the pre-existing labour. In these
products not only the labour newly added, but also the
constant capital they contain, must be paid for. Their
value is therefore equal to the total of profit and
wages. If we take linen as the example, then the linen
represents for us the aggregate of the products entering
into individual consumption annually. This linen must
not only be equal to the value of all its elements of value,
but its whole use-value must be consumable by the various
producers who take their share of it. Its whole value
must be resolvable into profit and wages, that is, labour
newly added each year, although it consists of labour added
and constant capital.

This is partly explained, as we have said, by:

First. A part of the constant capital
required for the production of the linen does not enter into
it, either as use-value or as exchange-value. This is the
part of the flax which consists of seed, etc.; the part of
the constant capital of the agricultural product which does
not enter into circulation, but is directly or indirectly
returned to production, to the land. This part
replaces itself, so it does not need to be repaid out of the
linen. <A peasant may sell his whole harvest, say
120 quarters. But then he must buy from another
peasant for example 12 quarters of seed, and the latter has
then to use as seed, out of his 120 quarters, 24 quarters
instead of 12 quarters, 1/5 instead of
1/10 of his product. In both
cases 24 quarters of the 240 quarters are given back to the
land as seed. Of course, this makes a difference in
the circulation. In the first case, where each deducts
one-tenth, 216 quarters enter circulation. In the
second case 120 quarters of the first and 108 quarters of
the second enter circulation, that is, 228 quarters.
As in the previous case, 216 quarters reach the actual
consumers. Here therefore we have an example of the
fact that the total of values as between dealers and dealers
is greater than the total of values as between dealers and
consumers.// (Moreover there is the same difference in all
cases in which a part of the profit is transformed into new
capital; moreover, transaction between dealers and dealers
extend over many years, etc.)

This part [of the raw material required] for the
production of the linen, that is, the consumable products,
therefore does not have to replace a considerable part of
the constant capital required for its production.

Secondly. A large part of the constant
capital required for the linen, that is, for the annual
consumable product, appears at one level as constant
capital, at another level as labour newly added, and
consequently in fact consists of profit and wages, revenue,
for one, while the same sum of value appears as capital for
another. Thus a part of [the weaver’s] constant
capital is reducible to the labour of the spinner, etc.

| Thirdly.
In all the intermediate processes that are necessary to
produce the consumable product, a large part of the
products, apart from the raw material and certain auxiliary
materials, never passes into the use-value, but only enters
into the consumable product as a component part of its
value—such as machinery, coal, oil, tallow, leather
belting, etc. In each of these processes which in fact
always only produce the constant capital for the next
stage—in so far as, through the division of social
labour, they take the form of separate branches of
business—the product of each stage is divided into one
part representing the newly-added labour (consisting of
profit and wages, and, with the proviso made above, forms
revenue), and another part which represents the value of the
constant capital consumed. It is therefore clear that
in each of these spheres of production only that part of the
product can be consumed by its own producers which
represents wages and profit—only that part which
remains over after deducting the quantity of products equal
to the value of the constant capital they contain. But
none of these producers consumes any part whatever of the
products of the previous stage, or of the products, of all
the stages, which in fact produce nothing but constant
capital for a further stage.

Thus although the final product—the linen, which
represents all consumable products—consists of
newly-added labour and constant capital, and so the final
producers of this consumable product can only consume that
part of it which consists of the labour last added, of their
total wages and profits, their revenue—nevertheless
all the producers of constant capital consume or realise
their newly-added labour only in the consumable
product. Thus although this consists of labour added
and constant capital, its purchase price consists—in
addition to that part of the product which is equal to the
quantity of labour last added—of the total quantity of
all the labour added in the production of its constant
capital. They realise all added labour in the
consumable product instead of in their own product—so
that in this respect it is the same as if the consumable
product consisted entirely of wages and profit, of labour
added.

From the consumable product, the linen (the exchange of
consumable products for each other and the previous
transformation of the commodities into money makes no
difference), the producers from whose sphere of production
it emerges as a finished product themselves deduct the part
of the product equal to their revenue—equal to the
labour last added by them, equal to the total wages and
profit. With the other part of the consumable product
they pay the component part of the value due to the
producers who have directly supplied them with their
constant capital. All of this part of their consumable
product therefore covers the value of the revenue and
constant capital of the producers of this constant capital
in its nearest stage. The latter however keep only the
part of the consumable product whose value is equal to their
revenue. With the other part they pay in turn the
producers of their constant capital, equal to revenue plus
constant capital. The account, however, can only be
settled if it is only revenue, newly-added labour, not
constant capital, that has to be replaced by the last part
of the linen, the consumable product. For on the
assumption we have made the linen enters only into
consumption and does not in turn form the constant capital
of another phase of production.

This has already been shown to be the case for a part of
the product of agriculture.

In general, it is only products that enter as raw
materials into the final product of which it can be said
that they are consumed as products. Other products
enter into the consumable product only as component parts of
value. The consumable product is bought by revenue,
that is, by wages and profit. Its total value must
therefore be resolvable into wages and profit, that is, into
the labour added in all its stages. The question now
arises: in addition to the part of the product of
agriculture which is returned to | production by its producers
themselves—seed, cattle, manure, etc.—is there
yet another part of the constant capital which does not
enter into the consumable product as a component part of
value, but is replaced in kind in the process of production
itself?

Fixed capital in all its forms can of course only be
considered here to the extent that its value enters into
production and is consumed.

Apart from agriculture (including cattle-raising and fish
farming, and forestry, in which reproduction is artificially
organised)—and so apart from all raw materials for
clothing, actual means of sustenance and a large part of the
products entering into fixed capital in industry, such as
sails, rope, belting, etc.— in mining there is the
partial replacement of constant capital in kind out of the
product, so that the part which enters into circulation does
not have to replace this part of the constant capital.
For example, in coal production some of the coal is used to
work the steam-engine which pumps out water or raises
coal.

The value of the annual product is therefore partly equal
to the part of the labour pre-existing in coal and consumed
in producing the coal, and partly equal to the quantity of
labour added (leaving out of account wear and tear of
machinery, etc.). Of the total product, however, the
part of the constant capital which consists in coal itself
is directly deducted and returned to production. No
one has to replace this part for the producer, because he
replaces it himself. If the productivity of labour has
neither fallen nor risen, then too the part of the value
which this part of the product represents remains unchanged,
and is equal to a definite aliquot part of the quantity of
labour existing in the product—partly pre-existing
labour, partly labour added during the year. In the
other mining industries too there is a partial replacement
of the constant capital in kind.

Waste products—as for example cotton waste and so
on—are fed to the fields as fertiliser or become raw
material for other branches of industry, as for example
linen rags [in the production] of paper. In such
cases, as in the former case, part of an industry’s constant
capital may be directly exchanged for the constant capital
of another industry. For example, cotton for cotton
waste used as fertiliser.

In general, however, there is a cardinal difference
between the production of machines and primary production
(of raw materials: iron, wood, coal) and the other phases of
production: in the latter, there is no interaction between
them. Linen cannot be a part of the spinner’s constant
capital, nor can yarn (as such) be part of the constant
capital of the flax-grower or machinery manufacturer.
But the raw material of machinery— apart from such
agricultural products as leather belting, rope, etc.
—is wood, iron and coal, while on the other hand
machinery in its turn enters as a means of production into
the constant capital of the producers of wood, iron, coal,
etc. In fact, therefore, both replace each other a
part of their constant capital in kind. Here there is
exchange of constant capital for constant capital.

Here it is not merely a question of accounting. The
producer of iron debits the machinery manufacturer for the
wear and tear of the machinery used up in producing the iron
and the machinery manufacturer debits [the producer of iron]
for the wear and tear of his machinery in constructing the
machines. Let the producers of iron and coal be the
same person. First, he himself replaces the coal, as
we have seen. Secondly, the value of his total product
of iron and coal is equal to the value of the labour added
plus the labour pre-existing in the worn-out
machinery. After deducting from this total product the
quantity of iron that replaces the value of the machinery,
the quantity of iron which is left represents the labour
added. The latter part forms the raw material of
manufacturers of machinery, instruments, etc. The
machinery manufacturer pays the iron manufacturer for this
latter part in linen. In exchange for the first part,
he supplies him with machinery to replace the old.

On the other hand, the part of the machinery
manufacturer’s constant capital which represents the wear
and tear of his machine-building machines, instruments,
etc.—and therefore consists neither of raw material
(leaving out of account here the machinery used [in coal and
iron production] | and the
part of the coal which replaces itself) nor of labour added,
and so neither of wages or profit—this wear and tear
is in fact made good by the machinery manufacturer
appropriating for himself one or two of his own machines to
serve as machine-building machines. This part of his product
merely comes to an excess consumption of raw material.
For it does not represent labour newly added, since in the
total product of the labour so many machines are equal to
the value of the added, so many machines are equal to the
value of the raw material, and so many machines are equal to
the part of the value that was contained in machine-building
machines. It is true that this last part does contain labour
added. But in value this is equal to zero, since the
labour contained in the raw material and in the machinery
used up is not reckoned in the group of machines that
represents labour added; and the part which replaces the new
labour and machinery is not reckoned in the second group,
which replaces the raw material; and consequently in the
third part—considered as value—neither labour
added nor raw material is contained, but this group of
machines represents only the wear and tear of the
machinery.

The machinery of the machinery manufacturer himself is
not sold. It is replaced in kind, deducted from the
total product. Consequently the machines which he
sells represent only raw material (which consists only of
labour, if he has already been charged for the wear and tear
of the raw material producer’s machinery) and labour added,
and therefore are resolvable into linen for himself and for
the raw material producer. As for what specially
concerns the relations between the machinery manufacturer
and the producer of raw materials, the latter has deducted,
in respect of the part of his machinery that has been
wasted, a quantity of iron equal to its value. He
exchanges this with the machinery manufacturer, so that each
of them pays the other in kind, and this process has nothing
to do with the division of revenue between them.

So much for this question, to which we shall return in
connection with the circulation of capital.

In reality, the constant capital is replaced by being
constantly produced anew and in part by reproducing
itself. The part of the constant capital which enters
into the consumable product is however paid for out of the
living labour which enters into the non-consumable
products. Because the latter labour is not paid for in
its own products, it can resolve the whole consumable
product into income. A part of the constant capital,
considered as part of the annual product, is only seemingly
constant capital. Another part, although it enters
into the total product, does not enter into the consumable
product either as a component part of its value or as a
use-value, but is replaced in kind, remaining always
incorporated in production.

Here we have considered how the total consumable product
is divided up and resolved into all the component parts of
value and conditions of production that have entered into
it.

But always there are, simultaneously and side by side,
the consumable product (which, in so far as it consists of
wages, is equal to the variable part of capital), the
production of the consumable product, and the production of
all parts of the constant capital required for its
production, whether it enters into it or not. In the
same way, each capital is always simultaneously divided into
constant and variable capital, and although the constant
capital, like the variable, is continuously replaced by new
products, it is always in existence in the same form, so
long as production of the same kind goes on.

| The relation between
the machinery manufacturer and the primary
producers—of iron, wood, etc.—is that they in
fact exchange with each other a part of their constant
capital (which has nothing in common with the transformation
of a part of the constant capital of one into revenue for
the other), because their products—although one is a
previous stage for the other— on both sides enter as
means of production into the constant capital of the
other. In return for the machinery which the producer
of iron, wood, etc., needs, he gives the machine builder
iron, wood, etc., to the value of the machine to be
replaced. This part of the machine builder’s constant
capital is for him just the same as seed is for the
peasant. It is part of his annual product which he
replaces in kind for himself and which is not resolved into
revenue for him. On the other hand, what is thus
replaced for the machine builder in the form of raw material
is not only the raw material contained in the iron
producer’s machine, but also the part of the value of this
machine which consists of labour added and wear and tear of
his own machinery. Thus it replaces for him not only
the wear and tear of his own machinery, but can be regarded
as accounting for (replacing) a part of the wear and tear
contained in the other machines.

It is true that this [machine sold] to the producer of
iron also contains component parts of value equal to the raw
material and the labour added. But on the other hand
there is correspondingly less wear and tear to be accounted
for in the other machines. This part of their constant
capital—that is, of the product of their annual labour
which replaces only the part of the value of the constant
capital representing wear and tear—therefore does not
enter into the machines which the machine builder sells to
other industrialists. But as regards the wear and tear in
these other machines, it is in fact replaced for the machine
builder by the above-mentioned two-thirds of a yard of
linen, the equivalent of 2 hours’ labour. With that,
he buys pig-iron, wood, etc., to the same value, and
replaces the wear and tear in another form of his constant
capital— [in the form] of iron. Thus a part of
his raw material replaces for him the value of his wear and
tear, in addition to the value of the raw material.
This raw material, however, as far as the producer of iron,
etc., is concerned, consists only of the labour-time added,
as the machinery of these producers of raw materials (iron,
wood, coal, etc.) has already been accounted for.

Thus all the elements of the linen are resolved into a
sum of quantities of labour equal to the amount of labour
newly added, but not equal to the amount of the total labour
contained in the constant capital and perpetuated by
reproduction.

That the quantity of labour consisting partly of living
labour, partly of pre-existing labour, which forms the total
of commodities which enter each year into individual
consumption, and thus are consumed as revenue, cannot be
greater than the labour added annually, is for that matter a
tautology. For the revenue is equal to the total of profit
and wages, which is equal to the total labour newly added,
and is equal to the total of the commodities which contain
an equal quantity of labour.

The case of iron producer and machine builder is only one
example. Between different spheres of production,
where the products of each enter into the other as means of
production, an exchange in kind takes place too (even though
concealed by a series of money transactions) between the
constant capital of the one and that of the other. In
so far as this is the case, the consumers of the final
product which enters into consumption have not got to
replace this constant capital, since it has already been
replaced. |

| <For example: in
the manufacture of locomotives, every day the waste amounts
to whole wagon-loads of iron filings. These are
collected and resold (or charged in account) to the same
iron manufacturer who supplied the locomotive manufacturer
with his principal raw material. The iron manufacturer
again gives them solid form, adding new labour to
them. However in the form in which he sends them back
to the locomotive manufacturer, these filings represent the
part of the value of the product which replaces raw
material. In this way not the same filings but constantly a
certain quantity of filings, move hither and thither between
the two factories. This part forms in turn the raw material
for each of the two branches of industry and, considered as
value, only wanders from one shop to the other.
Consequently it does not enter into the final product, but
is a replacement in kind of the constant capital.

In fact, every machine supplied by the machinery
manufacturer, from the standpoint of value, is divided into
raw material, labour added, and wear and tear of machinery,
But the whole total that enters into the production of other
spheres can only be equal in value to the total value of the
machinery minus the part of the constant capital which is
continually passing backwards and forwards between the
machinery manufacturer and the iron manufacturer.

One quarter of wheat sold by a peasant is as dear as
another, and a quarter of wheat that is sold is no cheaper
than one that is returned to the land in the form of
seed. Still, if the product equals 6 quarters, and the
quarter equals £3—each quarter containing
component parts of value for labour added, raw material and
machinery—and if he has to use 1 quarter as seeds, he
would only sell to consumers 5 quarters, equal to
£15. They would therefore not pay for the part
of the value contained in the 1 quarter of seed. And
this is the point: how can the value of the product sold be
equal to all the elements of value contained in
it—labour added and constant capital—and how in
spite of this does the consumer buy the product and yet not
pay for the constant capital?// |

| <In addition to
the foregoing:

The following quotation shows how little the insipid Say
even understood what the question was:

“In order fully to understand this
subject of revenues, it is necessary to take into
account that the entire value of a product is divided into
revenues for various persons; for the total value of
each product is composed of the profits of the landowners,
of the capitalists and of the craftsmen who have contributed
to bring it into existence. This is why the revenue of
society is equal to the gross value which has been
produced, and not, as the sect of Economists imagines, to
the net product of the land… If the only
revenues in a nation were the excess of the values produced
over the values consumed, this would lead to a truly absurd
result: that a nation which had consumed in the year values
as great as it had produced would have no […]
revenue.” ([Jean-Baptiste Say, Traité
d’économie politique…, troisième
edition], t. II, [Paris, 1817], pp. 63–64.)

In fact, in the year that was past it would have had a
revenue, but it would have none the next year. It is
not true that the annual product of labour, of which
the product of the annual labour forms only one part,
consists of revenue. On the other hand, it is correct
that this is the case with the part of the product which
each year enters into individual consumption. The
revenue, which consists only of added labour, is able to pay
for this product, which consists partly of added and partly
of preexisting labour; that is to say, the labour added in
these products can pay not only for itself but also for the
pre-existing labour, because another part of the
product—which also consists of labour added and
pre-existing labour—replaces only preexisting labour,
only constant capital.//

### [11. Additional Points: Smith’s Confusion on the Question of the Measure of Value. General Character of the Contradictions in Smith]

<To the points in Adam Smith’s theory just discussed
must be added that in his vacillations on the determination
of value —in addition to the apparent contradiction in
regard to wages —there is also confusion [of ideal: in
so far as he confuses the measure of value as the immanent
measure which at the same time forms the substance of value,
with the measure of value in the sense that money is called
a measure of value. With regard to the latter the
attempt is then made to square the circle —to find a
commodity whose value does not change to serve as a constant
measure for others. On the question of the relation of
the measure of value as money to the determination of value
by labour-time, see the first part of my work. This
confusion is also to be found in Ricardo in certain
passages.// |

| Adam Smith’s
contradictions are of significance because they contain
problems which it is true he does not solve, but which he
reveals by contradicting himself. His correct instinct
in this connection is best shown by the fact that his
successors take opposing stands based on one aspect of his
teaching or the other.

Footnotes

* Marx refers to
Garnier’s French translation of Adam Smith’s work from which
he takes the quotation. All excerpts from Smith’s
Wealth of Nations quoted by Marx in French in the
manuscript are printed in this edition in English as given
in Adam Smith, An Inquiry into the Nature and Causes of
the Wealth of Nations, Oxford University Press (O.U.P.)
(The World’s Classics), London 1928. In two
volumes. Those passages which Marx has taken from
Garnier’s French translation are marked in the
text ”Garnier”. The French extracts used
by Marx are printed in the Appendix.—Ed.

* The manuscript
reads: “Interchange of commodities and distribution
must be kept distinct each other.”—Ed.

* See pp. 41–42 of
the present volume.—Ed.

* In the manuscript:
“The natural price (or necessary
price)”.—Ed.

** In the
manuscript: “so”.—Ed.

*** In the
manuscript: “Man muss immer zwischen den beiden
unterscheiden.”—Ed.

* Marx refers to the
French translation from which he takes these
passages. See Appendix, p. 427.—Ed.

* Not
so.—Ed.

* All the same,
nearer the right view than the others. [This was added
by Marx in pencil.]—Ed.

* The beginning of
the sentence has been translated by Marx into German and
shortened as follows: “Wie Vergleichen des Produkt
und”.—Ed.

** In the
manuscript: “In”.—Ed.

*** In the
manuscript: “all”.—Ed.

**** In the
manuscript: “the”.—Ed.

**** In the
manuscript: “the”.—Ed.

***** In the
manuscript: “Also upon two circumstances hängt
die rate of profit ab”.—Ed.

* In the
manuscript: “return”—Ed.

** In the
manuscript: “whatever”.—Ed.

* In the
manuscript: “master-capitalist”.—Ed.

** In the
manuscript: “wealth”.—Ed.

* As for example
is now the case with the yarn or cloth of the cotton
manufacturers, as a result of the American Civil War.
The mere sale of their product is no guarantee for them that
it will be retransformed, since there is no cotton on the
market.

## [CHAPTER IV] Theories of Productive and Unproductive Labour

We come now to the last controversial point in Adam
Smith’s writings which we have to consider: the
distinction between productive and unproductive
labour.

| In Adam Smith’s
definition of what he calls productive labour as
distinguished from unproductive labour, we find the same
two-sided approach as we have found on every question up to
now. Jumbled together in his presentation we find two
definitions of what he calls productive labour, and to begin
with we will examine the first, the correct definition.

### [1. Productive Labour from the Standpoint of Capitalist Production: Labour Which Produces Surplus-Value]

Productive labour, in its meaning for capitalist
production, is wage-labour which, exchanged against the
variable part of capital (the part of the capital that is
spent on wages), reproduces not only this part of the
capital (or the value of its own labour-power), but in
addition produces surplus-value for the capitalist, It is
only thereby that commodity or money is transformed into
capital, is produced as capital. Only that wage-labour
is productive which produces capital. (This is the
same as saying that it reproduces on an enlarged scale the
sum of value expended on it, or that it gives in return more
labour than it receives in the form of wages.
Consequently, only that labour-power is productive which
produces a value greater than its own.)

The mere existence of a class of capitalists, and
therefore of capital, depends on the productivity of labour:
not however on its absolute, but on its relative
productivity. For example: if a day’s labour only
sufficed to keep the worker alive, that is, to reproduce his
labour-power, | speaking
in an absolute sense his labour would be productive because
it would be reproductive; that is to say, because it
constantly replaced the values ( equal to the value of its
own labour-power) which it consumed. But in the
capitalist sense it would not be productive because it
produced no surplus-value. (It produced in fact no new
value, but only replaced the old; it would have consumed
it—the value—in one form, in order to reproduce it in
the other. And in this sense it has been said that a
worker is productive whose production is equal to his own
consumption, and that a worker is unproductive who consumes
more than he reproduces.)

Productivity in the capitalist sense is based on relative
productivity—that the worker not only replaces an old
value, but creats a new one; that he materialises more
labour-time in his product than is materialised in the
product that keeps him in existence as a worker. It is
this kind of productive wage-labour that is the basis for
the existence of capital.

<Assuming, however, that no capital exists, but that
the worker appropriates his surplus-labour himself—the
excess of values that he has created over the values that he
consumes. Then one could say only of this labour that
it is truly productive, that is, that it creates new
values.>

### [2. Views of the Physiocrats and Mercantilists on Productive Labour]

This conception of productive labour follows naturally
from Adam Smith’s view of the origin of surplus-value, that
is, of the nature of capital. In so far as he holds to
this conception he is following a course that was taken by
the Physiocrats and even by the Mercantilists; he only frees
it from misconceptions, and in this way brings out its inner
kernel. Though wrong in thinking that only
agricultural labour is productive, the Physiocrats put
forward the correct view that from the capitalist standpoint
only that labour is productive which creates a
surplus—value; and in fact a surplus—value not
for itself, but for the owner of the conditions of
production; labour which produces a net product not for
itself, but for the landowner, For the surplus-value or
surplus labour-time is materialised in a surplus-produce or
net product. (But here again they have a wrong
conception of this; in as much as there is, for example,
more wheat than labourers and farmers eat; but also in the
case of cloth there is more than what the cloth
manufacturers—workman and master—need for their
own clothing.) Surplus-value itself is wrongly conceived,
because they have a wrong idea of value and reduce it to the
use-value of labour, not to labour-time, social, homogeneous
labour. Nevertheless, there remains the correct
definition that only the wage-labour which creates more
value than it costs is productive. Adam Smith frees
this definition from the wrong conception with which the
Physiocrats linked it.

If we go back from the Physiocrats to the Mercantilists,
there too we find one aspect of their theory which contains
the same view of productive labour, even though they were
not conscious of it, The basis of their theory was the idea
that labour is only productive in those branches of
production whose products, when sent abroad, bring back more
money than they have cost (or than had to be exported in
exchange for them); which therefore enabled a country to
participate to a greater degree in the products of
newly-opened gold and silver mines. They saw that in
these countries there was a rapid growth of wealth and of
the middle class. What in fact was the source of this
influence exerted by gold? Wages did not rise in
proportion to the prices of commodities; that is, wages
fell, and because of this relative surplus-labour increased
and the rate of profit rose—not because the labourer
had become more productive, but because the absolute wage
(that is to say, the quantity of means of existence which
the labourer received) was forced down—in a word,
because the position of the workers grew worse. In
these countries, therefore, labour was in fact more
productive for those who employed it. This fact was
linked with the influx of the precious metals; and it was
this, though they were only dimly aware of it, which led the
Mercantilists to declare that labour employed in such
branches of production was alone productive.

“The remarkable increase [of population] which has
taken place […] in almost every European State,
during the last fifty or sixty years, has perhaps proceeded
chiefly from the increased productiveness of the American
mines. An increased abundance of the precious
metals” (of course as a result of the fall in their
real value) “raises the price of commodities in a
greater proportion than the price of labour; it depresses
the condition of the labourer, and at the same time
increases the gains of his employer, who is thus induced to
enlarge his circulating capital to the utmost of his
ability, to hire as many hands as he has the means to
pay;—and it has been seen that this is precisely the
state of things most favourable to the increase of
people… Mr. Malthus observes, that ‘the
discovery of the mines of America, during the time that it
raised the rice of corn between three and four times, did
not nearly so much as double the price of
labour’. — The price of commodities
intended for home consumption (of corn for instance) does
not immediately rise in consequence of an influx of money;
but as the rate of profit in agricultural employments is
thus depressed below the rate of profit in manufactures,
capital will gradually be withdrawn from the former to the
latter: thus all capital comes to yield higher profits than
formerly, and a rise of profits is always equivalent to a
fall of wages” (John Barton, Observations on the
Circumstances which Influence the Condition of the Labouring
Classes of Society, London, 1817, pp. 29 sqq.).*

So, firstly, according to Barton, in the second half of
the eighteenth century there was a repetition of the same
phenomenon as that which, from the last third of the
sixteenth century and in the seventeenth, has given the
impulse to the Mercantile system. Secondly as only
exported goods were measured in gold and silver on the basis
of its reduced value, while those for home consumption
continued to be measured in gold and silver according to its
former value (until competition among the capitalists put an
end to this measuring by two different standards), labour in
the former branches of production appeared to be directly
productive, that is, creating surplus-value, through the
depression of wages below their former level.

### [3. The Duality in Smith’s Conception of Productive Labour. His First Explanation: the View of Productive Labour as Labour Exchanged for Capital]

The second, wrong conception of productive labour which
Smith develops is so interwoven with the correct one that
the two follow each other in rapid succession in the same
passage. To illustrate the first conception it is
therefore necessary to tear the quotations into separate
parts.

“There is one sort of labour which adds to the
value of the subject upon which it is bestowed: there is
another which has no such effect. The former, as it
produces a value, may be called productive; the
latter, unproductive labour. Thus the labour
of a manufacturer adds, generally, to the value of
the materials which he works upon, that of his own
maintenance, and of his master’s profit. The
labour of a menial servant, on the contrary, adds to the
value of nothing. Though the manufacturer has his
wages advanced to him by his master, he, in
reality, costs him no expense, the value of those wages
being generally restored, together with a profit, in
the improved value of the subject upon which his labour is
bestowed. But the maintenance of a menial servant
never is restored. A man grows rich by
employing a multitude of manufacturers: he grows poor, by
maintaining a multitude of menial servants” ([Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations,] b. II, ch. III, Vol. II,
ed. McCulloch, pp. 93 and 94).

In this passage—and in its continuation to be
quoted later, the contradictory definitions jostle each
other even more closely—what is in the main and
pre-eminently understood by productive labour is labour
which produces a surplus-value—“his master’s
profit”—in addition to the reproduction of the
value of “his” (the labourer’s) “own
maintenance”. Also, the industrialist could not
grow rich “by employing a multitude of
manufacturers” (working men), unless the latter, in
addition to the value which their own maintenance costs,
added also a surplus-value.

Secondly, however, in this passage Adam Smith treats as
productive labour, labour which in general “produces a
value”. |
Leaving this latter statement out of account for the moment,
however, we will first cite other passages in which the
first conception is partly repeated, partly formulated more
sharply, but particularly also further developed.

“If the quantity of food and
clothing, which were — consumed by unproductive, had
been distributed among productive hands, they would have
reproduced, together with a profit, the full value of
their consumption” (l.c., p. 109; b. II, ch. III).

Here the productive labourer is quite explicitly one who
not only produces for the capitalist the full value of the
means of subsistence contained in his wages, but reproduces
it for him “with a profit”.

Only labour which produces capital is productive
labour. Commodities or money become capital, however,
through being exchanged directly for labour-power, and
exchanged only in order to be replaced by more labour than
they themselves contain. For the use-value of
labour-power to the capitalist as a capitalist does not
consist in its actual use-value, in the usefulness of
this particular concrete labour—that it is spinning
labour, weaving labour, and so on. He is as little
concerned with this as with the use-value of the product of
this labour as such, since for the capitalist the product is
a commodity (even before its first metamorphosis), not an
article of consumption. What interests him in the
commodity is that it has more exchange-value than he paid
for it; and therefore the use-value of the labour is, for
him, that he gets back a greater quantity of labour-time
than he has paid out in the form of wages. Included
among these productive workers, of course, are all those who
contribute in one way or another to the production of the
commodity, from the actual operative to the manager or
engineer (as distinct from the capitalist), And so even the
latest English official report on the factories
“explicitly” includes in the category of
employed wage-labourers all persons employed in the
factories and in the offices attached to them, with the
exception of the manufacturers themselves (see the wording
of the report before the concluding part of this
rubbish).

Productive labour is here defined from the standpoint of
capitalist production, and Adam Smith here got to the very
heart of the matter, hit the nail on the head. This is
one of his greatest scientific merits (as Malthus rightly
observed, this critical differentiation between productive
and unproductive labour remains the basis of all bourgeois
political economy) that he defines productive labour as
labour which is directly exchanged with capital; that
is, he defines it by the exchange through which the
conditions of production of labour, and value in general,
whether money or commodity, are first transformed into
capital (and labour into wage-labour in its scientific
meaning).

This also establishes absolutely what unproductive
labour is. It is labour which is not exchanged
with capital, but directly with revenue, that is,
with wages or profit (including of course the various
categories of those who share as co-partners in the
capitalist’s profit, such as interest and rent). Where
all labour in part still pays itself (like for example the
agricultural labour of the serfs) and in part is directly
exchanged for revenue (like the manufacturing labour in the
cities of Asia), no capital and no wage-labour exists in the
sense of bourgeois political economy. These
definitions are therefore not derived from the material
characteristics of labour (neither from the nature of its
product nor from the particular character of the labour as
concrete labour), but from the definite social form, the
social relations of production, within which the labour is
realised. An actor, for example, or even a clown,
according to this definition, is a productive labourer if he
works in the service of a capitalist (an entrepreneur) to
whom he returns more labour than he receives from him in the
form of wages; while a jobbing tailor who comes to the
capitalist’s house and patches his trousers for him,
producing a mere use-value for him, is an unproductive
labourer. The former’s labour is exchanged with
capital, the latter’s with revenue. The former’s
labour produces a surplus-value; in the latter’s, revenue is
consumed.

Productive and unproductive labour is here throughout
conceived from the standpoint of the possessor of money,
from the standpoint of the capitalist, not from that of
the workman; hence the nonsense written by Ganilh,
etc., who have so little understanding of the matter that
they raise the question whether the labour or service or
function of the prostitute, flunkey, etc., brings in
returns. |

| A writer is a
productive labourer not in so far as he produces ideas, but
in so far as he enriches the publisher who publishes his
works, or if he is a wage-labourer for a capitalist.

The use-value of the commodity in which the labour of a
productive worker is embodied may be of the most futile
kind. The material characteristics are in no way
linked with its nature which on the contrary is only the
expression of a definite social relation of
production. It is a definition of labour which is
derived not from its content or its result, but from its
particular social form.

On the other hand, on the assumption that capital has
conquered the whole of production—and that therefore a
commodity (as distinct from a mere use-value) is no
longer produced by any labourer who is himself the owner of
the conditions of production for producing this
commodity—that therefore only the capitalist is the
producer of commodities (the sole commodity excepted
being labour-power)—then revenue must be exchanged
either against commodities which capital alone produces and
sells, or against labour, which just like those commodities
is bought in order to be consumed; that is, only for the
sake of its particular material characteristics, its
use-value—for the sake of the services which,
through its particular material characteristics, it renders
to its buyer and consumer. For the producer of these
services the services rendered are commodities. They
have a definite use-value (imaginary or real) and a definite
exchange-value. For the buyer, however, these services
are mere use-values, objects in which | he consumes his revenue.
These unproductive labourers do not receive their share of
revenue (of wages and profits), their co-partnership in the
commodities produced by productive labour, gratis: they must
buy their share in them; but they have nothing to do with
their production.

It is, however, in any case clear: the greater the part
of the revenue (wages and profit) that is spent on
commodities produced by capital, the less the part that can
be spent on the services of unproductive labourers, and vice
versa.

The determinate material form of the labour, and
therefore of its product, in itself has nothing to do with
this distinction between productive and unproductive
labour. For example, the cooks and waiters in a public
hotel are productive labourers, in so far as their labour is
transformed into capital for the proprietor of the
hotel. These same persons are unproductive labourers
as menial servants, inasmuch as I do not make capital out of
their services, but spend revenue on them. In fact,
however, these same persons are also for me, the consumer,
unproductive labourers in the hotel.

“That part of the annual produce of
the land and labour of any country which replaces a
capital, never is immediately employed to
maintain any but productive hands. It pays the
wages of productive labour only. That which is
immediately destined for constituting a revenue
either as profit or as rent, may maintain indifferently
either productive or unproductive hands. Whatever part
of his stock a man employs as a capital, he always expects
it to be replaced to him with a profit. He employs it,
therefore, in maintaining productive hands
only; and after having served in the function of a capital
to him, it constitutes a revenue to them. Whenever he
employs any part of it in maintaining unproductive
hands of any kind, that part is, from that
moment, withdrawn from his capital, and placed in his stock
reserved for immediate consumption” (l.c., p. 98).

To the extent that capital conquers the whole of
production, and therefore the home and petty form of
industry—in short, industry intended for
self-consumption, not producing
commodities—disappears, it is clear that the
unproductive labourers, those whose services are directly
exchanged against revenue, will for the most part be
performing only personal services, and only an
inconsiderable part of them (like cooks, seamstresses,
jobbing tailors and so on) will produce material
use-values. That they produce no commodities
follows from the nature of the case. For the commodity
as such is never an immediate object of consumption, but a
bearer of exchange-value. Consequently only a quite
insignificant part of these unproductive labourers can play
a direct part in material production once the capitalist
mode of production has developed. They participate in
it only through the exchange of their services against
revenue. This does not prevent, as Adam Smith remarks,
the value of the services of these unproductive labourers
being determined and determinable in the same (or an
analogous) way as that of the productive labourers: that is,
by the production costs involved in maintaining or producing
them. Other factors also come into play in this
connection, but they are not relevant here.

| The labour-power of
the productive labourer is a commodity for the labourer
himself. So is that of the unproductive
labourer. But the productive labourer produces
commodities for the buyer of his labour-power. The
unproductive labourer produces for him a mere use-value, not
a commodity; an imaginary or a real use-value. It is
characteristic of the unproductive labourer that he produces
no commodities for his buyer, but indeed receives
commodities from him.

“The labour of some of the most
respectable orders in the society is, like that of menial
servants, unproductive of any value… The
sovereign, for example, with all the officers both of
justice and war who serve under him, the whole army and
navy, are unproductive labourers. They are the
servants of the public, and are maintained by a part of the
annual produce of the industry of other people…
In the same class must be ranked.., churchmen, lawyers,
physicians, men of letters of all kinds; players, buffoons,
musicians, opera-singers, opera-dancers, etc.” (l.c.,
pp. 94-95).

It itself, as has been said, this distinction between
productive and unproductive labour has nothing to do either
with the particular speciality of the labour or with the
particular use-value in which this special labour is
incorporated. In the one case the labour is exchanged
with capital, in the other with revenue. In the one
case the labour is transformed into capital, and creates a
profit for the capitalist; in the other case it is an
expenditure, one of the articles in which revenue is
consumed. For example, the workman employed by a piano
maker is a productive labourer. His labour not only
replaces the wages that he consumes, but in the product, the
piano, the commodity which the piano maker sells, there is a
surplus-value over and above the value of the wages.
But assume on the contrary that I buy all the materials
required for a piano (or for all it matters the labourer
himself may possess them), and that instead of buying the
piano in a shop I have it made for me in my house. The
workman who makes the piano is now an unproductive labourer,
because his labour is exchanged directly against my
revenue.

### [4. Adam Smith’s Second Explanation: the View of Productive Labour as Labour Which Is Realised in a Commodity]

It is however clear that in the same measure as capital
subjugates to itself the whole of production—that is
to say, that all commodities are produced for the market and
not for immediate consumption, and the productivity of
labour rises in this same measure—there will also
develop more and more a material difference between
productive and unproductive labourers, inasmuch as the
former, apart from minor exceptions, will exclusively
produce commodities, which the latter, with minor
exceptions, will perform only personal services. Hence
the former class will produce immediate, material wealth
consisting of commodities, all commodities except
those which consist of labour-power itself. This is
one of the aspects which lead Adam Smith to put forward
other points of difference, in addition to the first and in
principle determining specific difference between productive
and unproductive labour. Thus, following through
various associations of ideas, he says:

“The labour of a menial
servant” (as distinct from that of a manufacturer)
“adds to the value of nothing … the
maintenance of a menial servant never is
restored. A man grows rich by employing a
multitude of manufacturers; he grows poor, by maintaining a
multitude of menial servants. The labour of the
latter, however, has its value, and deserves its
reward as well as that of the former. But the labour
of the manufacturer fixes and realises itself in some
particular subject or vendible commodity, which lasts for
some time at least after that labour is past. It
is, as it were, a certain quantity of labour stocked and
stored up to be employed, if necessary, upon some other
occasion. That subject, or what is the same thing, the
price of that subject, can afterwards, if necessary, put
into motion a quantity of labour equal to that which had
originally produced it. The labour of the menial
servant, | on the
contrary, does not fix or realise itself in any
particular subject or vendible commodity. His
services generally perish in the very instant of their
performance, and seldom leave any trace or value
behind them, for which an equal quantity of service
could afterwards be procured. The labour of
some of the most respectable orders in the society is, like
that of menial servants, unproductive of […]
value, and does not fix or realise itself in any
permanent subject, or vendible commodity” (l.c.,
pp. 93-94 passim).

To define the unproductive labourer we here have the
following determinants, which at the same time reveal the
links in Adam Smith’s train of thought:

It (the labour of the unproductive
labourer) is “unproductive of […] value”,
“adds to the value of nothing”, “the
maintenance” (of the unproductive labourer)
“never is restored”, “[it] does not
fix or realise itself in any particular subject or
vendible commodity”. On the contrary,
“his services generally perish in the very instant of
their performance, and seldom leave any trace or value
behind them for which an equal quantity of service could
afterwards be procured”. Finally, his
labour “does* not
fix or realise itself in any permanent subject or
vendible commodity”.

Here “productive of value” or
“unproductive of value” is used in a different
sense from that in which these terms were used
originally. The reference is no longer to the
production of a surplus-value, which in itself implies the
reproduction of an equivalent for the value consumed.
But according to this presentation the labour of a labourer
is called productive in so far as he replaces the consumed
value by an equivalent, by adding to any material, through
his labour, a quantity of value equal to that which was
contained in his wages. Here the definition by social
form, the determination of productive and unproductive
labourers by their relation to capitalist production, is
abandoned. From Chapter IX of Book IV (where Adam
Smith criticises the doctrine of the Physiocrats), it can be
seen that he came to make this aberration as a result partly
of his opposition to the Physiocrats and partly under their
influence. If a labourer merely replaces each year the
equivalent of his wages, then for the capitalist he is not a
productive labourer. He does indeed replace his wages,
the purchase price of his labour. But the transaction
is absolutely the same as if this capitalist had bought the
commodity which this labourer produces. He pays for
the labour contained in the constant capital and in the
wages. He possesses the same quantity of labour in the
form of the commodity as he had before in the form of
money. Its money is not thereby transformed into
capital. In this case it is the same as if the
labourer himself owned his conditions of production.
He must each year deduct the value of the conditions of
production from the value of his annual product, in order to
replace them. What he consumed or could consume
annually would be that portion of the value of his product
equal to the new labour added to his constant capital during
the year. In this case, therefore, it would not be
capitalist production.

The first reason why Adam Smith calls this kind of labour
“productive” is that the Physiocrats call it
“stérile”* and “nonproductive”.

Thus Adam Smith tells us in the chapter referred to:

“First, this class” (namely the
industrial classes, who do not carry on agriculture),
“it is acknowledged “ [by the Physiocrats],
“reproduces annually the value of its own
annual consumption, and continues, at least, the existence of the
stock or capital which maintains and employs it…
Farmers and country labourers, indeed, over and above the
stock which maintains and employs them, reproduce annually a
neat produce, a free rent to the landlord .., the
labour of farmers and country labourers is certainly more
productive than that of merchants, artificers, and
manufacturers. The superior produce of the one class,
however, does not render the other barren or
unproductive” ([Wealth of Nations O.U.P.
edition, Vol. II, pp. 294-95], [Garnier], l.c., t, III,
p. 530).

Here, therefore, Adam Smith falls back into the
Physiocratic |
standpoint. The real “productive labour”,
which produces a surplus-value and therefore a “neat
produce”, is agricultural labour. He abandons
his own view of surplus-value and accepts that of the
Physiocrats. At the same time he asserts, as against
the Physiocrats, that manufacturing (and according to him,
also commercial) labour is nevertheless also productive,
even if not in this highest sense of the word. He
therefore drops the definition by social form, the
definition of what a “productive labourer” is
from the standpoint of capitalist production; and asserts,
in opposition to the Physiocrats, that the non-agricultural,
industrial class reproduces its own wages, that is, it does
after all produce a value equal to the value it consumes,
and thereby “continues, at least, the existence of the
stock or capital which employs it”. Hence
arises, under the influence of and in contradiction to the
Physiocrats, his second definition of what is
“productive labour.

“Secondly,” says Adam Smith,
“it seems, on this account, altogether improper to
consider artificers, manufacturers, and merchants, in the
same light as menial servants. The labour of menial
servants does not continue the existence of the fund which
maintains and employs them. Their maintenance and
employment is altogether at the expense of their masters,
and the work which they perform is not of a nature to repay
expense. That work consists in services
which perish generally in the very instant of their
performance, and does not fix or realise itself in
any vendible commodity, which can replace the value of their
wages and maintenance. The labour, on the
contrary, of artificers, manufacturers, and merchants,
naturally does fix and realise itself in some such
vendible commodity. It is up on this account that,
in the chapter in which I treat of productive and
unproductive labour, I have classed artificers,
manufacturers, and merchants among the productive
labourers, and menial servants among the barren or
unproductive” ([ibid., p. 295], [Garnier],
l.c., p. 531).

As soon as capital has mastered the whole of production,
revenue, in so far as it is at all exchanged against labour,
will not be exchanged directly against labour which produces
commodities, but against mere services.
It is exchanged partly against commodities which are
to serve as use-values, and partly against services,
which as such are consumed as use-values.

A commodity—as distinguished from
labour-power itself—is a material thing confronting
man, a thing of a certain utility for him, in which a
definite quantity of labour is fixed or materialised.

So we come to the definition already in essence contained
in point I: a productive labourer is one whose labour
produces commodities; and indeed such a labourer does
not consume more commodities than he produces, than his
labour costs. His labour fixes and realises itself
“in some such vendible commodity”,
“in any vendible commodity which can replace the
value of their wages and maintenance”—(that
is, of the workers who produced these commodities). By
producing commodities the productive worker constantly
reproduces the variable capital which he constantly consumes
in the form of wages. He constantly produces the fund
which pays him, “which maintains and employs
him”.

In the first place. Adam Smith naturally
includes in the labour which fixes or realises itself in a
vendible and exchangeable commodity all intellectual labours
which are directly consumed in material production.
Not only the labourer working directly with his hands or a
machine, but overlooker, engineer, manager, clerk,
etc.—in a word, the labour of the whole personnel
required in a particular sphere of material production to
produce a particular commodity, whose joint labour
(co-operation) is required for commodity production.
In fact they add their aggregate labour to the constant
capital, and increase the value of the product by this
amount. (How far is this true of bankers, etc.?)

| Secondly, Adam
Smith says that on the whole, “generally”, this
is not the case with the labour of unproductive
labourers. Even though capital has conquered material
production, and so by and large home industry has
disappeared, and the industry of the small craftsman who
makes use-values directly for the consumer at his home
—even then, Adam Smith knows quite well, a seamstress
whom I get to come to my house to sew shirts, or workmen who
repair furniture, or the servant who scrubs and cleans the
house, etc., or the cook who gives meat and other things
their palatable form, fix their labour in a thing and in
fact increase the value of these things in exactly the same
way as the seamstress who sews in a factory, the engineer
who repairs the machine, the labourers who clean the
machine, or the cook who cooks in a hotel as the
wage-labourer of a capitalist. These use-values are
also, potentially, commodities; the shirts may be sent to
the pawnshop, the house resold, the furniture put up to
auction, and so on. Thus these persons have
potentially also produced commodities and added value to the
objects on which they have worked. But this is a very
small category among unproductive workers, and does not
apply either to the mass of menial servants or to parsons,
government officials, soldiers, musicians and so on.

But however large or small the number of these
“unproductive labourers” may be, this much at
any rate is evident—and is admitted by the limitation
expressed in the phrase “services which perish
generally in the very instant of their
performance”, etc.— that neither the special
kind of labour nor the external form of its product
necessarily make it “productive” or
“unproductive”. The same labour can be
productive when I buy it as a capitalist, as a producer, in
order to create more value, and unproductive when I buy it
as a consumer, a sender of revenue, in order to consume its
use-value, no matter whether this use-value perishes with
the activity of the labour-power itself or materialises and
fixes itself in an object.

The cook in the hotel produces a commodity for the person
who as a capitalist has bought her labour—the hotel
proprietor; the consumer of the mutton chops has to pay for
her labour, and this labour replaces for the hotel
proprietor (apart from profit) the fund out of which he
continues to pay the cook. On the other hand if I buy
the labour of a cook for her to cook meat, etc., for me, not
to make use of it as labour in general but to enjoy it, to
use it as that particular concrete kind of labour, then her
labour is unproductive, in spite of the fact that this
labour fixes itself in a material product and could just as
well (in its result) be a vendible commodity, as it in fact
is for the hotel proprietor. The great difference (the
conceptual difference) however remains: the cook does not
replace for me (the private person) the fund from which I
pay her, because I buy her labour not as a value-creating
element but purely for the sake of its use-value. Her
labour as little replaces for me the fund with which I pay
for it, that is, her wages, as, for example, the dinner I
eat in the hotel in itself enables me to buy and eat the
same dinner again a second time. This distinction
however is also to be found between commodities. The
commodity which the capitalist buys to replace his constant
capital (for example, cotton material, if he is a cotton
printer) replaces its value in the printed cotton. But
if on the other hand he buys it in order to consume the
cotton itself, then the commodity does not replace his
outlay.

The largest part of society, that is to say the working
class, must incidentally perform this kind of labour for
itself; but it is only able to perform it when it has
laboured “productively”. It can only cook
meat for itself when it has produced a wage with which to
pay for the meat; and it can only keep its furniture and
dwellings clean, it can only polish its boots, when it has
produced the value of furniture, house rent and boots.
To this class of productive labourers itself, therefore, the
labour which they perform for themselves appears as
“unproductive labour”. This unproductive
labour never enables them | to repeat the same
unproductive labour a second time unless they have
previously laboured productively.

Thirdly. On the other hand: an entrepreneur
of theatres, concerts, brothels, etc., buys the temporary
disposal over the labour-power of the actors, musicians,
prostitutes, etc.—in fact in a roundabout way that is
only of formal economic interest; in its result the process
is the same—he buys this so-called “unproductive
labour”, whose “services perish in the very
instant of their performance and do not fix or realise
themselves “any permanent”
(“particular” is also used) “subject or
vendible commodity” (apart from themselves). The
sale of these to the public provides him with wages and
profit. And these services which he has thus bought
enable him to buy them again; that is to say, they
themselves renew the fund from which they are paid
for. The same is true for example of the labour of
clerks employed by a lawyer in his office—except for
the fact that these services as a rule also embody
themselves in very bulky “particular subjects”
in the form of immense bundles of documents.

It is true that these services are paid for to the
entrepreneur out of the revenue of the public. But it
is no less true that this holds good of all products in so
far as they enter into individual consumption. It is
true that the country cannot export these services as such;
but it can export those who perform the services. Thus
France exports dancing masters, cooks, etc., and Germany
schoolmasters. With the export of the dancing master,
or the schoolmaster, however, his revenue is also exported,
while the export of dancing shoes and books brings a return
to the country.

If therefore on the one hand a part of the so-called
unproductive labour embodies itself in material use-values
which might just as well be commodities (vendible
commodities), so on the other hand a part of the services in
the strict sense which assume no objective form—which
do not receive an existence as things separate from those
performing the services, and do not enter into a commodity
as a component part of its value—may be bought with
capital (by the immediate purchaser of the labour),
may replace their own wages and yield a profit for
him. In short, the production of these services can be
in part subsumed under capital, just as a part of the labour
which embodies itself in useful things is bought directly by
revenue and is not subsumed under capitalist production.

Fourthly. The whole world of
“commodities” can be divided into two great
parts. First, labour-power; second, commodities as
distinct from labour-power itself. As to the purchase
of such services as those which train labour-power, maintain
or modify it, etc., in a word, give it a specialised form or
even only maintain it—thus for example the
schoolmaster’s service, in so far as it is
“industrially necessary” or useful; the doctor’s
service in so far as he maintains health and so conserves
the source of all values, labour-power itself—these
are services which yield in return “a vendible
commodity, etc.”, namely labour-power itself, into
whose costs of production or reproduction these services
enter. Adam Smith knew however how little
“education’ enters into the costs of production
of the mass of working men. And in any case the
doctor’s services belong to the faux frais* of production.
They can be counted as the cost of repairs for
labour-power. Let us assume that wages and profit fell
simultaneously in total value, from whatever cause (for
example, because the nation had grown lazier), and at the
same time in use value (because labour had become less
productive owing to bad harvests, etc.), in a word, that the
part of the product whose value is equal to the revenue
declines, because less new labour has been added in the past
year and because the labour added has been less
productive. If in such conditions capitalist and workman
wanted to consume the same amount of value in material
things as they did before, they would have to buy less of
the services of the doctor, schoolmaster, etc. And if
they were compelled to continue the same outlay for both
these services, then they would have to restrict their
consumption of other things It is therefore clear that the
labour of the doctor and the schoolmaster does not directly
create the fund out of which they are paid, although their
labours enter into the production costs of the fund which
creates all values whatsoever—namely, the production
costs of labour-power.

| Adam Smith
continues:

“Thirdly, it seems, upon every
supposition, improper to say, that the labour of artificers,
manufacturers, and merchants, does not increase the real
revenue of the society. Though we should suppose,
for example, as it seems to be supposed in this system, that
the value of the daily, monthly, and yearly consumption of
this class was exactly equal to that of its daily, monthly,
and yearly production; yet it would not from thence follow,
that its labour added nothing to the real revenue, to the
real value of the annual produce of the land and labour of
the society. An artificer, for example, who, in the
first six months after harvest, executes ten pounds worth of
work, though he should, in the same time, consume ten pounds
worth of corn, and other necessaries, yet really adds the
value of ten pounds to the annual produce of the land and
labour of the society. While he has been consuming a
half-yearly revenue of ten pounds worth of corn and other
necessaries, he has produced an equal value of work, capable
of purchasing, either to himself, or to some other person,
an equal half-yearly revenue. The value, therefore, of
what has been consumed and produced during these six months,
is equal, not to ten, but to twenty pounds. It is
possible, indeed, that no more than ten pounds worth of this
value may ever have existed at any one moment of time.
But if the ten pounds worth of corn and other necessaries
which were consumed by the artificer, had been consumed by a
soldier, or by a menial servant, the value of that part of
the annual produce which existed at the and of the six
months, would have been ten pounds less than it actually is
in consequence of the labour of the artificer. Though
the value of what the artificer produces, therefore, should
not, at any one moment of time, be supposed greater than the
value he consumes, yet, at every moment of time, the
actually existing value of goods in the market is, in
consequence of what he produces, greater than it otherwise
would be” ([Wealth of Nations, O.U.P. edition,
Vol. II, pp. 295-96], [Garnier], l.c., t. III,
pp. 531-33).

Is not the [total] value of the commodities at any time
in the market greater as a result of the “unproductive
labour” than it would no without this labour?
Are there not at every moment of time in the market,
alongside wheat and meat, etc., also prostitutes, lawyers,
sermons, concerts, theatres, soldiers, politicians,
etc.? These lads or wenches do not get the corn and
other necessaries or pleasures for nothing. In return
they give or pester us with their services, which as such
services have a use-value and because of their production
costs also an exchange-value. Reckoned as consumable
articles, there is at every moment of time, alongside the
consumable articles existing in the form of goods, a
quantity of consumable articles in the form of
services. The total quantity of consumable articles is
therefore at every moment of time greater than it would be
without the consumable services. Secondly, however,
the value too is greater; for it is equal to the value of
the commodities which are given for these services, and is
equal to the value of the services themselves. Since
here, as in every exchange of commodity for commodity, equal
value is given for equal value, the same value is therefore
present twice over, once on the buyer’s side and once on the
seller’s.

<Adam Smith goes on to say in reference to the
Physiocrats:

“When the patrons of this system
assert, that the consumption of artificers,
manufacturers, and merchants, is equal to the value of
what they produce, they probably mean no more than that
their revenue, or the fund destined for their
consumption, is equal to it” (that is, to the
value of what they produce) ([ibid., p. 296], [Garnier]
l.c., p. 533).

In this the Physiocrats were right in relation to workmen
and employers taken together, rent forming only a special
category of the latter’s profit.>

| <Adam Smith
notes on the same occasion—that is, in his criticism
of the Physiocrats—Book IV, Chapter IX (edit. Garnier,
t. III):

“The annual produce of the land and
labour of any society can be augmented only in two ways;
either, first, by some improvement in the
productive powers of the useful labour actually
maintained within it; or, secondly, by some increase in
the quantity of that labour. The improvement in
the productive powers of useful labour depends, first,
upon the improvement in the ability of the workman;
and, secondly, upon that of tire machinery with which he
works… The increase in the quantity of
useful labour actually employed within any society must
depend altogether upon the increase of tire capital which
employs it; and the increase of that capitol, a
must be exactly equal to the amount of the savings
from the revenue, either of the particular persons who
manage and direct the employment of that capital, or of some
other persons, who lend it to them” ([ibid., p. 297],
[Garnier], pp. 534-35).

Here we have a double vicious circle. First:
the annual product is augmented by greater productivity of
labour. All means to augment this productivity (in so
far as this is not due to accidents of nature such as a
specially favourable season, etc.) require an increase of
capital. But in order to increase the capital, the
annual product of labour must be increased. First
circle. Secondly: the annual product can be
augmented by an increase in the quantity of labour
employed. The quantity of labour employed, however,
can only be increased if the capital which employs it is
first increased. Second circle. Adam Smith helps
himself out of both vicious circles with
“savings”, by which he means in fact the
transformation of revenue into capital.

To think of the whole profit as “revenue” for
the capitalist is already in itself wrong. The law of
capitalist production requires on the contrary that a part
of the surplus-labour, of the unpaid labour, performed by
the workman should be transformed into capital. When
the individual capitalist functions as a
capitalist—that is, as a functionary of
capital—he himself may think of this as saving; but it
also appears to him as a necessary reserve fund. The
increase of the quantity of labour does not however depend
only on the number of workmen, but also on the length of the
working-day. The quantity of labour can therefore be
increased without increasing the part of the capital that is
converted into wages. Similarly, on this assumption
there would be no need to increase the machinery, etc.
(although it would wear out more quickly; but this makes no
difference). The only thing that would have to be
increased is the part of the raw material that resolves
itself into seed, etc. And it remains true that,
taking a single country (excluding foreign trade),
surplus-labour must first be applied to agriculture before
it becomes possible in the industries which get their raw
materials from agriculture. A part of these raw
materials, such as coal, iron, wood, fish, etc. (the
last-named for example as manure), in a word, all
fertilisers other than animal manures, can be got by merely
increasing the labour (the number of labourers remaining the
same). There can therefore be no lack of these.
On the other hand it has been shown above that the increase
of productivity in its origin always presupposes merely the
concentration of capital, not the accumulation of
capital. Later however each process supplements the
other.>

<The reason why the Physiocrats preached laissez
faire, laissez passer, in short, free competition, is
correctly stated in the following passages from Adam
Smith:

“The trade which is carried on
between these two different sets of people” (country
and town) “consists ultimately in a certain quantity
of rude produce exchanged for a certain quantity of
manufactured produce. The dearer the latter,
therefore, the cheaper the former; and whatever tends in any
country to raise the price of manufactured produce, tends to
lower that of the rude produce of the land, and thereby to
discourage agriculture.”

But all fetters and restrictions placed on manufactures
and foreign trade make manufactured commodities, etc.,
dearer. Therefore, etc. (Smith, [ibid., p.308]
[Garnier trans], l.c., pp. 554-56).

| Smith’s second view
of “productive” and “unproductive
labour”—or rather the view that is interwoven
with his other view—therefore amounts to this: that
the former is labour which produces commodities, and
the latter is labour which does not produce “any
commodity”. He does not deny that the one kind
of labour, equally with the other, is a
commodity. See above: “The labour of the
latter …has its value, and deserves its reward as
well as that of the former” (that is, from the
economic standpoint; there is no question of moral or other
standpoints in the case of either the one or the other kind
of labour). The concept commodity however implies that
labour embodies, materialises, realises itself in its
product. Labour itself, in its immediate being, in its
living existence, cannot be directly conceived as a
commodity, but only labour-power, of which labour itself is
the temporary manifestation. Just as it is only in
this way that wage-labour in the true sense can be
explained, so it is with “unproductive labour”,
which Adam Smith throughout defines by the costs of
production required to produce the “unproductive
labourer”. A commodity must therefore be
conceived as something different from labour itself.
Then, however, the world of commodities is divided into two
great categories:

On one side, labour-power.

On the other side, commodities themselves.

The materialisation, etc., of labour is however not to be
taken in such a Scottish sense as Adam Smith conceives
it. When we speak of the commodity as a
materialisation of labour—in the sense of its
exchange-value—this itself is only an imaginary, that
is to say, a purely social mode of existence of the
commodity which has nothing to do with its corporeal
reality; it is conceived as a definite quantity of social
labour or of money. It may be that the concrete labour
whose result it is leaves no trace in it. In
manufactured commodities this trace remains in the outward
form given to the raw material. In agriculture, etc.,
although the form given to the commodity, for example wheat
or oxen and so on, is also the product of human labour, and
indeed of labour transmitted and added to from generation to
generation, yet this is not evident in the product. In
other forms of industrial labour the purpose of the labour
is not at all to alter the form of the thing, but only its
position. For example, when a commodity is brought
from China to England, etc., no trace of the labour involved
can be seen in the thing itself (except for those who call
to mind that it is not an English product). Therefore
the materialisation of labour in the commodity must not be
understood in that way. (The mystification here arises
from the fact that a social relation appears in the form of
a thing).

It remains true, however, that the commodity appears as
past, objectivised labour, and that therefore, if it does
not appear in the form of a thing, it can only appear in the
form of labour-power itself; but never directly as living
labour itself (except only in a roundabout way which in
practice seems the same, but whose significance lies in the
determination of different rates of wages). Productive
labour would therefore be such labour as produces
commodities or directly produces, trains, develops,
maintains or reproduces labour-power itself. Adam
Smith excludes the latter from his category of productive
labour; arbitrarily, but with a certain correct
instinct—that if he included it, this would open the
flood-gates for false pretensions to the title of productive
labour.

In so far therefore as we leave labour-power itself out
of account, productive labour is labour which produces
commodities, material products, whose production has cost a
definite quantity of labour or labour-time. These
material products include all products of art and science,
books, paintings, statues, etc., in so far as they take the
form of things. In addition, however, the product of
labour must be a commodity in the sense of being
“some vendible commodity”, that is to say, a
commodity in its first form, which has still to pass through
its metamorphosis. (A manufacturer may himself
construct a machine if he cannot get one built anywhere
else, not to sell it but to make use of it as a
use-value. However, he then wears it out as a part of
his constant capital and so sells it piecemeal in the form
of the product which it has helped to make.)

| Certain labours of
menial servants may therefore equally well take the form of
(potential) commodities and even of the same
use-values considered as material objects. But they
are not productive labour, because in fact they produce not
“commodities” but immediate
“use-values”. As for labours which
are productive for their purchaser or employer
himself—as for example the actor’s labour for the
theatrical entrepreneur—the fact that their purchaser
cannot sell them to the public in the form of commodities
but only in the form of the action itself would show that
they are unproductive labours.

Apart from such cases, productive labour is such as
produces commodities, and unproductive labour
is such as produces personal services. The former
labour is represented in a vendible thing; the latter must
be consumed while it is being performed. The former
includes (except for that labour which creates labour-power
itself) all material and intellectual wealth—meat as
well as books—that exists in the form of things; the
latter covers all labours which satisfy any imaginary or
real need of the individual—or even those which are
forced upon the individual against his will.

The commodity is the most elementary form of
bourgeois wealth. The explanation of “productive
labour” as labour which produces
“commodities” also corresponds, therefore, to a
much more elementary point of view than that which defines
productive labour as labour which produces capital.

Adam Smith’s opponents have disregarded his first,
pertinent definition, and instead have concentrated on the
second, pointing out the unavoidable contradictions and
inconsistencies to which it gives rise. And their
attacks were made all the easier for them by their
insistence on the material content of the labour, and
particularly the specific requirement that the labour must
fix itself in a more or less permanent product.
We shall see in a moment what it was that particularly gave
rise to the polemics.

But first this further point. Adam Smith says of
the Physiocratic system that its great merit is that it
represented the wealth of nations as consisting

“not in the unconsumable riches of
money, but in the consumable goods annually produced by the
labour of the society”( [Wealth of Nations,
O.U.P. edition, p. 299], [Garnier] t. III, l. IV, ch. IX,
p. 538).

Here we have a deduction of his second definition of
productive labour. The definition of surplus-value
naturally depended on the form in which value itself was
conceived. In the Monetary and Mercantile systems it
is therefore presented as money; by the Physiocrats,
as the produce of the land, as agricultural product; finally
in Adam Smith’s writings as commodity in
general. In so far as the Physiocrats touch on the
substance of value, they resolve it entirely into pure
use-value (matter, corporeal object), just as the
Mercantilists resolve it into the pure form of value, the
form in which the product makes itself manifest as
general social labour: money. With Adam Smith, both
conditions of the commodity—use-value and
exchange-value—are combined; and so all labour is
productive which manifests itself in any use-value, any
useful product. That it is labour that manifests
itself in the product already implies that the product is
equal to a definite quantity of general social labour.
As against the Physiocrats, Adam Smith re-establishes the
value of the product as the essential basis of bourgeois
wealth; but on the other hand he divests value of the purely
fantastic form—that of gold and silver—in which
it appeared to the Mercantilists. Every commodity is
in itself money. It must be recognised that at
the same time Adam Smith also falls back more or less into
the Mercantilist conception of
“permanency”—in fact,
inconsumability. We can recall the passage in Petty
(see my first volume, p. 109, where I quote from Petty’s
Political Arithmetick) where wealth is valued
according to the degrees in which it is imperishable, more
or less permanent, and finally gold and silver are set above
all other things as wealth that is “not
perishable”.

Adolphe Blanqui (Histoire de l’économie
politique, Bruxelles, 1839, p.152) says [of Adam
Smith]:

“In restricting the sphere of
wealth exclusively to those values which are embodied
in material substances, he erased from the book of
production the whole boundless mass of immaterial values,
daughters of the moral capital of civilised
nations,” etc.

### [5. Vulgarisation of Bourgeois Political Economy in the Definition of Productive Labour]

The polemics against Adam Smith’s distinction between
productive and unproductive labour were for the most part
confined to the dii minorum gentium* (among
whom moreover Storch was the most important); they are not
to be found in the work of any economist | of significance—of
anyone of whom it can be said that he made some discovery in
political economy. They are, however, the hobby-horse
of the second-rate fellows and especially of the
schoolmasterish compilers and writers of compendia, as well
as of dilettanti with facile pens and vulgarisers in
this field. What particularly aroused these polemics
against Adam Smith was the following circumstance.

The great mass of so-called “higher grade”
workers—such as state officials, military people,
artists, doctors, priests, judges, lawyers, etc.—some
of whom are not only not productive but in essence
destructive, but who know how to appropriate to themselves a
very great part of the “material” wealth partly
through the sale of their “immaterial”
commodities and partly by forcibly imposing the latter on
other people—found it not at all pleasant to be
relegated economically to the same class as clowns
and menial servants and to appear merely as people partaking
in the consumption, parasites on the actual producers (or
rather agents of production). This was a peculiar
profanation precisely of those functions which had hitherto
been surrounded with a halo and had enjoyed superstitious
veneration. Political economy in its classical period,
like the bourgeoisie itself in its parvenu period,
adopted a severely critical attitude to the machinery of the
State, etc. At a later stage it realised and—as
was shown too in practice—learnt from experience that
the necessity for the inherited social combination of all
these classes, which in part were totally unproductive,
arose from its own organisation.

In so far as those “unproductive labourers”
do not produce entertainment, so that their purchase
entirely depends on how the agent of production cares to
spend his wages or his profit—in so far on the
contrary as they are necessary or make themselves necessary
because of physical infirmities (like doctors), or spiritual
weakness (like parsons), or because of the conflict between
private interests and national interests (like statesmen,
all lawyers, police and soldiers)—they are regarded by
Adam Smith, as by the industrial capitalists themselves and
the working class, as incidental expenses of production,
which are therefore to be cut down to the most indispensable
minimum and provided as cheaply as possible. Bourgeois
society reproduces in its own form everything against which
it had fought in feudal or absolutist form. In the
first place therefore it becomes a principal task for the
sycophants of this society, and especially of the upper
classes, to restore in theoretical terms even the purely
parasitic section of these “unproductive
labourers”, or to justify the exaggerated claims of
the section which is indispensable. The
dependence of the ideological, etc., classes on the
capitalists was in fact proclaimed.

Secondly, however, a section of the agents of
production (of material production itself) were declared by
one group of economists or another to be
“unproductive”. For example, the
landowner, by those among the economists who represented
industrial capital (Ricardo). Others (for example
Carey) declared that the merchant in the true sense of the
word was an “unproductive” labourer. Then
even a third group came along who declared that the
“capitalists” themselves were unproductive, or
who at least sought to reduce their claims to material
wealth to “wages”, that is, to the wages of a
“productive labourer”. Many intellectual
workers seemed inclined to share the scepticism in regard to
the capitalist. It was therefore time to make a
compromise and to recognise the “productivity”
of all classes not directly included among the agents of
material production. One good turn deserves another;
and, as in the Fable of the Bees, it had to be
established that even from the “productive”,
economic standpoint, the bourgeois world with all its
“unproductive labourers” is the best of all
worlds. This was all the more necessary because the
“unproductive labourers” on their part were
advancing critical observations in regard to the
productivity of the classes who in general were
“fruges consumere nati”*;
or in regard to those agents of production, like landowners,
who do nothing at all, etc. Both the
do-nothings and their parasites had to be
found a place in this best possible order of things.

Thirdly: As the dominion of capital extended, and
in fact those spheres of production not directly related to
the production of material, wealth became also more and more
dependent on it— especially when the positive science
(natural sciences) were subordinated to it as serving
material production— | the sycophantic underlings of
political economy felt it their duty to glorify and justify
every sphere of activity by demonstrating that it was
“linked” with the production of material wealth,
that it was a means towards it; and they honoured everyone
by making him a “productive labourer” in the
“primary” sense, namely, a labourer who labours
in the service of capital, is useful in one way or another
to the enrichment of the capitalist, etc.

In this matter even such people as Malthus are to be
preferred, who directly defend the necessity and usefulness
of “unproductive labourers” and pure
parasites.

### [6. Advocates of Smith’s Views on Productive Labour. On the History of the Subject]

### [(a) Advocates of the First View: Ricardo, Sismondi]

It is not worth the trouble to examine in detail the
inanities of Germain Garnier (Smith’s translator), the Earl
of Lauderdale, Brougham, Say, Storch, and later Senior,
Rossi, and so on, in regard to this question. We shall
cite only a few characteristic passages.

But first a passage from Ricardo, in which he
shows that it is much more advantageous for the
“productive labourers” when the owners of
surplus-value (profit, rent) consume it in
“unproductive labourers” (as menial servants,
for instance) than in luxury products produced by the
“productive labourers.

<Sismondi, Nouveaux principes, t. I, p. 148,
accepts the correct statement of Smith’s distinction (as
also of course does Ricardo): the real distinction between
productive and unproductive classes is:

“The one always exchanges its labour
against the capital of a nation; the other always exchanges
it against a part of the national revenue.”

Sismondi—likewise following Adam
Smith—on surplus-value:

“Although the labourer, by his daily
labour, may have produced much more than his daily outlay,
after sharing with the landowner and the capitalist what
remains for him is seldom much beyond what is strictly
necessary for his existence” (Sismondi, Nouveaux
principes, etc., t. I, p. 87).

Ricardo says:

“If a landlord, or a capitalist,
expends his revenue in the manner of an ancient baron, in
the support of a great number of retainers, or menial
servants, he will give employment to much more labour, than
if he expended it on fine clothes, or costly furniture; on
carriages, on horses, or in the purchase of any other
luxuries. In both cases the net revenue would be the
same, and so would be the gross revenue, but the former
would be realised in different commodities. If my
revenue were 10,000 l., the same quantity nearly of
productive labour would be employed, whether I realised it
in fine clothes and costly furniture, etc.,etc,, or in a
quantity of food and clothing of the same value. If,
however, I realised my revenue in the first set of
commodities no more labour would be consequently
employed:— I should enjoy my furniture and my clothes,
and there would be an end of them; but if I realised my
revenue in food and clothing, and my desire was to employ
menial servants, all those whom I could so employ with my
revenue of 10,000 l., or with the food and clothing
which it would purchase, would be to be added to
the former demand for labourers, and this addition would
take place only because I chose this mode of expending my
revenue. As the labourers, then, are interested in
the demand for labour, they must naturally desire
that as much of the revenue as possible should be diverted
from expenditure on luxuries, to be expended in the support
of menial servants” ([David ] Ricardo, [On the]
Principles [of Political Economy, and Taxation,] third
edition, [London,] 1821, pp. 475-76).

### [(b) Early Attempts to Distinguish between Productive and Unproductive Labour (D’Avenant, Petty)]

D’Avenant quotes from an old statistician, Gregory
King, a list entitled Scheme of the Income and Expense of
the Several Families of England, calculated for the year
1688. In this, the erudite King divides the whole
nation into two main classes: “Increasing the
Wealth of the Kingdom—2,675,520 heads”, and
“Decreasing the Wealth of the
Kingdom—2,825,000 heads”; thus the former is the
“productive” class, the latter the
“unproductive”. The
“productive” class consists of Lords,
Baronets, Knights, Esquires, Gentlemen, Persons in Office
and Places, merchants in oversea trade, Persons in the Law,
Clergymen, freeholders, farmers, persons in liberal arts and
sciences, shopkeepers and tradesmen, artisans and
handicrafts, Naval Officers, Military Officers. As
against these, the “unproductive” class
consists of: common seamen, labouring people and out
servants (these are agricultural labourers and day
wage-labourers in manufacture), cottagers (who in
D’Avenant’s time were still a fifth of the total English
population), | common
soldiers, paupers, gipsies, thieves, beggars and vagrants
generally. D’Avenant explains this list of ranks
prepared by the learned King as follows:

“By which he means, That the First
Class of the People, from Land, Arts and Industry, maintain
themselves, and add every Year something to the Nation’s
General Stock; and besides this, out of their Superfluity,
contribute every Year so much to the maintenance of
Others. That of the Second Class, some partly maintain
themselves by Labour […] but that the rest, as most
of the Wives and Children of these, […] are nourish’d
at the Cost of Others; and are a Yearly Burthen to the
Publick, consuming Annuallv so much as would be otherwise
added to the Nation’s General Stock” (D’Avenant, An
Essay upon the Probable Methods of Making a People Gainers
in the Ballance of Trade, London, 1699, p. 50).

In addition to this, the following passage from D’Avenant
is rather characteristic of the views of the Mercantilists
on surplus-value:

It is “… the Exportation of our own Product that
must make England rich; to be Gainers in the Ballance of
Trade, we must carry out of our own Product, what will
purchase the Things of Foreign Growth that are needful for
our own Consumption, with some Overplus either in
Bullion or Goods to be sold in other Countries; which
Overplus is the Profit a Nation makes by Trade,
and it is more or less according to the natural Frugality of
the People that Export,” (a frugality which the Dutch
have, but not the English—l.c., pp. 46-47) “or
as from the low Price of Labour and Manufacture they can
afford the Commodity cheap, and at a rate not to be
under-sold in Foreign Markets” (D’Avenant, l.c.,
pp. 45-46).

<“… by what is Consum’d at
Home, one loseth only what another gets, and the Nation in
General is not at all the Richer; but all Foreign
Consumption is a clear and certain Profit” (An
Essay on the East-India Trade, etc., London,
1697). [In D’Avenant, Discourses on the Publick
Revenues, and on the Trade of England… Part II,
London, 1698, p. 31.]>

<This work printed in the form of an appendix
to another work of D’Avenant’s, which he tries to defend, is
not the same as the Considerations on the East-India
Trade, 1701, quoted by McCulloch.>

Incidentally, it must not be thought that these
Mercantilists were as stupid as they were made out to be by
the later Vulgar-Freetraders. In Volume II of his
Discourses on the Publick Revenues, and on the Trade of
England, etc., London, 1698, D’Avenant says among
other things:

“Gold and Silver are indeed the
Measure of Trade, but the Spring and Original of it, in all
Nations, is the Natural, or Artificial Product of the
Country, that is to say, what their Land, or what their
labour and Industry produces. And this is so true,
that a Nation may be suppos’d, by some Accident, quite
without the Species of Money, and yet, if the People are
numerous, industrious, vers’d in Traffick, skill’d in
Sea-Affairs, and if they have good Ports, and a Soil fertile
in variety* of
Commodities, such a people will have Trade, […] and,
they shall quickly get among ‘em, a plenty of Gold and
Silver**: So that the
real and effective Riches of a Country, is its Native
Product” (p.45). “Gold and Silver are so
far from being […] the only Things that deserve the
name of Treasure, or the Riches of a Nation that in truth,
Money is at Bottom no more than the Countries with which Men
in their dealings have been accustom’d to reckon
(p. 46). “We understand that to be Wealth which
maintains the Prince, and the general Body of his People, in
Plenty, Ease and Safety. We esteem that to be Treasure
which for the use of Man has been converted from Gold and
Silver, into Buildings and Improvements of the
Country. As also other Things convertible into
those Metals, as the Fruits of the Earth, Manufactures or
Foreign Commodities and stock of Shipping … even
perishable Goods, may be he1d the Riches of a Nation, if
they are convertible, tho’not converted into
Gold and Silver; and this we believe does not only hold
between Man and Man, […] but between one Country and
another” (pp. 60-64). “The Common People
being the Stomach of the Body Politick, […] that
Stomach” in Spain did not take the money as it should
have done, | and failed to
digest it. … “Trade and Manufactures are
the only Mediums by which such a digestion and distribution
of Gold and Silver can be made, as will be Nutritive to the
Body Politick” (pp. 62-63).

Moreover, Petty too had the conception of productive
labourers (though he also includes soldiers):

“Husbandmen, Seamen, Soldiers,
Artizans and Merchants, are the very Pillars of any
Common-Wealth: all the other great Professions, do rise
out of the infirmities and miscarriages of these; now
the Seaman is three of these four” (navigator,
merchant, soldier) ([William Petty,] Political
Arithmetick, etc. [in Several Essays in Political
Arithmetick], London, 1699, p. 177).
“… the Labour of Seamen, and Freight of Ships,
is always of the nature of an Exported Commodity, the
overplus whereof, above what is Imported, brings home
Money, etc.” (p. 179).

In this connection Petty also explains the advantages of
the division of labour:

“Those who have the command of the
Sea-Trade, may Work at easier Freight with more profit, than
others at greater:” (higher freight charges)
“for a Cloth must be cheaper made, when one”
etc., “another” etc. “so those who command
the Trade of Shipping, can build “ different sorts of
vessels for different purposes, “one sort of vessels
for the turbulent Sea, another for Inland Waters and Rivers
… one sort for War … another for
Burthen”, etc. … And this
“is” the chief of several Reasons, why the
Hollanders can go at less Freight than their Neighbours,
viz., because they can afford a particular sort of Vessels
for each particular Trade”* (l.c., pp. 179-80).

Here too Petty strikes quite a Smithian note when he
continues:

If taxes are taken from industrialists,
etc., in order to give [money] to those who in general are
occupied in ways “which produce no material
thing, or things of real use and value in the
Commonwealth: In this case, the Wealth of the
Publick will be diminished: Otherwise than as such
Exercises, are Recreations and Refreshments of the mind; and
which being moderately used, do qualify and dispose Men to
what in it self is more considerable” (l.c.,
p. 198). After computing how many people are needed
for industrial work “…The Remainder […]
may safely and without possible prejudice to the
Commonwealth, be employed in the Arts and Exercises of
Pleasure and Ornament: the greatest whereof is the
improvement of natural Knowledge” (l.c.,
p. 199). “There is much more to be gained by
Manufacture than Husbandry; and by Merchandize than
Manufacture…” (l.c., p. 172).
“… a Seaman is in effect three
Husbandmen…“ (p. 178).
|VII-318||

||VIII-346| Petty,
Surplus-Value. In one passage of Petty’s there can
be seen an anticipation of the nature of
surplus-value, although he treats it only in the form
of rent. Especially when it is put alongside the
following passage, in which he determines the relative value
of silver and corn by the relative quantities of each that
can be produced in the same labour-time.

“If a man can bring to London an
ounce of Silver out of the Earth in Peru, in the same time
that he can produce a Bushel of Corn, then one is the
natural price of the other; now if by reason of new and more
easier Mines a man can get two ounces of Silver as easily as
formerly he did one, then Corn will be as cheap at ten
shillings the Bushel, as it was before five shillings,
caeteris paribus*.”

“…let a hundred men work ten
years upon Corn, and the same number of men the same time,
upon Silver; I say, that the neat proceed of the Silver is
the price of the whole neat proceed of the Corn, and like
parts of the one, the price of like parts of the
other.”

“Corn will be twice as dear where** are two hundred
Husbandmen to do the same work which an hundred could
perform…” ( [William Petty], On Taxes and
Contributions, 1662) (in the edit. of 1679, pp. 32, 24,
67).

The passages to which I alluded above are the
following:

“… as Trades and curious Arts
increase; so the Trade of Husbandry will decrease, or else
the Wages of Husbandmen must rise, and consequently
the Rents of Lands must fall” (p. 193).

“… if Trade and Manufacture
have increased in England … if a greater part of the
People, apply themselves to those Faculties, than there did
heretofore, and if the price of Corn he no greater now, than
when Husbandmen were more numerous, and the Tradesmen fewer:
it follows from that single reason .., that the Rents of
Land must fall: As for Example, suppose the price of Wheat
be 5s. or 60d. the Bushel; now if the Rent of the Land
whereon it grows be the third Sheaf”; (i.e., part,
share) “then of the 60d. 20d. is for the Land, and
40d, for the Husbandman; but if the Husbandman’s wages
should rise one-eighth part, or from 8d. to 9d. per Diem,*** then the
Husbandman’s share in the Bushel of Wheat rises from 40d. to
45d. and consequently the Rent of the Land must fall from
20d. to 45d. for we suppose the price of the Wheat still
remains the same; especially since we cannot raise
it, for if we did attempt it, Corn would be brought in
to us, | (as into Holland)
from Foreign Parts, where the State of Husbandry was not
changed.” ([William Petty], Political
Arithmetick [in Several Essays in Political
Arithmetick], London, 1699, pp. 493-94.)
|VIII—347||

||VIII-364|
<Petty. The following passage, where rent in
general is treated as a surplus-value, a net product, should
be compared with the one quoted above from Petty:

“Suppose a man could with his own
hands plant a certain scope of land with Corn, that is,
could Dig, or Plough: Harrow, Weed, Reap, Carry home,
Thresh, and Winnow so much as the Husbandry of this Land
required […]. I say, that when this man hath
subducted his seed out of the proceed of his Harvest, and
also what himself hath both eaten and given to others in
exchange for Clothes, and other Natural necessaries; that
the Remainder of Corn is the natural and true Rent of the
Land for that year; and the medium of seven years, or
rather of so many years as makes up the Cycle, within which
Dearths and Plenties make their revolution, doth give the
ordinary Rent of the Land in Corn. But a further,
though collateral question may be, how much English
money this Corn or Rent is worth; I answer so much as the
money, which another single man can save, within the same
time, over and above his expense, if he imployed himself
wholly to produce and make it; viz. Let another man go
travel into a Countrey where is Silver, there Dig it, Refine
it, bring it to the same place where the other man planted
his Corn; Coyne it, etc. the same person, all the while of
his working for Silver, gathering also food for his
necessary livelihood, and procuring himself covering,
etc. I say, the Silver of the one must be esteemed of
equal value with the Corn of the other”
(Traité des taxes, pp. 23-24). [William
Petty, A Treatise of Taxes, and
Contributions…, London, 1662, pp. 23-24.
Marx quotes the passage from Charles Ganilh, Des Systeme
d’économie politique…, t. II, Paris, 1821,
pp. 36-37.]> |VIII-364||

### [(c) John Stuart Mill, an Adherent of Smith’s Second View of Productive Labour]

||VII-318| Mr. John
Stuart Mill, in Essays on Some Unsettled Questions of
Political Economy, London, 1844, also struggled with the
problem of productive and unproductive labour; but in so
doing he in fact added nothing to Smith’s (second)
definition except that labours which produce labour-power
itself are also productive.

“Sources of enjoyment may be
accumulated and stored up; enjoyment itself cannot.
The wealth of a country consists of the sum total of the
permanent sources of enjoyment, whether material or
immaterial, contained in it; and labour or expenditure which
tends to augment or keep up these permanent sources, should,
we conceive, be termed productive” (l.c., p.
82). “If the mechanic who made the
spinning-jenny laboured productively, the spinner also
laboured productively when he was learning his trade: and
what they both consumed productively, that is to say, its
consumption did not tend to diminish, but to increase the
sum of the permanent sources of enjoyment in the country, by
effecting a new creation of those sources, more than equal
to the amount of the consumption” (l.c., p. 83).

We will now briefly run over the twaddle written against
Adam Smith in connection with productive and unproductive
labour.

### [7.] Germain Garnier [Vulgarisation of the Theories Put Forward by Smith and the Physiocrats]

| The fifth volume
[contains Garnier’s] Notes to his translation of Smith’s
Wealth of Nations (Paris, 1802).

On “productive labour” in the highest sense
Garnier shares the view of the Physiocrats; he only makes it
somewhat weaker. He opposes Smith’s view that
“productive labour .., is that which realises itself
in some particular subject or vendible commodity, which
lasts for some time at least after that labour is
past” ([Garnier] 1.c., t. V, p. 169). |VII-319||

### [(a) Confusion of Labour which Is Exchanged Against Capital with Labour Exchanged against Revenue. The False Conception that the Total Capital Is Replaced through the Revenue of the Consumers]

||VIII-347| (Germain
Garnier). He brings forward various arguments
against Adam Smith (which are in part repeated by later
authors).

First.

“This distinction is false, inasmuch
as it is based on a difference which does not exist.
All labour is productive in the sense in which the
author uses this word productive, The labour of the
one as of the other of these two classes is equally
productive of some enjoyment, commodity or utility for the
person who pays for it, otherwise this labour would not find
wages.”

<It is therefore productive because it produces some
use-value and is sold, has an exchange-value, and is thus
itself a commodity.>

In developing this point, however, Garnier cites examples
by way of illustration, in which the “unproductive
labourers” do the same thing, produce the same
use-value or the same kind of use-value as the
“productive”. For example:

“The servant who is in my service,
who lights my fire, who dresses my hair, who cleans and
keeps in order my clothes and my furniture, who prepares my
food, etc., performs services absolutely of the same
kind as the laundress or the seamstress who cleans and
keeps in order her customers’ Linen: as the eating-house
keeper, cook-shop proprietor or publican who carries on his
trade of preparing food for persons whom it suits better to
come and dine with him; as the barber, the
hairdresser” (for Adam Smith, however, most of these
fellows are as little reckoned among productive workers as
the servants) “who perform immediate services; finally
as the mason, the tiler, joiner, the glazier, the stove
setter […], etc., and the multitude of building
labourers who come when they are called to carry out
restorations and repairs, and whose annual income depends as
much on simple repair and maintenance work as on new
construction.”

(Adam Smith nowhere says that the labour which fixes
itself in a more or less permanent object cannot be equally
well repairs as the making of new things.)

“This kind of labour consists less in
producing than in maintaining; its aim is less to add to the
value of the subjects to which it is applied than to prevent
their decay. All these labourers, including the
servants, so ye the person who pays them the labour of
maintaining his own things… “

(They can therefore be regarded as machines for
maintaining value, or rather use-values. Destutt de
Tracy also asserts this view of the “saving”
of labour. See further on. The unproductive
labour of one does not become productive by saving the other
unproductive labour. One of the two performs
it. A part of Adam Smith’s unproductive
labour—but only the part which is absolutely necessary
in order to consume things, which so to speak belongs to the
costs of consumption (and then, too, only when it
saves this time for a productive worker)—becomes
necessary as a result of the division of labour. But
Adam Smith does not deny this “division of
labour”. If everyone had to perform productive
and unproductive labour, and through the dividing up of
these kinds of labour between two persons both were better
performed, according to Adam Smith this would in no way
alter the circumstance that one of these labours is
productive and the other unproductive.)

“It is for that and for that alone
that they most often labour” (for one person to save
the labour of looking after himself, ten have to look after
him—a curious way of “saving” labour;
besides “unproductive labour” of this kind is
most often made use of by those who do nothing);
“thus, either they are all productive, or none
of them is productive” (l.c., p.172).

Secondly. A Frenchman cannot forget the
ponts et chaussées.* Why, he says, call productive

“the labour of an inspector or
director of a private enterprise in trade or manufacture,
and non-productive, the labour of the government
official who, watching over the upkeep of public highways,
of navigable canals and ports, of monies and other important
instruments destined to enliven commercial activity,
watching over the security of transport and communications,
the carrying out of conventions, etc., can with justice be
regarded as the inspector of the great social
manufacture? It is labour of absolutely the same nature,
though on a vaster scale” (pp. 172-73).

In so far as such a lad takes part in the production (or
conservation and reproduction) of material things which
could be sold were they not in the hands of the State, Smith
might call his labour “productive”.
“Inspectors of the great social manufacture” are
purely French creations.

Thirdly. Here Garnier falls into
“moralising”. Why should the
“manufacturer of perfumery, who flatters my sense of
smell”, be productive and not the musician, who
“enchants my ear”? (p. 173). Smith
would reply: because the former supplies a material product
and the latter does not. Morals and the
“merits” of the two lads have nothing to do with
the distinction.

Fourthly. Is it not a contradiction that the
“violin maker, the organ builder, the music dealer,
the mechanic, etc.”, are productive, and the
professions for which these labours are only
“preparations” are unproductive?

“All of them have, as the final aim
of their labour, a consumption of the same
kind. If the result which some of them have in
view does not deserve to be counted among the
products of the labour of society, why should one treat
more favourably what is nothing but a means for attaining
this result?”(l.c., p. 173).

On this reasoning, a man who eats corn is just as
productive as the man who produces it. For with what
aim is corn produced? In order to eat it. So if
the labour of eating is not productive, why should the
labour of cultivating corn be productive, since it is only a
means for attaining this aim? Besides, the man who
eats produces brain, muscles, etc., and are these not just
as worthy products as barley or wheat?—an indignant
friend of humanity might ask Adam Smith.

In the first place, Adam Smith does not deny that the
unproductive labourer produces a product of some sort.
Otherwise he would not be a labourer at all. Secondly,
it may seem strange that the doctor who prescribes pills is
not a productive labourer, but the apothecary who makes them
up is. Similarly the instrument maker who makes the
fiddle, but not the musician who plays it. But that
would only show that “productive labourers”
produce products which have no purpose except to serve as
means of production for unproductive labourers. Which
however is no more surprising than that all productive
labourers, when all is said and done, produce firstly the
means for the payment of unproductive labourers, and
secondly, products which are consumed by those who do not
perform any labour.

Of all these comments, No. II is that of a Frenchman who
can’t forget his ponts et chaussées; No. III
amounts only to morals; No. IV either contains the stupidity
that consumption is just as productive as production
<which is not true in bourgeois society, where one
produces and another consumes> or that some productive
labour merely produces the material for unproductive labour,
which Adam Smith nowhere denies. Only No. I contains
the correct point that Adam Smith, by his second definition,
calls the same kinds of labour | productive and
unproductive—or rather that according to his own
definition he would have to call a relatively small part of
his “unproductive” labour productive; a
point therefore that does not tell against the
distinction, but against the subsumption of
certain activities under the distinction or the way it is
applied. After making all these comments, the
learned Garnier finally comes to the point.

“The only general difference that
can, it seems, be observed between […] the two
classes assumed by Smith, is that in the class which he
calls productive, there is or may always be some
intermediary person between the maker of the object and the
person who consumes it; whereas in the labour
that he calls non-productive, there cannot be any
intermediary, and the relation between the labourer
and the consumer is necessarily direct and
immediate. It is evident that there is
necessarily a direct and immediate relation between
the person who uses the experience of the physician, the
skill of the surgeon, the knowledge of the lawyer, the
talent of the musician or actor, or finally the services of
the domestic servant, and each of these different hired
workers at the moment of their labour; while in the
professions constituting the other class, the thing to be
consumed being material and palpable, it can be the subject
of many intermediary exchanges after leaving the person
who makes it before it reaches the one who consumes
it” (p. 174).

In these last words Garnier shows, in spite of himself,
the concealed association of ideas that exists between
Smith’s first distinction (labour which is exchanged against
capital, and labour which is exchanged against revenue) and
his second (labour which fixes itself in a material,
vendible commodity and labour which does not so fix
itself). The latter by its nature cannot for
the most part be subordinated to the capitalist mode of
production; the former can. To say nothing of the fact
that on the basis of capitalist production, where the
great majority of material commodities—material and
palpable things—is produced by wage-labourers under
the domination of capital, [unproductive] labours (or
services, whether those of a prostitute or of the Pope) can
only be paid for either out of the wages of the productive
labourers, or out of the profits of their employers (and the
partners in those profits), quite apart from the
circumstances that those productive labourers produce the
material basis of the subsistence, and consequently, the
existence, of the unproductive labourers. It is
however characteristic of this shallow French cur that he,
who wants to be an expert in political economy and so an
explorer of capitalist production, considers
inessential the feature which makes this production
capitalist—the exchange of capital for wage-labour
instead of the direct exchange of revenue for wage-labour or
the revenue which the labourer directly pays to
himself. By so doing Garnier makes capitalist
production itself an inessential form instead of a
necessary—though only historically, that is,
transiently necessary —form for the development of the
social productive powers of labour and the transformation of
labour into social labour.

“… it would also always be
necessary to deduct from his productive class all
labourers whose labour consists purely of cleaning,
conserving or repairing finished articles, and consequently
does not put any new product into circulation”
(p. 175).

(Smith nowhere says that the labour or its product must
enter into the circulating capital. It can enter
directly into fixed capital, like the mechanic’s labour
repairing a machine in a factory. But in this case its
value enters into the circulation of the product, the
commodity. And the repairers, etc., who do this labour
as servants, do not exchange | their labour against capital
but against revenue.)

“It is in consequence of this
difference that the non-productive class, as Smith
has observed, subsists only on revenues. In fact,
since this class allows of no intermediary between itself
and the consumer of its products, that is to say, the person
who enjoys its labour, it is paid immediately by the
consumer; and he pays only from revenues. As
against these, the labourers of the productive class,
being as a rule paid by an intermediary who intends to
make a profit from their labour, are most often paid by
capital. But this capital is always in the end
replaced by the revenue of a consumer, otherwise it would
not circulate and therefore would not yield any profit to
its possessor.“

This last “but” is quite childish. In
the first place, a part of the capital is replaced by
capital and not by revenue, whether this part of the capital
circulates or does not circulate (as in the case of
seed).

### [(b) Replacement of the Constant Capital by Means of the Exchange of capital against Capital]

When a coal-mine supplies coal to an ironworks and gets
from the latter iron which enters into the operations of the
coal-mine as means of production, the coal is in this way
exchanged for capital to the amount of the value of this
iron, and reciprocally the iron, to the amount of its own
value, is exchanged as capital for coal. Both
(considered as use-values) are products of new labour,
although this labour was produced with means of labour that
were already in existence. But the value of the
product of the year s labour is not the product of the
labour [newly added] in the year. It also replaces the
value of the past labour which was materialised in the means
of production. Therefore the part of the total product
which is equal to this value is not a part of the product of
the year’s labour, but the reproduction of past labour.

Let us take for example the product of the daily labour
of a coal-mine, an ironworks, a timber producer and a
machine-building factory. Let the constant capital in
all these industries be equal to one-third of all the
component parts of value in the product: that is, let the
proportion of pre-existing labour to living labour be 1 :
2. Then all these industries produce each a daily
product of x, x', x'', x'''.
These products are certain quantities of coal, iron, timber
and machinery. As such products, they are products of
the day’s labour (but also of the daily consumed raw
materials, fuel, machinery, etc., which have all contributed
to the day’s production). Let the values of these be
equal to z, z', z'',
z'''. These values are not the product of
the day’s labour, since z/3, z'/3, z''/3, z'''/3 are only
equal to the value which the constant elements of z, z',
z'', z''' had before they entered into the day’s
labour. Therefore also x/3, x'/3, x''/3, x'''/3, or a
third part of the use values produced, represent only the
value of the pre-existing labour and continually replace
it. <The exchange which here takes place between
pre-existing labour and the product of living labour
is of quite a different nature from the exchange between
labour-power and the conditions of labour existing as
capital.>

x=z; yet z is the value of the total x, but one-third of
z is equal to the value of the raw material, etc., contained
in the total x, Thus is a part of the day’s product of the
labour <but not at all the product of the day’s labour,
but on the contrary of the previous pre-existing labour
combined with it> in which the preexisting labour
combined with the day’s labour reappears and is
replaced. Now it is true that each aliquot part of x,
which is simply the quantity of actual products (iron, coal,
etc.), represents in its value one-third pre-existing labour
and two-thirds labour performed or added the same day.
Pre-existing labour and the day’s labour enter into the
total product in the same proportion as they enter into each
separate product of which the total product is made
up. But if I divide the total product into two parts,
putting one-third on one side and two-thirds on the other,
it is the same as if the one-third represents only
pre-existing labour and the other two-thirds only the labour
of the day. In fact the first one-third represents all
past labour which entered into the total product, the full
value of the means of production consumed. After
deducting this one-third, therefore, the other two-thirds
can represent only the product of the day’s labour.
The two-thirds in fact represent the total amount of the
day’s labour that was added to the means of production.

The last two-thirds are therefore equal to the producer’s
revenue (profit and wages). He can consume them, that
is, spend them on articles which enter into his individual
consumption. Suppose that these two-thirds of the coal
produced daily were bought by the consumers or purchasers
not with money, but with the commodities which they have
previously transformed into money in order to buy coal with
it. A part of these two-thirds of the coal will enter
into the individual consumption of the coal producers
themselves, for heating, etc. This part therefore does
not enter into circulation, or if it does first enter into
circulation it will be withdrawn again from it | by its own producers.
Minus this part of the two-thirds which the producers of
coal themselves consume, they must exchange all the rest of
it (if they want to consume it) for articles which enter
into individual consumption.

In this exchange it is a matter of complete indifference
to them whether the sellers of the consumable articles
exchange capital or revenue for the coal; that is to say,
whether for example the cloth manufacturer exchanges his
cloth for coal in order to heat his private dwelling (in
this case the coal itself in turn is an article of
consumption for him, and he pays for it with revenue, with a
quantity of cloth that represents profit); or whether James,
the cloth manufacturer’s footman, exchanges the cloth he has
received as wages for the coal (in this case the latter is
once more an article of consumption and exchanged for the
revenue of the cloth manufacturer, who in turn however has
exchanged his revenue for the unproductive labour of the
footman); or whether the cloth manufacturer exchanges cloth
for coal in order to replace the coal required in his
factory that has been used up. (In the latter case the
cloth that the cloth manufacturer exchanges represents for
him constant capital, the value of one of his means of
production; and the coal represents for him not only the
value but his means of production in kind, But for the coal
producer the cloth is an article of consumption, and both
cloth and coal represent for him revenue; the coal, revenue
in its non-realised form; the cloth, revenue in its realised
form.)

But as for the last one-third of the coal, the coal
producer cannot spend it on articles which enter into his
individual consumption; he cannot spend it as revenue.
It belongs to the process of production (or reproduction)
and must be transformed into iron, timber,
machinery—into articles which form the component parts
of his constant capital and without which the production of
coal cannot be renewed or continued. He could, it is
true, exchange also this one-third for articles of
consumption (or, what is the same thing, for the money of
the producers of these articles), but in fact only on the
condition that he exchanges these consumption articles in
turn for iron, timber, machinery—that they enter
neither into his own consumption nor into the outlay of his
revenue, but into the consumption and revenue outlays of the
producers of timber, iron and machinery; all of whom,
however, in turn find themselves in the position of not
being able to expend one-third of their product on articles
for individual consumption.

Now let us assume that coal enters into the constant
capital of the producers of iron and timber, and of the
machine builder. On the other hand iron, timber, and
machinery enter into the constant capital of the producer of
coal. In so far as these products of theirs enter
[into their] mutual [constant capital] to the same amount of
value, they replace themselves in kind, and one has to pay
the other only the balance for the surplus that he has
bought from him in excess of what he has sold to him.
In fact, in such a transaction money appears in practice
(through the medium of bills of exchange, etc.) only as
means of payment, not as coin, means of circulation;
and only the balance is paid in money. The producer of
coal will need a part of this one-third of his coal for his
own reproduction, just as he deducted from the product a
part of the two-thirds for his own consumption.

The whole quantity of coal, iron, timber and machinery
which are reciprocally replaced in this way by the exchange
of constant capital for constant capital, of constant
capital in one natural form for constant capital in another
natural form, has absolutely nothing to do either with the
exchange of revenue for constant capital or with the
exchange of revenue for revenue. It plays exactly the
same role as seed in agriculture or the capital stock of
cattle in cattle-rearing. It is a part of the
yearly product of labour, but it is not a part of
the product of the year’s [newly- added] labour (on the
contrary it is a part of the product of the year’s labour
plus the pre-existing labour), which (conditions of
production remaining the same) replaces itself annually as
means of production, as constant capital, without entering
into any circulation other than that between dealers and
dealers and without affecting the value of the part
of the product which enters into the circulation between
dealers and consumers.

Let us assume that the whole one-third of the coal is
thus exchanged in kind for its own elements of production,
iron, timber, machinery. <It might be possible for
example to exchange the entire amount direct for machinery;
but the machine builder in turn would exchange it as
constant capital, not only for his own but for that of the
producers of iron and timber.> In fact, each
hundredweight of the two-thirds of his product in coal | which he exchanged for
articles of consumption, exchanged as revenue, would, from
the standpoint of value, consist of two parts, as the total
product does. One-third of a hundredweight would be
equal to the value of the means of production used up in the
hundredweight, and two-thirds of the hundredweight would be
equal to the labour newly added to this third by the
producers of the coal. But if the total product is for
example equal to 30,000 hundredweight he exchanges only
20,000 hundredweight as revenue. On the assumption
made, the other 10,000 hundredweight would be replaced by
iron, timber, machinery, etc., etc.; in a word, the whole
value of the means of production used up in the 30,000
hundredweight would be replaced in kind by means of
production of the same sort and of equal value.

The buyers of the 20,000 hundredweight thus do not pay a
single farthing for the value of the pre-existing labour
contained in the 20,000 hundredweight; for the 20,000
represent only two-thirds of the value of the total product
in which the newly-added labour is realised. It comes
to the same thing, therefore, as if the 20,000 hundredweight
represented only labour newly added (during the year, for
example) and no pre-existing labour. The buyer
therefore pays the whole value of each hundredweight,
pre-existing labour plus newly-added labour, and yet he pays
only for the newly-added labour; and that is because the
quantity he buys is only 20,000 hundredweight, only that
quantity of the total product which is equal to the value of
all the newly-added labour. Just as little does he pay
for the farmer’s seed in paying for the wheat which he
eats. The producers have mutually replaced this part
for each other; therefore they do not need to have it
replaced a second time. They have replaced it with the
part of their own product which it is true is the year’s
product of their labour, but is not at all the product of
their year’s labour, but on the contrary is the part of
their annual product that represents the pre-existing
labour. Without the new labour the product would not
be there; but in the same way it would not be there without
the labour materialised in the means of production. If
it were merely the product of the new labour, then its value
would be less than it now is, and there would be no part of
the product to be returned to production. But if the
other method of labour [using means of production] were not
more productive and did not yield more product in spite of a
part of the product having to be returned to production, it
would not be used.

Although no part of the value of the one-third of the
coal enters into the 20,000 hundredweight of coal sold as
revenue, any change in the value of the constant capital
which the one-third or 10,000 hundredweight represented
would nevertheless bring about a change of value in the
other two-thirds which are sold as revenue. Let
production in iron, timber, machinery and so on, in a word,
in the elements of production of which the one-third of the
product is composed, become more costly. Let the
productivity of mining labour remain the same. The
30,000 hundredweight are produced with the same quantity of
iron, timber, coal, machinery and labour as before.
But since iron, timber and machinery have got dearer, cost
more labour-time than before, more coal than before must be
given for them.

| As previously, the
product would be equal to 30,000 hundredweight. The
coal-mining labour has remained as productive as it was
before. With the same quantity of living labour and
the same amount of timber, iron, machinery, etc., it
produces 30,000 hundredweight as before. The living
labour, as before, is represented by the same value, say
£20,000 (reckoned in money). On the other hand
timber, iron, etc., in a word, the constant capital, now
cost £16,000 instead of £10,000; that is to say,
the labour-time contained in them has increased by
six-tenths, or 60 per cent.

The value of the total product is now equal to
£36,000; it was £30,000 before; it has therefore
risen by one-fifth, or 20 per cent. So also every
aliquot part of the product costs one-fifth, or 20 per cent,
more than before. If a hundredweight cost £1
previously, then now it costs £1 plus one-fifth of
£1=£1. 4s. Previously,
1/3 or 3/9 of
the total product was equal to constant capital,
2/3 equal to labour added. Now
the proportion of the constant capital to the value of the
total product is as 16,000 : 36,000 =
16/36 =
4/9. It amounts therefore to
one-ninth [of the value of the total product] more than
before. The part of the product which is equal to the
value of the labour added was formerly
2/3 or 6/9 of
the product, now it is 5/9.

So we get:

Constant capitalLabour added

Value = £36,000
£16,000 (4/9 of the product)
£20,000(the
same value as before = 5/9 of the
product

Product = 30,000 cwt.
13,333 1/3 cwt.
16,666 2/3 cwt.

The coal miners’ labour would not have become less
productive; but the product of their labour plus the
pre-existing labour would have become less productive; that
is, 1/9 more of the total product
would be required to replace the component part of the value
| formed by the constant
capital. 1/9 less of the product
would be equal to the value of the labour added. Now
as before the producers of iron, timber, etc., would only
pay for 10,000 cwt. of coal. Previously these cost
them £10,000. They will now cost them
£12,000. A part of the costs of the constant
capital would therefore be made good, since they would have
to pay the increased price for the part of the coal which
they get in replacement of iron, etc. But the producer
of coal has to buy raw material, etc., from them to the
amount of £16,000. There remains therefore a
debit balance of £4,000, that is, 3,333
1/3 cwt. of coal. He must
therefore, as before, supply 16,666
2/3 + 3,333 1/3
cwt. = 20,000 cwt. of coal = two-thirds of the product to
the consumers, who would now have to pay £24,000 for
it instead of £20,000. In so doing they would
have to replace for him not only labour, but also a part of
the constant capital.

As regards the consumers, the matter would be very
simple. If they wished to consume the same quantity of
coal as before, they must pay one-fifth more for it and so
must spend one-fifth of their revenue less on other
products, if the production costs have remained the same in
every branch of production. The difficulty lies only
in this: how does the producer of coal pay for the
£4,000 of iron, timber, etc., for which their
producers do not want coal in exchange? He has sold
the 3,333 1/3 cwt., equal to this
£4,000, to the consumers of coal, and has received in
exchange commodities of all kinds. But these cannot
enter into his consumption or that of his labourers, but
must pass into the consumption of the producers of iron,
timber, etc., for he must replace in these articles the
value of his 3,333 1/3 cwt. It
will be said: it’s quite a simple matter. All
consumers of coal have to consume 1/5
less of all other commodities, or each of them has to give
1/5 more of his commodities for
coal. The producers of timber, iron, etc., consume
exactly this 1/5 more. However,
it is not prima facie evident how the lowered
productivity in the ironworks, machine building,
timber-felling, etc., is to enable their producers to
consume a larger revenue than before, since the price of
their articles is supposed to be equal to their values, and,
consequently, to have risen only in proportion to the
diminished productivity of their labour.

Now it is assumed that iron, timber, machinery have risen
in value by three-fifths, by 60 per cent. There are
only two causes which can give rise to this. Either
the iron, timber, etc., production has become less
productive, because the living labour used in it has become
less productive, that is, a greater quantity of labour must
be used to produce the same product. In this case the
producers must use three-fifths more labour than
before. The rate of wages has remained the same,
because the lowered productivity of labour has only a
passing effect on individual products. Therefore the
rate of surplus-value also has remained the same. The
producer needs 24 days’ labour where he needed 15 before;
but he pays the labourers, as before, only 10 hours’ labour
on each of the 24 [working-days], and makes them work 2
[hours] for nothing on each of these days, as
previously. If the 15 [labourers] have therefore done
150 hours’ labour for themselves and 30 for him; so the 24
work 240 hours for themselves and 48 for him. (Here we
don’t worry about the rate of profit.) Wages have only
fallen in so far as they are spent in iron, timber and
machinery, etc., which is not the case. The 24
labourers now consume 3/5 more than
the 15 did before. So the coal producers can set aside
correspondingly more for them from the value of the 3,333
1/3 cwt, (i.e., for their master, who
pays out the wages).

Or the reduced productivity in the production of iron,
timber, etc., arises from the fact that parts of their
constant capital, of their means of production, have become
dearer. Then the same alternative applies, and finally
the reduced productivity must result in the use of a greater
quantity of living labour; therefore also in increased
wages, which the coal producer has partly received from the
consumers in the £4,000.

In the branches of production where more labour is
employed, the amount of the surplus-value will have risen
because the number of workers employed is greater. On
the other hand, the rate of profit will have fallen in so
far as all component parts of their constant capital into
which their own product enters [have risen]; whether they
themselves use a part of their own product as means of
production, or, as in the case of coal, their product enters
as a means of production into their own means of
production. However, if their circulating capital laid
out in wages has increased more than the part of the
constant capital that they have to replace, their rate of
profit will also have risen, and they | will participate in the
consumption of a part of the £4,000.

An increase in the value of the constant capital (arising
from lowered productivity in the branches of labour which
supply it) raises the value of the product into which it
enters as constant capital, and reduces the part of the
product (in kind) which replaces the newly-added labour,
thus making it less productive in so far as this is reckoned
in its own product. For the part of the constant
capital which is exchanged in kind, the position is the same
as it was. The same quantity of iron, timber and coal
as before will be exchanged in kind in order to replace the
iron, timber and coal that has been used up, and in this
transaction the higher prices will balance each other.
But the surplus of coal which now forms a part of the
constant capital of the coal producer and does not enter
into this exchange in kind is, as before, exchanged for
revenue (in the case given above, in part not only for wages
but also for profit); this revenue, however, instead of
going to the former consumers, accrues to the producers in
whose spheres of production a greater quantity of labour is
used, that is, the number of labourers has increased.

If a branch of industry produces products which enter
only into individual consumption, and neither into other
industries as means of production (by means of production
constant capital is always meant here) nor into their own
reproduction (as for example in agriculture, cattle-raising,
or the coal industry, into which coal itself enters as
auxiliary material), then the annual product of this
branch<any possible surplus over the annual product
making no difference in this connection> must always be
paid for out of revenue, wages or profit.

Let us take the case of the linen given earlier.
Three yards of linen consist of: two-thirds constant capital
and one-third labour added. One yard of linen
therefore represents labour added. If the
surplus-value is 25 per cent, then one-fifth of the 1 yard
represents the profit, the other four-fifths represent the
reproduction of the wages. The manufacturer himself
consumes the one-fifth, or what is the same thing, others
consume it and pay him the value, which he consumes in their
own or in other commodities. <To simplify matters,
here the whole profit is—wrongly—considered as
revenue.> But he expends the four-fifths of a yard again
in wages; his labourers consume them as their revenue either
directly or in exchange for other consumable products, whose
owners consume the linen.

This is the total part of the 3 yards of linen—the
1 yard—which the linen producers can themselves
consume as revenue. The other 2 yards represent the
manufacturer’s constant capital; they must be reconverted
into the conditions of production for linen—yarn,
machinery, etc. From the standpoint of the
manufacturer, the exchange ‘of the 2 yards of linen is
an exchange of constant capital; but he can only exchange it
against the revenue of other people. So he pays for
the yarn, say, with 4/5 of the 2 yards
or 8/5 yards, and for the machinery
with 2/5 of a yard. The spinner
and machine builder in turn can each consume
1/3 of what they get, that is, the
former, out of 8/5 yards,
8/15 of a yard; the latter
2/15 out of the
2/5 of a [yard]. Added together,
10/15 or 2/3 of
a yard. But 20/15 or
4/3 yards must replace for them the
raw material, flax, iron, coal, etc., and each of these
articles in turn consists of one part which represents
revenue (labour newly added), and another part which
represents constant capital (raw materials and fixed
capital, etc.).

The last 4/3 yards, however, can
only be consumed as revenue. What therefore ultimately
appears as constant capital in yarn and machinery and is
used by the spinner and machine builder to replace the flax,
iron and coal (except for the part of the iron, coal, etc.,
which the machine builder replaces with machines) can only
represent the part of the flax, iron and coal which forms
the revenue of the flax, iron and coal producers, so that
there is no constant capital to be replaced in this; that is
to say, it must belong to the part of the product into
which, as shown above, no part of the constant capital
enters. But these producers consume what is their
revenue in iron, coal, flax, etc., in linen or in other
consumable products, because their own products do not enter
in that form, or only to a small extent, into their
individual consumption. Thus a part of the iron, flax,
etc., can be exchanged for a product which only enters into
individual consumption, that is linen, and in exchange for
it replace for the spinner all, and for the machine builder
part, of his constant capital; while in turn the spinner and
machine builder, with the part of their yarn and machinery
that represents revenue, consume linen and thereby replace
the weaver’s constant capital.

Thus in fact the whole of the linen is resolved into the
profits and wages of the weaver, spinner, machine builder,
flax-grower and producers of coal and of iron, while at the
same time they replace the whole of the constant capital for
the linen manufacturer and the spinner. The account
would not balance if the final producers of raw materials
had to replace their own constant capital by exchange with
the linen, since this is an article for individual
consumption, which does not enter into any sphere of
production as means of production, | as part of the constant
capital. The account balances, because the linen
bought by the flax-grower, producers of coal and of iron,
machine builder, etc., with their own product, replaces for
them only the part of their product which consists in
revenue for them, but in constant capital for those
who buy their products. That is only possible because
they replace the part of their product which does not
consist of revenue and which therefore cannot be exchanged
for consumable products, in kind or by the exchange of
constant capital for constant capital.

In the example given above it may seem strange that it is
assumed that the productivity of labour in a given branch of
industry has remained the same, and yet that it has fallen,
if the productivity of the living labour employed in this
branch of industry is reckoned in its own product. But
this is very simply explained.

Suppose the product of a spinner’s labour is equal to 5
lbs. of yarn. Assume that he needs for this only 5
lbs. of cotton (that is, there is no waste); and that an
lb. of yarn costs 1 shilling (we leave the machinery out of
account; that is, we suppose that its value has neither
fallen nor risen; for the case we are considering,
therefore, its value is equal to nil). [Let] cotton
[cost] 8d. an lb. Of the 5s, which the 5 lbs. of yarn
costs, 40d. (5x8d.)=3s. 4d. is for the cotton, and
5x4d.=20d.=1s. 8d, is the newly-added labour. Of the
total product, therefore, constant capital amounts to
3s. 4d., [that is,] 3 1/3 lbs, of
yarn, and labour to 1 2/3 lbs. of
yarn, Hence two-thirds of the 5 lbs. of yarn replace
constant capital and one-third of the 5 lbs, of yarn, or 1
2/3 lbs., is the part of the product
which pays for the labour. Assume that the price of an
lb. of cotton now rises by 50 per cent, from 8d. to 12d., or
1s. Then we have for 5 lbs, of yarn, first, 5s. for 5
lbs. of cotton, and 1s. 8d. for labour added, whose
quantity, and therefore whose value expressed in money,
remains the same. Thus the 5 lbs. of yarn now costs
5s, plus 1s. 8d.=6s, 8d. Of this 6s. 8d., however, raw
material is now 5s, and labour 1s. 8d.

6s. 8d.=80 d., of which 60d, is for raw material and
20d. for labour. Labour now only forms 20d, of the
value of the 5 lbs., 80d., or 1/4=25
per cent; previously, 33 1/3 per
cent. On the other hand the raw material is 60d =
3/4 = 75 per cent; previously it was
only 66 2/3 per cent. As the 5
lbs. of yarn now costs 80d., 1 lb. costs
80/5d.=16d. For his
20d.—the value of the [newly-added] labour—[the
spinner] will therefore get 1 1/4 lbs,
of the 5 lbs, of yarn, and [the other] 3
3/4 lbs. [go for] raw material.
Previously, 1 2/3 lbs. were for labour
(profit and wages) and 3 1/3 lbs, for
constant capital. Reckoned in its own product,
therefore, the labour has become less productive, although
its productivity has remained the same and only the raw
material has got dearer. But it has remained equally
productive, because the same labour has transformed 5
lbs. of cotton into 5 lbs. of yarn in the same time, and the
actual product of this labour (considered as use-value) is
only the form of yarn which has been given to the
cotton. The 5 lbs. of cotton have been given the form
of yarn as before, with the same labour. The actual
product, however, consists not only of this form of yarn but
also of the raw cotton, the material which has been put into
this form, and the value of this material now forms a
greater part of the total product than it did before, in
proportion to the labour which gives it the form.
Consequently the same quantity of spinning labour is paid
for in less yarn, or the part of the product which replaces
it has become smaller.

So much for that.

### [(c) Vulgar Assumptions of Garnier’s Polemics against smith, Garnier’s Relapse into Physiocratic Ideas. The View of the Unproductive Labourers’ Consumption as the source of Production—a step Backwards as Compared with the Physiocrats]

So in the first place Garnier is wrong when he says that
the whole capital is in the end always replaced by
consumer’s revenue, since a part of the capital can be
replaced by capital and not by revenue. Secondly, it
is in itself a silly statement, since revenue itself, in so
far as it is not wages (or wages paid by wages, revenue
derived from wages), is profit on capital (or revenue
derived from profit on capital). Finally, it is silly
to say that the part of capital which does not circulate (in
the sense that it is not replaced by consumer’s revenue)
“yields no profit to its possessor”. In
fact— conditions of production remaining the
same—this part yields no profit (or rather, no
surplus-value). But without it capital could in no
case produce its profit.

| “All that can
be deduced from this difference is that, in order to employ
productive people, what is required is not only the
revenue of the person who enjoys their labour, but
also a capitol which yields profit to intermediaries,
while to employ non-productive people the revenue
which pays them is most often sufficient” (l.c.,
p. 175).

This one sentence is such a bundle of nonsense that it
makes it clear that Garnier, the translator of Adam Smith,
in fact understood nothing of what Adam Smith wrote, and in
particular had no conception whatever of the essence of the
Wealth of Nations—namely, the view that the
capitalist mode of production is the most productive mode
(which it absolutely is, in comparison with previous
forms).

First, it is an extremely silly objection to raise
against Smith, who declared that unproductive labour was
labour paid directly from revenue, that “to employ
non-productive people the revenue which pays them is
most often sufficient”. Now however the
antithesis:

“in order to employ productive
people, what is required is not only the revenue of the
person who enjoys their labour, but also a capital which
yields profit to intermediaries. “

(How productive then must agricultural labour be for
Monsieur Garnier, which in addition to the revenue which
enjoys the product of the land, requires a capital which not
only yields profit to intermediaries, but in addition a rent
to the landowner!)

In order “to employ these productive people”,
what is necessary is not first capital that employs them,
and secondly revenue that enjoys their labour, but nothing
other than capital, which produces the revenue, which enjoys
the fruit of their labour. If as a capitalist tailor I
lay out £100 in wages, this £100 produces for me
say £120. It produces for me a revenue of
£20, with which I can then, if I want to, also enjoy
tailoring labour in the form of a
“frockcoat”. If on the other hand I buy
clothes for £20 in order to wear them, it is obvious
that these clothes have not created the £20 with which
I buy them. And the case would be the same if I got a
jobbing tailor to come to my house and made him sew coats
for me for £20. In the first case I received
£20 more than I had before, and in the second case,
after the transaction, I have £20 less than I had
before. Moreover, I would soon realise that the tailor
whom I pay directly from revenue does not make the coat as
cheaply as if I bought it from the intermediary.

Garnier imagines that the profit is paid by the
consumer. The consumer pays the “value” of
the commodity; and although it contains a profit for the
capitalist, the commodity is cheaper for him, the consumer,
than if he had spent his revenue directly on labour causing
it to produce on a small scale for his personal
requirements. It is obvious here that Garnier has not
the slightest idea of what capital is.

He continues:

“Do not many unproductive workers,
such as actors, musicians, etc., as a rule only receive
their wages through the channel of a manager w ho draws
profits from the capital placed in this kind of
enterprise?” (l.c., pp.175-76).

This observation is correct, but it only shows that a
part of the labourers whom Adam Smith in his second
definition calls unproductive are productive according to
his first definition.

“It follows therefore that in a
society in which the productive class is very
numerous, it must be supposed that a large accumulation of
capitals exists in the hands of the intermediaries or
entrepreneurs of labour” (l.c., p. 176).

In fact, wage-labour on a mass scale is only another
expression for capital on a mass scale.

“It is therefore not, as Smith
maintains, the proportion existing between the mass of
capitals and that of revenues which will determine the
proportion between the productive class and the
non-productive class. This latter proportion
seems to depend much more on the customs and habits of the
people; on the more or less advanced degree of its
industry” (l.c., p. 177).

If productive labourers are such as are paid from
capital, and unproductive such as are paid from revenue, the
proportion of the productive class to the unproductive is
obviously that of capital to revenue. The proportional
growth of the two classes, however, will not depend only on
the existing proportion of the mass of capitals to the mass
of revenues. It will depend on the proportion in which
the increasing revenue (profit) is transformed into capital
or expended as revenue. Although the bourgeoisie was
originally very thrifty, with the growing productivity of
capital, i.e., of the labourers, | it imitates the retainer
system of the feudal lords. According to the latest
report (1861 or 1862)* on the factories, the total number of
persons (managers included) employed in the factories
properly so called of the United Kingdom was only 775,534,* while the number of
female servants in England alone amounted to 1
million. What a convenient arrangement it is that
makes a factory girl to sweat twelve hours in a factory, so
that the factory proprietor, with a part of her unpaid
labour, can take into his personal service her sister as
maid, her brother as groom and her cousin as soldier or
policeman!

Garnier’s last sentence is trite tautology. He
makes the proportion between the productive and the
unproductive classes depend, not on the proportion of
capital and revenue—or rather on the mass of existing
commodities which are expended in the form of capital or of
revenue—but (?) on the customs and habits of the
people, on the degree of development of its industry.
In fact, capitalist production first appears at a certain
stage of development of industry.

As a Bonapartist senator, Garnier naturally waxes
enthusiastic over lackeys and servitors in general:
“No class with an equal number of individuals
contributes more than domestic servants to the conversion
into capital of sums originating from revenue
“(p. 181).

In fact, no class provides a more worthless section of
recruits for the petty bourgeoisie. Garnier does not
understand how Smith, “a man who has observed things
with such sagacity”, does not value more highly
“this intermediary, placed close to the rich, in order
to gather up the scraps of revenue which the latter
so thoughtlessly dissipates” (l.c., pp. 82,
183). He himself says in this sentence that he merely
“gathers up” the scraps of
“revenue”. But of what does this revenue
consist? Of the unpaid labour of the productive
labourer.

After all these extremely worthless polemics against
Smith, Garnier, relapsing into Physiocracy, declares
agricultural labour the only productive labour! And
why? Because it “creates another new value, a
value which did not exist in society, even as an
equivalent, at the moment when this labour began to be
performed; and it is this value which provides a rent to the
owner of the land” (l.c., p. 184).

So what is productive labour? Labour which produces
a surplus-value, a new value over and above the equivalent
which it receives as wages. Smith is not to blame for
Garnier’s failing to understand that the exchange of
capital for labour means nothing but the exchange
of a commodity of a given value—equal to a given
quantity of labour—for a greater quantity of labour
than it itself contains, and thus creates “a new
value, a value which did not exist in society, even as an
equivalent, at the moment when this labour began to be
performed”. |VIII-358||

||IX-400| Monsieur
Germain Garnier had published in Paris in 1796
Abrégé élémmentaire des
principes de l’économie politique. Along
with the Physiocratic view that agriculture alone is
productive another is to be found (which to a great extent
explains his polemic against Adam Smith), namely, that
consumption (strongly represented by the “unproductive
labourers”) is the source of production, and that the
volume of the latter is to be measured by the volume of the
former. The unproductive labourers satisfy artificial
needs and consume material products, and are thus in every
way useful, He also polemises, therefore, against economy
(thrift). On p. xiii of his preface we find:

“The fortune of an individual is
enlarged by saving; the public fortune, on the
contrary, derives its increase from the increase of
consumption.”

And on p. 240, in the chapter on public debts:

“The improvement and extension of
agriculture and consequently the progress of industry and
commerce have no other cause than the extension of
artificial needs.”

From this he concludes that public debts are a good
thing, in that they increase these needs. |IX-400||

||XI-421|
Schmalz. In his criticism of Smith’s
distinction between productive labour and unproductive
labour this German afterbirth of the Physiocrats says
(German edition [it was published in]
1818):

“I observe only … that Smith’s
distinction between productive and
unproductive labour should not be considered as
essential or very precise, if one has regard to the fact
that in general the labour of others never produces anything
for us but a saving of time, and that this saving of time is
all that forms its value and its
price.”*

<There is a confusion here: the value and the price of
a thing is not determined by the economy of time effected
through the division of labour; but I get more use-value for
the same value, labour is more productive, because a greater
quantity of products is produced in the same time; however
as the echo of the Physiocrats he naturally could not
discover value in labour-time itself.>

“The joiner for example who makes a
table for me, and the servant who takes my letters to the
post, who cleans my clothes or gets for mc the things I
need, both perform a service of absolutely like nature, Both
the one and the other save mc the time which I myself would
have to use up in doing these things, as also the time I
would have to devote to acquire the skill and facility
needed for them” (Schmalz, Économie
politique, traduit par Henri Jouffroy, etc., t. I, 1826,
p. 304).

The following remark of this same scribbler Schmalz**** is also important
for the link with Garnier, for instance his consumption
system (and the economic utility of vast expenditure) with
the Physiocratic system:

“This system” (Quesnay’s)
“regards the consumption of artisans, and even of
those who merely consume, as meritorious, because
this consumption, even though in an indirect and mediated
way, contributes to the growth of the nation’s revenue;
since but for this consumption the consumed products
would not have been produced from the land and could not
have been added to the revenue of the landowner”
(p. 321). |IX-421||

### [8.] Charles Ganilh [Mercantilist Conception of Exchange and Exchange-Value. Inclusion of All Paid Labour in the Concept of Productive Labour]

||VIII-358| A very inferior and superficial
compilation is Charles Ganilh’s Des systémes
d’économie politique, First edition Paris
1809, second 1821. (Quotations from the
latter.) His twaddle is directly linked with Garnier,
against whom he polemises.

<Canard in Principes
d’économie politique defines
“wealth” [as] “an accumulation
of supeflruous labour”. Had
he said that it is the labour which is superfluous for
keeping the labourer alive as a labourer, the definition
would be correct.>

Monsieur Ganilh’s starting-point is the elementary fact
that the commodity is the element of bourgeois wealth, and
therefore labour, in order to produce wealth, must produce
commodities, must sell itself or its product.

“In the present state of
civilisation, labour is only known to us through
exchange” (l.c., t. I, p. 79). “Labour
without exchange can produce no wealth” (l.c.,
p. 81).

From this Ganilh jumps straight into the Mercantile
system.

Because labour without exchange creates no bourgeois
wealth. “wealth comes exclusively from
trade” (l.c., p. 84). Or, as he says later:
“Exchange or trade alone gives value to things”
(l.c., p. 98). On this “principle of the
identity of values and wealth … rests the doctrine of
the fruitfulness of general labour” (l.c., p. 93).

Ganilh himself declares | that the “commercial
system” which he calls a mere
“modification” of the monetary system

“derives private and public wealth
from the exchangeable values of labour, whether these values
are or are not fixed in material, durable, and permanent
objects” (l.c., p. 95).

He thus falls into the Mercantile system, as Garnier fell
into the Physiocratic. His trash, if good for nothing
else, is consequently not had as a characterisation of this
system and of its views on “surplus-value”,
especially as he puts forward these views in opposition to
Smith, Ricardo, etc.

Wealth is exchangeable value; all labour which produces
an exchangeable value or itself has an exchangeable value
consequently produces wealth. The only word in which
Ganilh shows himself a more profound Mercantilist, is the
word general labour. The labour of individuals,
or rather its product, must take the form of general
labour. Only so is it exchange-value,
money. In fact, Ganilh comes back to the view
that wealth is equivalent to money; though no longer only
gold and silver, but the commodity itself, in so far as it
is money. He says: “Commercial
system, or the exchange of values of general
labour” (l.c., p. 98). This is
nonsense. The product is value as the form of
existence, as the incarnation of general labour, but not as
“the value of general labour”, which
would be equivalent to the value of value. But let us
assume that the commodity is constituted as value, and has
even taken on the form of money, is metamorphosed. It
is now exchangeable value. But how great is its
value? All commodities are exchangeable value.
They are not different from each other in this. But
what makes the exchangeable value of a definite
commodity? Here Ganilh does not get beyond the crudest
superficiality. A is of greater exchange-value when it
exchanges for more B, C, D, etc.

Ganilh is quite right when he says of Ricardo and most
economists that they consider labour without exchange,
although their system, like the whole bourgeois system,
rests on exchange-value. This however is only due to
the fact that to them the form of product as
commodity seems self-evident, and consequently they examine
only the magnitude of value. In exchange the
products of individuals only manifest themselves as products
of general labour by taking the form of money.
This relativity, however, originates from the fact that they
must present themselves as the form of existence of general
labour, and can be reduced to it only as relative, merely
quantitatively different expressions of social labour.
But the exchange itself does not give them their
magnitude of value. In exchange they appear as
general social labour; and the extent to which they can
appear as general social labour depends on the extent to
which they can present themselves as social labour, that is,
on the extent of the commodities for which they can be
exchanged, and therefore on the expansion of the market, of
trade; on the range of commodities in which they can be
expressed as exchange-value. For example, were there
only four different branches of production in existence,
each of the four producers would produce a great part of his
product for himself. If there are thousands, then he
can produce his total product as commodities. It can
enter entirely into exchange. But Ganilh imagines,
with the Mercantilists, that the magnitude of value is
itself the product of exchange, whereas in fact it is
only the form of value or the form of commodity which
the product receives through exchange.

“Exchange gives things a value
which they would not have had without it”
(p. 102).

If this means that things, use-values, only become
value, receive this form as relative expressions of social
labour, it is a tautology. But if it is intended to
mean that through exchange they get a greater value than
they would have had without it, it is clearly nonsense, for
exchange can only increase A’s magnitude of value by
reducing that of B. So far as it gives A a greater
value than it has before the exchange, it gives B a smaller
value. A+B, therefore, has the same value after the
exchange as it had before it.

“The most useful products may have no
value if exchange does not give any to them”
(p. 104).

(First, if these things are “products”, they
are from the start products of labour, not general elemental
things provided by nature like air, etc.; if they are
“the most useful”, they are use-values in the
highest sense, use-values that everyone needs; if exchange
gives them no value, this is only possible if
everyone produces them for himself; this however contradicts
| the assumption that they
are produced for exchange; therefore the whole proposition
is nonsense.)

“And the most useless products may
have very great value, if exchange is favourable for
them” (p. 104).

For Monsieur Ganilh, “exchange” is a mystical
being. If the “most useless” products are
no use for anything, have no use-value, who will buy
them? They must therefore have at least an imaginary
“utility” for the buyer. And if he is not
a fool, why should he pay more for them? Their
dearness must therefore originate in some circumstance which
in any case does not arise from their
“uselessness”. Their
“scarcity”, rarity? But Ganilh calls them
“the most useless products”. As
therefore they are products, why are they not produced in
greater quantities, in spite of their great
“exchange-value”? If before it was the
buyer who was a fool, giving a lot of money for something
that had neither a real nor an imaginary use-value for him,
now it is the seller, who does not produce these trifles of
great exchange-value instead of utilities of small
value. That their exchange-value is great in spite of
their small use-value (use-value determined by the natural
needs of man), must therefore be due to some circumstance
that originates not from Lord Exchange, but from the product
itself. Its high exchange-value is therefore not
the product of exchange, but only appears in
exchange.

“The exchanged value of things and
not their exchangeable value establishes the real
value, the value which is identical with wealth”
(l.c., p. 104).

But exchangeable value is a relation of the thing to
other things with which it can be exchanged. <The
correct point underlying this statement is: what compels the
transformation of the commodity into money is that it has to
enter into exchange as an exchangeable value, but only
becomes that as the result of exchange.> On the other
hand, the exchanged value of A is a definite quantity of
products B, C, D, etc. Therefore (according to
Monsieur Ganilh) it is no longer a value, but a thing,
without exchange. B, C, D, etc., were not
“values”. A has become a value through
these non-values stepping into its place (as exchanged
value). By the mere change of place—after they
have come out of exchange and find themselves in the same
position as before—these things have become
values.

“It is therefore neither the real
utility of things, nor their intrinsic value, which
makes them wealth; it is exchange which fixes and determines
their value, and it is this value which identifies them with
wealth” (l.c., p. 105).

Lord Exchange fixes and determines something which was
there or was not there. If only exchange creates the
value of things, then this value, this product of exchange,
ceases to exist as soon as exchange itself ceases.
Thus what it makes, it equally unmakes. I exchange A
for B+C+D, In the act of this exchange A gets value.
As soon as the act is past, B+C+D stands on the side where A
was, and A on the side where B+C+D was. And in fact
each stands on its own, outside Lord Exchange, who only
consisted of this change of place. B+C+D is now
things, not values. So is A. Or exchange
“fixes and determines” in the literal meaning of
the word. A dynamometer determines and fixes the
degree of strength of my muscles, but it does not make
it. In this case value is not produced by
exchange.

“There is in truth no wealth for
individuals and for peoples, except when each labours for
all” (that is to say, when his labour takes the form
of general social labour, for in any other meaning
this would be nonsense; since, except in the form of general
social labour, an iron manufacturer does not work for all,
but only for consumers of iron); “and all for
each” (which again is nonsense, if we are dealing with
use-value, for the products of all are without exception
special products, and each person needs only special
products; what this means is therefore only that each
special product takes on a form in which it exists for
everyone; and it only exists in this form, not because
as a special product it is distinct from the product of each
other person, but because it is identical with it; that is,
once more the form of social labour as it exists on the
basis of commodity production) (l.c., p. 408).

| From this
definition—exchange-value is the expression of the
labour of the isolated individual as general social
labour—Ganilh falls once more into the crudest
conception: that exchange-value is the proportion in which
commodity A exchanges against commodity B, C, D, etc.
A has great exchange-value if much B, C, D is given for it;
but then little A is given for B, C, D. Wealth
consists of exchange-value. Exchange-value consists of
the relative proportion in which products exchange for each
other. The total quantity of products has therefore no
exchange-value, since it is not exchanged for
anything. Hence, society, whose wealth consists of
exchange-values, has no wealth. Consequently it
follows not only, as Ganilh himself concludes, that the
“national wealth, which is composed of the
exchange-values of labour” (p.108), can never rise and
can never fall in exchange-value ( therefore there is no
surplus-value), but that it has no exchange-value
whatever, and so is not wealth, since wealth consists only
of exchangeable values.

“If the abundance of wheat makes
its value fall, the farmers will be less rich,
because they have less exchange-values to obtain for
themselves things that are necessary, useful or pleasant for
life; but the consumers of wheat will profit from all that
the farmers have lost: the loss of some will be compensated
by the gain of others, and the general wealth will undergo
no change” (pp. 108-09).

Excuse me. The consumers of wheat eat the wheat and
not the exchangeable value of the wheat. They are
richer in means of subsistence, but not in exchangeable
value. They have exchanged a small amount of their
products—which have a high exchange-value because of
their relative paucity as compared with the quantity of
wheat for which they are exchanged—for the
wheat. The farmers have now received the high
exchange-value and the consumers a good deal of wheat of
small exchange-value, so that now the latter are the poor
ones and the farmers the rich.

Moreover, the total (the social total of exchange-values)
loses its nature of being exchange-value in the same degree
as it becomes the total of exchange-values. A, B, C,
D, E, F have exchange-value in so far as they are exchanged
for each other. When they have been exchanged, they
are then all products for their consumers, their
purchasers. By exchanging hands they have ceased to be
exchange-value. And thereby the wealth of society,
which is composed of exchangeable values, has
disappeared. The value of A is relative; it is its
exchange relation to B, C, etc. A+B has less
exchange-value, because its exchange-value now exists only
in relation to C, D, E, F. But the total of A, B, C,
D, E, F has no exchange-value at all, because it expresses
no relation. The total of commodities is not exchanged
for other commodities. Therefore the wealth of
society, which consists of exchange-values, has no
exchange-value and is consequently not wealth.

“Hence it is that it is difficult,
and perhaps impossible, for a country to enrich itself by
internal commerce. It is not at all the same for
peoples who engage in foreign trade” (l.c.,
p. 109).

This is the old Mercantile system. Value consists
in my getting not an equivalent, but more than the
equivalent. At the same time, however, for Ganilh
there is no equivalent, for this would imply that the value
of A and the value of B are determined not by the proportion
of A in B or of B in A, but by a third thing in which A and
B are identical. But if there is no equivalent, there
can also be no excess over the equivalent. I get less
gold for iron than iron for gold. Now I have more
iron, for which I get less gold. If therefore I gain
on the original transaction because less gold is equal to
more iron, I now lose just as much because more iron is
equal to less gold.

“All labour, whatever be its nature,
is productive of wealth provided that it has an
exchange-value” (l.c., p. 119). “Exchange
pays no regard either to the quantity or to the material
nature or to the durability of the products” (l.c.,
p. 121). “All” (kinds of labour) “are
equally productive of the sum for which they
have been exchanged” (pp. 121-22).

First they are equally productive of the sum, that
is, the price, which they have been paid (the
value of their wages). But Ganilh at once goes
another step further. Immaterial labour, he says,
produces the material product for which it is exchanged, so
that it seems that material labour produces the product of
immaterial labour.

| “There is no
difference between the labour of the workman who makes a
chest of drawers for which he gets two bushels of wheat in
exchange and the labour of a village fiddler for which he
gets two bushels of wheat. In both cases two bushels
of wheat are produced: two bushels to pay for the chest of
drawers, and two bushels to pay for the pleasure given by
the village fiddler. It is true that after the joiner
has consumed the two bushels of wheat, a chest of drawers
remains, and after the fiddler has consumed the two bushels
of wheat, nothing remains; bet how many labours reputed
productive are in the same case!… it is net by what
remains after consumption that one can judge whether a
labour is productive or sterile, it is by the exchange or
by the production to which it has given rise. But
since the joiner’s labour, as well as the fiddler’s labour,
is the cause of the production of two bushels of wheat,
both are equally productive of two bushels of wheat,
although the one, after it is finished, does not fix and
realise itself in any durable object, and the other fixes
and realises itself in a durable object” (l.c., pp.
122-23).

“Adam Smith would like to reduce the
number of labourers who are not usefully occupied, in order
to multiply that of the labourers who are usefully occupied;
but no consideration has been given to the fact that if this
desire could be realised all wealth would be impossible,
because consumers would be lacking for the producers, and
the excess that was not consumed would not be
reproduced. The productive classes do not give the
products of their labours gratuitously to the classes
whose labours do not yield any material products”
(here he nevertheless himself distinguishes between labours
which yield material products and labours which do not);
“they give them to them in exchange for the
convenience, the pleasures and the enjoyments that they
receive from them, and, in order to give them to
them, they are obliged to produce them. If the
material products of labour were not employed to pay for the
labours which do not yield material products, they would not
have consumers and their reproduction would cease,
The labours productive of enjoyment thus contribute to
production as efficaciously as the labour which is
considered to be the most productive” (l.c.,
pp. 123-24).

“Almost always the convenience, the
pleasures or the enjoyments which they” (the peoples)
“seek follow and do not precede the products
which are to pay for them” (l.c.,
p. 125). (They seem therefore to be much more
effect than cause of the products which are to pay for
them). “The position is different when the pro
ours devoted to pleasure, luxury and ostentation are not
wanted by the productive classes, “ (thus he
himself makes the distinction here) “and they are
nevertheless forced to pay for them and to cut down
their own requirements by this amount. Then it may
come about that this forced payment does not bring about an
increase in production” (l.c., p. 125).
“Apart from this case all labour is necessarily
productive, and contributes more or less efficaciously to
the formation and growth of the public wealth, because it
necessarily calls forth the products which pay for
it” (l.c. p. 126).

<So according to this the “unproductive
labours” are productive neither because of their cost,
that is, their exchange-value, nor because of the special
enjoyment that they produce, that is, their use-value, but
because they produce productive labour.>

<If, according to Adam Smith, that labour is
productive which is directly exchanged for capital, then we
have to consider, apart from the form, also the material
components of the capital which is exchanged for
labour. It resolves itself into the necessary means of
subsistence; that is for the most part into commodities,
material things. What the labourer has to pay from
these wages to State and Church is a deduction for services
which are forced upon him; what he pays out for education is
devilishly little, but when he does, his payments are
productive, for education produces labour-power; what he
pays out for the services of physicians, lawyers, priests,
is his misfortune; there are very few unproductive labours
or services left on which the labourer’s wages are spent,
especially as he himself provides his costs of consumption
(cooking, keeping his house clean, generally even
repairs).>

The following statement of Ganilh’s is extremely
characteristic:

“If exchange gives to the servant’s
labour a value of 1,000 francs, while it gives to that of
the husbandman or factory worker only a value of 500 francs,
one must conclude from this that the servant’s labour
contributes to the production of wealth twice as much
as that of the husbandman and the factory worker; and it
cannot be otherwise, as long as the labour of servants
receives in payment twice as much in material products as
the labour of husbandmen and factory workers. How can
it be imagined that wealth results from labour which has
less exchange-value and which is consequently paid
less!” (l.c., pp. 293-94).

| If the wages of the
factory or agricultural labourer are 500 francs, and the
surplus-value (profit and rent) created by him is equal to
40 per cent, his net product would be 200 francs, and five
such labourers would be required to produce the wages of
1,000 francs for the servant. If instead of the
servant Lord Exchange cared to buy a mistress for 10,000
francs annually, the net product of 50 such productive
labourers would be required. And because her
unproductive labour brings in for the mistress twenty times
as much exchange-value, wages, as the wages of the
productive labourer, this person adds twenty times as much
to “the production of wealth”, and a country
produces the more wealth the higher it pays its servants and
mistresses. Monsieur Ganilh forgets that only the
productivity of manufacturing and agricultural labour, only
the surplus created by the productive workers but not paid
to them, provides any fund at all for which the unproductive
labourers are paid. But he reckons like this: 1,000
francs wage, and the labour of servant or mistress as
equivalent for the wage, make together 2,000 francs.
The value of servants and mistresses, that is, their
production costs, depend entirely on the net product
of the productive labourers. Indeed, their existence
as a special breed of people depends on it. Their
price and their value have little in common with each
other.

But even assuming that the value (the costs of
production) of a servant is twice as great as that of a
productive labourer, it must be observed that the
productivity of a labourer (like that of a machine) and his
value are entirely different things, which are even in
inverse proportion to each other. The value that a
machine costs is always a minus in relation to its
productivity.

“In vain is the objection raised that
if the labour of servants is as productive as that of
husbandmen and factory workers, there is no reason why the
public economy of a country should not be used to maintain
them, not only without being squandered but with a constant
increase of value. This objection is only specious
because it assumes that the fruitfulness of each labour
results from its co-operation in the production of
material objects, that material production is constitutive
of wealth and that production and wealth are completely
identical. It is forgotten that all production
only becomes wealth concurrently with its
consumption,* and that exchange
determines up to what point it contributes to the formation
of wealth. If it is remembered that all labours
contribute directly or indirectly to the total production of
each country, that exchange, in fixing the value of each
labour, determines the part that it has had in this
production, that consumption of the production
realises the value that exchange has given it, and that the
surplus or deficit of production over consumption determines
the state of wealth or poverty of peoples, it will be
realised how inconsistent it is to isolate each
labour, to fix its fertility and its fruitfulness by its
contribution to material production and without any
regard to its |
consumption, which alone gives it a value, a value
without which wealth cannot exist” (l.c.,
pp. 294-95).

On the one hand the fellow makes wealth depend on the
excess of production over consumption, on the other hand he
says that only consumption gives value. And a servant
who consumes 1,000 francs consequently contributes twice as
much to the giving of value as a peasant who consumes 500
francs.

In the first place he admits that these unproductive
labours do not ‘directly participate in the formation
of material wealth. Smith does not claim more than
this. On the other hand he tries to prove that on the
contrary they create material wealth in the same measure as,
according to his own admission, they do not.

All those who polemise against Adam Smith on the one hand
assume a superior attitude to material production, and on
the other hand they attempt to justify immaterial
production—or even no production, like that of
lackeys—as material production. It makes
absolutely no difference whether the owner of the net
revenue consumes this revenue in lackeys, mistresses or
pasties. But it is ludicrous to imagine that the
surplus must be consumed by servants and cannot be consumed
by productive labourers themselves without the value of the
product going to the devil. With Malthus too we find
the same view of the necessity of unproductive
consumers—which necessity in fact exists when the
surplus comes into the hands of idlers. |

### [9. Ganilh and Ricardo on Net Revenue. Ganilh as Advocate of a Diminution of the Productive Population; Ricardo as Advocate of the Accumulation of Capital and the Growth of Productive Forces]

| Ganilh claims
to have put forward a theory in his Théorie de
l’économie politique (a book I don’t know) which
Ricardo later copied from him. This theory is that
wealth depends on net product and not on gross product, and
thus on the level of profit and rent. (This is
certainly not a discovery of Ganilh’s, who distinguishes
himself, however, by the way he puts it.)

Surplus-value presents itself (has its real existence) in
a surplus-produce in excess of the quantity of products
which only replace its original elements, that is, which
enter into its production costs and—taking constant
and variable capital together—are equal to the total
capital advanced to production. The aim of capitalist
production is the surplus, not the product. The
labourer’s necessary labour-time, and therefore also its
equivalent in the product with which it is paid for, is only
necessary as long as it produces surplus-labour.
Otherwise it is unproductive for the capitalist.

The surplus-value is equal to the rate of surplus-value
s/v multiplied by the number of simultaneous days’
labour or the number of employed labourers, that is, by
n. So S= s/v × n.
This surplus-value can therefore be increased or reduced in
two ways. For example, (s/v)/2×n is equal
to 2s/v × n=2S. Here S | has doubled, because the rate
has doubled, since (s/v)/2 is 2s/v, that is,
is twice as much as s/v. On the other hand,
however s/v × 2n would also be equal to
2sn/v, that is, also equal to 2S. V, the
variable capital, is equal to the p rice of the single day’s
labour multiplied by the number of labourers employed.
If 800 labourers are employed, each costing £1, then
V=£800, that is, £1 × 800, where
n=800. Then if the surplus-value is 160, its
rate would be 160/(£1×800)
= 160/800 =
16/80 = 1/5 = 20
per cent. But the surplus-value itself is
160/(£1×800) × 800,
that is,
£S/£1×n×
n.

With a given length of labour-time, this surplus-value
can only be increased by an increase of productivity, or at
a given level of productivity, by a lengthening of the
labour-time.

But what concerns us here is: 2S=[(s/v)/2]
× n; and 2S=s/v × 2n.

The surplus-value (gross amount of surplus-value) remains
the same, if the number of labourers is reduced by
half—is only n instead of 2n, but the
surplus-labour performed by them each day is twice as much
as it was before. On this assumption, therefore, two
things would remain the same: first, the total quantity of
products produced; secondly, the total quantity of
surplus-produce or net product. But the following
would have changed: first, the variable capital, or the part
of the circulating capital expended in wages, would have
fallen by half. The part of the constant capital which
consists of raw materials would also remain unchanged, as
the same quantity of raw material as before would be worked
up, although this would be done by half the labourers
employed before. As against this, the part which
consists of fixed capital has increased.

If the capital expended in wages was £300 (£1
per labourer), it would now be £150. If that
expended in raw materials was £310, it would now be
£310. If the value of the machinery was four
times as much as the rest of the capital, it would now be
£1,600. Therefore if the machinery is worn out
in ten years, the machinery entering annually into the
product would be £160. We will assume that the
capital previously expended annually on instruments was
£40, thus only 1/4, Then the
account would stand:

Machinery

Raw Material

Wages

Total

Surplus-value

Rate of Profit

Total Product

Old capital

40

310

300

650

150 or 50%

23 1/13%

800

New Capital

160

310

150

620

150 or 100%

246/31%

770

In this case the rate of profit has risen, because the
total capital has decreased—the capital expended in
wages has fallen by £150, the total value of the fixed
capital has only risen by £120, and so in all
£30 less than before is expended.

But if the £30 left over is again employed in the
same way, 31/62 (or
1/2) in raw material,
16/62 in machinery and
15/62 in wages, the result would
be:

Machinery

Raw material

Wages

Surplus-value

£7.14.6

£15

£7.5.6

£7.5.6

And taking both together:

Machinery

Raw material

Wages

Surplus-value

Rate of profit

New capital

£167.14.6

£325

£157.5.6

£157.5.6

24 6/31%

Total amount of capital expended: £650 as
before. Total product £807.5.6.

The total value of the product has risen; the total value
of the capital expended has remained the same; and not only
the value, but the amount of the total product has risen,
since an additional £15 in raw materials has been
transformed into the product.

| [We find in
Ganilh:]

“When a country is deprived of
the aid of machines, and its labour is carried out by hand,
the labouring classes consume almost the whole of their
production. To the degree that industry makes
progress, is improved by the division of labour, the skill
of the workmen, and the invention of machines, the costs of
production diminish, or in other words, a smaller
number of labourers is required to obtain a greater
production” (l.c., t. 1, pp. 211-12).

That is to say, therefore, in the same degree as industry
becomes more productive, the production costs of wages are
reduced. Fewer labourers are employed in relation to
the product, and these therefore also consume a smaller part
of the product.

If a labourer without machinery needs 10 hours to produce
his own means of subsistence, and if with machinery he only
needs 6, then (with 12 hours’ labour) in the first case he
works 10 for himself and 2 for the capitalist, and the
capitalist gets one-sixth of the total product of the 12
hours. In the first case 10 labourers will produce a
product for 10 labourers (equal to 100 hours) and 20 [hours]
for the capitalist. Of the value of 120, the
capitalist gets one-sixth, or 20. In the second case,
5 labourers will produce a product for 5 Labourers (equal to
30 hours), and for the capitalist 30 hours. Of the 60
hours the capitalist now gets 30, that is, one half—3
times as much as before, The total surplus-value too would
have risen, namely from 20 to 30, by
1/3. When I appropriate one-half
of 60 days, this is one-third more than when I appropriate
one-sixth of 120 days.

Moreover, the one-half of the total product that the
capitalist gets is also greater in quantity than
before. For 6 hours now produce as much product as 10
did before; 1 [hour] as much as ten-sixths of an hour
[before], or 1 as much as 1 4/6=1
2/3, So the 30 surplus hours contain
as much product as did previously 30
(1+2/3) = 30 +
60/3 = 50. 6 hours produce as
much product as 10 did previously, that is, 30—or
5×6—produce as much as 5×10 did
before.

The capitalist’s surplus-value would therefore have risen
and also his surplus-product (if he consumes it himself, or
as much of it as he consumes in kind). The
surplus-value can even rise without the quantity of the
total product being increased. For the increase of
surplus-value means that the labourer is able to produce his
means of subsistence in less time than before, that
therefore the value of the commodities he consumes falls,
represents less labour-time, and that therefore a certain
value, equal to 6 hours for example, represents a greater
quantity of the use-values than before. The labourer
receives the same quantity of product as before, but this
quantity forms a smaller part of the total product, as its
value expresses a smaller part of the fruits of the day’s
labour. Although an increase in productive power in
the branches of industry whose product neither directly nor
indirectly enters into the formation of the labourer’s means
of consumption could not have this result—since
increased or reduced productivity in these branches does not
affect the relation between the necessary and the
surplus-labour—the result for these industries would
nevertheless be the same, although it did not originate from
a change in their own productivity. The relative value
of their products would rise in exactly the same proportion
as that of the other commodities had fallen (if their own
productivity had remained the same); consequently, a
proportionately smaller aliquot part of these products, or a
smaller part of the labour-time of the labourer which is
materialised in them, would procure for him the same
quantity of means of subsistence as before. The
surplus-value would therefore rise in these branches of
labour just as in the others.

But what will then become of the five displaced
labourers?

It will be said that capital has also been released,
namely, that which paid the five dismissed workers, who each
received 10 hours (f or which they worked 12), that is, 50
hours in all, which could previously have paid the wages of
five labourers and which [now] that wages have fallen to 6
hours can pay for 50/6 = 8
1/2 days’ labour. Therefore now
the capital of 50 [hours’] labour that has been released can
employ more labourers than have been dismissed.

But a capital equivalent to the whole 50 hours’ labour
has not been released. For even assuming that the raw
material has become cheaper in the same proportion as the
increase in the quantity of it that is worked up in the same
labour-time—that is, assuming that the same increase
of productivity has taken place in that branch of production
—the outlay for the new machinery nevertheless
remains. Assuming that this costs exactly 50 hours’
labour, it has certainly in no case employed as many
labourers as were put off. For this 50 hours’ labour
was laid out entirely in wages, for 5 labourers. But
in the value of the machine, equivalent to 50 hours’ labour,
both profit and wages are contained, both paid and unpaid
labour-time. In addition, constant capital enters into
the value of the machine. The number of
machine-building labourers [who built the machine is]
smaller than the number of labourers discharged; nor are
they the same individuals | as those discharged. The
greater demand for labourers in machine building can at most
affect the future distribution of the number of labourers,
so that a larger part of the generation entering the
labour-market—a larger part than before—turns to
that branch of industry. It does not affect those who
have been discharged. Moreover the increase in the
annual demand for these is not equal to the new capital
expended on machinery. The machine lasts for example
for ten years. The constant demand which it creates is
therefore equal annually to 1/10 of
the wages contained in it. To this
1/10 must be added labour for repairs
during the 10 years, and the daily consumption of coal, oil
and other auxiliary materials; which in all amounts perhaps
to another 2/10.

<If the capital released were equal to 60 hours, these
would now represent 10 hours’ surplus-labour and only 50
necessary labour. Thus if previously the 60 hours had
been expended in wages and 6 labourers had been employed,
now it would be only 5.>

<The shifting of labour and capital which increased
productivity in a particular branch of industry brings about
by means of machinery, etc., is always only
prospective. That is to say, the increase, the new
number of labourers entering industry, is distributed in
a different way; perhaps the children of those who have been
thrown out, but not these themselves. They themselves
vegetate for a long time in their old trade, which they
carry on under the most unfavourable conditions, inasmuch as
their necessary labour-time is greater than the socially
necessary labour-time; they become paupers, or find
employment in branches of industry where a lower grade of
labour is employed.>

<A pauper, like a capitalist (rentier), lives
on the revenue of the country. He does not enter into
the production costs of the product, and consequently
Monsieur Ganilh would call him a representative of
exchangeable value. Ditto, for a criminal who is fed
in prison. A large part of the “unproductive
labourers”, holders of State sinecures, etc., are
simply respectable paupers.>

<Assume that the productivity of industry is so
advanced that whereas earlier two-thirds of the population
were directly engaged in material production, now it is only
one-third. Previously 2/3
produced means of subsistence for 3/3;
now 1/3 produce for
3/3. Previously
1/3 was net revenue (as distinct from
the revenue of the labourers), now
2/3. Leaving [class]
contradictions out of account, the nation would now use
1/3 of its time for direct production,
where previously it needed 2/3.
Equally distributed, all [that is, the whole population]
would have 2/3 more time for
unproductive labour and leisure. But in capitalist
production everything seems and in fact is
contradictory. The assumption does not imply that the
population is stagnant. For if the
3/3 grow, so also do the
1/3; thus, measured in
quantity, a larger number of people could be employed in
productive labour. But relatively, in proportion to
the total population, it would always be 50 per cent less
than before. Those two-thirds of the population
consist partly of the owners of profit and rent, partly of
unproductive labourers (who also, owing to competition, are
badly paid). The latter help the former to consume the
revenue and give them in return an equivalent in
services—or impose their services on them, like the
political unproductive labourers. It can be supposed
that—with the exception of the horde of flunkeys, the
soldiers, sailors, police, lower officials and so on,
mistresses, grooms, clowns and jugglers—these
unproductive labourers will on the whole have a higher level
of culture than the unproductive workers had previously, and
in particular that ill-paid artists, musicians, lawyers,
physicians, scholars, schoolmasters, inventors, etc., will
also have increased in number.

Within the productive class itself commercial middlemen
will have multiplied, but in particular those engaged in
machine construction, railway construction, mining and
excavation; moreover, in agriculture labourers engaged in
stock-raising will have increased in number, and also those
employed in producing chemical and mineral materials for
fertilisers, etc. Further, the farmers who grow raw
materials for industry will have risen in number, in
proportion to those producing means of subsistence; and
those who provide fodder for cattle, in proportion to those
who produce means of subsistence for people. As the
constant capital grows, so also does the proportionate
quantity of the total labour which is engaged in its
reproduction. Nevertheless, the part [of the
population] directly producing means of subsistence,
although its number declines, | produces more products than
before. Its labour is more productive. While
for the individual capital the fall in the variable part of
the capital as compared with the constant part takes the
direct form of a reduction in the part of the capital
expended in wages, for the total capital—in its
reproduction—this necessarily takes the
form that a relatively greater part of the total labour
employed is engaged in the reproduction of means of
production than is engaged in the production of products
themselves—that is, in the reproduction of machinery
(including means of communication and transport and
buildings), of auxiliary materials (coal, gas, oil, tallow,
leather belting, etc.) and of plants which form the raw
material for industrial products. Relatively to the
manufacturing labourers, agricultural labourers will decline
in number. Finally the luxury, labourers will increase
in number, since the higher revenue will consume more luxury
products.>

<The variable capital is resolved into revenue,
firstly wages, secondly profit. If therefore capital
is conceived as something contrasted with revenue, the
constant capital appears to be capital in the strict
sense: the part of the total product that belongs to
production and enters into the costs of production without
being individually consumed by anyone (with the exception of
draught cattle). This part may originate entirely from
profit and wages. In the last analysis, it can never
originate from these alone; it is the product of labour, but
of labour which regarded the instrument of production itself
as revenue, as the savage did the bow. But once
transformed into constant capital, this part of the product
is no longer resolvable into wages and profit, although its
reproduction yields wages and profit. A part of the
product belongs to this part. Each subsequent product
is the product of this past labour and of present
labour. The latter can only be continued in so
far as it returns a part of the total product to
production. It must replace the constant capital in
kind. If it grows more productive, it replaces the
product, but not its value, reducing this value as a
result. If it grows less productive, it raises its
value. In the first case the aliquot part drawn by
past labour from the total product falls; in the second case
it rises. In the first case the living labour becomes
more productive, in the second, less productive.>

<The factors which reduce the costs of the constant
capital, also include improved raw materials. For
example, it is not possible to make the same quantity of
twist in the same time both from good and from had raw
cotton, leaving entirely out of account the relative
quantity of waste, etc. Hence the importance of the
quality of seed, etc.>

<As an example combination where a manufacturer
himself makes a part of his former constant capital, or
where previously the raw material passed as constant capital
out of his sphere of production into a second sphere, and he
now himself gives it the second form—this always only
amounts to a concentration of profits, as was shown
earlier. An example of the first: the linking
together of spinning and weaving. An example of the
second: the mine owners of Birmingham, who took over the
complete process of making iron, which had formerly
been divided between a number of entrepreneurs and
owners.>

Ganilh continues:

“So long as the division of labour is
not established in all branches, so long as all classes of
the labouring and industrious population have not attained
their full development, the invention of machines, and their
employment in certain industries, only cause the capitals
and labourers displaced by the machines to flow into other
employments which can usefully employ them. But
it is evident that when all branches of employment
have the capital and the labourers they require, every
further improvement and every new machine that cuts down
labour, necessarily reduces the labouring population: and as
this reduction does not diminish production, the part which
it leaves available accrues either to the profit of capitals
or to the rent of land; and in consequence the natural and
necessary effect of machines is to diminish the population
of the wage-earning classes who live on the gross product,
and to increase the population of the classes which live on
the net product” (l.c., p. 212).

| “The
displacement of the population of a country, a
necessary consequence of the progress of industry, is
the true cause of the prosperity, the power and the
civilisation of modern peoples. The more the lower
classes of society decrease in number, the less need it be
troubled by the dangers to which the distress, the
ignorance, the credulity and the superstition of these
unfortunate classes ceaselessly expose it; the more the
upper classes multiply, the more subjects the State has at
its disposal, the stronger and more powerful it is, the more
knowledge, intelligence and civilisation there is in the
whole population” (l.c., p. 213).

<Say makes the total value of the product
resolvable into revenue in the following way: in the
Constancio translation of Ricardo’s [book
Principles], Chapter 26, he says in a note:

“The net revenue of an individual
consists of the value of the product to which he has
contributed … less his disbursements; but as the
disbursements that he has made are portions of
revenue which he has paid to others, the totality of
the value of the product has served to pay
revenues. The total revenue of a nation is
composed of its gross product, that is to say, of the gross
value of all its products which are distributed among the
producers.”

The last sentence would be correct if expressed in this
way:

The total revenue of a nation is composed of that part of
its gross product, that is to say, of the gross value of all
the products which are distributed as revenues among the
producers, that is to say, less that portion of all the
products which in each branch of industry had replaced the
means of production. But so expressed, the sentence
would negate itself.

Say continues:

“This value, after many exchanges,
would be entirely consumed in the year which saw its birth,
but it would nonetheless he still the revenue of the nation;
just as an individual who has 20,000 francs annual revenue
has nonetheless 20,000 francs annual revenue, although he
consumes it entirely each year. His revenue does not
consist only of his savings.”

His revenue never consists of his savings, although his
savings always consist of his revenues. To prove that
a nation can annually consume both its capital and its
revenue, Say compares it to an individual who leaves his
capital intact and only consumes his revenue each
year. If this individual consumed in a single year
both his capital of 200,000 francs and the revenue of
20,000, he would have nothing to eat the year after.
If the entire capital of a nation, and consequently the
entire gross value of its products, consisted of revenues,
Say would be right. The individual consumes his 20,000
francs revenue. His 200,000 francs capital, which he
does not consume, would be composed of the revenues of other
individuals, each of whom consumes his share, and thus, at
the end of the year, the whole capital would be
consumed. But perhaps it would be reproduced while it
is consumed, and thus replaced? But the individual in
question reproduces annually his revenue of 20,000 francs,
because he has not consumed his capital of 200,000
francs. The others have consumed this capital.
Then they have no capital with which to reproduce
revenue.>

“Only the net product,”
says Ganilh, “and those who consume it form its”
(the State’s) “wealth and its power, and contribute to
its prosperity, its glory and its grandeur” (l.c.,
p. 218).

Ganilh further cites Say’s notes to Constancio’s
translation of Ricardo [Principles,] Chapter XXVI,
where Ricardo says that if a country has 12 million
[inhabitants], it would be more advantageous for it if 5
million productive labourers labour for the 12 million, than
if 7 million productive labourers labour for the 12
million. In the first case the net product consists of
the surplus-produce on which the 7 million who are not
productive live; in the other, of a surplus-produce for 5
million. Say remarks on this:

“This is quite like the doctrine of
the Economists of the eighteenth century, who maintained
that manufactures in no way helped towards the wealth of the
State, because the wage-earning class, consuming a
value equal to | that
which they produce, contribute nothing to their famous
net product.” “

On this, Ganilh observes (pp. 219-20):

“It is not easy to see any connection
between the Economists’ assertion that the industrial
class consumes a value equal to that which it produces
and the doctrine of Mr. Ricardo, that the wages of
labourers cannot be counted in the revenue of a
State.”

Here too Ganilh misses the point. The Economists go
wrong in regarding the manufacturers as only wage-earning
classes. This distinguishes them from
Ricardo. They are further wrong in thinking that the
wage-earners produce what they consume. The
correct view, as Ricardo in contrast to them knew very well,
is that it is they who produce the net product, but produce
it precisely because their consumption, that is to say their
wage, is equal not to the time they labour, but to the
labour-time that they have put in to produce this wage; that
is, that they receive a share of the product only equal to
their necessary consumption, or that they receive only as
much of their own product as is equivalent to their own
necessary consumption. The Economists assumed that the
whole industrial class (masters and workmen) was in this
position. They considered that only rent bore the
character of an excess of production over wages, and
consequently that it was the only wealth. But when
Ricardo says that profits and rents form this surplus and
are consequently the only wealth, in spite of his difference
from the Physiocrats, he agrees with them in thinking that
only the net product, the product in which the surplus-value
exists, forms the national wealth; although he has a better
understanding of the nature of this surplus. For him,
too, it is only the part of the revenue which is in excess
of wages. What distinguishes him from the Economists
is not his explanation of the net product, but his
explanation of wages, under which category the Economists
wrongly also include profits.

Say also remarks in opposition to Ricardo:

“From seven million fully employed
labourers there would be more savings than from five
million.”

Ganilh rightly observes, refuting this:

“That is to suppose that economies
from wages are preferable to the economy which
results from the reduction of wages… It
would be too absurd to pay four hundred millions in wages to
labourers who give no net product, in order to provide them
with the opportunity and the means for making economies on
their wages” (l.c., p. 221).

“With every step made by
civilisation, labour becomes less burdensome and more
productive; the classes condemned to produce and to consume
diminish; and the classes which direct labour, which relieve
(!), console (!) and enlighten the whole population,
multiply, become more numerous and appropriate to
themselves all the benefits which result from the diminution
of the costs of labour, from the abundance
of products and the cheapness of consumer goods. In
this way, the human race lifts itself up…
Because of this progressive tendency to the diminution of
the lower classes of society and the increase of the upper
classes … civil society becomes more prosperous,
more powerful,” etc, (l.c., p. 224). “If
… the number of labourers employed is seven millions,
the wages will be fourteen hundred millions; but if the
fourteen hundred millions do not yield a larger net product
than the thousand millions paid to the five million
labourers, the real economy would be in abolishing the
four hundred millions in wages paid to two million labourers
who yield no net product, and not in the savings that
these two million labourers could make from the four hundred
millions of wages” (l.c., p. 221).

In Chapter XXVI [of his Principles] Ricardo
observes:

“Adam Smith constantly
magnifies the advantages which a country derives from a
large gross, rather than a large net income…
What would be the advantage resulting to a country from the
employment of a great quantity of productive labour, if,
whether it employed that quantity or a smaller, its net rent
and profits together would be the same? “
Whether a nation employs five or seven million productive
labourers to produce the net revenue | on which five million others
live, “the food and clothing of five millions would be
still the net revenue. The employing of a greater
number of men would enable us neither to add a man to our
army and navy, nor to contribute one guinea more in
taxes” (l.c., p. 215).

This reminds us of the ancient Germans, of whom one part
in turn took the field and the other cultivated the
field. The smaller the number that was indispensable
for cultivating the field, the greater the number who were
able to war. It would not have helped them if the
number of people had increased by one-third, so that instead
of 1,000 they had 1,500, if 1,000 were then required to
cultivate the field while previously it was 500. Their
disposable forces would have consisted of only 500 men both
before and after. If on the other hand the
productivity of their labour had increased, so that 250
sufficed to cultivate the field, 750 of the 1,000 could have
taken the field, whereas in the opposite case, if the
productivity of their labour had fallen, it would be only
500 out of the 1,500.

First it should be noted here that Ricardo means by net
revenue or net product not the excess of the total product
over the part of it that must be returned to production as
means of production, raw materials or instruments. On
the contrary, he shares the false view that the gross
product consists of gross revenue. By net product or
net revenue he means the surplus-value, the excess of the
total revenue over the part of it that consists of wages, of
the revenue of the labourers. This revenue of the
labourer, however, is equal to the variable capital, the
part of the circulating capital which he is constantly
consuming and constantly reproducing as the part of his
production which he himself consumes.

If Ricardo treats the capitalists as not entirely
useless, that is to say, as themselves agents of production,
and therefore resolves a part of their profit into wages, he
has to deduct a part of their revenue from the net revenue
and to declare that all these persons only contribute to
wealth in so far as their wages form the smallest possible
part of their profit. However that may be, at least a
part of their time as agents of production belongs, like a
fixture, to production itself. And to this extent they
cannot be used for other purposes of society or of the
State. The more free time their duties as managers of
production leave them, the more is their profit independent
of their wage. In contrast to these, the capitalists
who live only on their interest, and also the landlords who
live on rent, are in person entirely at the disposal [of
society and the State], and no part of their income enters
into the costs of production—except for that part
which is used for the reproduction of their own worthy
person. Ricardo should therefore have also desired, in
the interests of the State, a growth of rent (the
pure net revenue) at the cost of profits; but this is not at
all his viewpoint. And why not? Because it
hinders the accumulation of capitals [or]—what is in
part the same thing—because it increases the number of
unproductive labourers at the cost of the productive.

Ricardo fully shares Adam Smith’s view of the distinction
between productive and unproductive labour, that the former
exchanges its labour directly for capital, [the latter I
directly for revenue. But he no longer shares Smith’s
tenderness for and illusion about the productive
labourer. It is a misfortune to be a productive
labourer. A productive labourer is a labourer who
produces wealth for another. His existence only
has meaning as such an instrument of production for the
wealth of others. If therefore the same quantity of
wealth for others can be created with a smaller number of
productive labourers, then the suppression of these
productive labourers is in order. Vos, non
vobis.* Ricardo, incidentally, does not
think of this suppression as Ganilh does—that
through mere suppression the revenue increases and that what
was formerly consumed as variable capital (that is,
in the form of wages) would then be consumed as
revenue. With the diminution in the number of
productive workers also disappears the amount of product
which those who have been discharged themselves consumed and
themselves produced—their equivalent. Ricardo
does not assume, as Ganilh does, that the same quantity of
products as before is produced; but the same quantity of net
product. If the labourers consumed 200 and their
surplus was 100, the total product was 300, and the surplus
was one third=100. If the labourers consume 100 and
their surplus is 100 as before, the total product is 200 and
the surplus is one half=100. The total product would
have fallen by one-third— by the quantity of products
consumed by the 100 dismissed workers, and the net product
| [would have] remained
the same, because 200/2 =
300/3. For Ricardo, therefore,
the amount of the gross product does not matter, provided
that that portion of the gross product which constitutes the
net product remains the same or grows, but in any case does
not diminish.

So he says:

“To an individual with a capital of
20,000 l., whose profits were 2,000 1. per
annum, it would be a matter quite indifferent whether his
capital would employ a hundred or a thousand men, whether
the commodity produced sold for 10,000 l., or for
20,000 l., provided, in all cases, his profits were
not diminished below 2,000 l. Is not the real
interest of the nation similar? |VIII-372||

||IX - 377 | The passage in
Ricardo (Chapter XXVI) runs:

“Adam Smith constantly magnifies the
advantages which a country derives from a large gross,
rather than a large net income” (because, says Adam,
“the greater will be the quantity of productive labour
which it puts into motion”) “What
would be the advantage resulting to a country from the
employment of a great quantity of productive labour, if,
whether it employed that quantity or a smaller, its net rent
and profits together would be the same.“

<This therefore means nothing but: if the
surplus-value produced by a greater quantity of labour would
be the same as that produced by a smaller quantity.
That however in turn means nothing but that it is the same
thing for a country whether it employs a large number of
labourers at a lower rate of surplus or a smaller number at
a higher rate. n ×
1/2 is just as much as 2n
× 1/4, where n represents
the number [of labourers] and 1/2 and
1/4 the surplus-labour, The
“productive labourer “ as such is a mere
instrument of production for the production of surplus, and
if the result is the same a larger number of these
“productive labourers” would be a
nuisance.>

“To an individual with a capital of
20,000 l., whose profits were 2,000 l. per
annum, it would be a matter quite indifferent whether his
capital would employ a hundred or a thousand men, whether
the commodity produced sold for 10,000 l or for 20,000
l. provided, in all cases, his profits were not
diminished below 2,000 1.”

<The meaning of this, as is evident from a later
passage, is perfectly banal. For example, a
wine-merchant, who makes use of £20,000 and has
£12,000 lying in his cellar each year, but sells
£8,000 for £10,000, employs few people and makes
10 per cent profit, etc. And then take
bankers!>

“Is not the real interest of the nation
similar? Provided its net real income, its rent and
profits be the same, it is of no importance whether the
nation consists of ten or of twelve millions of
inhabitants. Its power of sup-porting fleets and
armies, and all species of unproductive labour”
(this passage shows among other things that Ricardo shared
Adam Smith’s view of productive and unproductive labour,
although he did no longer share Smith’s tenderness, based on
illusions, for the productive labourer) “must be in
proportion to its net, and not in proportion to its gross,
income. If five millions of men could produce as much
food and clothing as was necessary for ten millions, food
and clothing for five millions would be the net
revenue. Would it be of any advantage to the country,
that to produce this same net revenue, seven millions
of men should be required, that is to say, that seven
millions should be employed to produce food and clothing
sufficient for twelve millions? The food and clothing
of five millions would be still the net revenue. The
employing a greater number of men would enable us neither to
add a man to our army and navy, nor to contribute one guinea
more in taxes” (Ricardo, On the Principles of
Political Economy and Taxation, 3rd edition, London,
1821, pp. 415-17).

A country is the richer the smaller its productive
population is relatively to the total product; just
as for the individual capitalist: the fewer labourers he
needs to produce the same surplus, so much the better for
him. The country is the richer the smaller the
productive population in relation to the unproductive, the
quantity of products remaining the same. For the
relative smallness of the productive population would be
only another way of expressing the relative degree of the
productivity of labour.

On the one hand it is the tendency of capital to reduce
to a dwindling minimum the labour-time necessary for the
production of commodities, and therefore also the number of
the productive population in relation to the amount
of the product. On the other hand, however, it* has the opposite
tendency to accumulate, to transform profit into capital, to
appropriate the greatest possible quantity of the labour of
others. It*
strives to reduce the norm of necessary labour, but to
employ the greatest possible quantity of productive labour
at the given norm. The proportion of the products to
the population makes no difference in this. Corn and
cotton can be changed into wine, diamonds, etc., | or labourers can be employed
in productive labour which does not directly add anything to
the (consumable) products (such as railway construction,
etc.).

If as the result of an invention a capitalist can now
only use in his business £10,000 instead of the
£20,000 he used previously, because £10,000 is
sufficient, and if this sum yields 20 per cent for him
instead of 10, that is, as much as the £20,000 brought
in before, this would be no reason for him to spend
£10,000 as revenue instead of as capital as
before. (Actually it is only in the case of State
loans that we can speak of a direct transformation of
capital into revenue.) He would place it elsewhere—and
in addition would capitalise a part of his profit.

Among the economists (including Ricardo in part) we find
the same antimony as there is in reality. Machinery
displaces labour and increases the net revenue (particularly
always what Ricardo here calls net revenue—the
quantity of products in which revenue is consumed); it
reduces the number of labourers and increases the products
(which then are partly consumed by unproductive labourers,
partly exchanged abroad, etc.). So this would be
desirable. But no. In that case it must be shown
that machinery does not deprive the labourers of
bread. And how is this to be shown? By the fact
that after a shock (to which perhaps the section of the
population which is directly affected cannot offer any
resistance) machinery once again employs more people than
were employed before it was introduced—and therefore
once again increases the number of “productive
labourers” and restores the former disproportion.

That is in fact what happens. And so in spite of
the growing productivity of labour the labouring population
could constantly grow not in proportion to the product,
which grows with it and faster than it, but proportionately
[to the total population], if, for example, capital
simultaneously becomes concentrated, and therefore former
component parts of the productive classes fall into the
ranks of the proletariat. A small part of the latter
rises into the middle class. The unproductive classes,
however, see to it that there is not too much food
available. The constant retransformation of profit
into capital always restores the same cycle on a wider
basis.

And Ricardo’s care for accumulation is even greater than
his care for net profit, which he regards with fervent
admiration as a means to accumulation. Hence too his
contradictory admonitions and consoling remarks to the
labourers. They are the people most interested in the
accumulation of capital, because it is on this that the
demand for them depends. If this demand rises, then
the price of labour rises. They must therefore
themselves desire the lowering of wages, so that the surplus
taken from them, once more filtered through capital, is
returned to them for new labour and their wages rise.
This rise in wages however is bad, because it restricts
accumulation. On the one hand they must not produce
children. This brings a fall in the supply of labour,
and so its price rises. But this rise diminishes the
rate of accumulation, and so diminishes the demand for them
and brings down the price of labour. Even quicker than
the supply of them falls, capital falls along with it.
If they produce children, then they increase their own
supply and reduce the price of labour; thus the rate of
profit rises, and with it the accumulation of capital.
But the labouring population must rise in the same degree as
the accumulation of capital; that is to say, the labouring
population must be there exactly in the numbers that the
capitalist needs—which it does anyway.

Monsieur Ganilh is not altogether consistent in his
admiration for the net product. He quotes from
Say:

“I do not doubt at all (…)
that in slave labour the excess of the products over
consumption is larger than in the labour of a free
man… The worker of the slave has no limit but
his capacity. … The slave” (and the free
work too) “labours for an unlimited need: his
master’s cupidity” (Say, 1re éd., pp. 215,
216).

| On this Ganilh
observes:

“The free labourer cannot consume
more and produce less than the slave… All
consumption presumes an equivalent produced to pay for
it. If the free labourer consumes more than the slave,
the products of his labour must be more considerable than
those of the slave’s labour” (Ganilh, t. I, p.
234).

As if the size of the wage depended only on the
productivity of the labourer, and not, with a given
productivity, on the division of the product between
labourer and master.

“I know,” he continues,
“that it can be said with some reason that the
economies made by the master at the expense of the
slave” (according to this there are after all
economies made on the wages of the slave) “serve to
augment his personal expenses,” etc. “But
it is more advantageous to the general wealth that there
should be well-being in all classes of society rather than
no excessive opulence among a small number of
individuals” (pp. 234-35).

How does that tally with the net product? And for
that matter Monsieur Ganilh at once retracts his liberal
tirades (l.c., pp. 236-37). He wants Nigger-slavery
for the colonies, He is only liberal in so far as he does
not want to reintroduce it into Europe, having grasped that
the free labourers here are slaves, that they only exist to
produce net product for capitalists, landlords and their
retainers.

“He” (Quesnay)
“definitely denies that economies made by the
wage-earning classes have the faculty to increase capital;
and the reason he gives for this is that these classes
should not have any means on which to make economics, and
that if they had a surplus, an excess, this could
only be due to an error or to some disorder in the society’s
economy” (l.c., p. 274).

Ganilh cites in evidence the following passage from
Quesnay:

“If the sterile class saves in order
to augment its cash … its labours and its gains will
diminish in the same proportion, and it will fall into
decay”(Physiocratie, p. 321).

The ass! He does not understand Quesnay.

Monsieur Ganilh puts on the keystone in the following
paragraph:

“The larger they” (wages)
“are, the less is the revenue of the society”
(society stands on them, but they do not stand in society),
“and all the skill of governments should be applied to
reducing the amount [of the wages]… A
task …worthy of the enlightened century in
which we live” (t. II, p. 24).

Then there are still Lauderdale (Brougham’s
insipit jests are not worth examining after him),
(Ferrier?), Tocqueville, Storch, Senior, and
Rossi to be considered briefly on productive and
unproductive labour.

### [10.] Exchange of Revenue and Capital [Replacement of the Total Amount of the Annual Product: (a) Exchange of Revenue for Revenue; (b) Exchange of Revenue for Capital; (c) Exchange of Capital for Capital]

{To be distinguished: 1. The part of the revenue
which is trans-formed into new capital; that is, the
part of the profit which is itself again capitalised.
Here we leave this entirely out of account—it belongs
to the section on accumulation. 2. The revenue which
is exchanged with capital consumed in production, so that by
means of this exchange not new capital is formed, but old
capital replaced—in a word, the old capital is
conserved. In this inquiry, therefore, we can put the
part of the revenue which is transformed into new capital as
equal to nil, and treat the subject as if all revenue covers
either revenue or capital consumed.

The whole amount of the annual product is therefore
divided into two parts: one part is consumed as revenue, the
other part replaces in kind the constant capital
consumed.

Revenue is exchanged for revenue, when for example the
producers of linen exchange a portion of that part of their
product—the linen—which represents their profits
and wages, their revenue, for corn that represents a portion
of the profits and | wages
of farmers. Here therefore there is the exchange of
linen for corn, those two commodities which both enter into
individual consumption—exchange of revenue in the form
of linen for revenue in the form of corn. There is
absolutely no difficulty in this. If consumable
products are produced in proportions corresponding to needs,
which means also that the proportionate amounts of social
labour required for their production are proportionately
distributed <which of course is never exactly the case,
there being constant deviations, disproportions, which as
such are adjusted; but in such a way that the continuous
movement towards adjustment itself presupposes continuous
disproportion>, then revenue, for example in the form of
linen, exists in the exact quantity in which it is required
as an article of consumption, therefore in which it is
replaced by the articles of consumption of other
producers. What the producer of linen consumes in
corn, etc., the farmers and others consume in linen.
The part of his product which represents revenue, which he
exchanges for other commodities (articles of consumption),
is thus taken in exchange as an article of consumption by
the producers of these other commodities. What he
consumes in the product of others, these others consume in
his product.

It may be noted in passing: that no more necessary
labour-time is employed on a product than is required by
society—that is to say, no more time than on the
average is required for the production of this
commodity—is the result of capitalist production,
which even continuously reduces the minimum of necessary
labour-time. But in order to do so, it must constantly
produce on a rising scale.

If 1 yard of linen costs only 1 hour and this is the
necessary labour-time that society has to use to satisfy its
need for 1 yard of linen, it by no means follows from this
that if 12 million yards are produced—that is, 12
million hours’ labour, or what is the same thing, 1 million
days’ labour—1 million labourers being employed as
linen weavers, society [needs] to employ such a part of its
labour-time “necessarily” on the weaving of
linen. If the necessary labour-time is given, and
therefore also that a certain quantity of linen can be
produced in one day, the question arises how many such days
are to be used in the production of linen? The
labour-time used on the total of particular products, in a
year for example, is equal to a definite quantity of this
use-value—for example, 1 yard of linen (say equivalent
to 1 day’s labour)—multiplied by the number of days’
labour used in all. The total quantity of labour-time
used in a particular branch of production may be under or
over the correct proportion to the total available social
labour, although each aliquot part of the product contains
only the labour-time necessary for its production, or
although each aliquot part of the labour-time used was
necessary to make the corresponding aliquot part of the
total product.

From this standpoint, the necessary labour-time acquires
another meaning. The question is, in what quantities
the necessary labour-time itself is distributed among the
various spheres of production. Competition constantly
regulates this distribution, just as it equally constantly
disorganises it. If too large a quantity of social
labour-time is used in one branch, the equivalent can be
paid only, as if the correct quantity had been used.
The total product—that is to say, the value of the
total product—is in this case therefore not equal to
the labour-time contained in it, but is equal to the
proportionate labour-time which would have been used had the
total product been in proportion to production in the other
spheres. But in as much as the price of the total
product falls below its value, the price of each aliquot
part of it falls. If 6,000 yards of linen instead of
4,000 are produced, and if the value of the 6,000 yards is
12,000 shillings, they are sold for 8,000. The price
of each yard is 1 1/3 shillings
instead of 2—one-third below its value. It
therefore amounts to the same thing as if
1/3 too much labour-time had been used
to produce one yard. Assuming that the commodity has
use-value, the fall of its price below its value therefore
shows that, although each part of the product has cost only
the socially necessary labour-time <here it is assumed
that the conditions of production remain unchanged>, a
superfluous—more than necessary —total quantity
of social labour has been employed in this one branch.

The sinking of the relative value of the commodity as a
result of altered conditions of production is something
entirely different; | this
piece of linen on the market has cost 2s., equal for example
to 1 day’s labour. But it can be reproduced every day
for 1s. Since the value is determined by the socially
necessary labour-time, not by the labour-time used by the
individual producer, the day that the producer has used for
the production of the one yard is now only equal to half the
socially determined day. The fall of the price of his
yard from 2s. to 1s.—that is, of its price below the
value it has cost him—shows merely a change in
the conditions of production, that is, a change in the
necessary labour-time itself. On the other hand, if
the production costs of the linen remain the same while
those of all other articles rise—with the exception of
gold, the material of money; or even [if the rise applies
to] certain articles such as wheat, copper, etc., in a word,
to articles which do not enter into the component parts of
the linen—then one yard of linen would be equal to
2s. as before. Its price would not fall, but
its relative value expressed in wheat, copper, etc., would
have fallen.

Of the part of the revenue in one branch of production
(which produces consumable commodities) which is consumed in
the revenue of another branch of production, it can be said
that the demand is equal to its own supply (in so far as
production is kept in the right proportion). It
is the same as if each branch itself consumed that part of
its revenue. Here there is only a formal metamorphosis
of the commodity: C—M—C’. Linen—
money—wheat.

Both commodities which are exchanged here represent only
a part of the new labour added in the year. But in the
first place it is clear that this exchange—in which
two producers mutually consume a part of their product which
represents revenue in each other’s commodities—only
takes place in those branches of production which produce
consumable articles, articles which enter directly into
individual consumption, in which consequently revenue can be
spent as revenue. Secondly, it is just as clear: that
only regarding this part of the exchange of products
it is true that the producer’s supply is equal to the demand
for other products which he wishes to consume. Here in
fact it is only a question of a simple exchange of
commodities. Instead of producing his means of
subsistence himself, he produces the means of subsistence
for another, who produces his. No relation between
revenue and capital enters into this. Revenue in one
form of consumable articles is exchanged against revenue in
another form of consumable articles, and so in fact
consumable articles are exchanged for consumable
articles. What determines their process of exchange is
not that both are revenue, but that both are consumable
articles. Their definite form as revenue does not
enter into it at all. It shows itself however in the
use-value of the interchangeable commodities, in that both
enter into individual consumption; which in turn however
means no more than that one part of consumable products is
exchanged for another part of consumable products.

The form of revenue can only intervene or make itself
manifest where the form of capital confronts it. But
even in this case what Say and other vulgar economists
assert is not true— that if A cannot sell his linen or
can only sell it under its price—that is, the part of
his linen which he wishes to consume himself as
revenue—then this happens because B, C, etc., have
produced too little wheat, meat, etc. It may be
because they have not produced enough of these. But it
may also be because A has produced too much linen. For
assuming that B, C, etc., have enough wheat, etc., to buy
all A’s linen, they nevertheless do not buy it, because only
a definite quantity of linen is consumed by them, Or
it may also be because A has produced more linen than the
part of their revenue which can be spent on clothing
materials altogether—that is, absolutely, because each
person can expend as revenue only a definite quantity of his
own product, and A’s production of linen presupposes a
greater amount of revenue than in total there is. It
is ridiculous, however, when it is only a matter of the
exchange of revenue against revenue, to suppose that what is
wanted is not the use-value of the product but the quantity
of this use-value, thus once again forgetting that
this exchange concerns only the satisfaction of
needs, not, as in exchange-value, the quantity.

But everyone will prefer to have a large rather than a
small quantity of an article. If this is supposed to
solve the difficulty, then | it is absolutely impossible to
understand why the producer of linen, instead of exchanging
his linen for other articles of consumption and piling these
up en masse, does not carry out the simpler process
of enjoying a part of his revenue in his superfluous
linen. Why does he at all transform his revenue from
the form of linen into other forms? Because he has to
satisfy other needs than the need for linen. Why does
he himself consume only a certain part of the linen?
Because only a quantitatively determined part of the linen
has use-value for him. The same thing, however, holds
for B, C, etc. If B sells wine and C books and D
mirrors, each may prefer to consume the surplus of his
revenue in his own product—wine, books,
mirrors—rather than in linen. Thus it cannot be
said that, necessarily, too little wine, books and mirrors
have been produced because A cannot transform his revenue in
the form of linen (or cannot transform it at its value) into
wine, books and mirrors. It is still more ridiculous,
however, when this exchange of revenue against
revenue—this one section of the exchange of
commodities—is passed off as the whole of commodity
exchange.

We have thus disposed of one part of the product. A
part of the consumable products changes hands between the
producers of these consumable products themselves.
Each consumes a part of his revenue (profit and wages) in
the other’s consumable product instead of in his own
consumable product, and in fact he can only do this in so
far as there is the reciprocal consumption by the other of
someone else’s consumable product instead of his own.
It is the same as if each had consumed that part of his
consumable product which represents his own revenue.

For all the rest of the products, however, complicated
relations intervene, and it is only here that the
commodities exchanged confront each other as revenue and
capital, and not only as revenue.

First a distinction has to be made. In all branches
of production a part of the total product represents
revenue, labour added (during the year), profit and
wages. <Rent, interest, etc., are parts of profit;
the income of the State good-for-nothings is part of profit
and wages; the income of other unproductive labourers is the
part of profit and wages which they buy with their
unproductive labours—it therefore does not increase
the product existing as profit and wages, but only
determines how much of it they consume, and how much is
consumed by the labourers and capitalists themselves.>
But only in one section of the spheres of production can the
part of the product representing revenue enter directly in
kind into the revenue, or in its use-value be
consumed as revenue. All products which are
only means of production cannot be consumed in kind,
in their immediate form, as revenue, but only their
value. This however must be consumed in the
branches of production which produce directly consumable
articles. A part of the means of production may be
immediate articles of consumption—it may be one or the
other according to the use made of it, as for example a
horse, a cart, etc. A part of the immediate articles
of consumption may be means of production, like corn for
spirits, wheat for seed, and so on. Almost all
articles of consumption can re-enter the production process
as excrements of consumption, as for example worn-out and
half-rotten rags of linen in the manufacture of paper.
But no one produces linen in order that it should become, as
rags, the raw material for paper. It only gets this
form after the linen weaver’s product as such has entered
consumption. Only as excrement of this consumption, as
residuum and product of the consumption process, can it then
go into a new production sphere as means of
production. This case, therefore, is not relevant
here.

The products therefore—of which the aliquot part
that represents revenue can be consumed by their own
producers as value, but not as use-value (so that they must
sell the part for example of their machines which represents
wages and profit in order to consume it, [as they] cannot
directly satisfy any individual need with it as a
machine)— [these products] can just as little be
consumed by the producers of other products; they cannot
enter into their individual consumption, and hence cannot
form part of the products on which they spend their revenue,
since this would be in contradiction to the use-value of
these commodities: their use-value by the nature of the case
excludes individual consumption. The producers
of these unconsumable products, therefore, can only consume
their exchange-value; that is to say, they must first
transform them into money in order to retransform this money
into consumable commodities. But to whom are they to
sell | them? To
producers of other individually unconsumable products?
Then they would merely have one unconsumable product in the
place of the other. It is however presupposed that
this part of the product forms their revenue; that they sell
these commodities in order to consume their value in
consumable products. For that reason they can only
sell them to the producers of products that can be consumed
individually.

This part of the exchange of commodities represents
exchange of one man’s capital for another man’s revenue, and
of one man’s revenue for another man’s capital. Only
one part of the total product of the producer of consumable
products represents revenue; the other part represents
constant capital. He can neither himself consume the
latter, nor can he exchange it for the consumable products
made by others. He can neither consume in kind the
use-value of this part of the product, nor can he consume
its value by exchanging it for other consumable
products. He must on the contrary transform it again
into the natural elements of his constant capital. He
must consume industrially this part of his product,
that is, use it as means of production.

But in its use-value his product is only capable of
entering individual consumption; he cannot therefore
transform it again in kind into his own elements of
production. Its use-value excludes industrial
consumption. So he can only industrially consume
its value, [by selling it] to the producers of those
elements of production needed for his product. He can
neither consume in kind this part of his product, nor can he
consume its value by selling it for other products that can
be consumed individually. Just as little as this part
of his product can enter into his own revenue, can it be
replaced out of the revenue of producers of other
individually consumable products; since this would only be
possible if he exchanged his product for their product and
so consumed the value of his product, which cannot
happen. But since this part of his product, as well as
the other part which he can consume as revenue, by its
use-value can only be consumed as revenue, must enter into
individual consumption and cannot replace constant capital,
it must enter into the revenue of the producers of
unconsumable products —it must be exchanged against
that part of their products whose value they can consume, or
in other words which represents their revenue.

If we look at this exchange from the standpoint of each
of the people exchanging, for A, the producer of the
consumable product, it represents a transformation of
capital into capital. He transforms the part of his
total product which is equal to the value of the constant
capital it contains back again into the natural form in
which it can function as constant capital. Both before
and after the exchange it represents, in its value, only
constant capital. For B, the producer of the product
that cannot be consumed, it is the reverse: the exchange
represents merely the transformation of revenue from one
form into another. He transforms the part of his total
product which forms his revenue—equal to the part of
the total product which represents labour newly added, his
own labour (capital and labourer)—into the natural
form in which only he can consume it as revenue. Both
before and after the exchange it represents, in its value,
only his revenue.

If we look at the relation from both sides there, A
exchanges his constant capital for B’s revenue, and B
exchanges his revenue for A’s constant capital. B’s
revenue replaces A’s constant capital, and A’s constant
capital replaces B’s revenue.

In the exchange itself <irrespective of the purposes
of those carrying it out> only commodities confront each
other—and a simple exchange of commodities takes
place—the relation between which is merely that of
commodities, the designations of revenue and capital having
no significance here. Only the different
use-value of these commodities shows that one lot can
only serve for industrial consumption, and the other only
for individual consumption, can only enter into this
consumption. The various practical uses of the various
use-values of various commodities, however, concern their
consumption and do not affect the process of their exchange
as commodities. It is quite a different thing when the
capitalist’s capital is transformed into wages, and labour
is transformed into capital. Here the commodities do
not confront each other as simple commodities, but capital
as capital. In the exchange we have just been
considering sellers and buyers face each other only as
sellers and buyers, only as simple commodity owners.

It is further clear that the whole of the product
destined for individual consumption or the whole product
entering into individual consumption, in so far as it enters
into it, can only be exchanged for revenue. The fact
that it cannot be industrially consumed means precisely that
it can only be consumed as revenue, i.e., only
individually. <As noted above, we here abstract
from the transformation of profit into capital.>

If A is a producer of a product that can only be
individually consumed, let his revenue be equal to one-third
of his total product, his constant capital to
two-thirds. The assumption implies that he himself
consumes the first one-third, whether he | consumes it all himself in
kind or only partly or not at all, or whether he consumes
its value in other articles of consumption; the sellers of
these articles of consumption then consume their own revenue
in A’s product. So the part of the consumable product
which represents the revenue of the producers of consumable
products is consumed by them either directly, or indirectly,
through exchanging among themselves the products to be
consumed by them; in regard to this part, therefore, where
revenue is exchanged for revenue—here it is the
same as if A represented the producers of all consumable
products. He himself consumes one-third of this
aggregate amount, the aliquot part which represents his
revenue. This part, however, represents exactly the
quantity of labour which during the year category A has
added to its constant capital, and this quantity is equal to
the total sum of wages and profits produced by category A
during the year.

The other two-thirds of category A’s total product are
equal value of the constant capital, and must therefore be
replaced by the product of the annual labour of category B,
which produces products that cannot be [individually]
consumed and only enter into industrial consumption as means
of production in the production process. But as this
two-thirds of A’s total product, just the same as the first
one-third, must enter into individual consumption, it is
taken by the producers of category B, in exchange for the
part of their product which represents their revenue.
Category A has therefore exchanged the constant part of its
total product for constant capital in its original natural
form, retransforming it into the newly-produced products of
category B; but category B has only paid for it with that
part of its product which represents its revenue but which
it can only consume in the products of A. It has thus
in fact paid with its newly-added labour, which is
completely represented by the part of B’s product that is
exchanged for the last two-thirds of A’s product. Thus
A’s total product is exchanged for revenue, or passes
entirely into individual consumption. On the other
hand (on the assumption that the transformation of revenue
into capital is here left out of account, being taken as
equal to nil) the total revenue of society is
expended on product A; for the producers of A consume their
revenue in A, and so do the producers of category B.
And there is no other category besides these two.

The total product A is consumed, although it contains
two-thirds constant capital, which cannot be consumed by the
producers of A but must be retransformed into the natural
form of their elements of production. The total
product A is equal to the total revenue of society.
The total revenue of society, however, represents the total
labour-time which it has added during the year to the
existing constant capital. Now although the total
product A consists of newly-added labour only as to
one-third, and as to two-thirds of past labour that has to
be replaced, it can be bought in its entirety by newly-added
labour, because two-thirds of this total annual labour must
be consumed not in their own products but in the products of
A. A is replaced by two-thirds more newly-added labour
than it itself contains, because these two-thirds are labour
newly added in B, and B can only consume it individually in
A, just as A can only consume the two-thirds industrially in
B. Thus the total product of A can in the first place
be entirely consumed as revenue, and at the same time its
constant capital can be replaced. Or rather it can
only be entirely consumed as revenue because two-thirds of
it are replaced by the producers of constant capital, who
cannot consume in kind the part of their product
representing revenue, but are obliged to consume it in A,
that is, through exchanging it for two-thirds of A.

We have thus disposed of the final two-thirds of A.

It is clear that it makes no difference if a third
category C exists, whose products are consumable both
industrially and individually; for example, corn, by men or
by cattle or as seed or as bread; vehicles, horses, cattle,
etc. In so far as these products enter into individual
consumption they must be consumed as revenue, direct or
indirect, by their own producers, or by the producers
(direct or indirect) of the part of the constant capital
contained in them. They therefore come under A.
In so far as they do not enter into individual consumption,
they come under B.

The process of this second kind of exchange, where it is
not revenue that is exchanged against revenue but capital
against revenue —in which the whole constant capital
must in the end be resolved into revenue, that is, into
newly-added labour —can be thought of in two
ways. Let A’s product be for example linen. The
two-thirds of the linen which are equal to the constant
capital of A (or its value) pay for yarn, machinery and
auxiliary materials. But the yarn manufacturer and the
manufacturer of machinery | can only consume as much of
this product as represents their own revenue. The
linen manufacturer pays the whole price of the yarn and
machinery with these two-thirds of his product. By so
doing he has thus replaced for the spinner and the machinery
manufacturer their total product which entered into the
linen as constant capital. But this total product is
itself equal to the constant capital and revenue—one
part being equal to the labour added by the spinner and
machinery manufacturer, and another part representing the
value of their own means of production, that is, for the
spinner flax, oil, machinery, coal, etc., and for the
machinery manufacturer coal, iron, machinery, etc. A’s
constant capital, equal to two-thirds, has thus replaced the
total product of the spinner and machinery manufacturer,
their constant capital plus the labour newly added by
them—their capital plus their revenue. But they
can only consume their revenue in A. After deducting
the part of the two-thirds of A which is equal to their
revenue, with the rest they pay for their raw materials and
machinery. According to our assumption, however, the
latter need not replace any constant capital. Only so
much of their product can enter into product A—and
therefore also into the products which are means of
production for A—as A can pay for. But A can
only pay with his two-thirds for as much as B can buy with
his revenue, that is to say, as much as the product
exchanged by B contains revenue, newly-added labour.
If the producers of the final elements of production of A
had to sell to the spinner a quantity of their product which
represented a part of their own constant capital— that
is, which represented more than the labour they had added to
their constant capital—then they could not accept
payment in A, because they cannot consume one part of this
product. Consequently what takes place is the
opposite.

Let us trace the stages in reverse. Let us assume
that the total linen is equal to 12 days. The product
of the flax-grower, of the iron manufacturer, etc., is equal
to 4 days; this product is sold to the spinner and the
machinery manufacturer, who in turn add 4 days to it; these
sell it to the weaver, who again adds 4 days. The
linen weaver can thus himself consume one-third of his
product; 3 days replace his constant capital for him and pay
for the product of the spinner and machinery manufacturer;
these can consume 4 of the 8 days, and with the other 4 they
pay the flax-grower, etc., and thus replace their constant
capital; the last-named have only their labour to replace
with the last 4 days in linen.

The revenue, although it is assumed to be of the same
size— equal to 4 days—in all three cases, is of
different proportions in the products of the three classes
of producers who participate in producing product A.
For the linen weaver, it is one-third of his product, equal
to one-third of 12; for the spinner and for the machinery
manufacturer it is equal to one-half of his product, equal
to one-half of 8; for the flax-grower it is equal to his
product, 4. In relation to the total product it is
however exactly the same, equal to one-third of 12, that
is, 4. But for the weaver, the labour newly added by
spinner, machinery manufacturer and flax-grower takes the
form of constant capital. For the spinner and
machinery manufacturer, the total product represents the
labour newly added by themselves and by the flax-grower, the
labour-time of the flax-grower appearing as constant
capital. For the flax-grower, this phenomenon of
constant capital has ceased to exist. Because of this,
the spinner for example can use machinery, or constant
capital in general, in the same proportions as the
weaver. For example, 1/3 :
2/3. But in the first place the
amount (the total amount) of the capital employed in
spinning must be smaller than that used in weaving, since
its total product enters as constant capital into
weaving. Secondly, if the spinner also has the
proportion of 1/3 :
2/3, his constant capital would be
equal to 16/3 his labour added to
8/3; the former equal to 5
1/3 days’ labour, the latter to 2
2/3. In this case there would be
proportionately more days’ labour contained in the branch
which supplies him with flax, etc. He would then have
to pay 5 1/3 for newly-added labour,
instead of 4 days.

It is self-evident that only that part of category A’s
constant capital has to be replaced by new labour which
enters into the process of giving value to A, that is, is
consumed by A during the labour-process. The whole of
the raw material and the auxiliary materials enter into it,
and the wear and tear of the fixed capital. The other
part of the fixed capital does not enter into it, and
therefore has not got to be replaced.

A large part of the existing constant capital—large
as regards the relation of the fixed capital to the total
capital—does not therefore require to be replaced
annually by new labour. For that reason the (absolute)
amount [of the capital to be annually replaced] may be
considerable, but nevertheless it is not large in relation
to the total (annual) product. This entire part of
the constant capital, in A and B, which enters into the
determination of the rate of profit (with a given
surplus-value), does not enter as a determining element into
the current reproduction of the fixed capital. The
larger this part in relation to the total capital—the
greater the scale on which present, already existing, fixed
capital is employed in production—the greater the
current volume of reproduction will be that is used
for the replacement of the worn-out fixed capital, but the
smaller relatively will be the proportional amount,
in relation to the total capital,

Let the reproduction period (the average) for all
kinds of fixed capital be ten years. | Let us assume that the
different kinds of fixed capital have a turnover of 20, 17,
15, 12, 11, 10, 8, 6, 4, 3, 2, 1, 4/6
and 2/6 years (14 kinds), so that the
fixed capital has an average turnover of 10
years.

On the average, therefore, the capital would have to be
replaced in 10 years. If the total fixed capital
amounted to 1/10 of the total capital,
then 1/10 of this would mean that only
1/100 of the total capital would have
to be replaced annually.

If it amounted to 1/3, then
1/30 of the total capital would have
to be replaced annually.

But let us now compare fixed capitals with different
reproduction periods—the capital with a 20-year
period, for example, in contrast to the capital with a
period of 1/3 of a year.

Only 1/20 of the fixed capital
which is reproduced in 20 years has to be replaced
annually. So that if it amounts to
1/2 of the total capital, only
1/40 of the total capital has to be
replaced annually, and if it amounts even to
4/5 of the total capital, only
4/100=1/25 of
the total capital has to be replaced annually. On the
other hand, if the capital which has a reproduction period
of 2/6 of a year—that is, turns
over three times a year—amounts to only
1/10 of the capital, then the fixed
capital has to be replaced three times a year, so that
3/10 of the capital has to be replaced
annually, nearly one-third of the total capital. On
the average, the larger the fixed capital in proportion to
the total capital, the longer is its relative (not
absolute) period of reproduction; and the smaller it is, the
shorter its relative period of reproduction.
Implements form a much smaller part of handicraft capital
than machinery does of machine-production capital. But
handicraft implements wear out much more quickly than
machinery.

Although the absolute magnitude of its
reproduction—or its wear and tear—grows with the
absolute size of the fixed capital, as a rule its
proportional magnitude falls, in so far as its period of
turnover, its duration, as a rule increases in proportion to
its size. This proves among other things that the
quantity of labour reproducing machinery or fixed capital is
not at all proportional to the labour which originally
produced these machines (conditions of production remaining
the same), since only the annual wear and tear has to be
replaced. If the productivity of labour rises—as
it constantly does in this branch of production—the
quantity of labour required for the reproduction of this
part of the constant capital diminishes still more.
However, account has to be taken of the means of consumption
daily used by the machine (which however have nothing
directly to do with the labour employed in the
machine-building industry itself). But machinery,
which needs merely coal and a little oil or tallow, lives on
an infinitely stricter diet than the labourer—not only
the labourer whom it replaces, but the labourer who built
the machine itself.

We have now disposed of the product of the entire
category A and of a part of category B’s product. A is
completely consumed: one-third by its own producers,
two-thirds by the producers of B, who cannot consume their
own revenue in their own product. The two-thirds of A,
in which they consume the part of the value of their product
which represents revenue, at the same time replace their
constant capital in kind for the producers of A, that is,
provide them with the commodities which they consume
industrially. But with the consumption of A’s
entire product, and with two-thirds of it replaced by B in
the form of constant capital, we have also disposed of the
entire part of the product which represents the
labour newly added annually. This labour cannot
therefore buy any other part of the total product. In
fact, the whole of the labour added annually (leaving out of
account the capitalisation of profit) is equal to the
labour contained in A. For one-third of A which
is consumed by its own producers represents the labour newly
added by them during the year to the two-thirds of A which
represent A’s constant capital. They have performed no
labour apart from this, which they consume in their own
product. And the other two-thirds of A, which are
replaced by B’s product and consumed by the producers of B,
represent all the labour-time which the producers of B have
added to their own constant capital. They have added
no more in labour, and there is nothing more for them to
| consume.

In its use-value, product A represents the whole
part of the annual total product which enters annually into
individual consumption. In its exchange-value,
it represents the total quantity of labour newly added by
the producers during the year.

Thus, however, we have as residuum a third part of
the total product whose constituent parts, when exchanged,
can represent neither the exchange of revenue against
revenue nor of capital against revenue and vice versa.
This is the part of product B which represents B’s constant
capital. This part is not included in B’s revenue and
therefore cannot be replaced by or exchanged against product
A, and therefore also cannot enter as a constituent part
into A’s constant capital. This part is likewise
consumed, industrially consumed, to the extent that it
enters not only into B’s labour-process but also into the
formation of value in B. This part, therefore, like
all other parts of the total product, must be replaced in
the proportion in which it forms a component part of the
total product, and indeed it must be replaced in kind by
new products of the same sort. On the other
hand, it is not replaced by any new labour. For the
total quantity of newly-added labour is equal to the
labour-time contained in A, which is completely replaced
only by B consuming his revenue in two-thirds of A and
supplying to A in exchange all the means of production which
are consumed in A and must be replaced. For the first
one-third of A, which is consumed by its own producers,
consists only—as exchange-value—of the labour
newly added by themselves, and it contains no constant
capital.

Let us now examine this residuum.

It consists of the constant capital which enters into raw
materials, and secondly of the constant capital which enters
into the formation of the capital, and thirdly of the
constant capital which enters into auxiliary materials.

First, the raw materials. Their constant
capital consists in the first place of fixed capital,
machinery, instruments of labour and buildings, and perhaps
auxiliary materials, which are means of consumption for the
machinery employed. In regard to the directly
consumable part of the raw materials —such as cattle,
corn, grapes, and such like—this difficulty does not
arise. In this aspect they belong to class A.
This part of the constant capital contained in them enters
into the two-thirds of the constant part of A, which is
exchanged as capital against the unconsumable products of B
or in which B consumes his revenue. This holds good
too in general for such raw materials that cannot be
immediately consumed as far as they enter in kind into the
consumable product itself, however many intermediate stages
they may pass through in the processes of production.
The part of flax that is transformed into yarn and later
into linen enters in its entirety into the consumable
product.

But a part of these vegetative raw materials, such
as timber, flax, hemp, leather and so on, partly enters
directly into the components of the fixed capital itself,
and partly into the auxiliary materials for the fixed
capital. For example, in the form of oil, tallow,
etc.

Secondly, however, seed [belongs to the
constant capital expended for the production of raw
materials]. Vegetative materials and animals reproduce
themselves. Vegetation and generation. By seed
we mean actual seed, and in addition fodder which reverts to
the land as dung, pedigree cattle, etc. This large
part of the annual product—or of the constant part of
the annual product—itself serves directly as material
for regeneration, it reproduces itself.

Non-vegetative raw materials. Metals,
stones, etc. Their value consists of only two parts,
since here there is no seed—which represents the raw
materials of agriculture. Their value consists only of
added labour and machinery consumed (including the means of
consumption for the machinery). In addition therefore
to the part of the product which represents newly-added
labour and is hence included in the exchange of B for the
two-thirds of A, there is nothing to be replaced but the
wear and tear of the fixed capital and its means of
consumption (such as coal, oil, etc.). But these raw
materials form the principal component part of the constant
capital, of the fixed capital (machinery and instruments of
labour, buildings, etc.). They therefore replace their
constant capital in kind by the exchange [of capital against
capital].

| Secondly, the
fixed capital (machinery, buildings, instruments of labour,
containers of all kinds).

Their constant capital consists of: (1) their raw
materials, metals, stones, vegetative raw materials such as
timber, leather belting, rope, etc. But though these
raw materials form the raw material for them, they
themselves enter as instruments of labour into the
production of these raw materials. Hence they replace
themselves in kind. The iron producer has to replace
machinery, the machine builder iron. In quarrying
there is wear and tear of machinery, but in factory
buildings there is wear and tear of building stone,
etc. (2) The wear and tear of
machine—building machinery, which within a certain
period has to be replaced by a new product of the same
kind. But the product of the same kind can, of course,
replace itself. (3) The means of consumption for
the machine (auxiliary materials). Machinery
consumes coal, but coal consumes machinery, and so on.
In the form of containers, tubes, pipes, etc., machinery of
all kinds enters into the production of the means of
consumption for machinery, as in the case of tallow, soap,
gas (for lighting). Therefore also in these cases the
products of these spheres enter reciprocally into each
other’s constant capital, and consequently replace each
other in kind.

If beasts of burden are included among machines, what has
to be replaced in their case is fodder and in certain
conditions stabling (buildings). But if fodder enters
into the production of cattle, so do cattle into the
production of fodder.

In the third place, auxiliary materials.
Some of these require raw materials, like oil, soap, tallow,
gas, etc. On the other hand, in the form of
fertilisers, etc., they in turn enter in part into the
production of these raw materials. Coal is required
for making gas, but gas lighting is used in producing coal,
etc. Other auxiliary materials consist only of
labour added and fixed capital (machinery, containers,
etc.). Coal must replace the wear and tear of the
steam-engine used to produce it. But the steam-engine
consumes coal. Coal itself enters into the means of
production of coal. Thus it replaces itself in
kind. Transport by rail enters into the production
costs of coal, but coal in turn enters into the production
costs of the locomotive.

Later on, there is something special to be added about
chemical factories, all of which in greater or smaller
degree produce auxiliary materials, such as the raw material
of containers (for example, glass, porcelain), as well as
articles which enter directly into consumption.

All colouring materials are auxiliary materials.
But they enter into the product not only as to their value,
as for example coal consumed enters into cotton; but they
reproduce themselves in the form of the product (its
colours).

Auxiliary materials are either means of
consumption for machinery —in this case either
fuel for the prime mover, or means of reducing the friction
of the operating machinery, such as tallow, soap, oil,
etc.—or they are auxiliary materials for buildings,
like cement, etc. Or they are auxiliary materials for
carrying on the production process in general, such as
lighting, heating, etc. (in this case they are
auxiliary materials required by the labourers themselves to
enable them to work).

Or they are auxiliary materials which enter into
the formation of the raw materials as do all types of
fertilisers and all chemical products consumed by the raw
materials.

Or they are auxiliary materials which enter into
the finished product—colouring matter, polishing
materials, and so on.

The result is therefore:

A replaces his own constant capital, [equal to]
two-thirds [of the product], by exchange with that part of
B’s unconsumable product which represents B ‘s
revenue—that is, the labour added in category B during
the year. But A does not replace B’s constant
capital. B for his part must replace this constant
capital in kind by new products of the same sort. But
B has no labour-time over to replace them with. For
all the new labour-time added by him forms his revenue, and
is therefore represented by the part of B’s product which
enters as constant capital into A. How then is B’s
constant capital replaced?

Partly by his own reproduction (vegetative or
animal), as in all agriculture and stock-raising; partly by
exchange in kind of parts of one constant capital for
parts of another constant capital, because the product of
one sphere enters as raw material or means of production
into the other sphere, and vice versa; that is, because the
products of the various spheres of production, the | various sorts of constant
capital, enter reciprocally in kind into each other’s sphere
as conditions of production.

The producers of unconsumable products are the producers
of constant capital for the producers of consumable
products. But at the same time their products serve
them reciprocally as elements or factors of their own
constant capital. That is to say, they consume each
other’s products industrially.

The whole product A is consumed. Therefore also the
whole of the constant capital it contains. The
producers of A consume one-third of A, the producers of the
unconsumable products B consume two-thirds of A. A’s
constant capital is replaced by the products of B which form
B’s revenue. This is in fact the only part of the
constant capital that is replaced by newly-added
labour; and it is replaced by it because the quantity of
products B that is the newly-added labour in B, is not
consumed by B, but on the contrary is industrially consumed
by A, while B consumes individually the two-thirds of A.

Let A be equal to 3 days’ labour; his constant capital,
on our assumption, is equal to 2 days’ labour. B
replaces the product of two-thirds of A, and so supplies
unconsumable products equal to 2 days’ labour. Now 3
days’ labour have been consumed, and 2 are left. In
other words, the 2 days of past labour in A are replaced by
2 days of newly-added labour in B, but only because the 2
days of newly-added labour in B consume their value in A and
not in product B itself.

B’s constant capital, in so far as it has entered into
the total product B, must likewise be replaced in
kind by new products of the same sort—that is, by
products which are required for industrial
consumption by B. But it is not replaced by new
labour-time, although it is replaced by the products
of the labour-time newly applied during the year.

Let the whole constant capital in B’s total product be
two-thirds. Then if the newly-added labour (equal to
the total wages and profit) is 1, the past labour which
served it as material and means of labour is equal to
2. How then are these 2 replaced? The proportion
of constant and variable capital may vary considerably
within the various spheres of production of B. But on
our assumption the average is as 1/3 :
2/3, or 1 : 2. Each of the
producers of B is now Laced by two-thirds of his product,
such as coal, iron, flax, machinery, cattle, wheat (i.e.,
the part of his cattle and wheat that does not enter into
consumption), etc.; whose elements of production must be
replaced, or which must be reconverted into the natural form
of their elements of production. But all these
products themselves re-enter industrial consumption.
The wheat (as seed) is in turn also its own raw material,
and a part of the cattle produced replaces what has been
consumed, that is, itself. In these spheres of
production of B (agriculture and stock-raising) this part of
their product therefore replaces their own constant capital
in its natural form. A part of this product,
therefore, does not go into circulation (at least need not
go into circulation, and can only do so in a formal
sense). Others of these products, such as flax, hemp,
etc., coal, iron, timber, machinery, in part enter into
their own production as means of production, in the same way
as seed in agriculture: for example, coal in the production
of coal, and machinery in the production of machinery.
A part of the product consisting of machinery and coal, and
in fact a part of that part of this product which represents
its constant capital, thus replaces itself and merely
changes its place in the process of production. It
changes from a product into its own means of production.

Another part of these and of other products reciprocally
enter into each other as elements of
production—machinery into iron and timber, timber and
iron into machinery, oil into machinery and machinery into
oil, coal into iron, iron (tram-rails, etc.) into coal, and
so on. In so far as the two-thirds of these products
of B are not self-replacing in this way—that is, do
not come back in their natural form into their own
productions so that a part of B is directly consumed
industrially by its own producers, just as a part of A is
directly consumed individually by its own
producers—the products of the producers of B replace
each other reciprocally as means of production. The
product of a goes into b’s industrial consumption and the
product of b into a’s industrial consumption; or in a
roundabout way, a’s product into b’s industrial consumption,
b’s product into that of c, and that of c into that of
a. What therefore is consumed as constant capital in
one of B’s spheres of production is newly produced in
another; but what is consumed in the latter is produced in
the former. What in one sphere passes from the form of
machinery and coal into the form of iron, passes in the
other from the form of iron and coal into machinery, and so
on.

| What has to be done
is to replace B’s constant capital in its natural
form. If we consider B’s total product, it represents
the entire constant capital in all its natural forms.
And where the product of one particular sphere of B cannot
replace its own constant capital in kind, purchase and sale,
a change of hands, puts everything here in its proper place
again.

Here, therefore, there is replacement of constant capital
by constant capital; in so far as this does not occur
directly and without exchange, here therefore there is
exchange of capital for capital, that is, of products
for products on the basis of their use-value; the products
enter reciprocally into their respective production
processes, so that each of them is industrially consumed by
the producers of the other.

This part of the capital consists neither of profit nor
of wages. It contains no newly-added labour. It
is not exchanged against revenue. It is neither
directly nor indirectly paid for by consumers. It
makes no difference whether this reciprocal replacement of
capitals is carried through with the aid of merchants (that
is, by merchant’s capitals) or not.

But since these products are new (machinery, iron, coal,
timber, etc., which reciprocally replace each other), since
they are the products of the last year’s labour—thus
the wheat which serves as seed is just as much a product of
new labour as the wheat which passes into consumption,
etc.—how can it be said that no newly-added labour is
contained in these products? And moreover isn’t their
form striking evidence to the contrary? Even if not in
the case of wheat or cattle, surely in the case of a machine
its form bears witness to the labour which has transformed
it from iron, etc., into a machine, and so forth.

This problem has been solved earlier, It is not necessary
to go into it here again.

<Adam Smith’s statement that the trade between dealers
and dealers must be equal to the trade between dealers and
consumers (by which he means direct, not industrial,
consumers, since he himself includes industrial consumers
among dealers) is therefore wrong. It is based on his
false assertion that the whole product consists of revenue,
and in fact only means that the part of the exchange of
commodities which is equal to the exchange between capital
and revenue is equal to the total exchange of
commodities. As the assertion is wrong, the practical
applications Tooke made of it for the circulation of money
are also wrong (especially the relation between the quantity
of money circulating between dealers and the quantity of
money circulating between dealers and consumers).

Let us take as the final dealer confronting the consumer
the merchant who buys the product of A; this product is
bought from him by the revenue of A, equal to one-third of
A, and by the revenue of B, equal to two-thirds of A.
These replace his merchant’s capital for him. The
total of their revenues must cover his capital. (The
profit which the rascal makes must be accounted for by his
retaining a part of A for himself, and selling a smaller
part of A for the value of A. Whether the rascal is
thought of as a necessary agent of production or as a
sybaritic intermediary does not in any way alter the case.)
This exchange between dealer in A and consumer of A covers
in value the exchange between the dealer in A and all the
producers of A, and consequently all dealings between these
producers among themselves.

The merchant buys the linen. This is the last
dealing between dealer and dealers. The linen weaver
buys yarn, machinery, coal, etc. This is the last but
one dealing between dealer and dealers. The spinner
buys flax, machinery, coal, etc. This is the last
dealing but two between dealer and dealers. The
flax-grower and machine builder buy iron, machines, etc.,
and so on. But the dealings between the producers of
flax, machinery, iron, coal, [which are carried out] to
replace their constant capital, and the value of these
dealings, do not enter into the dealings which A’s product
passes through, whether as the exchange of revenue for
revenue, or as the exchange of revenue for constant
capital. These dealings—not those between the
producers of B and the producers of A, but those between the
producers of B— have not to be replaced by the buyer
of A to the seller of A, any more than the value of this
part of B enters into the value of A. These dealings
too require money, and are carried out through
merchants. But the part of the circulation of money
which exclusively belongs to this sphere is completely
separate from that between dealers and consumers.>

| Two questions are
still to be solved:

1. In our investigation up to now wages have
been treated as revenue, without being distinguished from
profit. How far in this connection have we to take
account of the fact that wages are at the same time part of
the circulating capital of the capitalist?

2. Up to now it has been assumed that the total
revenue is spent as revenue. The alteration that comes
in when a part of the revenue, of the profit, is
capitalised, has therefore to be considered. This in
fact comes up in the examination of the process of
accumulation—but not in its formal aspect. That
a part of the product which represents surplus-value is
reconverted, partly into wages and partly into constant
capital, presents no difficulty. Here we have to
examine how this affects the exchange of commodities under
the headings previously considered—under which it can
be examined in relation for its holders, that is to say, as
exchange of revenue for revenue, exchange of revenue for
capital, or finally, exchange of capital for capital.}

<This intermezzo has therefore to be completed in this
historico-critical section, as occasion warrants.>

### [11.] Ferrier [Protectionist Character of Ferrier’s Polemics against Smith’s Theory of Productive Labour and the Accumulation of Capital, Smith’s Confusion on the Question of Accumulation, The Vulgar Element in Smith’s View of “Productive Labourers”]

Ferrier (François-Louis-Auguste) (Sub-inspector
of Customs): Du Gouvernement considéré dans ses
rapports avec le commerce, Paris, 1805. (This was
the main source for Friedrich List.) This fellow eulogises
the Bonapartist system of prohibitions, etc. In
fact the Government (therefore also State officials
—those unproductive labourers) is in his view
important, as a manager directly intervening in
production. This customs officer is consequently
extremely angry with Adam Smith for calling State officials
unproductive.

“The principles which Smith has
laid down in regard to the economy of nations have as
their basis a distinction in labour, which he calls
productive or unproductive …”

<Because in fact he wants the largest possible part to
be spent as capital, i.e., in exchange for productive
labour, and the smallest possible part as revenue, in
exchange for unproductive labour.>

“This distinction is in essence
false. There is no unproductive labour”
(p. 141). “There is therefore economy and
prodigality on the part of nations; but a nation is only
prodigal or economic in its relations with other
peoples, and it is from this standpoint that the question
should be considered” (l.c., p. 143).

In a moment we shall quote for comparison the context of
the passage from Adam Smith which Ferrier regards with such
abomination.

“There is an economy on the part of
nations, hut it is very different from what Smith
recommends…, It consists in not buying foreign
products except in so far as a nation can pay for them with
its own, It consists sometimes in doing without them
altogether” (l.c., pp. 174-75).

<Book I, Chapter VI, (t. I, éd. Garnier,
pp. 108-09) Adam Smith says at the end of this
chapter which deals with the component parts of the price of
commodities:

“As in a civilised country there are
but few commodities of which the exchangeable value
arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so the
annual produce of its labour will always be sufficient to
purchase or command a much greater quantity of labour than
what was employed in raising, preparing, and bringing that
pro duce to market. 1f the society were annually to
employ all the labour which it can annually purchase, as the
quantity of labour would increase greatly every year, so
the produce of every succeeding year would be of vastly
greater value than that of the foregoing. But there is
no country in which the whole annual produce is
employed in maintaining the industrious. The idle
everywhere consume a great part of it; and, according to the
different proportions in which it is annually divided
between those two different orders of people, its ordinary
or average value must either annually increase or diminish,
or continue the same from one year to another” [Smith,
Wealth of Nations, O.U.P. edition, Vol. 1,
pp. 59-60].

There is confusion of all kinds in this passage, in which
Smith is in fact trying to solve the problem of
accumulation.

First, once again there is the wrong assumption that the
“exchangeable value” of the annual product of
labour, and so also “the annual produce of
labour”, resolves itself into wages and profits
(including rents). We will not deal again with this
nonsense. We only observe: the amount of the annual
product—or of the funds, the stocks of commodities
which are the annual product of labour—consists for
the most part | of
commodities in kind which can only enter as elements into
constant capital <raw materials, seed, machinery,
etc.>, which can only be consumed
industrially. The very use-value of these
commodities (and they form the larger part of the
commodities entering into constant capital) shows that they
are not suitable for individual consumption; that therefore
revenue cannot be expended on them, whether it is wages,
profit or rent. A part of the raw materials (in so far
as it is not required for the reproduction of raw materials
themselves, or in so far as it does not enter into the fixed
capital as auxiliary material or directly as a component
part) will, it is true, later on be given a consumable form,
but only through the labour of the current year. As a
product of the previous year’s labour these raw materials
themselves form no part of revenue. It is only the
consumable part of the product that can be consumed, can
enter into individual consumption and thus form
revenue. But even a part of the consumable product
cannot be consumed without making reproduction
impossible. One part even of the consumable part of
commodities therefore must be deducted which must be
consumed industrially, that is, it must serve as
material of labour, as seed, etc., not as means of
subsistence, whether for labourers or for capitalists.
This part of the product therefore has first to be deducted
from Adam Smith’s calculation—or rather has to be
added to it. If the productivity of labour remains
the same, then this part of the product which
does not consist of revenue remains the same from year to
year; provided that, with the productivity of labour
remaining the same, the same quantity of labour-time as
before is employed.

On the assumption therefore that a greater
quantity of labour than before is used each year, we
have to see what happens to the constant capital. In
short: in order to employ a greater quantity of labour, it
is not enough either that a greater quantity of
labour should be available, or that a greater
quantity should be paid for, that is, more should be
spent in wages; but the means of labour—raw material
and fixed capital—must also be there in order to
absorb a greater quantity of labour. Hence this point
is still to be discussed after the points
raised by Adam Smith have been cleared up.

So then, once more [we take] his first sentence:

“As in a civilised country there are
but few commodities of which the exchangeable value
arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so
the annual produce of its labour will always he
sufficient to purchase or command a much greater quantity
of labour than what was employed in raising,
preparing, and bringing that produce to market” (in
other words, to produce it).

Here different things are obviously mixed up. Not
only living labour, living labour employed during the
current year, enters into the exchangeable value of the
total annual product, but also past labour, product of the
labour of past years. Not only labour in living form,
but labour in materialised form. The exchangeable
value of the product is equal to the total labour-time which
it contains, a part of which consisted of living labour and
a part of materialised labour.

Let the proportion of the former to the latter be as
1/3 : 2/3 or 1 :
2. Then the value of the total product is equal to 3,
of which 2 are materialised labour-time and 1 living
labour-time. The value of the total product can
therefore buy more living labour than is contained in it, on
the assumption that materialised labour and living labour
exchanged for each other as equivalents, that a definite
quantity of materialised labour commanded only a quantity of
living labour equal to itself. For the product is
equal to 3 days’ labour; but the living labour-time
contained in it is only equal to 1 day’s labour. 1
day’s living labour sufficed to produce the product (in
fact, only to give the final form to its elements).
But 3 days’ labour is contained in it. Therefore if it
was exchanged entirely against living labour-time, if it was
employed only “to purchase or command”
quantities of living labour, it would be able to command, to
purchase, 3 days’ labour.

This however is evidently not what Adam Smith has in
mind, and would be a quite useless premise for him.
What he means is that a large part of the exchangeable value
of the product does not resolve itself (or as he
wrongly expresses it, because of a confusion of ideas
noted earlier) into wages but into profits and rents, or, as
we will say to simplify things, into profits. In other
words, the part of the value of the product which is equal
to the quantity of labour added during the last
year—thus in fact the part of the product which in the
proper meaning of the word is the product of last year’s
labour—pays first the labourers and secondly enters
into the capitalist’s revenue, his fund for
consumption. This whole part of the total product
arises from labour, and indeed exclusively from labour; but
it consists of paid and unpaid labour. The wages are
equal to the total of the paid labour, the profits | to the total of the unpaid
labour. If therefore this total product was expended
in wages, it could naturally set in motion a greater
quantity of labour than that of which it was the product;
and in fact the proportion in which the product can set in
motion more labour-time than it itself contains depends
exactly on the proportion in which the working-day is
divided into paid and unpaid labour-time.

Let us assume that the proportion is such that the
labourer produces or reproduces his wages in 6 hours, that
is, in half a day. Then the other 6 hours or the other
half day forms the surplus. Thus for example of a
product which contained 100 days’ labour [newly-added
labour], equal to £50 (when the day’s labour is equal
to 10s., making 100 days’ labour equal to 1,000s., or
£50), there would be £25 for wages and £25
for profit (rent). With the £25—equal to
50 days’ labour—100 labourers would have been paid,
who would have worked precisely half their labour-time for
nothing or for their masters. If therefore the whole
product (of the 100 days’ labour) were to be expended in
wages, then 200 labourers could be set in motion with the
£50, each of whom would receive as wages 5s. or
half the product of his labour as before. The product
of this labour would be equal to £100 (that is, 200
days’ labour, equal to 2,000s., or £100), with which
400 labourers (5s. the labourer, making 2,000s.) could be
set in motion, whose product would be equal to £200,
and so on.

And this is what Adam Smith means by saying that
“the annual produce of labour” will always be
sufficient “to purchase or command a much greater
quantity of labour” than what was employed to produce
the product. (If the labourer were paid the whole
product of his labour, that is, £50 for 100 days’
labour, then the £50 too could only set in motion 100
days’ labour.) And so Smith goes on to say:

“if the society were annually to
employ all the labour which it can annually purchase, as the
quantity of labour would increase greatly every year, so the
produce of every succeeding year would be of vastly greater
value than that of the foregoing.”

A part of this product however is consumed by the owners
of profit and rent; a part by their parasites. The
part of the product that can be expended again in
(productive) labour is consequently determined by the part
of the product which the capitalists, landlords and their
parasites (that is the unproductive labourers) do not
themselves consume.

But nevertheless there is always a new fund (a new fund
of wages) to set in motion, with the previous year’s
product, a greater quantity of labourers in the current
year. And as the value of the annual product is
determined by the quantity of labour-time employed, the
value of the annual product will grow each year.

Of course it would be of no use to have the fund
“to purchase or command” a
“much greater quantity of labour” than in the
previous year unless a greater quantity of labour was on the
market. It is of no use to me to have more money to
buy a commodity, unless more of this commodity is on the
market. Let us assume that the £50 set in
motion, instead of the 100 as before (who received
£25), not 200 but only 150 labourers, while the
capitalists themselves consumed £12.10s. instead
of £25. The 150 labourers ([receiving]
£37.10s.) would perform 150 days’ labour, equal to
1,500s. or £75. But if the quantity of
labourers available were, as before, only 100, instead of
£25 as before, they would receive £37.10s, as
wages, though their product [would amount to I only
£50 as before. Thus the revenue of the
capitalist would have fallen from £25 to
£12.10s., because wages had risen by 50 per
cent. Adam Smith knows, however, that an increasing
quantity of labour will be available. Partly [due to]
the annual increase of the population (though this is
supposed to be provided for in the old wages), partly
unemployed paupers, or half-employed labourers, etc.
Then the large numbers of unproductive labourers, part of
whom can be transformed into productive labourers by
a different way of using the surplus-produce. Finally
the same number of labourers can perform a greater
quantity of labour. And whether I pay 125
labourers instead of 100, or whether the 100 work 15 hours a
day instead of 12, would be quite the same thing.

It is incidentally an error of Adam
Smith’s—directly connected with his analysis of the
total product into revenue—to say that with the
increase of the productive capital—or with the growth
of the part of the annual product which is destined for
reproduction—the labour employed (the living
labour, the part of capital expended in wages) must increase
in the same proportion.

| Thus first Adam Smith
has a fund of consumable means of subsistence, which can
“purchase or command” a greater quantity of
labour this year than the foregoing year; he has more
labour; and at the same time more means of subsistence for
this labour. Now we must see how this additional
quantity of labour is to be realised.>

Had Adam Smith adhered with full consciousness to the
analysis of surplus-value which in substance is to be found
in his work—which is created only in the exchange of
capital against wage-labour—it would have followed
that productive labour is only that which is exchanged
against capital: never labour which is exchanged with
revenue as such. In order for revenue to be exchanged
against productive labour, it must first be transformed into
capital.

But taking as his starting-point one aspect of the
traditional view—that productive labour is labour
which directly produces material wealth of any
kind—and at the same time combining with this his
distinction in so far as it is based on the exchange of
either capital for labour or of revenue for labour, with
Smith the following became possible: The kind of labour for
which capital is exchanged is always productive (it always
creates material wealth, etc.). The kind of labour
which is exchanged for revenue may be productive or it may
not; but the spender of revenue as a rule prefers to set in
motion directly unproductive labour rather than
productive. One can see how Adam Smith, by this
compound of his two distinctions, very much weakens and
blunts the principal distinction.

The following quotation shows that Adam Smith does not
take the fixation of labour in a purely external sense;
among the various component parts of the fixed capital is
enumerated:

“Fourthly, of the acquired and useful
abilities of all the inhabitants and members of the
society. The acquisition of such talents, by the
maintenance of the acquirer during his education, study, or
apprenticeship, always costs a real expense, which is a
capital fixed and realised, as it were, in his person.
Those talents, as they make a part of his fortune, so do
they likewise that of the society to which he be
Longs. The improved dexterity of a workman may be
considered in the same light as a machine or instrument of
trade which facilitates and abridges labour, and which,
though it costs a certain expense, repays that expense with
a profit” ([Wealth of Nations, O.U.P,
edition, Vol. I, p. 308], [Garnier], l.c., t. II, ch, I,
pp. 204-05).

The strange origin of accumulation and its necessity:

“In that rude state of society, in
which there is no division of labour, in which exchanges are
seldom made, and in which every man provides every thing for
himself, it is not necessary that any stock should be
accumulated, or stored up beforehand, in order to carry on
the business of the society” (that is, after
assuming that there is no society). “Every man
endeavours to supply, by his own industry, his own
occasional wants, as they occur. When he is hungry, he
goes to the forest to hunt”—and so on ([ibid.,
p.301], [Garnier], l.c., t, II, pp. 191-92) (l. II,
Introduction). “But when the division of
labour has once been thoroughly introduced, the produce of a
man’s own labour can supply but a vary small part of his
occasional wants. The far greater part of them are
supplied by the produce of other men’s labour, [which
he purchases with the produce ], or, what is the same thing,
the price of the produce of his own, But this
purchase cannot be made till such time as the
produce of his own labour has not only been
completed, but sold.”

(Even in the first case he could not eat the hare before
he had killed it, and he could not kill it before he had
produced for himself the classical “bow” or
something similar. The only thing that seems to be
added in case II is therefore not the necessity of a stock
of any sort, but the “time… to sell the
produce of his labour”.)

“A stock of goods of different
kinds, therefore, must be stored up somewhere,
sufficient to maintain him, and to supply him with the
materials and tools of his work, till such time at least as
both these events can be brought about. A weaver
cannot apply himself entirely to his peculiar
business, unless there is beforehand stored up somewhere,
either in his own possession, or in that of some
other persons, a stock sufficient to maintain him, and
to supply him with the materials and tools of his work, till
he has not only completed, but sold his web. This
accumulation must evidently be previous to his
applying his industry for so long a time to such a peculiar
business, … The accumulation of s t o c k
must, in the nature of things, be previous to the
division of labour…” ([ibid., pp. 301-02],
[Garnier], l.c., pp. 192-93).

(On the other hand, according to what he has stated at
the beginning, it appears that no accumulation of capital
takes place before the division of labour, just as
there is no division of labour before the accumulation of
capital.)

He continues:

“… Labour can be more and more
subdivided in proportion only as stock is previously more
and more accumulated. The quantity of materials
which the same number of people can work up, increases in a
great proportion as labour comes to be more and more
subdivided; and as the operations of each workman are
gradually reduced to a greater degree of simplicity, a
variety of new machines come to be invented for facilitating
and | abridging those
operations. As the division of labour advances,
therefore, in order to give constant employment to an equal
number of workmen, an equal stock of provisions, and a
greater stock of materials and tools than what would
have been necessary in a ruder state of things, must be
accumulated be forehand”, ([ibid., p. 302],
[Garnier], l.c., pp. 193-94). “As the
accumulation of stock is previously necessary for
carrying on this great improvement in the productive powers
of labour, so that accumulation naturally leads to this
improvement. The person who employs his stock in
maintaining labour, necessarily wishes to employ it in
such a manner as to produce as great a quantity of work as
possible. He endeavours, therefore, both to make among
his workmen the most proper distribution of employment, and
to furnish them with the best machines which he can either
invent or afford to purchase. His abilities, in both
these respects, are generally in proportion to the extent of
his stock, or to the number of people whom it can
employ. The quantity of industry, therefore,
not only increases in every country with the increase of
the stock which employs it, but, in consequence of
that increase, the same quantity of industry produces
a much greater quantity of work” ( [ibid.,
pp. 302-03], [Garnier], l.c., pp. 194-95).

Adam Smith treats the objects which are already in the
fund for consumption in exactly the same way as productive
and unproductive labour. For instance:

“A dwelling-house, as such,
contributes nothing to the revenue of its inhabitant; and
though it is, no doubt, extremely useful to him, it is as
his clothes and household furniture are useful to him,
which, however, make a part of his expense, and not of his
revenue” ( [ibid., pp. 306-07 ], [Garnier], l.c.,
t. 11, pp. 201-02). On the other hand, fixed capital
includes “all those profitable buildings which are the
means of procuring a revenue, not only to their proprietor
who lets them for a rent, but to the person who possesses
them, and pays that rent for them; such as shops,
warehouses, workhouses, farm-houses, with all their
necessary buildings, stables, granaries, etc, These are very
different from mere dwelling-houses. They are a sort
of instruments of trade… “ ( [ibid., p. 308 ],
[Garnier], l.c., t. II, pp. 203-04).

“… All such improvements in
mechanics, as enable the same number of workmen to perform
an equal quantity of work with cheaper and simpler machinery
than had been usual before, are always regarded as
advantageous to every society. A certain quantity of
materials, and the labour of a certain number of workmen,
which had before been employed in supporting a more complex
and expensive machinery, can afterwards be applied to
augment the quantity of work which that or any other
machinery is useful only for performing” ( [ibid.,
p. 315 ], [Garnier], l.c., t, II, pp. 216-17).

“… The whole expense of
maintaining the fixed capital is … necessarily
excluded from the neat revenue of the society” (
[ibid., p. 316 ], [Garnier], l.c., t, II, p. 218).
“Every saving, therefore, in the expense of
maintaining the fixed capital, which does not
diminish the productive powers of labour, must increase the
fund which puts industry into motion, and consequently the
annual produce of land and labour, the real revenue of every
society” ( [ibid., p. 321 ], [Garnier ], l.c., t. II,
pp. 226-27).

Gold and silver money forced to go abroad
by bank-notes and by paper money in general—if spent
“in purchasing foreign goods for home
consumption”—buys either luxury products such as
foreign wines, foreign silks, etc., in a word, “goods
… likely to be consumed by idle people, who
produce nothing… or .., they may purchase on
additional stock of materials, toots, and provisions, in
order to maintain and employ an additional number of
industrious people, who reproduce, with a profit, the value
of their annual consumption” ([ibid., p. 324],
[Garnier], l.c., t. II, pp. 231-32).

The first manner of employment, says Smith, promotes
prodigality, “increases expense and consumption,
without increasing production, or establishing any permanent
fund for supporting that expense, and is in every respect
hurtful to the society” ([ibid., p. 324],
[Garnier], l.c., t. II, p. 232). On the other hand
“employed in the second way, it promotes industry; and
though it increases the consumption of the society, it
provides a permanent fund for supporting that consumption;
the people who consume reproducing, with a profit, the
whole value of their annual consumption” ( [ibid.,
p. 324], [Garnier], l.c., t, II, p. 232).

“The quantity of industry which any
capital can employ, must evidently be equal to the number of
workmen whom it can supply with materials, tools, and a
maintenance suitable to the nature of the work” (
[ibid., p.326], [Garnier], l.c., t, II, p. 235).

| In Chapter III of
Book II (l.c., t. II, p. 314 sqq.) [we find]:

“Both productive and unproductive
labourers, and those who do not labour at all, are all
equally maintained by the annual produce of the land and
labour of the country. This produce … must have
certain limits. According, therefore, as a smaller or
greater proportion of it is in any one year employed in
maintaining unproductive hands, the more in the one case,
and the less in the other, will remain for the productive,
and the next year’s produce will be greater or smaller
accordingly…

“Though the whole annual produce of
the land and labour of every country is … ultimately
destined for supplying the consumption of its inhabitants,
and for procuring a revenue to them; yet when it
first comes either from the ground, or from the hands of
the productive labourers, it naturally divides itself into
two parts. One of them, and frequently the largest,
is, in the first place, destined for replacing a capital,
or for renewing the p r o v i s i o n s, materials,
and finished work, which had been withdrawn from a
capital; the other for constituting a revenue either to the
owner of this capital, as the profit of his stock, or to
some other person, as the rent of his land…

“That part of the annual produce
of the land and labour of any country which replaces a
capital, never is immediately employed to maintain any
but productive hands. It pays the wages of productive
labour only. That which is immediately destined for
constituting a revenue… may maintain indifferently
either productive or unproductive hands. …

“Unproductive labourers, and those
who do not labour at all, are all maintained by
revenue; either, first, by that part of the annual
produce which is originally destined for constituting a
revenue to some particular persons, either as the rent of
land, or as the profits of stock; or, secondly, by the part
which, though originally destined for replacing a capital,
and for maintaining productive labourers only, yet when it
comes into their hands, whatever part of it is over and
above their necessary subsistence, may be employed in
maintaining indifferently either productive or unproductive
hands. Thus … even the common workman, if his
wages are considerable, may maintain a menial servant; or he
may sometimes go to a play or a puppet-show, and so
contribute his share towards maintaining one set of
unproductive labourers; or he may pay some taxes, and thus
help to maintain another set … equally unproductive,
No part of the annual produce, however, which had been
originally destined to replace a capital, is ever directed
towards maintaining unproductive hands, till after it has
put into motion its full complement of productive labour,
… The workman must have earned his wages by work
done, before he can employ any part of them in this
manner,.,, The rent of land and the profits of stock are
everywhere… the principal sources from which
unproductive hands derive their subsistence, “ These
two sorts of revenue “might both maintain
indifferently, either productive or unproductive
hands. They seem, however, to have some predilection
for the latter….

“The proportion, therefore,
between the productive and unproductive hands, depends very
much in every country upon the proportion between that part
of the annual produce, which, as soon as it comes either
from the ground, or from the hands of the productive
labourers is destined for replacing a capital, and that
which is destined for constituting a revenue, either as rent
or as profit. This proportion is very different in
rich from what it is in poor countries” [Wealth of
Nations, O.U.P. edition, Vol. I, pp. 370-73].

[Adam Smith] then contrasts the “very
large, frequently the largest, portion of the produce of the
land” which “in the opulent countries of Europe
[…] is destined for replacing the capital of the
rich and independent farmer”with “the
prevalency of the feudal government”, when “a
very small portion of the produce was sufficient to replace
the capital employed in cultivation”.

It is the same with commerce and manufactures.
Large capitals are now employed in them, formerly very small
capitals, but they

“yielded very large profits.
The rate of interest was nowhere less than ten per cent, and
their profits must have been sufficient to afford this great
interest. At present, the rate of interest, in the
improved parts of Europe, is nowhere higher than six per
cent; and in some of the most improved, it is so low as
four, three, and two per cent. Though that part of the
revenue of the inhabitants which is derived from the profits
of stock, is always much greater in rich than in poor
countries, it is because the stock is much greater; in
proportion to the stock, the profits are generally much
less.

“That part of the annual produce,
therefore, which, as soon as it comes either from the
ground, or from the hands of the productive labourers, is
destined for replacing a capital, | is not only much greater in
rich than in poor countries, but bears a much greater
proportion to that which is immediately destined for
constituting a revenue either as rent or as profit.
The funds destined for the maintenance of productive labour
are not only much greater in the former than in the latter,
but bear a much greater proportion to those which, though
they may be employed to maintain either productive or
unproductive hands, have generally a predilection for the
latter,”

(Smith falls into the error of identifying the size of
the productive capital with the size of that part of
it which is destined to provide subsistence for
productive labour. But in fact large-scale industry,
as he knew it, was as yet only in its beginnings.)

“The proportion between those
different funds necessarily determines in every country the
general character of the inhabitants as to industry or
idleness.” Thus he says for example: in English and
Dutch manufacturing towns “where the inferior ranks of
people are chiefly maintained by the employment of capital,
they are in general industrious, sober and
thriving”. On the other hand, in “towns
which are principally supported by the [constant or
occasional] residence of a court, and in which the inferior
ranks of people are chiefly maintained by the spending of
revenue, they are in general idle, dissolute, and poor; as
at Rome, Versailles”,* etc. [ibid., pp. 372-75].

“The proportion between capital and
revenue, therefore, seems everywhere to regulate the
proportion between industry and idleness. Wherever
capital predominates, industry prevails: wherever revenue,
idleness. Every increase or diminution of
capital, therefore, naturally tends to increase or
diminish the real quantity of industry, the number of
productive hands, and consequently the exchangeable value of
the anneal produce of the land and labour of the country,
the real wealth and revenue of all its inhabitants.
…

“What is annually saved, is as
regularly consumed as what is annually spent, and nearly in
the same time, too: but it is consumed by a different set of
people.” The first portion “by idle guests and
menial servants, who leave nothing behind them in return for
their consumption”. The second [portion]
“by labourers […] who, reproduce, with a
profit, the value of their annual consumption…
The consumption is the same, but the consumers are
different” [ibid., pp. 377-78].

Hence Smith’s homilies (further on [Garnier], 1, c.,
t. II, l. II, ch. III,
pp. 328-29 sqq.) on the frugal man, who by his annual
savings provides something like a public workhouse for an
additional number of productive hands, and thus

“establishes, as it were, a perpetual
fund for the maintenance of an equal number in all times to
come”, while the prodigal diminishes “the funds
destined for the employment of productive
labour… If the quantity of food and clothing,
which were thus” (as a result of the prodigal’s
prodigality) “consumed by unproductive, had been
distributed among productive hands, they would have
reproduced, together with a profit, the full value of
their consumption” [ibid., pp. 378-79].

The conclusion of this moral tale is that these
(frugality and prodigality) average out among private
individuals, that in fact “wisdom” prevails.

“Great nations are never impoverished
by private, though they sometimes are by public prodigality
and misconduct. The whole, or almost the whole public
revenue is, in most countries, employed in maintaining
unproductive hands.” [These include] the people of the
court, the church, fleets and armies, “who in time of
peace produce nothing, and in time of war acquire nothing
which can compensate the expense of maintaining them, even
while the war lasts. Such people, as they
themselves produce nothing, are all maintained by the
produce of other men’s labour. When multiplied,
therefore, to an unnecessary number, they may in a
particular year consume so great a share of this produce, ns
not to leave a sufficiency for maintaining the productive
labourers, who should reproduce it next year” [ibid.,
pp. 382-83].

[In] Chapter IV of Book II [Smith writes]:

“The demand for productive labour, by
the increase of the funds which are destined for maintaining
it, grows every day greater and greater.
Labourers easily find |
employment; but the owners of capitals find it
difficult. To get labourers to employ. Their
competition raises the wages of labour, and sinks the
profits of stock” ([ibid., p. 395], [Garnier], l.c.,
t. II, p. 359).

In Chapter V of Book II (p. 369 sqq., t. II) of the
“Different Employments of Capitals”,
Smith classifies them according as they employ more or less
productive labour, and, consequently, raise “the
exchange-value” of the annual product. First
agriculture. Then manufacture.
Then commerce, and finally retail trade.
This is the order of precedence in which they set in motion
quantities of productive labour. Here too we get a
completely new definition of productive labourers:

“The persons whose capitals are
employed in any of those four ways, are themselves
productive labourers. Their labour, when
properly directed, fixes and realises itself in the subject
or vendible commodity upon which it is bestowed, and
generally adds to its price the value at least of their own
maintenance and consumption” ([ibid., p. 404],
[Garnier], l.c., p. 374).

(On the whole he sees their productivity in the fact that
they put into motion productive labour.)

He says of the farmer:

“No equal capital puts into motion a
greater quantity of productive labour than that of
the farmer, Not only his labouring servants, but his
labouring cattle are productive labourers” [ibid.,
p. 405.].

So in the end the ox too is a productive labourer.

### [12.] Earl of Lauderdale [Apologetic Conception of the Ruling Classes as Representatives of the Most Important Kinds of Productive Labour]

Lauderdale (Earl of): An Inquiry into the
Nature and Origin of Public Wealth, etc., [Edinburgh
and] London, 1804. (The French translation:
Recherches sur la nature et l’origine de la
richesse publique etc. par Lagentie de
Lavaïsse, Paris, 1808.)

Lauderdale’s apologetic justification of profit will be
examined only later on, in Section III. It regards
profit as arising from capitals themselves, because they
“supplant” labour. They are paid
for doing what otherwise, without them, the hand of man
would have to do, or could not do at all.

“Now it is apprehended, that in every
instance where capital is so employed as to produce a
profit, it uniformly arises, either—from its
supplanting a portion of labour which would otherwise be
performed by the hand of man; or—from its performing a
portion of labour, which is beyond the personal exertion of
man to accomplish” (French translation, p. 119)* [p. 161].

The “Earl” is a great enemy of Smith’s
doctrine of accumulation and saving, Also of his distinction
between productive and unproductive labourers;
but according to him what Smith calls “productive
powers of labour” are only the “productive power
of capital”. He flatly denies the derivation of
surplus-value put forward by Smith, on the following
grounds:

“If this, however, was a just and
accurate idea of the profit of capital, it would follow that
the profit of stock must be derivative, and not an original
source of revenue: and capital could not therefore be
considered as a source of wealth, its profit being only a
transfer from the pocket of the labourer into that of the
proprietor of stock” (l.c., pp. 116-17) [p. 157 ].

It is clear that on these premises he picks on the most
superficial points in his polemic against Smith. Thus
he says:

“Thus the same labour may appear
either productive or unproductive, according to the use
subsequently made of the commodity on which it was
bestowed. If my cook, for example, makes a tart which
I immediately consume, he is considered as an unproductive
labourer; and the net of making the tart is unproductive
labour: because that service has perished at the moment of
its performance: but if the same labour is performed in a
pastry cook’s shop, it becomes productive labour”
(l.c., p. 110) [pp. 149-50].

(Garnier has the copyright in this argument, as
his edition and notes on Smith appeared in 1802, two years
before Lauderdale.)

“This extraordinary distinction,
founded on the mere durability of the services performed,
classes as unproductive labourers some of those who are
occupied in rendering the most important services to
society. Thus the sovereign, and all who are employed
in the maintenance of religion, the justice, or the defence
of the State, as well as those whose skill and care are
occupied in superintending the health and education of the
society, are alike deemed unproductive Labourers”
(l.c., pp. 110-11) [p. 151 ], (Or, as Adam Smith [Garnier
trans.] l. II, ch. III, p. 313) presents the elegant
sequence: “churchmen, lawyers, physicians, men of
letters of all kinds; players, buffoons, musicians,
opera-singers, opera-dancers, etc.” [Wealth of
Nations, O.U.P, edition, Vol. I, p. 370 ].)

“If exchangeable value is to be
considered as the basis of wealth,—it is needless to
use much argument to explain the errors of this
doctrine. | The
practice of mankind, in estimating these services, if we can
judge by what is paid for them, bears sufficient testimony
of its inaccuracy” ( [Lauderdale ], l.c., p. 111) [pp.
151-52].

Further: “The labour of the manufacturer fixes and
realises itself in some vendible commodity…
Neither the labour performed by the menial servant,
nor that of which the necessity is supplanted by circulating
capital,” < by this he means money>
“do naturally stock, or store themselves up in such a
manner as to be transferred from one to another for a
defined value. The profit of the one and the other
alike arises from saving the labour of the owner or
master. The similarity is indeed such that it is
natural to suppose the same circumstances which led the one
to be deemed unproductive, would naturally create the same
impression with relation to the other.” > And
(Lauderdale, l.c., pp. 144-45) [pp. 195-97].

Thus we would have the succession: Ferrier, Garnier,
Lauderdale, Ganilh. The latter phrase about the
“saving of labour” is particularly hard
ridden by Tocqueville.

### [13. Say’s Conception of “Immaterial Products”. Vindication of an Unrestrained Growth of Unproductive Labour]

After Garnier appeared the inane Jean-Baptiste Say’s
Traité d’économie politique. He
reproaches Smith in that “he refuses the name of
products to the results of these activities
[e.g., those of the physician, actor, etc.]. He gives
the labour spent on them the name unproductive”
(3me éd., t. I, p. 117).

Smith does not at all deny that these activities produce
a “result”, a “product” of some
kind. He even expressly mentions “the
protection, security, and defence of the commonwealth”
as “the effect of their labour this year” (the
labour of the servants of the public) ([Wealth of
Nations], O.U.P. edition, Vol. I, pp. 369-70]
Smith, t. II, éd, Garnier, l. II, ch. III,
p. 313).

Say for his part sticks to Smith’s secondary definition,
that these “services” and their product
“generally perish in the very instant of their
performance”, “in the very instant of their
production” (Smith, l.c.).

Monsieur Say calls these consumed “services”,
or their products, results—in a word, their
use-value—“immaterial products or values, which
are consumed in the instant of their
production”. Instead of calling them
“unproductive”, he calls them “productive
of immaterial products”. He gives them another
name. But then he declares further:

“that they do not serve to augment
the national capital” (t, I, p. 119). “A
nation in which there were a multitude of musicians, priests
and officials, might be pleasantly entertained, well
educated and governed admirably well, but that would be all,
Its capital would not receive any direct increase from all
the labour of these industrious men, because their products
would be, consumed as fast as they were created”
(l.c., p. 119).

Thus Monsieur Say declares these labours to be
unproductive in the most restricted sense used by
Smith. But at the same time he wants to appropriate
Garnier’s “step forward”. Hence he invents
a new name for unproductive labours. This is his kind
of originality, his kind of productivity and way of making
discoveries, And with his customary logic, he refutes
himself again, He says:

“It is […] impossible to
accept the view of Monsieur Garnier, who concludes from the
fact that the labour of physicians, lawyers and other
similar persons is productive, that it is as advantageous
for a nation to increase it as any other labour”
(l.c., p. 120).

And why not, if one kind of labour is as productive as
the other, and the increase of productive labour is in
general “advantageous for a nation”? Why
is it not as advantageous to increase this kind of
labour as any other? Because, Say replies with his
characteristic profundity, because it is not at all
advantageous to increase productive labour of any kind above
the need for this labour. But then surely Garnier is
right. For it is equally advantageous—that is,
equally disadvantageous— to increase the one kind of
labours as to increase the other kind above a certain
quantity.

“The case is the same,” Say
continues. “as with physical labour expended on
a product beyond what is necessary to make it.”

(Not more joiner’s labour should be employed to make a
table than is necessary for the production of the
table. Or to patch up a sick body, not more than is
necessary to cure it. So lawyers and physicians should
perform only the necessary labour for the production of
their immaterial product.)

“The labour which is productive of
immaterial products, like all other labour, is only
productive up to the point at which it increases the
utility, and consequently the value” (that is the
use-value, but Say mistakes the utility for the
exchange-value) “of a product: beyond this point, it
is a purely unproductive labour” (l.c., p. 120).

Say’s logic is therefore this:

It is not so useful for a nation to increase the
“producers of immaterial products” as to
increase the producers of material products.
Proof: it is absolutely useless to increase the
producers of any kind of product, whether material or
immaterial, beyond what is necessary. Therefore
it is more useful to increase the useless producers of
material products than those of immaterial products.
It does not follow in both cases that it is useless to
increase these producers, but only the producers of a
particular kind in their corresponding branch of
production.

[According to Say], too many material products cannot
| be produced, nor can
too many immaterial. But a change is diverting.
So different kinds must be produced in both
departments. And moreover Monsieur Say teaches:
“Sluggishness in the sale of some products arises
from the scarcity of some others” (l.c., p. 438).

Therefore there can never be too many tables produced,
but at most perhaps too few dishes to be put on the
tables. If physicians increase too much in number,
what is wrong is not that their services are available in
superfluity, but perhaps that the services of other
producers of immaterial products are in short
supply—for example, prostitutes (see l. c., p. 123,
where the industries of street-porters, prostitutes, etc.,
are grouped together, and where Say ventures to assert that
the “apprenticeship” for a prostitute
“amounts to nothing”).

In the end, the scales come down on the side of the
“unproductive labourers”. With given
conditions of production, it is known exactly how many
labourers are needed to make a table, how great the quantity
of a particular kind of labour must be in order to make a
particular product. With many “immaterial
products” this is not the case. The quantity of
labour required to achieve a particular result is as
conjectural as the result itself. Twenty priests
together perhaps bring about the conversion that one fails
to make; six physicians consulting together perhaps discover
the remedy that one alone cannot find, In a bench of judges
perhaps more justice is produced than by a single judge who
has no control but himself. The number of soldiers
required to protect a country, of police to establish order
in it, of officials “to govern it” well,
etc. —all these things are problematical and are
very often discussed for example in the English Parliament;
although how much spinning labour is needed to spin 1,000
lbs. of twist is known very exactly in England. As for
other “productive” labourers of this kind, the
concept of them includes the fact that the utility which
they produce depends only on their number, consists in their
number itself. For example, lackeys, who should bear
witness to their master’s wealth and elegance. The
greater the number of them, the greater the effect they are
supposed to “produce”. Thus Monsieur Say
sticks to his point: “unproductive labourers”
can never be sufficiently increased in numbers. |

### [14.] Count Destutt de Tracy [Vulgar Conception of the Origin of Profit. Proclamation of the Industrial Capitalist” as the Sole Productive Labourer]

| Le comte Destutt de
Tracy: Élémments d’idéologie,
IVe et Ve parties.
Traité de la volonté et de ses effets,
Paris, 1826 ([First edition] 1815).

“All useful labour is really
productive, and the whole labouring class of society equally
deserves the name productive” (p. 87).

But in this productive class he distinguishes “the
labouring class which directly produces all our
wealth” (p. 88) —that is, what Smith calls the
productive labourers.

As against these, the sterile class consists of
the rich, who consume their rent of land or rent on
money. They are the idle class.

“The real sterile class is the
class of idlers, who do nothing but live what is called
nobly on the products of labours performed before
them, whether these products are realised in landed property
which they farm out, that is to say, which they lease
to a labourer, or whether they consist in money or goods
that they lend for a return, which also means to
lease them. Those are the real drones of the
hive (fruges consumere nati*)”
(p. 87): these idlers “can expend nothing but their
revenue. If they break into their funds | , nothing replaces diem; and
their consumption, increased for the moment, ceases for
ever” (p. 237).

“This revenue is … only
a deduction from the products of activity of the industrious
citizens” (p. 236).

How then does it stand with the labourers whom these
idlers directly employ? In so far as they consume
commodities, they do not consume actual labour, but the
products of the productive labourers, Here therefore we are
dealing with labourers for whose labour the idlers directly
exchange their revenue, that is, with labourers who draw
their wages directly from revenue, not from capital.

“Since the men to whom it” (the
revenue) “belongs are idle, it is obvious that they do
not direct any Productive labour. All these
labourers whom they pay are intended only to procure some
enjoyment for them. No doubt these enjoyments are of
different kinds… The expenditure of all this
class of men … feeds a numerous population whose
existence it makes possible, but one whose labour is
completely sterile. … Some of it may be more or
less fruitful, as for example the construction of a house,
the improvement of e landed estate; but these are particular
cases when for the tine being they cause productive labour
to be performed, Apart from these minor exceptions, the
whole consumption of this species of capitalists is
absolutely pure loss from the standpoint of reproduction,
and an equally great diminution of the wealth that has been
acquired” (p. 236).

<Real political economy à la Smith
treats the capitalist only as personified capital,
M—C—M, agent of production. But who is to
consume the products? The labourers? —but
they don’t. The capitalist himself? Then he is
acting as a big idle consumer and not as a capitalist.
The owners of land and money rents? They do not
reproduce their consumption, and thereby are of disservice
to wealth, Nevertheless, there are also two correct aspects
in this contradictory view, which regards the capitalist
only as a real amasser of wealth, not an illusory one like
the miser proper: (1) capital (and hence the capitalist, its
personification) is treated only as an agent for the
development of the productive forces and of production; (2)
it expresses the standpoint of emerging capitalist society,
to which what matters is exchange-value, not use-value;
wealth, not enjoyment. The enjoyment of wealth seems
to it a superfluous luxury, until it itself learns to
combine exploitation and consumption and to subordinate
itself to the enjoyment of wealth.>

“To find how these revenues”
(on which the Idlers live) “have been formed it is
always necessary to go back to the industrial
capitalists”(p 237, note)

The industrial capitalists—the second sort
of capitalists—

“include all the entrepreneurs in any
industry whatever, that Is to say, all the persons who,
having capitals, … employ their talent and
their labour in turning them to account themselves instead
of hiring them to others, and who consequently live neither
on wages nor on revenues but on profits”
(p. 237).

In Destutt it is quite clear —as with Adam Smith
before him —that what on the surface is glorification
of the productive labourer is in fact only glorification of
the industrial capitalist in contrast to landlords
and such moneyed capitalists as live only on their
revenue.

“They have … in their hands
almost all the wealth of society… It is not
only the income from this wealth that they spend annually,
but even the fund itself, and sometimes many times in the
year, when the course of business is rapid enough to make
this possible. For since in their capacity as
industrialists they spend only in order that the money shall
come back to them with a pro fit, the more they can do so on
this condition, the greater their profits”
(pp. 237-38).

As for their personal consumption, it is the same as that
of the idle capitalists. But it is

“in total moderate, because
industrialists are usually unassuming” (p. 238).
But it is different with their industrial consumption, it
“is nothing less than final; it returns to them with
profits” (l.c.). Their profit must be large
enough not only for their “personal consumption, but
also” for “the rents for the land and for the
money which they hold from the idle capitalists”
(p. 238).

Destutt is right on this. Rents of land and
interest on money are only “deductions”
from industrial profit, portions of the latter given by the
industrial capitalist from his gross profit to landlords and
moneyed capitalists.

“The revenues of the rich idlers are
only rents taken from industry; it is industry alone that
creates them” (p. 248). The industrial
capitalists “rent their” (that is, the idle
capitalists’) “land, their houses and their money, and
they make use of them in such a way as to draw
profits from them hi g her than this rent”
[p. 237]. That is, the rent which they pay to the
idlers, which therefore is only a part of this profit.
This rent that they thus pay to the idlers is “the
sole revenue of these idlers and the sole fund for their
annual expenditures” (p. 238).

Up to here, all right. But how then does it stand
with the wage-labourers (the productive labourers,
who are employed by the industrial capitalists)?

“These have no other treasure but
their everyday labour. This labour obtains wages for
them… But whence come these wages? It is
clear that they come from the properties of those to whom
the | wage-labourers
sell their labour, that is to say, from the funds
which are in their possession beforehand, and which are
nothing but the accumulated products of labours
previously performed. It follows from this that
the consumption paid for by this wealth is the consumption
of the wage-labourers, in the sense that it is they whom it
maintains, but at bottom it is not they who pay
it. Or at least they only pay for it with funds
existing beforehand in the hands of those who employ
them. Their consumption should therefore be
regarded as having been made by those who hire them.
They only receive with one hand and return with the
other,.,, It is therefore necessary to regard not only all
that they” (the wage-labourers) “spend but even
all that they receive as the real expenditure and
consumption of those who buy their labour. That
is so true that in order to see whether this consumption is
more or less destructive of wealth that has been acquired,
or even if it tends to increase it … it is necessary
to know what use the capitalists make of the labour that
they buy” (pp. 234-35).

Very well. And whence come the profits of the
entrepreneurs which enable them to pay revenue to themselves
and to the idle capitalists, etc.?

“I will be asked how these industrial
entrepreneurs can make such large profits, and whence they
can draw them? I reply that it is through their
selling everything that they produce at a higher price than
it has cost them to produce” (p. 239).

And to whom do they sell everything at a higher price
than it costs them?

“They sell it,

“1. to themselves, for the
whole part of their consumption destined for the
satisfaction of their needs, which they pay for with a
portion of their profits;

“2. to the wage-labourers, both
those whom they pay and those paid by the idle capitalists;
in this way they take beck from these labourers the total
amount of their wages, apart from any small economies
which these may be able to make;

“3. to the idle capitalists,
who pay them with the part of their revenue which
they have not already given to the labourers directly
employed by them, so that all the rent which they annually
pay to the idle capitalists comes back to them in one or
other of these ways” (p. 239).

Let us now have a look at these three categories of
sales.

1. The industrial capitalists themselves consume
one part of their product (or profit). They
cannot possibly enrich themselves by swindling themselves
and selling their products to themselves at a dearer
price than they themselves have paid for
them. Nor can any one of them swindle the others in
this way. If A sells his product, which the industrial
capitalist B consumes, at too dear a price, then B sells his
product, which the industrial capitalist A consumes, at too
dear a price. It is the same thing as if A and B had
sold their products to each other at their real value.
Category 1 shows us how the capitalists spend a part of
their profit; it does not show us whence they draw the
profit. In any case they make no profit by selling
“to one another” “everything that they
produce at a higher price than it has cost to produce
“.

2. They can likewise draw no profit from the part
of the product which they sell to their labourers above
the costs of production, It is presupposed that the
whole consumption of the labourers is in fact “the
consumption of those who buy their labour “.
Moreover Destutt rubs this in by remarking that the
capitalists, by selling their products to the wage-labourers
(their own and those of the idle capitalists), only
“get back their total wages ”. And in fact
not even the total, but after deducting their
economies. It is all the same whether they sell the
products to them cheap or dear, since they always only get
back what they have given them, and, as said above, the
wage-labourers only “receive with one hand and return
with the other”. First the capitalist pays
money to the labourer as wages. Then he sells
him his product “too dear”, and by so
doing draws the money back again. But as the labourer
cannot pay back to the capitalist more money than he has
received from him, so the capitalist can never sell
his products to him dearer than he has paid
him for his labour. He can always only get back from
him as much money for the sale of his products as the money
he has given him for his labour. Not a farthing
more. How then can his money increase through this
“circulation”?

| In addition to this,
there is another absurdity in Destutt. Capitalist C
pays the labourer L a weekly wage of £1, and then
draws back the £1 for himself again by selling him
commodities for £1. By this means, Tracy thinks,
he has drawn back to himself the total of the wages
paid. But first he gives the labourer £1.
And then he gives him commodities for £1. So
what in fact he has given him is £2: £1 in
commodities and £1 in money. Of this £2,
he takes back £1 in the form of money. Therefore
in fact he has not drawn back a farthing of the £1
wage. And if he intended to enrich himself by this
kind of “drawing back” the wages (instead of by
the labourer giving him back in labour what he advanced to
him in commodities), he would soon come to his senses.

Here, therefore, the noble Destutt confuses the
circulation of money with the real circulation of
commodities. Because the capitalist, instead of giving
the labourer directly commodities to the value of £1,
gives him £1, with which the labourer then decides as
he likes which commodities he wants to buy, and returns to
the capitalist in the form of money the draft he had given
him on his merchandise—after he, the labourer, has
appropriated his aliquot share of the
merchandise—Destutt imagines that the capitalist
“draws back” the wages, because the same piece
of money flows back to him, And on the same page Monsieur
Destutt remarks that the phenomenon of circulation is
“little known” (p. 239). Totally unknown
to himself, at any rate. If Destutt had not explained
“the drawing back of the total wages” in this
peculiar way, the nonsense might at least have been
conceivable in a way we shall mention now.

(But before that, a further illustration of his
sapience. If I go into a shop and the shopkeeper gives
me £1 and I then use this £1 to buy commodities
to the value of £1 in his shop, he then draws back the
£1 again. No one will assert that he has
enriched himself by this operation. Instead of
£1 in money and £1 in commodities he now has
only £1 in money left. Even if his commodity was
only worth l0s. and he sold it to me for £1, in this
case too he is 10s. poorer than he was before the sale, even
though he has drawn back the whole of one pound
sterling.)

If C, the capitalist, gives the labourer £1 wages,
and afterwards sells him commodities to the value of
10s. for £1, he would certainly have made a profit of
10s. because he had sold the commodities to the labourer
10s. too dear. But from Monsieur Destutt’s point of
view even so it could not be understood how any profit from
this transaction arises for C. (The profit arises from
the fact that he has paid him less wages—in fact has
given the labourer a smaller aliquot part of the product in
exchange for his labour—than he gives him
nominally.) If he gave the labourer 10s. and sold his
commodity for 10s., he would be just as rich as if he
gives him £1 and sells him his 10s. commodity for
£1. Moreover, Destutt bases his argument on the
assumption of necessary wages. In the best case any
profit here would only be explained by the labourer having
been cheated over his wages.

This case 2 therefore shows that Destutt has absolutely
forgotten what a productive labourer is, and has not the
slightest idea of the source of profit. At most it
could be said that the capitalist makes a profit by raising
the price of the products above their value, in so far as he
sells them not to his own wage-labourers but to the
wage-labourers of idle capitalists. But since the
consumption of unproductive labourers is in fact only a part
of the consumption of idle capitalists, we come now to case
3.

3. The industrial capitalist sells his products
“too dear”, above their value, to the

“idle capitalists, who pay them with
the part of their revenue which they have not already given
to the labourers directly employed by them, so that all the
rent which they annually pay to the idle capitalists comes
back to them” (the industrial capitalists) “in
one or other of these ways”.

Here again there is the childish conception of the rent,
etc., coming back, as there was above of the drawing back of
the whole of the wages. For example, C pays £100
rent for land and money to I (the idle capitalist).
The £100 are means of payment for C. They are
means of purchase for I, who with them draws £100 of
commodities from C’s warehouse. Thus the £100
return to C as the transformed form of his commodity.
But he has £100 less in commodities than before.
Instead of giving them direct to I, he has given him
£100 in money, with which the latter buys £100
of his commodities. But he buys these £100 worth
of commodities with C’s money, not with his own funds.
And Tracy imagines that in this way the rent which C has
paid over to I comes back to C. What imbecility!
First absurdity.

Secondly, Destutt himself has told us that rent of land
and interest on money are only deductions from the
industrial capitalist’s profit, and therefore only quotas of
profit given away to the idler. On the assumption that
C drew back this whole quota | to himself by some sort of
trick, though not in one or other of the ways described by
Tracy —in other words, that capitalist C paid no rent
at all, neither to the landlord nor to the moneyed
capitalist—lie would retain his whole profit,
but the question is precisely how to explain whence
he derived the profit, how he has made it, how it
arose. As this cannot be explained by his having or
retaining it without giving a quota of it to landlord
and moneyed capitalist, just as little can it be explained
by the fact that either part or the whole of the quota of
profit which he has given away to the idler under one
category or another is entirely or partially, in one way or
another, dragged back by him from the hand of the idler into
his own hand again. Second absurdity!

Let us disregard these absurdities. C has to pay I
—the idler—rent to the amount of £100 for
the land or the capital that he has rented (loué)
from him. He pays the £100 out of his profit
(whence the latter arises we do not yet know). Then he
sells his products to I, which are consumed either by I
directly or through his retainers (the unproductive
wage-labourers), and he sells them to him too dear,
for example, 25 per cent above their value. He sells
him products worth £80 for £100. In this
transaction C undoubtedly makes a profit of £20.
He has given I a draft for £100 worth of
commodities. When the latter presents the draft, he
gives his commodities only to the value of £80, by
fixing the nominal price of his goods 25 per cent above
their value. Even if I would be satisfied with
consuming commodities worth £80 and paying £100
for them, C’s profit could never rise above 25 per
cent. The prices and the fraud would be repeated every
year. But I wants to consume to the value of
£100. If he is a landlord, what is he to
do? He mortgages property to C for £25, in
exchange for which C gives him commodities worth
£20—for he sells his commodities at 25 per cent
(one-quarter) above their value, If he is a money-lender, he
hands over to C £25 of his capital, in exchange for
which C gives him commodities worth £20.

Let us assume that the capital (or value of the land) was
lent at 5 per cent. Then it amounted to
£2,000. Now it amounts to only
£1,975. His rents are now £98
3/4. And so it would go on, with
I constantly consuming commodities to the real value of
£100, but his rents constantly falling, because in
order to have commodities to the value of £100 he must
always consume an ever greater part of his capital
itself. Thus bit by bit C would get the whole of I’s
capital into his own hands, and the rents of it together
with the capital—that is to say, along with the
capital itself he would appropriate that portion of the
profit which he makes from borrowed capital.
Mr. Destutt evidently has this process in view, for he
continues:

“But, I will be told, if that is so
and if industrial entrepreneurs in effect reap each year
more than they have sown, in a very short time they must
have attracted to themselves the whole public
fortune, and soon there would be nothing left in a State
but labourers without funds and capitalist
entrepreneurs. That is true, and things would
in fact be so if the entrepreneurs or their heirs did not
take the course of resting as they grow wealthy, and did not
thus continually go to recruit the class of idle
capitalists; and even in spite of this frequent emigration,
it still happens that when industry has been at work in a
country for some time without too great disturbances, its
capitals are always being augmented not only because of the
growth of the total wealth, but also in a much greater
proportion… It might be added this effect would be
felt even more strongly but for the immense levies that all
governments impose each year on the industrious class by
means of taxes (pp. 240-41),

And Monsieur Destutt is quite right up to a certain
point, although not at all in what he wants to
explain. In the period of the declining Middle Ages
and rising capitalist production the rapid enrichment of the
industrial capitalists is in part to be explained by the
direct fleecing of the landlords. As the value of
money fell, as a result of the discoveries in America, the
farmers paid them nominally, but not really, the old rent,
while the manufacturers sold them commodities above their
value —not only on the basis of the higher value of
money. Similarly in all countries, as for example the
Asiatic, where the principal revenue of the country is in
the hands of landlords, princes, etc., in the form of rent,
the manufacturers, few in number and therefore not
restricted by competition, sell them their commodities at
monopoly prices, and in this way appropriate a part of their
revenue; they enrich themselves | not only by selling to them
“unpaid” labour, but by selling the commodities
at over the quantity of labour contained in them. Only
Monsieur Destutt is again wrong if he believes that
money-lenders let themselves be fleeced in this way.
On the contrary, they share, through the high interest they
draw, in those high profits, in that fleecing, directly and
indirectly.

The following passage shows that this phenomenon was in
Monsieur Destutt’s mind:

“One has only to see how weak
they” (the industrial capitalists) “were
throughout all Europe three or four centuries ago, in
comparison with the immense wealth of all the powerful men
of those days, and how today they have increased and grown
in number, while the others have diminished” (l.c., p.
241).

What Monsieur Destutt wanted to explain to us was the
profits and the high profits of industrial
capital. He has explained it in two ways. First,
because the money which these capitalists pay out in
the form of wages and rents flows back to them again, since
these wages and rents buy products from them. In fact,
what this explains is only why they do not pay wages and
rents twice, first in the form of money, and secondly
in the form of commodities to the same amount in
money. The second explanation is that they sell their
commodities above their price, they sell them too
dear, first to themselves, thus cheating
themselves; secondly to the labourers, thus again cheating
themselves, as Monsieur Destutt tells us that the
consumption of the wage-labourers “must be regarded as
the consumption of those who pay them” (p. 235);
finally, in the third place, to the gentlemen living on
rents, whom they fleece, and this would in fact explain
why the industrial capitalists always keep for themselves a
larger part of their profit, instead of giving it away to
the idlers. It would show why the distribution of
the total profit between the industrial and
non-industrial capitalists is increasingly to the advantage
of the former at the cost of the latter. It would not
help one iota to an understanding of whence this
total profit comes. Let us assume that the
industrial capitalists had got the whole of it for
themselves, the question remains where does it come
from?

Therefore Destutt has not only given no answer, but he
has only revealed that he thinks the reflux of the money is
a reflux of the commodity itself. This reflux of
money means only that the capitalists first pay wages
and rents in money, instead of paying them in commodities;
that their commodities are bought with this money and hence
they have paid in commodities in this roundabout way.
This money therefore constantly flows back to them, but only
to the extent that commodities to the same money value are
definitively taken from them and fall to the share of the
consumption of the wage-labourers and drawers of rent.

Monsieur Destutt (in a really French way—similar
exclamations of astonishment about himself are to be found
in Proudhon) is altogether astonished at the
“clarity” which this

“way of looking at the consumption of
our wealth…sheds on the whole progress of society.
Whence comes this consistency and this lucidity? From
the fact that we have lighted upon the truth. This
recalls the effect of those mirrors in which objects are
outlined clearly and in their right proportions when one is
in the right spot from which to view them, and in which
everything appears confused and disjointed when one is too
near or too far” (pp.242-43).

Later, quite incidentally, Monsieur Destutt recalls (from
Adam Smith) the real course of things, which however in
essence he only repeats as a phrase which he has not
understood—as otherwise he (this Member of the
Institute of France) would have been unable to shed the
streams of light referred to above. Destutt writes
(p. 246):

“Whence come their revenues to these
idle men? Is it not from the rent which those who
set their capitals to work pay to them out of their
profits, that is to say, those who use their funds
to pay labour which produces more than it costs, in a
word, the men of industry? ”

<Aha! So the rents (and also their own profits)
which the industrial capitalists pay to the idle capitalists
for the funds borrowed from the latter come from their using
these funds to pay wages to labour “which produces
more than it costs”; that is to say, therefore,
whose product has more value than is paid to them
—in other words, profit comes from what the
wage-labourers produce over and above what they cost; a
surplus-product which the industrial capitalist appropriates
for himself, and of which he gives away only one part to
those receiving rent from land and money.>

Monsieur Destutt concludes from this: not that we must go
back to these productive labourers, but that we must go back
to the capitalists who set them in motion.

“It is these who really maintain even
the labourers employed by the others” (p. 246).

To be sure; inasmuch as they directly exploit labour, and
the idle capitalists only do it through their agency.
And in this sense it is correct to regard industrial capital
as the source of wealth. |

“We must therefore always go back to
these” (the industrial capitalists) “in order to
find the source of all wealth” (p. 246).

“In the coarse of time, wealth has
accumulated in greater or less quantity, because the result
of previous labours has not been entirely consumed as soon
as produced. Some of the possessors of this wealth
are content to draw a rent from it and consume it.
These are those whom we have called idle. The other
more active ones set to work both their own funds and those
which they borrow. They employ them to pay labour
which reproduces them with a profit.”<
Hence, therefore, not only the reproduction of this fund,
but [the production ] of the surplus, which forms
profit.> “With this profit they pay for
their own consumption and defray that of others. By
these consumptions themselves” (their own and that of
the idlers? Here again the same absurdity)
“their funds come back to them somewhat increased, and
they start again. That is what constitutes
circulation” (pp. 246-47).

The inquiry into the “productive labourer”,
and the result that only one whose buyer is an industrial
capitalist is a productive labourer—one whose labour
produces profit for its immediate buyer—led Monsieur
Destutt to the conclusion that in fact the industrial
capitalists are the sole productive labourers in
the higher meaning of the word.

“They” (the industrial
capitalists) “who live on profits maintain all the
others and alone augment the public fortune and create all
our means of enjoyment. That must be so, because
labour is the source of oil wealth and because they
alone give a useful direction to current labour, by
making a useful application of accumulated
labour” (p. 242).

That they give “a useful direction to current
labour” in fact means only that they employ useful
labour, labour which results in use-values. But that
they make “useful application of accumulated
labour” —if it is not to mean the same thing
again, that they make industrial use of accumulated wealth
for the production of use-values —means that they make
“useful application of accumulated labour” by
buying with it more current labour than is contained in
it. In the passage just cited Destutt naïvely
epitomises the contradictions which make up the essence of
capitalist production. Because labour is the source of
all wealth, capital is the source of all wealth; the actual
propagator of wealth is not he who labours, but he who makes
a profit out of another’s labour. The productive
powers of labour are the productive powers of capital.

“Our faculties are our only original
wealth; our labour produces all other wealth, and all
labour, properly directed, is productive”
(p. 243).

Hence, according to Destutt, it follows as a matter of
course that the industrial capitalists “maintain all
the others and alone augment the public fortune and create
all our means of enjoyment”.

Our faculties (facultés) are our only
original wealth, therefore the faculty of labour is not
wealth. Labour produces all other wealth, that means:
it produces wealth for all others except for itself, and it
itself is not wealth, but only its product is wealth.
All properly directed labour is productive; that means: all
productive labour, all labour which yields profit to the
capitalist, is properly directed.

The following remarks of Destutt —which refer not
to the different classes of consumers, but to the
different nature of the articles of consumption
—are a very good paraphrase of Adam Smith’s views
in Book II, Chapter III, at the end of which he inquires
into what kind of (unproductive) expenditure, that is to
say, of individual consumption, consumption of revenue, is
more or less advantageous. He opens this inquiry
(Garnier, t. II, p. 345) with the words:

“As frugality increases, and
prodigality diminishes, the public capital, so the conduct
of those whose expense just equals their revenue, without
either accumulating or encroaching, neither increases nor
diminishes it. Some modes of expense, however, seem to
contribute more to the growth of public opulence than
others” [Wealth of Nations, O.U.P, edition,
Vol. I, pp. 387-88].

Destutt summarises Smith’s exposition as follows:

“If consumption is very different
according to the kind of consumer, it varies also according
to the nature of the things consumed. All indeed
represent labour, but its value is fixed more securely in
some than in others. As much trouble may have been
taken in making a firework as in finding and cutting a
diamond, and consequently one may have as much value as the
other. But when I have bought, paid for and used both,
at the end of half an hour I shall have nothing left of the
first, and the second can still be a resource for my
grandchildren a century later..,, It is the same with what
||4O7| are called” that is, (by Say) “immaterial
products. An invention is of eternal
utility. An intellectual work, a picture also have
a utility that is more or less durable, while that of a
ball, a concert, a play is instantaneous and disappears
immediately. The same can be said of the personal
services of doctors, lawyers, soldiers, domestic
servants, and in general of all who are called employed
persons. Their utility is that of the moment of
need… The most ruinous consumption is the
quickest, because it is that which destroys more labour in
the same time, or an equal quantity of labour in less time;
in comparison with it, consumption which is slower is a kind
of treasuring up, since it leaves to times to come
the enjoyment of part of the present
sacrifices… Everyone knows that it is more
economical to get, for the same price, a coat that
will last three years than a similar one which will only
last three months” (pp. 243-44).

### [15. General Nature of the Polemics against Smith’s Distinction between Productive and Unproductive Labour. Apologetic Conception of Unproductive Consumption as a Necessary Spur to Production]

Most of the writers who contested Smith’s view of
productive and unproductive labour regard consumption
as a necessary spur to production. For this
reason they regard the wage-labourers who live on
revenue—the unproductive labourers whose hire does not
produce wealth, but is itself a new consumption of
wealth—as equally productive even of material
wealth as the productive labourers, since they widen the
field of material consumption and therewith the field of
production. This was therefore for the most part
apologetics from the standpoint of bourgeois economy, partly
for the rich idlers and the “unproductive
labourers” whose services they consume, partly
for “strong governments” whose expenditure is
heavy, for the increase of the State debts, for holders of
church and State benefices, holders of sinecures, etc.
For these “unproductive labourers”—whose
services figure in the expenses of the idle rich—all
have in common the fact that although they produce
“immaterial products”, they consume
“material products”, that is, products of
the productive labourers.

Other economists, like Malthus, admit the distinction
between productive labourers and unproductive, but prove to
the industrial capitalist that the latter are as necessary
to him as the former, even for the production of material
wealth.

To say that production and consumption are identical or
that consumption is the purpose of all production or that
production is the pre-condition of all consumption, is of no
help in this connection. What—apart from the
tendentious purpose—is at the bottom of the whole
dispute is rather this:

The labourer’s consumption on the average is only equal
to his costs of production, it is not equal to his
output. He therefore produces the whole surplus for
others, and so this whole part of his production is
production for others. Moreover, the industrial
capitalist who drives the labourer to this
overproduction (that is, production over and above
his own subsistence needs) and makes use of all expedients
to increase it to the greatest extent possible—to
increase this relative overproduction as distinct
from the necessary production—directly appropriates
the surplus-product for himself. But as personified
capital he produces for the sake of production, he wants to
accumulate wealth for the sake of the accumulation of
wealth. In so far as he is a mere functionary of
capital, that is, an agent of capitalist production, what
matters to him is exchange-value and the increase of
exchange-value, not use-value and its increase. What
he is concerned with is the increase of abstract wealth, the
rising appropriation of the labour of others. He is
dominated by the same absolute drive to enrich himself as
the miser, except that he does not satisfy it in the
illusory form of building up a treasure of gold and silver,
but in the creation of capital, which is real
production. If the labourer’s overproduction is
production for others, the production of the normal
capitalist, of the industrial capitalist as he ought to be,
is production for the sake of production. It is
true that the more his wealth grows, the more he falls
behind this ideal, and becomes extravagant, even if only to
show off his wealth. But he is always enjoying wealth
with a guilty conscience, with frugality and thrift at the
back of his mind. In spite of all his prodigality he
remains, like the miser, essentially avaricious.

When Sismondi says that the development of the productive
powers of labour makes it possible for the labourer to
obtain ever-increasing enjoyments, but that these very
enjoyments, if put at his disposal, would make him unfit for
labour (as a wagelabourer)*; it is equally true that the
industrial capitalist becomes more or less unable to fulfill
his function as soon as he personifies the enjoyment of
wealth, as soon as he wants the accumulation of pleasures
instead of the pleasure of accumulation.

He is therefore also a producer of overproduction,
production for others. Over against this
overproduction on one side must be placed overconsumption on
the other, production for the sake of production must be
confronted by consumption for the sake of consumption.
What the industrial capitalist has to surrender to
landlords, the State, creditors of the State, the church,
and so forth, who only consume revenue, | is an absolute diminution of
his wealth, but it keeps his lust for enrichment going and
thus preserves his capitalist soul. If the landlords,
moneylenders, etc., were to consume their revenue also in
productive instead of unproductive labour, the purpose would
not be achieved. They would become themselves
industrial capitalists, instead of representing the function
of consumption as such. With regard to this point we
shall examine later an extremely comical dispute between a
Ricardian and a Malthusian.

Production and consumption are in their nature
[an sich] inseparable. From this it follows
that since in the system of capitalist production they are
in fact separated, their unity is restored through their
opposition—that if A must produce for B, B must
consume for A. Just as we find with every individual
capitalist that he favours prodigality on the part of those
who are co-partners with him in his revenue, so the older
Mercantile system as a whole depends on the idea that a
nation must be frugal as regards itself, but must produce
luxuries for foreign nations to enjoy. The idea here
is always: on the one side, production for production,
therefore on the other side consumption of foreign
production. This idea of the Mercantile system is
expressed for example by Dr. Paley, Moral Philosophy,
Vol. II, Ch.XI:

“… A laborious, frugal people,
ministering to the demands of an opulent, luxurious
nation.” [W. Paley, Principles of Moral and
Political Phylosophy, Edinburgh, 1788, Vol. II,
p. 359.]

“They” (our politicians,
Garnier, etc.) says Destutt, “put forward as a
general principle that consumption is the cause of
production, that therefore it is good for it to be very
plentiful. They declare that it is this which
constitutes a great difference between public economy and
the economy of individuals” (l.c., pp. 249-50).

One more fine phrase:

“The poor nations are those
where the people are comfortably off; and the rich
nations, those where the people are generally
poor” (l.c., p. 231).

### [16.] Henri Storch [Unhistorical Approach to the Problem of the Interaction between Material and Spiritual Production. Conception of “Immaterial Labour” Performed by the Ruling Class]

Henri Storch, Cours d’économie politique,
etc., edited by Jean— Baptiste Say, Paris, 1823
(Lectures read to Grand Duke Nicholas, concluded in 1815),
Vol. III.

After Garnier, Storch is in fact the first writer to
polemise against Adam Smith’s distinction between productive
and unproductive labour on a new basis.

He distinguishes the “internal
goods or the elements of civilisation”, with the
laws of whose production the “Theory of
Civilisation” has to concern itself, from material
goods, component parts of material production (l.c., t. III,
p. 217).

(On p age 136 of t. I [he says]: “It is evident
that man only attains to the production of wealth in so far
as he is endowed with internal goods, that is to say, in so
far as he has developed his physical, intellectual and moral
faculties, which implies the means for their development
such as social institutions, etc. Thus the more
civilised a people, the more its national wealth can
grow.” The reverse is also true.)

Against Smith:

“Smith…excludes from productive
labours all those which do not contribute
directly to the production of wealth: but also he
only considers the national wealth.” His error
is “not to have distinguished immaterial values
from wealth” (t. III, p. 218).

And that is really all there is to it. The
distinction between productive labours and unproductive
labours is of decisive importance for what Smith was
considering: the production of material wealth, and in fact
one definite form of that production, the capitalist mode of
production. In spiritual production another kind of
labour appears as productive. But Smith does not take
it into consideration. Finally, the interaction and
the inner connection between the two kinds of production
also do not fall within the field be is considering;
moreover, they can only lead to something more than empty
phrases when material production is examined in its own
form. In so far as he speaks of workers who are not
directly productive, this is only to the extent that they
participate directly in the consumption of material
wealth but not in its production.

With Storch himself the theory of civilisation
does not get beyond trivial phrases, although some ingenious
observations slip in here and there—for example, that
the material division of labour is the pre-condition for the
division of intellectual labour. How much it was
inevitable that Storch could not get beyond trivial
phrases, how little he had even formulated for
himself the task, let alone its solution, is apparent from
one single circumstance. In order to examine
the connection between spiritual | production and material
production it is above all necessary to grasp the latter
itself not as a general category but in definite
historical form. Thus for example different kinds
of spiritual production correspond to the capitalist mode of
production and to the mode of production of the Middle
Ages. If material production itself is not conceived
in its specific historical form, it is impossible to
understand what is specific in the spiritual production
corresponding to it and the reciprocal influence of one on
the other. Otherwise one cannot get beyond
inanities. This because of the talk about
“civilisation”.

Further: from the specific form of material production
arises in the first place a specific structure of society,
in the second place a specific relation of men to
nature. Their State and their spiritual outlook is
determined by both. Therefore also the kind of their
spiritual production.

Finally, by spiritual production Storch means also
all kinds of professional activities of the ruling class,
who carry out social functions as a trade. The
existence of these strata, like the function they perform,
can only be understood from the specific historical
structure of their production relations.

Because Storch does not conceive material production
itself historically—because he conceives it as
production of material goods in general, not as a definite
historically developed and specific form of this
production—he deprives himself of the basis on which
alone can be understood partly the ideological component
parts of the ruling class, partly the free spiritual
production of this particular social formation. He
cannot get beyond meaningless general phrases.
Consequently, the relation is not so simple as he
presupposes. For instance, capitalist production is
hostile to certain branches of spiritual production, for
example, art and poetry. If this is left out of
account, it opens the way to the illusion of the French in
the eighteenth century which has been so beautifully
satirised by Lessing. Because we are further ahead
than the ancients in mechanics, etc., why shouldn’t we be
able to make an epic too? And the Henriade in
place of the Iliad!

Storch, however, rightly stresses—with special
reference to Garnier, who was actually the father of
this attack on Smith —that Smith’s opponents
had set about it the wrong way.

“What do his critics do? Far
from establishing this distinction” (between
immaterial values and wealth), “they succeed in
confusing two kinds of value that are so evidently
different.”

(They assert that the production of spiritual products or
the production of services is material
production.)

“In regarding immaterial labour as
productive, they assume it is productive of
wealth” (that is, directly), “that is to
say, of material and exchangeable values, while it produces
only immaterial and immediate values: they assume that the
products of immaterial labour are subject to the same laws
as those of material labour: and yet the former are governed
by other principles than the latter” (t, III,
p. 218).

The following passages from Storch are to be noted as
having been copied from him by later authors:

“From the fact that internal goods
are in part the product of services. the conclusion
has been drawn that they are no more lasting than the
services themselves, and that they were necessarily consumed
as they were produced” (l.c., t. III, p. 234).
“The original” [internal] “goods, far from
being destroyed by the use made of them, expand and grow
with use, so that even the consumption of them
augments their value” (l.c., p. 236).
“Internal goods are susceptible of being accumulated
like wealth, and of forming capitals that can be used in
reproduction”, etc. (l.c., p. 236).
“Material labour must be divided up and its products
must be accumulated before the dividing up of immaterial
labour can be thought of” (p. 241).

These are nothing but general superficial analogies and
relations between spiritual and material wealth.
So for example is his observation that undeveloped
nations borrow their spiritual capitals from abroad,
just as materially undeveloped nations borrow their material
capitals (l.c., p. 306); and that the division of immaterial
labour depends on the demand for it, in a word, on the
market, etc. (p. 246).

Here are the passages which have actually been
copied:

| “The
production of internal goods, far from diminishing
the national wealth by the consumption of material products
it requires, is on the contrary a powerful means of
increasing it; as the production of wealth, in its turn, is
an equally powerful means of increasing civilisation”
(l.c., p. 517). “It is the equilibrium of the
two kinds of production that causes the advance of national
prosperity” (l.c., p. 521).

According to Storch, the physician produces health (but
also illness), professors and writers produce enlightenment
(but also obscurantism), poets, painters, etc., produce good
taste (but also had taste), moralists, etc., produce morals,
preachers religion, the sovereign’s labour security, and so
on (pp. 347-50). It can just as well be said that
illness produces physicians, stupidity produces professors
and writers, lack of taste poets and painters, immorality
moralists, superstition preachers and general insecurity
produces the sovereign. This way of saying in fact
that all these activities, these services, produce a real or
imaginary use-value is repeated by later writers in order to
prove that they are productive workers in Smith’s sense,
that is to say, that they directly produce not products
suigeneris*
but products of material labour and consequently immediate
wealth. In Storch there is not yet this nonsense,
which for that matter can be reduced to the following:

1. that the various functions in bourgeois society
mutually presuppose each other;

2. that the contradictions in material production
make necessary a superstructure of ideological strata, whose
activity— whether good or bad—is good, because
it is necessary;

3. that all functions are in the service of the
capitalist, and work out to his “benefit”;

4. that even the most sublime spiritual productions
should merely be granted recognition, and apologies
for them made to the bourgeoisie, that they are presented
as, and falsely proved to be, direct producers of material
wealth.

### [17.] Nassau Senior [Proclamation of All Functions Useful to the Bourgeoisie as Productive. Toadyism to the Bourgeoisie and the Bourgeois State]

Nassau William Senior, Principes fondamentaux
de 1’économie politique, traduit par Jean
Arrivabene, Paris, 1836. Nassau Senior mounts his high
horse:

“According to Smith, the lawgiver of
the Hebrews was an unproductive labourer” (l.c.,
p. 198).

Was it Moses of Egypt or Moses Mendelssohn? Moses
would have been very grateful to Mr. Senior for calling him
a “productive labourer” in the Smithian
sense. These people are so dominated by their fixed
bourgeois ideas that they would think they were insulting
Aristotle or Julius Caesar if they called them
“unproductive labourers”. Aristotle and
Caesar would have regarded even the title
“labourers” as an insult.

“Does not the doctor who, by a
prescription, heals a sick child and thus assures him many
years of life, produce a durable result?”
(l.c.)

Rubbish! If the child dies, the result is no less
durable. And if the child is no better after
treatment, the doctor’s service has to be paid for
just the same. According to Nassau doctors should only
be paid in so far as they cure, and lawyers in so far as
they win lawsuits, and soldiers in so far as they are
victorious. But now he gets really lofty:

“Did the Dutch produce temporary
results by fighting against the tyranny of the Spaniards, or
the English by revolting against a tyranny that threatened
to be even more terrible?” (l.c., p. 198).

Belletristic trash! Dutch and English revolted at
their own cost. No one paid them for labouring
“in revolution”. But with either
productive or unproductive labourers there is always a buyer
and seller of labour. Hence what rubbish!

These insipid literary flourishes used by these fellows
when they polemise against Smith show only that they are
representatives of the “educated capitalist”,
while Smith was the interpreter of the frankly brutal
bourgeois upstart. The educated bourgeois and his
mouthpiece are both so stupid that they measure the effect
of every activity by its |
effect on the purse. On the other hand, they are so
educated that they grant recognition even to
functions and activities that have nothing to do with the
production of wealth; and indeed they grant them recognition
because they too “indirectly” increase, etc.,
their wealth, in a word, fulfill a “useful”
function for wealth.

Man himself is the basis of his material production, as
of any other production that he carries on. All
circumstances, therefore, which affect man, the subject
of production, more or less modify all his functions and
activities, and therefore too his functions and activities
as the creator of material wealth, of commodities. In
this respect it can in fact be shown that all human
relations and functions, however and in whatever form they
may appear, influence material production and have a more or
less decisive influence on it.

“There are countries where it is
quite impossible for people to work the land unless there
are soldiers to protect them. Well, according to
Smith’s classification, the harvest is not produced by the
joint labour of the man who guides the plough and of the man
at his side with arms in hand: according to him, the
ploughman alone is a productive worker, and the soldier’s
activity is unproductive” (l.c., p. 202).

First, that is not true. Smith would say that the
soldier’s protective care is productive of defence, but not
of the corn. If order was restored in the country, the
ploughman would produce the corn just as before, without
being compelled to produce the maintenance, and therefore
the life, of the soldiers into the bargain. The
soldier belongs to the incidental expenses of production, in
the same way as a large part of the unproductive labourers
who produce nothing themselves, either spiritual or
material, but who are useful and necessary only because of
the faulty social relations—they owe their existence
to social evils.

However, Nassau might say: if a machine is invented that
makes nineteen out of twenty labourers superfluous, then
these nineteen too are incidental expenses of
production. But the soldier can drop out although the
material conditions of production, the conditions of
agriculture as such, remain unchanged. The nineteen
labourers can only drop out if the labour of the one
remaining labourer becomes twenty times more productive,
that is to say, only through a revolution in the actual
material conditions of production. Moreover,
Buchanan already observes:

“If the soldier, for example, be
termed a productive labourer because his labour is
subservient to production, the productive labourer might, by
the same rule, lay claim to military honours; as it is
certain that without his assistance no army could ever take
the field to fight battles or to gain victories”
(David Buchanan, Observations on the Subjects Treated of
in Dr. Smith’s Inquiry, etc., Edinburgh, 1814,
p. 132).

“The wealth of a nation does not
depend on a numerical proportion between those who produce
services and those who produce values, but on
the proportion between them that is most fitted to render
the labour of each more efficacious” (Senior, l.c.,
p. 204).

Smith never denied this, as he wants to reduce the
“necessary unproductive labourers like State
officials, lawyers, priests, etc., to the extent in
which their services are indispensable. And this is in
any case the “proportion” in which they make the
labour of productive labourers most efficacious. As
for the other “unproductive labourers”, whose
labours are only bought voluntarily by anyone in
order to enjoy their services, that is, as an article
of consumption of his own choice, different cases must be
distinguished. If the number of these labourers
living on revenue is large in proportion to the
“productive” labourers, it is, either,
because the total wealth is small or is of a one-sided
character—for example the medieval barons with their
retainers. Instead of consuming manufactured goods on
any considerable scale, they and their retainers consumed
their agricultural products. When instead of these
products they began to consume manufactured goods, the
retainers had to be set to labour. The number of those
living on revenue was only large because a large part of the
annual product was not reproductively consumed.
Along with this, the total population was small.
Or, the number of those living on revenue is large,
because the productivity of the productive labourers is
large, and therefore their surplus-produce upon which the
retainers feed. In this case the labour of the
productive labourers is not productive because there are so
many retainers, but on the contrary—there are so many
retainers because the labour of the productive labourers is
so productive.

Taking two countries with equal populations and an equal
development of the productive powers of labour, it would
always be true to say, with Adam Smith, that the wealth of
the two countries must be measured according to the
proportion of productive and of unproductive
labourers. For that means only that in the country
which has a relatively greater number of productive
labourers, a relatively greater amount of the annual revenue
is reproductively consumed, and consequently a greater mass
of values is produced annually. Therefore Mr. Senior
has only paraphrased a statement of | Adam’s, instead of
counterposing it with a novelty. Moreover, he himself
here makes the distinction between the producers of services
and the producers of values, and so it is the same with him
as with most of those who polemise against the Smithian
distinction —they accept and themselves use this
distinction, at the same time as they reject it.

It is characteristic that all “unproductive”
economists, who achieve nothing in their own speciality,
[come out] against the distinction between productive labour
and unproductive labour. However, in relation to the
bourgeois, it is on the one hand an expression of their
servility that they present all functions as serving the
production of wealth for him; then on the other hand, they
present the bourgeois world as the best of all possible
worlds, in which everything is useful, and the bourgeois
himself is so educated that he understands this.

In relation to the labourers, [what it expresses is:] it
is quite all right that the unproductive ones consume the
great mass [of products], since they contribute just as much
as the labourers to the production of wealth even though in
their own way.

Finally however Nassau blurts out, showing that he has
not understood one word of the essential distinction made by
Smith:

“It seems, in truth, that in this
case Smith’s attention was entirely absorbed by the position
of the great landowners, the only ones to whom his
observations on the unproductive classes can in general be
applied. I do not know how otherwise to account for
his supposition that capital is only employed to maintain
productive labourers, while unproductive labourers live from
revenue, The greater number of those whom be calls
preeminently unproductive—teachers, and those who
govern the State—are maintained at the expense of
capital, that is to say, by means of what is spent in
advance for reproduction” (l.c., pp. 204-05).

This, in fact, is past all understanding.
Mr. Nassau’s discovery that State and schoolmasters live at
the cost of capital and not at the cost of revenue needs no
further commentary. Does Mr. Senior mean by it that
they live on profit from capital, and in this sense at the
expense of capital? If so, he only forgets that
revenue from capital is not capital itself, and that this
revenue, the result of capitalist production, is not spent
in advance for reproduction, of which on the contrary it is
the result. Or does he mean that it is so because
certain taxes enter into the production costs of particular
commodities? That is, enter into the expenses of
certain branches of production? Then he should know
that this is only a form of levying taxes on revenue.

With reference to Storch Nassau Senior, the sophist, also
remarks:

“Mr. Storch is doubtless in error
when he expressly asserts that these results”
(health, good taste, etc.) “like other things which
have value, form part of the revenue of those who
possess them, and that they are also exchangeable”
(that is, in so far as they can be bought from their
produces). “If this was so, if good taste,
morality, religion, were really things which could be
bought, wealth would have an importance very
different from that given to it by the economists.
What we buy is not health, knowledge or piety. The
doctor, the priest, the teacher…can only produce the
instruments by means of which with greater or less certainty
and perfection, these ulterior results will be
produced… If in each particular case the most
suitable means to obtain success have been employed, the
producer of these means has a right to a reward, even
when he has not succeeded or when he has not produced the
results expected. The exchange is completed as soon as
the advice or the lesson has been given and the payment for
it has been received” (l.c., pp. 288-89).

Finally, the great Nassau himself adopts the Smithian
distinction. For in fact he distinguishes between
“productive consumption and unproductive
consumption” (p. 206) instead of between productive
and unproductive labour. But the object of consumption
is either a commodity—which is not referred to here
—or direct labour.

Consumption would be productive if it employed labour
that either produced labour-power itself (which for example
the schoolmaster’s or the physician’s labour might do) or
reproduced the value of the commodities with which it
was bought. The consumption of labour which
accomplished neither the one nor the other of these would be
unproductive. And indeed Smith says: the labour which
can only be consumed productively (i.e., industrially) I
call productive labour, and that which can be consumed
unproductively, whose consumption is by its nature not
industrial consumption, I call unproductive labour.
Mr. Senior has therefore proved his genius by giving things
new names.

In general, Nassau copies from Storch.

### [18.] Pellegrino Rossi [Disregard of the Social Form of Economic Phenomena. Vulgar Conception of “Labour-saving” by Unproductive Labourers]

| Pellegrino Rossi,
Cours d’économie politique (année 1836 to
1837), édit. Bruxelles, 1842.

Here is wisdom!

“The indirect means” (of
production) “include everything that furthers
production, everything which tends to remove an obstacle, to
make production more active, more speedy, easier.”
(Earlier, p. 268, be says: “There are direct and
indirect means of production. That is to say, there
are means which are a cause sine qua non of the
effect in question, forces which make this
production. There are others which contribute to
production, but do not make it. The former can act
even by themselves, the latter can only help the
former to produce.”) “.., The whole labour of
government is an indirect means of production, … The
man who has made this hat must surely recognise that the
gendarme who goes by in the street, the judge who sits in
his court, the gaoler who takes over a criminal and keeps
him in prison, the army which defends the frontier against
enemy invasions, contribute to production”
(p. 272).

What a pleasure it must be for the hatter, that everyone
gets moving so that he can produce and sell this hat!
Inasmuch as he makes these gaolers, etc., contribute
indirectly, not directly, to material
production, Rossi in fact makes the same distinction as Adam
(lecture XII).

In the following lecture XIII, Rossi takes the field
particularly against Smith —indeed rather [the same
as] his predecessors.

The erroneous distinction between productive labourers
and unproductive labourers, he says, arises for three
reasons.

1. “Among the buyers, some buy
products or labour for their own direct consumption;
others only buy them in order to sell the new products that
they obtain by means of the products and the labour that
they have acquired.”

The determining factor for the former is the
use-value; for the latter, the exchange-value.
But in paying attention only to exchange-value, one falls
into Smith’s error.

“My servant’s labour is unproductive
for me: let us admit that for a moment; is it unproductive
for him?” (l.c., pp. 275-76).

As all capitalist production rests on the direct purchase
of labour in order to appropriate a part of it without
purchase in the process of production; which part
however is sold in the product—since this is
the basis of existence of capital, its very essence
—is not the distinction between labour which produces
capital and that which does not produce it the basis for an
understanding of the process of capitalist production?
Smith does not deny that the servant’s labour is productive
for him. Every service is productive for its
seller. To swear false oaths is productive for the
person who does it for cash. Forging documents is
productive for anyone paid to do it. A murder is
productive for a man who gets paid for doing it. The
trade of sycophant, informer, toady, parasite, lickspittle,
is productive for people who do not perform these
“services” gratis. Hence they are
“productive labourers”, producers not only of
wealth but of capital. The thief, too, who pays
himself—just as the law-courts and the State do
—“employs his energy, uses it in a particular
way, produces a result which satisfies a human need”,
i.e., the need of the thief and perhaps also that of his
wife and children. Consequently [he is a] productive
labourer if it is merely a question of producing a
“result” which satisfies a “need”,
or as in the cases mentioned above, if selling his
“services” is enough to make them
“productive”.

2. “A second error has been not to
distinguish between direct production and indirect
production.” That is why Adam Smith thinks that a
magistrate is not productive. But “if production
is almost impossible” (without the magistrate’s
labour) “is it not clear that this labour contributes
to it, if not by direct and material co-operation, at least
by an indirect action which cannot be left out of
account?” (l.c., p. 276).

It is precisely this labour which participates indirectly
in production (and it forms only a part of unproductive
labour) that we call unproductive labour. Otherwise we
would have to say that since the magistrate is absolutely
unable to live without the peasant, therefore the peasant is
an indirect producer of justice! And so on.
Utter nonsense! There is yet another point of view
bearing on the division of labour, with which we shall deal
later.

[3.] “The three principal facts
of the phenomenon of production have not been carefully
distinguished: the force or productive means, the
application of this force, the
result.”

We buy a clock at a clockmarker’s; we are only interested
in the result of the labour. The same applies
when we buy a coat at the tailor’s. But:

“There are still people, men of the
old school, who do not understand things in this way.
They make a workman come to their home and get him to make
such-and-such a piece of clothing, giving him the material
and everything he needs for this labour. What is it
that these people buy? They buy a force” <but
also an application of this force>, “a means to
produce results of some kind at their peril and
risk… The object of the contract is the
purchase of a force.”

(The point here is only that these “men of the old
school” make use of a mode of production that has
nothing in common with the capitalist mode, and in which all
development of labour’s productive powers, such as
capitalist production brings with it, is impossible.
It is characteristic that for Rossi and all the rest of them
such a specific distinction is inessential.)

In the case of a servant, “you buy a force”,
capable of doing “a thousand different things.
The results it produces depend on the use that you make of
the force” (p. 276).

All this has nothing to do with the matter.

| “To buy or to
hire…a definite application of this force
….You do not buy a product, you do not buy the result
that you have in view.” Will the lawyer’s pleading win
your case? Who knows? “What is
certain. what passes between you and your lawyer, is
that, for a certain value, he will go on a certain day to a
certain place to speak on your behalf, to apply his
intellectual powers in your interests” (p. 276).

<One further point on this. In lecture XII,
p. 273, Rossi says:

“I am far from seeing producers only
in those who pass their hives in making cotton cloth or
shoes. I honour labour, whatever it may be…but
this respect should not be the exclusive privilege of the
manual labourer.”

Adam Smith does not do this. For him, a person who
produces a book, a painting, a musical composition or a
statue, is a “productive labourer” in the second
sense, although the person who improvises, recites, plays a
musical instrument, etc., is not. And Adam Smith
treats services, in so far as they directly enter into
production, as materialised in the product, both the labour
of the manual labourer and that of the manager, clerk,
engineer, and even of the scientist in so far as he is an
inventor, an indoor or outdoor labourer for the
workshop. In dealing with the division of labour,
Smith explains how these operations are distributed among
different persons; and that the product, the commodity, is
the result of their co-operative labour, not of the labour
of any individual among them. But the
“spiritual” labourers à la Rossi
are anxious to justify the large share which they draw out
of material production.>

After this discourse, Rossi continues:

“Thus in exchange transactions
attention is fixed on one or other of the three principal
facts of production. But can these different forms
of exchange deprive certain products of the
character of wealth and deprive the exertions of a
class of producers of the quality of being productive
labours? Clearly, there is no link between these ideas
such as would justify a deduction of this kind.
Because instead of buying the result, I buy the force
necessary to produce it, why should the action of the
force not be productive and the product not be
wealth? Take again the example of the tailor.
Whether one buys ready-made clothes from a tailor, or
whether one gets them from a jobbing tailor who has been
given the material and a wage, as far as the results are
concerned the two actions are perfectly similar. No
one will say that the former is a productive labour
and the latter an unproductive labour; only in the
second case the man who wants a coat has been his
own entrepreneur. Well, from the standpoint of
productive forces what difference is there between the
jobbing tailor you have brought to your home and your
domestic servant? None” (l.c., p. 277).

Here we have the quintessence of the whole superwise and
would-be profound windbag! When Adam Smith, in his
second and more superficial presentation, distinguishes
between productive and unproductive labour, according to
whether it is or is not directly realised in a vendible
commodity for the buyer of the labour, he calls the tailor
productive in both cases. But according to his more
profound definition the latter is an
“unproductive” labourer. Rossi only shows
that he “evidently” does not understand Adam
Smith.

That the “forms of exchange” seem to
Rossi to be a matter of complete indifference is just as if
a physiologist said that the different forms of life are a
matter of complete indifference, that they are all only
forms of organic matter. It is precisely these forms
that are alone of importance when the question is the
specific character of a mode of social production. A
coat is a coat. But have it made in the first form of
exchange, and you have capitalist production and modern
bourgeois society; in the second, and you have a form of
handicraft which is compatible even with Asiatic relations
or those of the Middle Ages, etc. And these
forms are decisive for material wealth itself.

A coat is a coat—that is Rossi’s wisdom. But
in the first case the jobbing tailor produces not only a
coat, he produces capital; therefore also profit; he
produces his master as a capitalist and himself as a
wage-labourer. When I have a coat made for me at home
by a jobbing tailor, for me to wear, that no more makes me
my own entrepreneur (in the sense of an economic
category) than it makes the entrepreneur tailor an
entrepreneur when | he
himself wears and consumes a coat made by his workmen.
In one case the purchaser of tailoring labour and the
jobbing tailor confront each other as mere buyers and
sellers. One pays money and the other supplies the
commodity into whose use-value my money is
transformed. In this transaction there is no
difference at all from my buying the coat in a shop.
Buyer and seller confront each other simply as such.
In the other case, on the contrary, they confront each other
as capital and wage-labour. As for the domestic
servant, he has the same determinate form as the jobbing
tailor No. II, whom I buy for the sake of the use-value of
his labour. Both are simply buyers and sellers.
But the way in which the use-value is enjoyed in this case
in addition bears a patriarchal form of relation, a relation
of master and servant, which modifies the relation in its
content, though not in its economic form, and makes it
distasteful.

For that matter Rossi only repeats in other phrases what
Garnier said:

“When Smith wrote that nothing
remained of the servant’s labour, he was mistaken, to a
greater extent, we must say, than an Adam Smith should be
mistaken. A manufacturer manages himself a larger
manufactory which requires very active and very assiduous
supervision… This man, not wanting to have
unproductive labourers around him, has no servants, He is
then compelled to serve himself… What
becomes of his productive labour during the time that he has
to devote to this so-called unproductive labour? Is it
not evident that your serving people perform a labour which
enables you to apply yourself to a labour more appropriate
to your abilities? Then how can it be said that no
trace remains of their services? There remains
everything that you do and that you could not have done if
they had not replaced you in the service of your person and
your home” (l.c., p. 277).

This is once more the labour-saving idea of
Garnier, Lauderdale and Ganilh. According to this,
unproductive labours would only be productive in so far as
they save labour and leave more time for a person’s own
labour, whether he is an industrial capitalist or a
productive labourer, who can perform a more valuable labour
through this replacement by a less valuable labour. A
large part of the unproductive labourers who would be
excluded by this are menial servants (in so far as they
provide only luxury articles), and all unproductive
labourers who produce merely enjoyment and whose labour I
can only enjoy in so far as I use just as much time to
enjoy it as its seller uses to produce it, to
provide it for me. In both cases there can be no talk
of “saving” labour. Finally, even really
labour-saving personal services would only be productive in
so far as their consumer is a producer. If he is an
idle capitalist, they only save him the labour of doing
anything at all: like a slut having her hair curled or her
nails cut instead of doing it herself, or a foxhunter
employing a stable-lad instead of being his own stable-lad,
or someone who is just a glutton keeping a cook instead of
cooking for himself.

Then these labourers would include too those who,
according to Storch (l.c.), produce
“leisure”, through which a man gets free
time for pleasure, spiritual labour, and so on. The
police-man saves me the time of being my own gendarme, the
soldier of defending myself, the government official of
governing myself, the shoe cleaner of cleaning my shoes
myself, the priest the time required for thinking, and so
on.

What is correct in this matter is—the division
of labour. Everyone, apart from his productive
labour or the exploitation of productive labour, would have
a number of functions to fulfill which would not be
productive and would in part enter into the costs of
consumption. (The real productive labourers have to
bear these consumption costs themselves and to perform their
unproductive labour themselves.) If these
“services” are pleasant, then sometimes the
master performs them for the servant, as the jus primae
noctis* shows, or
as is shown by the labour of ruling, etc., which the masters
have always taken on themselves. This in no way
obliterates the distinction between productive and
unproductive labour, but this distinction itself appears as
a result of the division of labour and thus furthers
the general productivity of the labourers by making
unproductive labour the exclusive function of one section of
labourers and productive labour the exclusive function of
another section.

But even the labour of a number of menial servants
for mere show, to satisfy vanity, “is not
unproductive”. Why? Because it produces
something, the satisfaction of vanity, ostentation,
the exhibition of wealth (l.c., p.277). Here once
again we meet the nonsense that every kind of services
produces something —the courtesan sensual pleasure,
the murderer homicide, etc. Moreover Smith said that
every form of this trash has its value. All
that is missing | is that
these services are rendered gratis. That is not the
point in question. But even if they are rendered
gratis, they will not increase (material) wealth by a single
farthing.

Then the belletristic piffle:

“The singer (they claim), when he has
finished singing, leaves us nothing—He leaves us a
memory!” (Very fine!) “When you have drunk
champagne, what remains?…Whether the consumption does
or does not follow closely on the act of production, whether
it takes place more or less rapidly, will bring about
different economic results, but the fact of consumption, of
whatever kind it may be, cannot deprive the product of its
character as wealth. There are immaterial products
which are of greater durability than certain material
products. A palace lasts a long time, but the
Iliad is a source of even more durable
pleasures” (pp. 277-78).

What bosh!

In the sense in which he is here speaking of wealth, as
use-value, it is precisely consumption, whether slow
or rapid (its length depends on its own nature and on the
nature of the object), and only consumption, that makes the
product wealth at all. Use-value has only value for
use, and its existence for use is only existence as an
object for consumption, its existence is in
consumption. Drinking champagne, although this may
produce a “hangover”, is as little productive
consumption as listening to music, although this may leave
behind “a memory”. If the music is good
and if the listener understands music, the consumption of
music is more sublime than the consumption of champagne,
although the production of the latter is a “productive
labour” and the production of the former is not.

If we consider all the twaddle against Smith’s
distinction between productive and unproductive labour, we
find that Garnier, and perhaps also Lauderdale and Ganilh
(though the latter said nothing new), exhausted [these
polemics]. Those who came later (apart from Storch’s
unsuccessful effort) [produced] merely pretentious literary
arguments, learned prattle. Garnier is the economist
of the Directory and the Consulate, Ferrier and Ganilh are
the economists of the Empire. On the other hand
Lauderdale, the Earl, was far more concerned to make
apologies] or consumers by presenting them as the
producers of “unproductive labour”.
The glorification of servility and flunkeyism, of
tax-gatherers and parasites, runs through the lot of
them. Compared with these, the rough cynical character
of classical economy stands out as a critique of existing
conditions.

### [19. Apologia for the Prodigality of the Rich by the Malthusian Chalmers]

One of the most fanatic Malthusians is the Reverend
Thomas Chalmers, who thinks that the only means for
curing all social ills is the religious education of the
labouring class (by which he means ramming down their
throats the Malthusian population theory with edifying
Christian priestly trimmings); at the same time he is a
great defender of all abuses, of wasteful expenditure by the
State, of fat livings for the clergy and of wild
extravagance on the part of the rich. He laments
(p. 260 sqq.) the spirit of the time, the “hard and
hunger-bitten economy”; and he wants heavy taxes, a
good deal to eat for the “higher” and
unproductive workers, clergymen and so on (l.c.).
Naturally, he blusters about the Smithian distinction.
He devoted a whole chapter to it (Chapter XI) which contains
nothing new except that parsimony, etc., only harms
“the productive labourers”, but whose tendency
is exemplified in the following summing up:
This “distinction seems to be nugatory […I;
and withal, mischievous in application” (l.c.,
p. 344). And in what does this mischief consist?

“We have entered at so much length
into this argument, because we think the political
economy of our days bears a hard and hostile aspect towards
an ecclesiastical establishment; and we have no doubt,
that to this, the hurtful definition* of Smith has largely […]
contributed” (Thomas Chalmers, Professor of Divinity,
On Political Economy, in Connexion with the Moral State
and Moral Prospects of Society, 2nd ed., London, 1832,
p. 346).

By the “ecclesiastical establishment” the
cleric means his own church, the Church of England as by law
“established”. Moreover he was one of the
fellows who had fostered this “Establishment”
upon Ireland. The parson is at least plain spoken.

### [20. Concluding Observations on Adam Smith and His Views on Productive and Unproductive Labour]

| Before we finish with
Adam Smith, we will cite two further passages, the first, in
which he gives vent to his hatred of the unproductive
government; the second, in which he aims to explain why the
advance of industry, etc., presupposes free labour.
Concerning Smith’s hatred of the clergy.

The first passage runs:

“it is the highest impertinence and
presumption, therefore, in kings and ministers, to pretend
to watch over the economy of private people, and to restrain
their expense, either by sumptuary laws, or by prohibiting
the importation of foreign luxuries. They are
themselves always, and with out any exception, the greatest
spendthrifts in the society. Let them look well after
their own expense, and they may safely trust private people
with theirs. If their own extravagance does not ruin
the State, that of their subjects never will”
([Wealth of Nations], t, II, l. II, ch. III,
ed. McCulloch, p. 122).

And once more the following passage —*

“The labour of some of the most
respectable orders in the** society is, like that of mental
servants, unproductive of any value,” <it has
value, and therefore costs an equivalent, but it produces no
value> “and does not fix or realise itself in any
permanent subject, or vendible commodity. … The
sovereign, for example, with all the officers both of
justice and war who serve*** under him, the whole army and navy,
are unproductive labourers. They are the
servants of the public, and are maintained by a part
of the annual produce of the industry of other
people… In the same class must be
ranked…churchmen, lawyers, physicians, men of letters
of all kinds; players, buffoons, musicians, opera-singers,
opera-dancers, etc.” (l.c., pp. 94-95).

This is the language of the still revolutionary
bourgeoisie, which has not yet subjected to itself the whole
of Society, the State, etc. All these illustrious and
time-honoured occupations— sovereign, judge, officer,
priest, etc., —with all the old ideological
professions to which they give rise, their men of letters,
their teachers and priests, are from an economic
standpoint put on the same level as the swarm of their
own lackeys and jesters maintained by the bourgeoisie and by
idle wealth—the landed nobility and idle
capitalists. They are mere servants of the
public, just as the others are their servants. They
live on the produce of other people’s
industry, therefore they must be reduced to the
smallest possible number. State, church, etc., are
only justified in so far as they are committees to
superintend or administer the common interests of the
productive bourgeoisie; and their costs —since by
their nature these costs belong to the overhead costs of
production—must be reduced to the unavoidable
minimum. This view is of historical interest in sharp
contrast partly to the standpoint of antiquity, when
material productive labour bore the stigma of slavery and
was regarded merely as a pedestal for the idle citizen, and
partly to the standpoint of the absolute or
aristocratic-constitutional monarchy which arose from the
disintegration of the Middle Ages—as Montesquieu,
still captive to these ideas, so naïvely expressed them
in the following passage (Esprit des lois, l. VII,
ch. IV): “If the rich do not spend much, the poor will
perish of hunger”.

When on the other hand the bourgeoisie has won the
battle, and has partly itself taken over the State, partly
made a compromise with its former possessors; and has
likewise given recognition to the ideological professions as
flesh of its flesh and everywhere transformed them into its
functionaries, of like nature to itself; when it itself no
longer confronts these as the representative of productive
labour, but when the real productive labourers rise against
it and moreover tell it that it lives on other people’s
industry; when it is enlightened enough not to be entirely
absorbed in production, but to want also to consume
“in an enlightened way”; when the spiritual
labours themselves are more and more performed in its
service and enter into the service of capitalist
production—then things take a new turn, and the
bourgeoisie tries to justify “economically”,
from its own standpoint, what at an earlier stage it had
criticised and fought against. Its spokesmen and
conscience-salvers in this line are the Garniers, etc.
In addition to this, these economists, who them-selves are
priests, professors, etc., are eager to prove their
“productive” usefulness, to justify their wages
“economically”.

| The second passage,
referring to slavery, runs:

“Such occupations” (as
artificer and manufacturer) “were considered”
(in several of the ancient states) “as fit only for
slaves, and the free citizens of the State were prohibited
from exercising them. Even in those States where no
such prohibition took place, as in Rome and Athens, the
great body of the people were in effect excluded from all
the trades which are now commonly exercised by the lower
sort of the inhabitants of towns. Such trades were, at
Athens and Rome., all occupied by the slaves of the rich,
who exercised them for the benefit of their masters, whose
wealth, power, and protection, made it almost impossible for
a poor freeman to find a market for his work, when it came
into competition with that of the slaves of the rich.
Slaves, however, are very seldom inventive; and all the most
important improvements, either in machinery, or in the
arrangement and distribution of work, which facilitate and
abridge labour have been the discoveries of freemen.
Should a slave propose any improvement of this kind, his
master would be very apt to consider the proposal as the
suggestion of laziness, and of a desire to save his own
labour at the master’s expense. The poor slave,
instead of reward would probably meet with much abuse,
perhaps with some punishment. In the manufactures
carried on by slaves, therefore, more labour must generally
have been employed to execute the same quantity of work,
than in those carried on by freemen. The work of the
former must, upon that account, generally have been dearer
than that of the latter. The Hungarian mines, it is
remarked by Mr. Montesquieu, though not richer, have always
been wrought with less expense, and therefore with more
profit, than the Turkish mines in their neighbourhood.
The Turkish mines are wrought by slaves; and the arms of
those slaves are the only machines which the
Turks have ever thought of employing. The
Hungarian mines are wrought by freemen, who employ a great
deal of machinery, by which they facilitate and abridge
their own labour. From the very little that is known
about the price of manufactures in the times of the Greeks
and Romans, it would appear that those of the finer sort
were excessively dear” ( [Wealth of Nations,
O.U.P. edition, Vol. II, pp. 305-06 I l.c., t. III, l. IV,
ch. IX, pp. 549-51, ed. Garnier).

Adam Smith himself says, l.c., t. III, l. IV, ch. I,
p. 5:

“Mr. Locke remarks a distinction
between money and other movable goods. All other
movable goods, he says, are of so consumable a
nature, that the wealth which consists in them cannot be
much depended on… Money, on the contrary, is a
steady friend” and so on [ibid., p. 3 ].

And again, [Garnier], l. c., pp. 24-25:

“Consumable commodities, it is said,
are soon destroyed; whereas gold and silver are of a more
durable nature, and were it not for this continual
exportation, might be accumulated for ages together, to the
incredible augmentation of the real wealth of the
country” [ibid., p. 14].

The man of the Monetary system raves about gold and
silver because they are money, the independent,
tangible form of existence of exchange-value; and a form of
its existence that is indestructible, everlasting —in
so far as they are not allowed to become means of
circulation, the merely transient form of the exchange-value
of commodities. The accumulation of gold and silver,
piling it up, hoarding it, is therefore his way of growing
rich. And as I showed in the quotation from Petty,
other commodities are themselves valued according to the
degree in which they are more or less durable, that is,
remain exchange-value.

Now in the first place Adam Smith repeats this
idea of the relatively greater or less durability of
commodities in the section where he speaks of consumption
which is more or less advantageous for the formation of
wealth, according as it is consumption of less or more
durable articles of consumption. Here therefore the
Monetary system peeps through; and necessarily so, since
even in direct consumption there is the mental reservation
that the | article of
consumption remains wealth, a commodity, therefore a
unity of use-value and exchange-value; and the latter
depends on the degree to which the use-value is durable,
that is, on how slowly consumption deprives it of the
possibility of being a commodity or bearer of
exchange-value.

Secondly, in his second distinction between
productive and unproductive labour he completely returns
—in a wider form —to the distinction made by the
Monetary system.

Productive labour “fixes and realises itself in
some particular subject or vendible commodity, which
lasts for some time at least after that labour is
past. It is, as it were, a certain quantity of
labour stocked and stored up to be employed, if necessary,
upon some other occasion”.

On the other hand, the unproductive labour’s results or
services “generally perish in the very instant of
their performance, and seldom leave any trace or
value behind them, for which an equal quantity of
service could afterwards be procured” (Vol. II, b. II,
ch. III, ed. McCulloch, p. 94).

Thus Smith makes the same difference between commodities
and services as the Monetary system did between gold and
silver and the other commodities. With Smith too the
distinction is made from the point of view of accumulation
—no longer however in the form of building a hoard,
but in the real form of reproduction. The commodity
perishes in consumption, but then it reproduces in turn a
commodity of higher value; or, if it is not so used, it is
itself value, with which another commodity can be
bought. It is the nature of the product of labour that
it exists in a more or less durable, and therefore again
salable, use-value; in a use-value in which it is a vendible
commodity, a bearer of exchange-value, a commodity,
or, in essence, money. The services of
unproductive labourers do not again become
money. I can neither pay debts nor buy
commodities nor buy labour which produces surplus-value with
the services for which I pay the lawyer, doctor, priest,
musician, etc., the statesman or the soldier, etc.
They have gone, like perishable articles of consumption.

Thus at bottom Smith says the same thing as the Monetary
system. For them, only that labour is productive which
produces money, gold and silver. For Smith,
only that labour is productive which produces money
for its buyer; although he discerns the money character in
all commodities in spite of its mask, while the Monetary
system sees it only in the commodity which is the
independent existence of exchange-value.

This distinction is founded on the nature of bourgeois
production itself, since wealth is not the equivalent of
use-value, but only the commodity is wealth,
use-value as bearer of exchange-value, as money. What
the Monetary system did not understand is how this money is
made and is multiplied through the consumption of
commodities, and not through their transformation into gold
and silver —in which they are crystallised as
independent exchange-value, in which however they not only
lose their use-value, but do not alter the magnitude
of their value.

Footnotes

* In translating
this passage Marx has abridged it somewhat.—Ed.

*In the manuscript:

*

+*

* Incidental
expenses, that is “mere expenses, unproductive
expenditure either of living labour or of materialised
labour” (Marx).- Ed.

* Gods of the
lesser tribes.-Ed

*“Born to
consume the fruits” (Horace).—Ed.

* In the
manuscript: “in a variety”.—Ed.

** In the
manuscript: “a plenty of silver and
gold”.—Ed.

*This passage was
translated by Marx into German and slightly shortened

* Other things
being equal. —Ed.

** In the
manuscript: “when there”.—Ed.

*** Per
day.—Ed.

* Lit.: bridges
and roads—in France this designated the administration
of roads and communications—Ed

* Return to an
Address of the House of Commons, dated 24 April, 1861
(printed II February, 1862).

* Return to an
Address of the House of Commons, dated 24 April, 1861
(printed II February, 1862).

* Marx quotes

** In the
manuscript there is a pun upon the name of the author that
cannot be translated, Marx calls him
Schmalzschmiertopf. (The German noun
“Schmalz” means grease, lard, dripping;
“Schmiertopf”—grease can,
scribbler.)—Ed.

* <And so the
same fellow says one page later “that all labour is
productive of wealth, in proportion to its
exchange-value determined by supply and demand” (it
produces wealth, not in proportion to the
exchange-value it produces, but in proportion to its own
exchange-value; that is to say, not on the basis of what it
produces but of what it costs), “that its respective
value only contributes to the accumulation of capitals by
the saving and non-consumption of the products that
this value is entitled to take out of total
production”.>

* You work, but
not for yourselves (Virgil).—Ed.

* This refers to
the capitalist mode of production.—Ed.

* This refers to
the capitalist mode of production.—Ed.

* Marx put the
passage in his own words and slightly abbreviated
it.—Ed.

* Marx refers to
the French translation from which be takes this and the
following passages ( see Appendix, p. 450). The page
reference in square brackets is to the English edition of

* Born to consume
the fruits (Horace).—Ed.

* Sismondi
says: “Because of the progress made by industry and
science, each labourer is able to produce each day more, and
much more, than he needs to consume. But at the same
time as his labour produces wealth, this wealth, if he was
called upon to enjoy it, would make him little fitted for
labour” (Nouveaux principes…, t. I,
p. 85).

* Of their own
peculiar kind.—Ed.

* The right of the
first night.—Ed.

* In the
manuscript: “distinction”.—Ed.

* See pp. 160, 161 and 264 of the
present volume—Ed.

* in the
manuscript: “of”.—Ed.

** In the
manuscript: “are”.—Ed


## [CHAPTER V] Necker

### [Attempt to Present the Antagonism of Classes in Capitalism as the Antithesis Between Poverty and Wealth]

Some quotations from Linguet above have already shown
that the nature of capitalist production was clear to him
nevertheless, Linguet, can be brought in here after
Necker.

In his two works Sur la législation et le commerce
des grains (first published 1775) and De
l’administration des finances de la France,
etc. [published 1784], Necker shows how the development of
the productive powers of labour merely results in the worker
requiring less time for the reproduction of his own
wage, and therefore working more time for his
employer unpaid. In dealing with this, he
rightly starts from the basis of the average wage,
the minimum of wages. What he is mainly concerned
with, however, is not the transformation of labour itself
into capital and the accumulation of capital through this
process, but rather the general development of the
antithesis between poverty and wealth, between poverty and
luxury, because, to the extent that a smaller quantity of
labour suffices to produce the necessary means of
subsistence, part of the labour becomes more and more
superfluous and can therefore be used in the production of
luxury articles, in a different sphere of production.
Some of these luxury articles are durable; and so they
accumulate from century to century in the possession of
those who have surplus-labour at their disposal, making the
contrast ever deeper.

The important thing is that Necker traces the origin of
the wealth of the non-labouring classes | —profit and rent—
entirely to surplus-labour. In his treatment of
surplus-value, however, what he has in mind is relative
surplus-value, resulting not from the lengthening of the
total working-day but from the shortening of the
necessary labour-time. The productive power of
labour becomes the productive power of the owner of the
conditions of labour. And productive power itself is
equivalent to the shortening of the labour-time that is
necessary to produce a certain result. The chief
passages are the following:

First: De l’administration des finances de la
France, etc. (Œuvres, t. II, Lausanne et Paris,
1789):

“I see one of the classes of society
whose wealth must always be pretty nearly the same; I see
another of these classes whose wealth necessarily increases:
thus luxury, which arises from a relation and a comparison,
has had to follow the growth of this disproportion and
become more evident as time went on” (l.c.,
pp. 285-86). (The contrast between the two
classes as classes has already been clearly
noticed.) “The class of society whose lot is as
it were fixed by the effect of social laws is
composed of all those who, living by the labour of their
hands, are subject to the imperative law of the
owners” (owners of the conditions of
production) “and are compelled to content themselves
with a wage proportionate to the simple necessities of
life; competition between them and the urgency of
their needs bring about their state of
dependence; these conditions cannot change” (l.c.,
p. 286).

“The continual invention of
instruments which have simplified all mechanical arts
has, then, augmented the wealth and the fortunate lot
of the owners; one part of these instruments, by
reducing the costs of working the land, has increased the
revenue of which the owners of such property can
dispose; another part of the discoveries of genius has so
greatly facilitated the labours of industry that the
men who are in the service of the dispensers of the means
of subsistence” (i.e., of the capitalists)
“have been able, in an equal length of time, and
for the same reward, to produce a greater quantity of
products of all kinds” (p. 287). “Let us
assume that a century ago a hundred thousand workers were
required to do what is done today by eighty thousand; the
other twenty thousand would have found themselves obliged to
take to other occupations to obtain wages; and the
new products of their manual labour resulting from this
would increase the pleasures and the luxuries of the
rich” (pp. 287-88).

“For,” he continues, “it
must not be forgotten that the rewards assigned to all
trades which do not require any special talent are always
proportionate to the necessary price of subsistence for
each labourer; thus the speed of production, when
the knowledge required has become common, does not accrue
to the advantage of the labouring men, and the result
is only an augmentation of the means for the
satisfaction of the tastes and vanities of those who have at
their disposal the products of the land” (l.c.,
p. 288). “Among the various good things of
nature which are fashioned and changed by men’s industry
there are a large number whose durability greatly exceeds
the usual span of life: each generation has inherited a part
of the labours of the preceding generation” <he is
here only taking into account the accumulation of what Adam
Smith calls the consumption fund> “and in all
countries there is a continual accumulation of a
greater quantity of the products of the arts; and as this
quantity is always divided among the owners, the
disproportion between their possessions and those of the
numerous class of citizens has necessarily grown greater and
more noticeable” (p. 289). Hence “the
quickening pace of industrial production, which has
multiplied the things of pomp and luxury on earth, the
length of time in which accumulation has grown from
this, and the laws of property, which have brought
these good things into the hands of one class of society
alone…these great sources of luxury would in any
case have existed, whatever had been the quantity of coined
money” (p. 291).

(The latter argument is directed against those who held
that luxury was the result of the growth in the amount of
money.)

Secondly: Sur la législation et le commerce des
grains, etc. (Œuvres, t. IV):

“When the artisan or the husbandman
have no reserves left, they can no longer argue;
they must work today on pain of dying tomorrow, and
in this conflict of interest between | the Owner and Labourer, the
one stakes his life and that of his family, and the other a
mere delay in the growth of his luxury” (l.c.,
p. 63).

This contrast between wealth that does not labour and
poverty that labours in order to live also gives rise to a
contrast of knowledge. Knowledge and labour become
separated. The former confronts the latter as capital,
or as a luxury article for the rich.

“The faculty of knowing and
understanding is a general gift of nature, but it is only
developed by education; if properties were equal, everyone
would labour moderately” (so once again, the
quantity of labour-time is the decisive thing), “and
everyone would know a little, because everyone would
have a portion of time” (spare time)
“left to give to study and reflection; but with the
inequality of fortunes, resulting from the social order,
education is prohibited for all who are born without
property; because all sustenance being in the hands of that
part of the nation which possesses money or land, and
no one giving anything for nothing , the man born without
any other resource but his strength is obliged to devote it
to the service of the Owners from the first moment when his
strength develops, and to continue thus all his life, from
the moment when the sun rises to the moment when this
strength has been worn down and needs to be renewed by
sleep” (p. 112). “Lastly, is it not
certain that this inequality of knowledge has become
necessary for the maintenance of all the social inequalities
which gave rise to it?” (l.c., p. 113),
(cf. pp. 118-19).

Necker ridicules the economic
confusion—characteristic of the Physiocrats in
relation to the land, and of all subsequent economists in
relation to the material elements of capital—which
glorifies the owners of the conditions of production, not
because they themselves, but these conditions, are necessary
for labour and the production of wealth.

“They begin by confusing the
importance of the owner (a function so easy to perform) with
the importance of the land” (l.c., p. 126).
|IX-421||


## [CHAPTER VI] Quesnay’s Tableau Économique

(Digression)

### [1. Quesnay’s Attempt to Show the Process of Reproduction and Circulation of the Total Capital]

||X-422| Tableau
économique, according to Quesnay

5,000 millions annual gross product (in pounds of
Tours)

In original and annual advances, the farmers lay
out

In rents, the landlords receive

The sterile class disposes of a fund of

a') 2,000 millions

a) 2,000 millions

a'')1,000 millions

b) 1,000 millions

b'') 1,000 millions

c) 1,000 millions

d) 1,000 millions

b') 1,000 millions

5,000 millions

2,000 millions, of which half remains as a fund
belonging to the sterile class

There are dotted lines from a) to b), from a) to c),
from c) to d), from a') to b'),
and from a'') to b'').—Transcriber

To make the Tableau clearer, I have shown what Quesnay
regards each time as the starting-point of a circulation, as
a, a', a'', the following link in the circulation as b,
c, d, and as b', b'' respectively.

The point to note in this Tableau, and the point which
impressed his contemporaries, is the way in which
circulation is shown as determined purely by the circulation
and reproduction of commodities, in fact by the process of
capital.

### [2. Circulation between Farmers and Landowners. The Return Circuit of Money to the Farmers, Which Does Not Express Reproduction]

The farmer first pays 2,000 million francs in money to
the landlord, the propriétaire. With this,
the landlord buys from the farmer, 1,000 millions worth of
means of subsistence. 1,000 millions therefore flow
back to the farmer in money, while one-fifth of the gross
product is disposed of, passing definitively out of
circulation into consumption.

The landlord next buys, with 1,000 millions in money,
manufactured commodities, non-agricultural products, to the
value of 1,000 millions. With this purchase, a second
one-fifth of the (in this case manufactured) products falls
out of circulation into consumption. These 1,000
millions in money are now in the hands of the sterile class,
who buys with them from the farmer 1,000 millions worth of
means of subsistence. Thus the second 1,000 millions
which the farmer has paid to the landlord in the form of
rent flow back to the farmer. On the other hand, a
further one-fifth of the farmer’s product has gone to the
sterile class, out of circulation into consumption. At
the end of this first movement, therefore, we have the 2,000
millions in money back in the hands of the farmer.
This money has carried through four different processes of
circulation.

First, it served as means of payment for
rent. In this function it does not circulate any part
of the annual product, but is merely a circulating draft on
the part of the gross product which is equal to the
rent.

Second, the landlord buys means of subsistence
from the farmer, using half the 2,000 millions, that is,
1,000 millions, thus realising his 1,000 millions in means
of subsistence. In fact, the farmer merely gets back,
in the 1,000 millions in money, half of the draft he has
given the landlord for two-fifths of his product. In
this transaction the 1,000 millions, since they serve as
means of purchase, circulate commodities to that amount,
which fall into final consumption. The 1,000 millions
here serve the landlord only as means of purchase; he
reconverts the money into use-value (commodities, which
however enter into final consumption, and are bought as
use-value).

If we consider purely the isolated act, the money in this
transaction plays merely the role which, as means of
purchase, it always plays for the seller, namely, being the
changed form of his commodity. The landlord has his
1,000 millions in corn, the farmer has converted into money
corn to the price of 1,000 millions, he has realised its
price. But if we consider this act in connection with
the preceding act of circulation, the money here does not
appear as a mere metamorphosis of the farmer’s commodity, as
a golden equivalent of his commodity. The 1,000
millions are in fact only half the 2,000 millions, in money,
which the farmer has paid to the | landlord in the form of
rent. It is true that he gets 1,000 millions in money
for 1,000 millions in commodities, but in so doing in
fact he only buys back the money with which he paid the
landlord the rent; that is to say, the landlord buys, with
the 1,000 millions which he has received from the farmer,
1,000 millions worth of commodities from the farmer.
He pays the farmer with the money which he has received
from the farmer without any equivalent.

This flowing back of the money to the farmer, taken in
con-junction with the first act, does not at first make it
appear to him a mere means of circulation. But then it
is different in essence from the flowing back of money to
its starting-point when the movement is an expression of a
process of reproduction.

For example: the capitalist—or, to leave the
characteristics of capitalist reproduction entirely out of
account, a producer— lays out £100 for raw
material, instruments of labour and means of subsistence for
the period of his labour. We will assume that he does
not add more labour to the means of production than he had
expended on the means of subsistence, the wages that he has
paid to himself. If the raw material, etc., equals
£80, and the labour added is equal to £20 (the means
of subsistence consumed also being equal to £20), then
the product is equal to £100. If he now sells it,
the £100 flows back to him in money, and so on.
This flowing back of the money to its starting-point here
expresses nothing but continuous reproduction. The
simple metamorphosis in this case is M—C—M,
transformation of money into commodity and retransformation
of commodity into money— this mere change of form of
money and commodity here representing at the same time the
process of reproduction. Money is transformed into
commodities, means of production and means of
subsistence; then these commodities enter as elements into
the labour-process and emerge from it as a product.
Thus a commodity appears again as a result of the process,
that is, when the finished product re-enters the process of
circulation, and by so doing again confronts money as a
commodity; and finally it is reconverted into money, since
the finished commodity can only be exchanged again for its
production elements after it has first been transformed into
money.

The constant flowing back of the money to its
starting-point expresses here not only the formal conversion
of money into commodity and commodity into money—as in
the simple process of circulation or the mere exchange of
goods—but at the same time the continuous
reproduction of the commodity by the same
producer. Exchange-value (money) is converted into
commodities which enter into consumption, and are consumed
as use-values; they pass however into reproductive or
industrial consumption, therefore reproduce the original
value and consequently reappear in the same amount of
money (in the above example, in which the producer labours
only for his own maintenance), M—C—M here shows
that M is not only formally converted into C, but C is
actually consumed as a use-value, falling out of circulation
into consumption, but into industrial consumption, so that
its value is maintained and reproduced in consumption, and M
therefore reappears at the end of the process, being
maintained in the movement M—C—M.

In contrast with this, in the case given above, no
reproduction process takes place when the money flows back
from the landlord to the farmer. It is as if the
farmer had given the landlord tokens or tickets for products
to the value of 1,000 millions. When the landlord
cashes these tokens, they flow back to the farmer and he
redeems them. If the landlord had had half the rent
paid directly in kind, no circulation of money would have
taken place. The whole circulation would have been
limited to a simple change of hands, the transfer of the
product from the farmer’s hand to the landlord’s.
First the farmer gives the landlord the money instead of the
commodity, and then the landlord returns the money to the
farmer in order to take the commodity itself. The
money serves the farmer as means of payment to the
landlord; it serves the landlord as means of purchase
in relation to the farmer. In the first function it
moves away from the farmer, in the second it comes back to
him.

This type of return flow of the money to the producer
must always take place whenever he pays his creditors,
instead of a part of his product, its value in money; and
everyone who is a co-proprietor of his surplus is in this
respect a creditor. For example: all taxes are paid by
the producers in money. In this transaction the money
is for them means of payment to the State. With this
money the State buys commodities from the producers.
In the hands of the State it is a means of purchase, and
thus returns to the producers in the same measure as they
part with their commodities.

This type of return flow—this peculiar flowing back
of money that is not determined by reproduction—must
take place in all cases where there is exchange of revenue
for capital. What makes the money flow back in such
cases is not reproduction but consumption. The revenue
is paid in money, but it can only be consumed in
commodities. The money which is received from the
producers as revenue must therefore be paid back to them in
order to obtain the same amount of value in commodities,
that is, in order to consume the revenue. The money in
which revenue is paid—rent for example, or interest or
taxes, <the |
industrial capitalist pays his revenue to himself in the
product, or from the sale of the product that part of it
which forms his revenue>—has the general form of
means of payment. The person who pays the revenue is
supposed to have received from his creditor a part of his
own product—for example, in the case of the farmer,
the two-fifths of the product which according to Quesnay
constitute the rent. He is only its nominal or de
facto owner.

The part of the farmer’s product, therefore, which
constitutes his rent, requires for its circulation between
farmer and landlord only an amount of money equal to the
value of the product, although this value circulates
twice. First the farmer pays the rent in money; then
with the same money the landlord buys the product. The
first is a simple transfer of money, since the money
functions only as means of payment; the assumption is
therefore that the commodity for which it is paid is already
in the hands of the payer and does not serve him as a means
of purchase; that he receives no equivalent for the money,
but on the contrary has this equivalent in advance. In
the second transaction, on the other hand, the money
functions as means of purchase, means of circulation for
commodities. It is as if, with the money in which he
pays his rent, the farmer had bought the landlord’s share in
the product. The landlord, with the same money that he
has thus received from the farmer (who however in fact has
given it away without any equivalent), buys the product back
again from the farmer.

The same sum of money, therefore, which is handed over by
the producers to the owners of revenue in the form of means
of payment, serves the owners of revenue as means of
purchase for the producers’ commodities. This twofold
change of place of the money—from the hands of the
producer into the hands of the owner of revenue, and from
the latter’s hands back into the hands of the
producer—thus expresses only a single change of place
on the part of the commodity, that is, from the hands of the
producer into the hands of the owner of revenue, Since the
producer is supposed to owe a part of his product to the
owner of revenue, the money-rent that he pays him is in fact
only a retrospective payment for the value of the commodity
which has already passed into his possession. The
commodity is in his hands; but it does not belong to
him. With the money that he pays in the form of
revenue, he therefore redeems it making it his
property. Therefore the commodity does not change
hands. When the money changes hands, this represents
only a change in the title of ownership of the
commodity, which remains in the hands of the producer as
before. Hence this twofold change of place of the
money with only a single change of hands for the
commodity. The money circulates twice, in order to
make the commodity circulate once. But it too
circulates only once as means of circulation (means of
purchase), while the other time it circulates as means of
payment; in which type of circulation, as I have shown
above, no simultaneous change of place between commodity and
money takes place.

In fact, if the farmer has no money in addition to his
product, he can only pay for his product after he has first
sold his commodity, and it has therefore already passed
through its first metamorphosis before he can pay it out as
money to the landlord. Even taking this into account,
there are more changes of place on the part of the money
than on the part of the commodity. First C—M [is
carried through]; two-fifths of the commodity is sold and
transformed into money. Here there is the simultaneous
exchange of commodity and money. Then however this
same money, without being exchanged for a commodity, passes
from the hands of the farmer into those of the
landlord. Here there is a change of place of the
money, but no change of place of the commodity. It is
the same as if the farmer had a co-partner. He has
received the money, but he must share it with his
co-partner. Or rather, for the two-fifths it is more
as if a servant of the farmer has received the money.
This servant must give it to the farmer, he cannot retain it
in his own pocket. In this instance the movement of
the money from one hand to the other does not express any
kind of metamorphosis of the commodity, but is a mere
transfer of the money from the hand of its immediate
possessor into the hand of its owner. This can
therefore be the case when the man who first receives the
money is merely an agent for his employer. Then the
money is also not a means of payment— there is a
simple transfer of it from the hand of the receiver, to whom
it does not belong, into the hand of the owner.

This kind of change of place of money has absolutely
nothing to do with the metamorphosis of the commodity, any
more than has the change of place arising from the mere
conversion of one kind of money into another kind.
With a means of payment, however, it is always implied that
the payer has received a commodity for which he subsequently
pays. In the case of the farmer, etc., he has not
received this commodity; it is in his hands before it is
in the landlord’s hands, and it is a part of his
product. But in law he becomes its owner only
by handing over to the landlord the money received for
it. His legal title to the commodity changes; the
commodity itself is in his hands both before and
after. But first it was in his hands as something
in his possession but the owner of which was the
landlord. It is now in his hands as his own
property. The change in the legal form while the
commodity remains in the same hands has naturally not caused
the commodity itself to change hands.

### [3. On the Circulation of Money between Capitalist and Labourer]

### [(a) The Absurdity of Speaking of Wages as an Advance by the Capitalist to the Labourer. Bourgeois Conception of Profit as Reward for Risk]

| <This also makes
it clear how absurd it is to “explain” the
profit of the capitalist from the fact that he advances
money to the labourer before he has converted the commodity
into money.

First: When I buy a commodity for my own
consumption I get no “profit” because I am the
buyer and the owner of the commodity is the
“seller”, because my commodity has the form of
money and his must first be transformed into money.
The capitalist pays for the labour only after he has
consumed it, while other commodities are paid for before
they are consumed. This arises from the peculiar
nature of the commodity which he buys, and which is in fact
only delivered after it is consumed. The money here
has the form of means of payment. The capitalist has
always appropriated to himself the commodity
“labour” before he pays for it. The
fact however that he only buys it in order to make a profit
out of the resale of its product is no reason for his
making this profit. It is a motive. And it would
mean nothing but: he makes a profit by buying wage-labour
because he wants to make a profit out of selling it
again.

Secondly: But he does nevertheless advance to the
labourer in the form of money the part of the product which
is his share as wages, and thus saves the latter himself the
trouble and risk and time involved in converting into money
the part of the commodity which is due to him as
wages. Is the labourer not to pay him for this
trouble, this risk, and this time, and on this account to
accept less of the product than he would otherwise get?

This would upset the whole relationship between
wage-labour and capital, and destroy the economic
justification of surplus-value. The result of the
process is in fact that the fund from which the capitalist
pays the wage-labourer is nothing but the latter’s own
product, and that therefore capitalist and labourer
actually share the product in aliquot parts.
But this actual result has absolutely nothing to do with the
transaction between capital and wage [-labour](on which
rests the economic justification of surplus-value, the
justification founded on the laws of commodity exchange
itself). What the capitalist buys is the temporary
right to dispose of labour-power; he only pays for it when
this labour-power has taken effect, materialised itself in a
product. Here, as in all cases where money functions
as means of payment, purchase and sale precede the real
handing over of the money by the buyer. But the labour
belongs to the capitalist after that transaction,
which has been completed before the actual process of
production begins. The commodity which emerges
as product from this process belongs entirely to him.
He has produced it with means of production belonging to him
and with labour which he has bought and which therefore
belongs to him, even though it has not yet been paid
for. It is the same as if he had not consumed anyone
else’s labour in the production of the commodity.

The profit that the capitalist makes, the surplus-value
which he realises, springs precisely from the fact that the
labourer has sold to him not labour realised in a commodity,
but his labour-power itself as a commodity. If he had
confronted the capitalist in the first form, as a possessor
of commodities, the capitalist would not have been able to
make any profit, to realise any surplus-value, since
according to the law of value exchange is between
equivalents, an equal quantity of labour for an equal
quantity of labour. The capitalist’s surplus arises
precisely from the fact that he buys from the labourer not a
commodity but his labour-power itself, and this has less
value than the product of this labour-power, or, what is the
same thing, realises itself in more materialised labour than
is realised in itself. But now, in order to justify
profit, its very source is covered up, and the whole
transaction from which it springs is repudiated.
Because in fact—once the process is
continuous—the capitalist only pays the labourer out
of his own product, the labourer is only paid with a
part of his own product, and the advance is therefore a
mere pretence, we are now told that the labourer has sold
his share in the product to the capitalist, before it
has been converted into money. (Perhaps before it
was capable of being converted into money, for although the
workman’s labour had materialised itself in a product, it
may be that only one part of the vendible commodity has as
yet been realised, for example, [only] part of a house.) So
the capitalist is no longer owner of the product, and
thereby the whole process through which he has appropriated
another’s labour gratis is invalidated. Now therefore
owners of commodities confront each other. The
capitalist has money, and the labourer sells him not his
labour-power but a commodity, namely, the part of the
product in which his own labour is realised.

He [the labourer] will now say to the capitalist:
“Of these 5 lbs. of twist, say three-fifths represent
constant capital. They belong to you.
Two-fifths, that is, 2 lbs., represent my newly-added
labour. Therefore you have to pay me the 2 lbs.
So pay me the value of 2 lbs.” And thereby he
would pocket not only the wages but also the profit, in
short, a sum of money equal to the quantity of labour newly
added by him and materialised in the form of the 2 lbs.

“But,” says the capitalist, “have I not
advanced the constant capital?”

“Well,” says the labourer, “you deduct
the 3 lbs. for it, and pay me only 2.”

“But,” insists the capitalist, “you
couldn’t materialise your labour, you couldn’t spin, without
my cotton and my spindles. You must pay extra for
that.”

“Well,” says the labourer, “the cotton
would have rotted and the spindles rusted if I hadn’t used
them for spinning. |
The 3 lbs. of yarn which you are deducting do represent, it
is true, only the value of your cotton and spindles which
were used up, and are therefore contained, in the 5 lbs. of
yarn. But it is only my labour that has maintained the
value of cotton and spindles unchanged, by using these means
of production as means of production. I’m not charging
you anything for this value-maintaining power of my labour,
because it didn’t cost me any extra labour-time beyond the
spinning itself, for which I get the 2 lbs. It’s
natural faculty of my labour which costs me nothing, though
it maintains the value of the constant capital. As I
don’t charge you anything for it, you can’t charge me for
not being able to spin without spindles and
cotton. For without spinning, your spindles and cotton
wouldn’t be worth a brass farthing.”

Driven into a corner, the capitalist says: “The 2
lbs. of yarn are in fact worth 2s. They represent that
much labour-time of yours. But am I to pay you for
them before I have sold them? Perhaps I may not sell
them at all. That is risk No. 1. Secondly,
perhaps I may sell them at less than their price. That
is risk No. 2. And thirdly, in any case it takes time
to sell them. Am I to take on both risks on your
behalf without recompense and lose my time into the
bargain? You can’t expect something for
nothing.”

“Wait a bit!” replies the labourer,
“what’s the relation between us? We face each
other as owners of commodities, you as buyer, we as
sellers, for you want to buy our share in the product,
the 2 lbs., and it in fact contains nothing but our own
materialised labour-time. Now you assert that we must
sell you our commodity below its value, so that as a
result you would be getting more value in commodity than you
now have in money. The value of our commodity is equal
to 2s. You want to give only 1s. for it, so
that—since 1s. contains as much labour-time as 1
lb. of yarn —you would get from the exchange twice as
much value as you give in return. We on the other hand
would get, instead of an equivalent, only half an
equivalent, an equivalent f or only 1 lb. of yarn instead of
2 lbs. And on what do you base this demand, which is
contrary to the law of value and the exchange of commodities
in proportion to their value? On what? On the
fact that you are buyer and we are seller, that our value is
in the form of yarn, of a commodity, and your value is in
the form of money —that the same value in the form of
yarn confronts the same value in the form of money.
But, my good friend, that is in fact a mere change of form,
which affects the way in which the value is expressed
but leaves the amount of value unaltered. Or do
you hold the childish view that every commodity must be sold
under its price, that is to say, for less than the
sum of money which represents its value, because in the form
of money it gets an increased value? But no,
good friend, it does not get any increased value; the
magnitude of its value does not change, it merely takes the
shape of exchange-value in its pure form.

“Besides, my good friend, think of the troubles you
are laying up for yourself by taking this line. For
what you assert amounts to this —that the seller must
always sell his commodity to the buyer below its
value. Indeed as far as you are concerned, this was
the case earlier when we sold you not a commodity we
produced but our labour-power itself. It is true that
you bought it at its value, but you bought our actual labour
below the value in which it is expressed.
However that’s an unpleasant memory—let’s say no more
about it. We’ve got beyond that, thank goodness,
since—by your own decision—we are no longer to
sell you our labour-power as a commodity, but the commodity
itself which is the product of our labour. Let’s look
at the troubles you’re laying up for yourself. The new
law you have set up—that the seller pays for the
conversion of his commodity into money not with his
commodity, through the exchange of his commodity for money,
but that he pays for it by selling the commodity
below its price—this law by which the buyer
always fleeces and defrauds the seller must hold good in
like measure for every buyer and seller. Let’s suppose
that we accept your offer—but on the condition that
you yourself submit to the law just created by you, namely
the law that the seller must surrender to the buyer a part
of his commodity for nothing, in return for the buyer
changing it into money for him. Then you buy our 2
lbs., which are worth 2s., for 1s. and thus
make a profit of 1s. or 100 percent. But
now you have 5 lbs. of yarn, of a value of 5s., after you
have bought the 2 lbs. belonging to us. Now you think
you’re going to do a good stroke of business. The 5
lbs. cost you only 4s., and you’re going to sell them for
5s. ‘Wait a minute!’ says the man who
buys from you, ‘your 5 lbs. of yarn is a
commodity, and you are a seller. I have the same value
in money and I am a buyer. Consequently, by the law
which you recognise I must make 100 per cent profit out of
you. You must therefore sell me the 5 lbs. of yarn at
50 per cent below its value, for 2s. 6d. I’ll give you
then 2s. 6d. and get in exchange a commodity to the value
of 5s., and thus make 100 per cent profit out of you, for
what’s sauce for the goose is sauce for the
gander.’

“So you see, my good friend, [continues the worker]
where you get with your new law; you would simply have
diddled yourself, since although at one moment you are a
buyer, the next you’re in turn a seller. In this
particular case you would lose more as a seller than you
gained as a buyer. And don’t forget this too—
before the 2 lbs. of yarn you want now to buy from us ever
existed, didn’t you make other purchases in advance, but for
which the 5 lbs. of yarn would never have been there at
all? ||426a | Didn’t you
buy cotton and spindles in advance, which are now
represented by .3 lbs. of yarn? At that time the
cotton jobber in Liverpool and the spindle maker in Oldham
faced you as sellers, and you faced them as
buyer; they represented commodity, you
money—exactly the same relationship as we have the
honour or the misfortune to stand in to each other at this
moment. Wouldn’t the sharp cotton jobber and your
jovial colleague from Oldham have had a good laugh at you,
if you had demanded that they hand over to you for
nothing a part of the cotton and spindles, or what is
the same thing, sell you these commodities below their price
(and their value), on the ground that you were transforming
commodities for them into money but they were transforming
money into commodities for you, that they were sellers, you
buyer? They risked nothing, for they got ready money,
exchange-value in the pure, independent form. You, on
the other hand, what a risk you were taking! First you
had to make spindles and cotton into yarn, run all the risks
of the production process, and then finally the risk of
reselling the yarn, changing it back again into money!
The risk whether it would sell at its value, or over or
under its value. The risk of not selling it at all, of
not transforming it back into money; and as to its quality
as yarn, you didn’t care a straw for it. You did not
eat yarn, nor drink it, nor have any use whatever for it
except selling it! And in any case the loss of time,
in transforming the yarn again into money, and that includes
therefore the transformation of spindles and yarn into
money. ‘Old boy,’ your colleagues will
reply, ‘don’t make a fool of yourself. Don’t
talk nonsense. What the devil do we care what you
propose turning our cotton and our spindles to? What
use you destine them for! Burn them, hang them, if you
like, throw them to the dogs, but pay for them! The
idea! We are to make you a present of our goods
because you have set up as a cotton spinner, and seem not to
feel quite at ease in that line of business, and magnify to
yourself its risks and perilous chances! Give up
cotton spinning, or don’t come into the market with such
preposterous ideas!’”

The capitalist, with a supercilious smile, replies to
this tirade from the labourers: “Evidently you people
are a bit out of your depth. You’re talking about
things you don’t understand. Do you imagine I’ve paid
ready money to the Liverpool ruffian and the chap in
Oldham? The devil I did. I’ve paid them in bills
of exchange, and the Liverpool ruffian’s cotton was in point
of fact spun and sold before his bill fell due. With
you it’s another affair altogether. You want to get
ready money.”

“Very well,” say the labourers, “and
what did the Liverpool ruffian and the Oldham chap do with
your bills?”

“What they were doing therewith?” says the
capitalist. “Stupid question! They lodged
them with their bankers and got them there
discounted.”

“How much did they pay the banker?”

“Let me see! Money is now very cheap. I
think they paid something like 3 per cent discount; that is
to say, not 3 per cent on the sum, but they paid so much on
the sum for the time the bill was running as would have come
up to 3 per cent on the whole matter if the bill had run for
a whole year.”

“Still better,” say the working men.
“Pay us 2s., the value of our commodity—or say
12s. as we have dealt today per day, but we will deal per
week. But take away from that sum 3 per cent per annum
for fourteen days.”

“But this bill is too small,” says the
capitalist, “to be discounted by any
banker.”

“Well,” reply the working men, “we are
100 men. Thus you have to pay to us 1,200
shillings. Give us a bill for them. This makes
£60 and is not too small a sum to be discounted; but
besides, as you discount it yourself, the sum must not be
too small for you, since it is the identical sum whence you
pretend to derive your profit on us. The amount
deducted wouldn’t be worth mentioning. And since we
would thus get the major part of our product in its
entirety, we would soon reach the point when we didn’t need
you to discount it for us. Naturally we will not give
you longer credit than the fourteen days the stock jobber
gives you.”

If—turning the actual relationship
upside-down—wages are to be derived from the discount
on the part of the value of the total product that belongs
to the workmen—that is, from the fact that the
capitalist pays them this part in advance in
money—he would have to give them very
short-term bills of exchange, such as for example he pays to
the cotton jobber, etc. The workman would get the
largest share of his product, and the capitalist would soon
cease being a capitalist. From being the owner of the
product he would become merely the workmen’s banker.

Moreover, just as the capitalist takes the risk of
selling the commodity below its | value, he equally takes the
chance of selling it above its value. The workman will
be thrown out onto the street if the product is unsalable;
and if it falls for long below the market-price, his wages
will be brought down below the average and short time will
be worked. It is he, therefore, that runs the greatest
risk.

Thirdly: It never enters anyone’s head to suggest
that the farmer, because he has to pay rent in money, or the
industrial capitalist, because he has to pay interest in
money —and therefore in order to pay them must first
have converted his product into money—is on that
account entitled to deduct a part of his rent or his
interest.>

### [(b) Commodities Which the Labourer Buys from the Capitalist. A Return Flow of the Money Which Does Not Indicate Reproduction]

In that part of the capital which circulates between
industrial capitalist and labourer (that is, the part of the
circulating capital which is equal to the variable capital),
there is also a return flow of the money to its
starting-point. The capitalist pays the labourer his
wages in money; with this money the labourer buys
commodities from the capitalist, and so the money flows back
to the capitalist. (In practice, to the capitalist’s
banker. But the bankers in fact represent, in relation
to the individual capitalist, the aggregate capital in so
far as it takes the form of money.) This return
flow of the money does not in itself indicate any
reproduction. The capitalist buys labour from the
labourer with money; with the same money, the labourer buys
commodities from the capitalist. The same money takes
the form first of means of purchase for labour, and later on
as means of purchase for commodities. That it comes
back to the capitalist is due to the fact that at first he
is a buyer, and then in turn, in relation to the same
parties, he is a seller. He parts with it as a buyer;
it returns to him as a seller. The labourer on the
contrary is first seller and then buyer, so first he gets
the money and then he pays it out, while in relation to him
the capitalist first pays it out and then takes it in.

For the capitalist, the movement here is
M—C—M. He buys a commodity (labour-power)
with money; with the product of this labour-power (a
commodity) he buys money; in other words, he sells this
product in turn to his former seller, the labourer.
For the labourer, on the other hand, the movement of
circulation is C—M—C. He sells his
commodity (labour-power), and with the money he gets for it
he buys back a part of his own product (a commodity).
It could indeed be said that the labourer sells a commodity
(labour-power) for money, spends this money on commodities,
and then sells his labour-power again, so that for him too
the movement is M—C—M; and since the money is
constantly fluctuating between him and the capitalist, it
could equally be said, depending on whether one considers it
from the standpoint of the one or of the other, that for him
as well as for the capitalist the movement is
M—C—M. The capitalist, however, is the
buyer. The renewal of the process starts from him, not
from the labourer, while the return flow of the money is
compulsory, since the labourer must buy means of
subsistence. Here, as in all movements where the form
of circulation on one side is M—C—M and on the
other C—M—C, it is made evident that the aim of
the process of exchange on one side is exchange-value,
money—and therefore its increase—and on the
other side use-value, consumption. This also is the
case when the money flows back as in the example first
considered, where on the farmer’s side the movement is
M—C—M, C—M—C on the landlord’s side;
taking into account the fact that the M with which the
landlord buys from the farmer is the money form of the rent,
and therefore the result of a movement C—M, the
changed form of the part of the product that at bottom
belongs to the landlord in kind.

This M—C—M, in so far as it merely expresses,
as between labourer and capitalist, the return to the latter
of the money laid out by him in wages, in itself does not
indicate any reproduction process, but only that the two
parties are in turn buyer and seller in relation to each
other. Nor does it represent money as capital, in such
a way as in M—C—M', where the second M' would be
a larger sum of money than the first M, so that M represents
value (capital) which increases in value. On the
contrary, it merely expresses the formal return of the
same amount of money (often even less) to its
starting-point. (By capitalist here, of course, is
meant the class of capitalists.) I was therefore wrong in
saying in the first Part that the form M—C—M
must always be M—C—M'. It may express
merely the formal return of the money, as I indicated there
already, by showing that the return circuit of the money to
the same starting-point arises from the fact that the buyer
in turn becomes seller.

It is not this return movement of the money that
enriches the capitalist. For example, say that he has
paid 10s. for wages. The labourer buys goods from him
with this 10s. He has given the labourer goods to the
value of 10s. for his labour-power. If he had given
him means of subsistence in kind to the price of 10s., there
would have been no circulation of money, and therefore no
return flow of money. This phenomenon of money
returning has therefore nothing to do with the enrichment of
the capitalist, which only arises from the fact that in the
production process itself the capitalist appropriates more
labour than he has expended in wages, and that his product
is consequently larger than the costs of producing it; while
the money that he pays the labourer can in no case be less
than the money with which the labourer buys goods from
him. This formal return of the money has nothing to do
with making a profit, and therefore M here does not signify
capital | any more than an
increase or replacement of value takes place when money
spent in rent, interest or taxes flows back to the payer of
rent, interest and taxes.

M—G—M, in so far as it represents the formal
return of money to the capitalist, only means that his
promissory note issued in money is realised in his own
commodity.

As an example of the wrong explanation of this money
circuit—this return of money to its
starting-point—see Destutt de Tracy above. As a
second example, with special reference to the circulation of
money between labourer and capitalist, Bray is to be quoted
later. Finally, Proudhon, in regard to the
money-lending capitalist.

This form of return circuit M—C—M is found
wherever the buyer becomes in turn seller, and therefore in
the movement of all commercial capital, where all dealers
buy from each other in order to sell, and sell in order to
buy. It is possible that the buyer—M—is
unable to sell the commodity, rice for example, at a higher
price than he bought it at; he may have to sell it below its
price. Thus in such a case a simple return of the
money takes place, because the purchase turns into a sale
without the M having established itself as value that
increases value, that is, as capital.

It is the same for example in the exchange of constant
capital. The machine builder buys iron from the
producer of iron and sells him machines. In this case
the money flows back. It was paid out as means of
purchase for the iron. It then serves the iron
producer as means of purchase for machines, and so flows
back to the machine builder. The latter has got iron
for the money he paid out; he has delivered machines for the
money he received. The same money has circulated twice
its value. For example, the machine builder buys iron
with £1,000; with the same £1,000 the iron
producer buys machinery. The value of the iron and the
machinery together is £2,000. In this way,
however, £3,000 must be in motion: £1,000 money,
£1,000 machinery and £1,000 iron. If the
capitalists made an exchange in kind, the commodities would
change hands without a farthing circulating.

It is the same when they have reciprocal accounting and
the money serves them as means of payment. If paper
money or credit money (bank-notes) circulate, then there is
one difference in the transaction. £1,000 still
exist in bank-notes, but they have no intrinsic value.
In any case here too there are three [times £1,000]:
£1,000 iron, £1,000 machinery, £1,000 in
bank-notes. But as in the first case these three only
exist because the machine builder has had [£l,000]
twice—machinery £1,000 and money— in gold
and silver or bank-notes—£l,000. In both
cases the iron producer returns to him only number two (the
money); because the only reason why he received it at all
was that the machine builder, as buyer, did not immediately
become seller; he did not pay for the first commodity, the
iron, in commodities, and so he paid for it in money.
When he pays for it in commodities, that is, when he sells
commodities to the ironmaster, the latter returns the money
to him because payment has not to be made twice, once in
money, and the second time in commodities.

In both cases the gold or the bank-note represents the
changed form of a commodity previously bought by the machine
builder or some other person, or perhaps of a commodity that
has been converted into money even though it has not yet
been bought (as in the case of revenue), such as the
landlord (his forebears, etc.) represents. Here the
flowing back of the money only indicates that the person who
has paid out the money for commodities, the person who has
thrown the money into circulation, pulls back the money out
of circulation by the sale of another commodity that he
throws into circulation.

The very same £1,000 we are thinking of could in
one day pass through forty or fifty hands, from capitalist
to capitalist, and [it would] only transfer capital from one
to the other. Machinery [goes] to the iron producer,
iron to the peasant, grain to the maker of starch or
spirits, and so on. In the end it might again come
into the hands of the machine builder, and pass from him to
the iron producer, and so on, and thus it might circulate a
capital of £40,000 or more and might continually flow
back to whoever first paid it out. M. Proudhon
concludes from this that that part of the profit made on
this £40,000 which consists of interest on money, and
is therefore paid out by the different capitalists
—for example, by the machine builder to the man who
lent him £1,000, by the iron producer to the man who
lent him £1,000 which he spent long ago for coal,
etc., or in wages, etc.—that these £1,000 yield
the total interest that the £40,000 brings
in. So that if the interest was 5 per cent,
£2,000 in interest. From which he makes the
correct calculation that the £1,000 have brought in
200 per cent. And he is a critic of political economy
par excellence!*

But although M—C—M, representing the money
circulation between capitalist and labourer, in itself does
not imply any act of reproduction, nevertheless this is
implied by the continuous repetition of this act, the
continuity of the return circuit. There cannot be a
buyer continually becoming a seller without the reproduction
of the commodity which he sells. In fact, this holds
good for everyone except those who live on rent or interest
or taxes. But in some cases the return movement
M—C—M always takes place if the transaction is
to be completed—as in the case of the capitalist in
relation to the labourer, or landlord or money-lender (with
these latter, there is a simple return of the money).
In other cases the act is completed when commodities are
bought, when the movement C—M—C has been
concluded, as in the case of the labourer. It is this
act which he continually renews. His initiative is
always as seller, not as buyer. The same holds good
for all money circulation | which is merely expenditure of
revenue. The capitalist himself, for example, consumes
a certain amount each year. He has converted his
commodity into money, in order to pay out this money for
commodities which he wants for his final consumption.
Here there is C—M—C, and there is no return of
the money to him; but the return is to the seller (the
shopkeeper for example), whose capital is replaced by the
expenditure of revenue.

Now we have seen that an exchange takes place, a
circulation of revenue against revenue. The butcher
buys bread from the baker; the baker meat from the butcher;
both consume their revenue. They do not pay for the
meat that the butcher himself eats or the bread that the
baker himself eats. Each of them consumes this part of
his revenue in kind. It is however possible that the
meat bought by the baker from the butcher replaces not the
latter’s capital but his revenue—that part of the meat
sold by him which not only represents his profit but the
part of his profit which he wants to consume himself, as
revenue. The bread that the butcher buys from the
baker is also an expenditure of his revenue. If the
two run accounts with each other, one or the other of them
has only to pay the balance. There is no money
circulated in respect of the part of their reciprocal
purchases and sales which balances out. Let us however
assume that the baker has to pay the balance and that this
balance represents revenue for the butcher. Then he
spends the money from the baker on other articles of
consumption. Assuming that this is £10, which he
spends with the tailor. If the £10 represents
revenue for the tailor, he spends it in a similar way; in
turn, he buys bread with it and so on, In this way the money
flows back to the baker, no longer however as a replacement
of revenue, but as a replacement of capital.

A question that can still be raised is: in
M—C—M, as carried through by the capitalist,
when it represents self-expanding value, the capitalist
draws more money out of circulation than he threw into
it. (This was what the miser actually wanted to do but
did not succeed in doing. For he does not draw more
value in the form of gold and silver out of circulation than
he threw into it in the form of commodities. He
possesses more value in the form of money, whereas
previously he had more value in the form of commodities.)
The total production costs of his commodity are
£1,000. He sells it for £1,200, because
his commodity now contains 20 per cent or one-fifth unpaid
labour—labour that he has not paid for but
nevertheless sold. How then is it possible for all
capitalists, the class of industrial capitalists,
continually to draw more money out of circulation than they
put into it? First it can be said that on the other
hand the capitalist continually puts in more than he draws
out. His fixed capital had to be paid for. But
he sells it only in the measure that he consumes it, only
bit by bit. It always enters only to a much smaller
extent into the value of the commodity, while it
enters in its entirety into the process of producing the
commodity. If its circulation is 10 years, only
one-tenth of it enters annually into the commodity, and no
money circulates in respect of the other nine-tenths, as
this nine-tenths does not in any way come into circulation
in the form of a commodity. That is the first
point.

We will consider this problem later, and meanwhile return
to Quesnay.

But first one other point. The return of bank-notes
to a bank which discounts bills or makes advances in notes
is quite a different phenomenon from the return of money
which we have been considering up to now. In this case
the transformation of the commodity into money is
anticipated. It receives the form of money before it
is sold, perhaps before it is produced. Or perhaps it
has already been sold (for bills of exchange). In
any case it has not yet been paid for, not yet
reconverted into money. This transformation is
therefore in any case anticipated. As soon as it is
sold (or deemed to be sold) the money flows back to
the bank, either in its own notes, which thus come back out
of circulation, or in notes of other banks, which are then
exchanged for its own (between the bankers)—so that
then the notes of both are withdrawn from circulation,
return to their starting-point—or in gold and
silver. If this gold and silver is demanded for
banknotes which are in some third person’s hands, the notes
come back. If the notes are not converted, a similar
quantity of gold and silver is taken out of circulation, and
now lies in the bank’s reserves instead of the notes.

In all these cases the process is this: the existence of
the money (transformation of the commodity into money) was
anticipated. As soon as it is actually transformed
into money, the transformation into money takes place a
second time. This second existence of it as money,
however, returns to the starting-point—it cancels out,
takes the place of its first existence as money, and comes
back out of circulation to the bank. It is perhaps the
same identical quantity of notes that expressed its
first existence which now expresses its second. The
bill of exchange for example has been discounted by a yarn
manufacturer. He has received the bill of exchange
from the weaver. With the £1,000 he pays for
coal, raw cotton, etc. The various hands through which
these notes pass in payment for their commodities finally
spend them on linen, and so the notes come to the weaver,
who on the day the bill matures pays the spinner the
identical notes, and the spinner in turn takes them back to
the bank. It is by no means necessary that the second
(posthumous) transformation of the commodity into
money—after the transformation in anticipation—
| should be carried
through in different money from the first. And so it
seems as if the spinner has in fact got nothing, since he
borrowed notes, and the end of the process is that he gets
them back again and returns them to the issuer. In
fact however these identical notes have served as means of
circulation and means of payment during this period, and the
spinner has used them in part to pay his debts, and in part
to buy goods needed for the reproduction of the yarn, and in
this way he has realised a surplus (through the exploitation
of his workmen) a part of which he can now pay back to the
bank. Likewise in money, since more money has flowed
back to him than he had expended, advanced, laid out.
How? That again brings us to the question we had
meanwhile held over.

### [4. Circulation between Farmer and Manufacturer According to the Tableau Économique]

So back to Quesnay. We come now to the third and
fourth acts of circulation.

L (the landlord) buys manufactured commodities from S
(sterile class, manufacturer) (line a—c in the
Tableau) for 1 milliard. Here 1 milliard in money, and
commodities to the same amount, circulate. <Because
what takes place is a single act of exchange. If L
bought from S in instalments and similarly received his rent
from F (the farmer) in instalments, the 1 milliard of
manufactured commodities could be bought say with 100
millions, For L buys manufactured commodities from S for 100
millions; S buys means of subsistence from F for 100
millions; F pays 100 millions of rent to L; and when this
had occurred ten times, ten times 100 millions of
commodities would have passed from S to L, and from F to S,
and ten times 100 millions from F to L. The whole
circulation would then have been carried out with 100
millions. If F however pays the rent in a single
payment, a part of the 1 milliard which is now in the
possession of S and of the 1 milliard which is again in F’s
possession might lie in their money-boxes, and the other
part be in circulation.> Commodities to the value of 1
milliard have now passed from S to L; on the other hand,
money to the value of 1 milliard has passed from L to
S. This is simple circulation. Money and
commodities merely change hands in the reverse
direction. But in addition to the 1 milliard of means
of subsistence which the farmer has sold to L and which have
thus gone into consumption, the 1 milliard of manufactured
commodities which S has sold to L have also gone into
consumption. It must be noted that these existed
before the new harvest. (Otherwise L could not buy
them with the product of the new harvest.)

S for his part now buys means of subsistence to the value
of 1 milliard from F [line c–d in the Tableau].
Now a second one-fifth of the gross product has
fallen out of circulation and into consumption. As
between S and F, the 1 milliard functions as means of
circulation. But at the same time two things take
place in this transaction which do not take place in the
process between S and L. In that process S reconverted
into money one part of his product—manufactured goods
to the amount of 1 milliard. But in the exchange with
F he transforms the money again into means of subsistence
(which for Quesnay are equivalent to wages), and in this way
replaces the capital which he had expended in wages and
consumed. This retransformation of the 1 milliard into
means of subsistence expresses, in the case of L, mere
consumption, but in the case of S it expresses industrial
consumption, reproduction; for he retransforms a part of his
commodity into one of the elements in its
production—means of subsistence. The one
metamorphosis of the commodity, its retransformation from
money into commodity, thus in this case expresses at the
same time the beginning of its real, not merely
formal, metamorphosis—the beginning of its
reproduction, the beginning of its retransformation into its
own production elements; in this transaction there is at the
same time metamorphosis of the capital. But for
L. revenue is merely converted from the form of money
into the form of commodity. This implies only
consumption.

In the second place, however, since S buys means of
subsistence from F for 1 milliard, the second 1 milliard
which F paid as money-rent to L returns to F. But it
only returns to him because he draws it back out of
circulation, buys it back, with an equivalent—1
milliard in commodities. It is the same as if the
landlord had bought from him 1 milliard of means of
subsistence (in addition to the first milliard); that is to
say, as if the landlord had had the second part of his
money-rent delivered by the farmer in commodities, and had
then exchanged these commodities for commodities from
S. S only lifts for L the second part of the 2
milliards in commodities which F has paid to L in
money. If payment had been in kind, F would have given
L 2 milliards in means of subsistence; L would have consumed
1 milliard of these himself, and exchanged the other 1
milliard in means of subsistence with S, for the latter’s
manufactured goods. In this case there would only have
been: (1) transfer of the 2 milliards in means of
subsistence from F to L; (2) a barter transaction between L
and S, in which the former exchanges 1 milliard in means of
subsistence against 1 milliard in manufactured goods, and
vice versa.

But instead of this, four acts have taken place: | (1) transfer of 2 milliards in
money from F to L; (2) L buys means of subsistence for 1
milliard from F, the money flows back to F, serving as means
of circulation; (3) L buys manufactured goods from S for 1
milliard in money; the money functions as means of
circulation; changing hands in the reverse direction to the
goods; (4) with the 1 milliard in money, S buys means of
subsistence from F; the money functions as means of
circulation. For S, it at the same time circulates as
capital. It flows back to F because now the second 1
milliard in means of subsistence is lifted—for which
the landlord held a note of assignment from him. The
money however does not come back to him directly from the
landlord, but only after it has served as means of
circulation between L and S, and in between, before it lifts
the 1 milliard of victuals, has on its passage lifted 1
milliard in manufactures, and transferred them from the
manufacturer to the landlord. The conversion of his
commodity into money (in the exchange with the landlord) as
well as the following conversion of money into victuals (in
the exchange with the farmer) are, on the part of S, the
metamorphosis of his capital, first into the form of money,
and secondly into the form of the constitutive elements
necessary to the reproduction of the capital.

The result of the four acts of circulation up to this
point is therefore: the landlord has spent his revenue, half
on means of subsistence, half on manufactured goods.
By these transactions, the 2 milliards he received as rent
in the form of money have been spent. Half of it flows
back to the farmer from him direct, and half indirect, via
S. S however has parted with one part of his finished
goods, and has replaced this part with means of subsistence,
that is, with an element needed for reproduction. With
these processes completed, the circulation is at an end as
far as the landlord comes into it. But the following
have passed out of circulation into consumption—partly
unproductive consumption, partly industrial—(the
landlord has partially replaced the capital of S by spending
his revenue): (1) 1 milliard of means of subsistence
(product of the new harvest); (2) 1 milliard of manufactured
goods (product of the previous year’s harvest); (3) 1
milliard of means of subsistence which enter into
reproduction, that is, into the production of the goods
which S next year will have to exchange against half the
landlord’s rent.

The 2 milliards in money are now again in the hands of
the farmer. He then buys goods for 1 milliard from S
to replace his annual and original advances, in so far as
these consist partly of tools, etc., and partly of
manufactured goods which he consumes during the process of
production. This is a simple process of
circulation. It puts 1 milliard into the hands of S,
while the second part of his product existing in the form of
a commodity is converted into money. On both sides
there is metamorphosis of capital. The farmer’s 1
milliard is reconverted into elements of production needed
for reproduction. The finished goods of S are
reconverted into money; they pass through the formal
metamorphosis from commodity into money, without which the
capital cannot be reconverted into its production elements,
and therefore also cannot be reproduced. This is the
fifth circulation process. One milliard of
manufactured goods (product of the previous year’s
harvest) (a'–b') fall out of circulation into
reproductive consumption.

Finally S reconverts the 1 milliard in money, in which
form half of his commodities now exist, into the other half
of his conditions of production—raw materials,
etc. (a''–b''), This is simple
circulation. For S, it is at the same time the
metamorphosis of his capital into the form suitable for its
reproduction; for F, it is the reconversion of his product
into money. Now the last one-fifth of the gross
product falls out of circulation into consumption.

That is to say: one-fifth goes into reproduction for the
farmer, and does not come into circulation; the landlord
consumes one-fifth (that makes two-fifths); S gets
two-fifths; in all, four-fifths.

Here there is an obvious gap in the explanation.
Quesnay seems to reckon like this: F gives L (line
a–b) 1 milliard (one-fifth) in means of
subsistence. With 1 milliard of his raw materials be
replaces S’s fund (a”–b”). And 1
milliard in means of subsistence form wages for S, which he
adds as value to the commodities and consumes in food while
he is doing it (c–d), And 1 milliard remains in
reproduction (a'), not entering into circulation.
Finally, 1 milliard of the product replaces advances
(a'–b'). Only he overlooks the fact that S buys
for the 1 milliard in manufactured goods, neither means of
subsistence nor raw materials from the farmer, but pays back
to him his own money. In fact he sets out from the
presupposition that the farmer possesses 2 milliards in
money in addition to his gross product, and that this money
is the total fund from which the money in circulation is
provided.

He also forgets that in addition to the 5 milliards in
gross product, a further 2 milliards of gross product exist
in manufactured commodities produced before the new
harvest. For the 5 milliards represent only the total
annual production, | the
total crop produced by the farmers, but not the gross
product of manufacture, the reproductive elements for which
have to be replaced out of this year’s harvest.

We thus have: (1) 2 milliards in money in the farmer’s
hands; (2) 5 milliards in gross product of the land; (3) 2
milliards in manufactured goods. That is, 2 milliards
in money, and 7 milliards in product (agricultural and
industrial), The circulation process, put briefly, is as
follows (F=farmer, L=landlord, S = manufacturer,
sterile):

F pays L 2 milliards in money for rent; L buys from F
means of subsistence for 1 milliard. So one-fifth of
the farmer’s gross product is disposed of. At the same
time, 1 milliard in money flows back to him. L
moreover buys goods from S for 1 milliard. By this
transaction, one-half of S’s gross product is disposed
of. In return for it, he has 1 milliard in
money. With this money he buys 1 milliard of means of
subsistence from F. By this transaction he replaces
one-half of the reproductive elements of his capital.
This disposes of another one-fifth of the farmer’s gross
product. At the same time the farmer finds himself
again in possession of the 2 milliards in money, the price
of the 2 milliards in means of subsistence which he has sold
to L and S. F now buys goods from S for 1 milliard,
which replace for him half of his advances. So the
other half of the manufacturer’s gross product is disposed
of. Finally, the latter, S, buys raw materials from
the farmer for the last 1 milliard in money; thereby a third
one-fifth of the farmer’s gross product is disposed of, and
the second half of the reproductive elements of the capital
of S is replaced; but also 1 milliard flows back to the
farmer. The latter finds himself therefore again in
possession of the 2 milliards, which is in order, since
Quesnay thinks of him as the capitalist, in relation to whom
L is merely a receiver of revenue and S merely a
wage-earner. If he paid L and S directly in his
product, he would not part with any money. If he pays
out in money, they buy his product with it, and the money
flows back to him. This is the formal return circuit
of money to the industrial capitalist, who as buyer opens
the whole business and brings it to an end. Moreover,
one-fifth of the advances belongs to reproduction.
One-fifth of the means of subsistence, however, which has
not entered into circulation at all, remains to be disposed
of.

### [5. Circulation of Commodities and Circulation of Money in the Tableau Économique. Different Cases in Which the Money Flows Back to Its Starting-Point]

S buys from the farmer means of subsistence for 1
milliard and raw materials for 1 milliard; and on the other
hand F buys from him only 1 milliard of commodities to
replace his advances. So S has to pay a balance of 1
milliard which in the final instance he pays with the 1
milliard he has received from L. Quesnay seems to
confuse this payment of 1 milliard to F with the
purchase of F’s product to the amount of 1
milliard. Reference must be made to the Abbé
Baudeau’s explanations on this point.

In fact (on our calculation) the 2 milliards have only
served to: (1) pay rent to the amount of 2 milliards in
money; (2) circulate 3 milliards of the farmer’s gross
product (1 milliard means of subsistence to L, 2 milliards
means of subsistence and raw materials to S) and to
circulate 2 milliards of the gross product of S (1 milliard
of it to L, who consumes it, and 1 milliard to F, who
consumes it reproductively).

In the last purchase (a''–b'') in which S
buys raw materials from F, he pays him back in money.

| So once more:

S has received from L 1 milliard in money. With
this 1 milliard in money he buys means of subsistence from F
to that amount. With the same 1 milliard in money F
buys commodities from S. With the same 1 milliard in
money S buys raw products from F.

Or, S buys from F raw materials for 1 milliard in money,
and means of subsistence for 1 milliard in money. F
buys goods from S for 1 milliard [in money]. In this
case 1 milliard flows back to S, but only because it was
assumed that in addition to the 1 milliard in money he
receives from the landlord, and the 1 milliard in goods that
he still has to sell, he had over and above this another 1
milliard in money which he himself had thrown into
circulation. Instead of 1 milliard circulating the
goods between him and the farmer, on this assumption 2
milliards would have been used for it. Then 1 milliard
returns to S. For he makes purchases from the farmer
for 2 milliards in money. The latter buys 1 milliard
from him, for which he pays him back half the money he had
received from him.

In the first case S buys in two stages. First he
pays out 1 milliard; this flows back to him from F; and then
he pays it out once more definitively to F, and so nothing
comes back.

In the second case, on the other hand, S makes a single
purchase for 2 milliards, If then F makes a return purchase
for 1 milliard, this remains with S. The circulation
would have used 2 milliards instead of 1 milliard, because
in the first case the 1 mil1iard, by rotating twice,
realised 2 milliards in commodities. In the second
case 2 milliards, in one rotation, also [realised] 2
milliards in commodities. If the farmer now pays back
1 milliard to S, S has not got more than in the first
case. For he has thrown into circulation, in addition
to 1 milliard in commodities, also 1 milliard in money from
his own fund which existed prior to the circulation
process. He has put it out into circulation, and so it
flows back to him.

In the first case: S [buys] 1 milliard of commodities
from F, for 1 milliard in money; F [buys] 1 milliard in
goods from S, [for] 1 milliard in money; S [buys] 1 milliard
of commodities from F, [for] 1 milliard in money; so that F
keeps 1 milliard.

In the second case: S [buys] 2 milliards of commodities
from F, for 2 milliards in money; F [buys] 1 milliard of
goods from S, for 1 milliard in money. The farmer, as
before, keeps the 1 milliard. S however gets back the
1 milliard of capital advanced by him to circulation, it is
thrown back to him by circulation. S buys commodities
from F for 2 milliards; F buys goods from S for 1
milliard. Therefore in any event S has to pay a
balance of 1 milliard, but not more than this. Since,
by way of paying this balance, he had paid F 2 milliards as
a result of the particular form of circulation, F pays him
back this 1 milliard, while in the first case he does not
return any money to him.

In the first case S makes purchases from F for 2
milliards, and F from S for 1 milliard. So in both
cases the balance in F’s favour is 1 milliard. But
this balance is paid to him in such a way that his own money
flows back to him, because S first buys 1 milliard from F,
then F 1 milliard from S, and finally S 1 milliard from
F. In these transactions 1 milliard has circulated 3
milliards. But in the aggregate the value in
circulation (if the money is real money) has been 4
milliards, 3 milliards in commodities and 1 milliard in
money. The amount of money originally thrown into
circulation (to pay F) and circulating was never more than 1
milliard—that is, never more than the balance which S
had to pay to F. Because F bought from him to the
amount of 1 milliard before he buys from F to the amount of
1 milliard for the second time, S can pay his balance with
this 1 milliard.

In the second case S throws 2 milliards into
circulation. It is true that with it he buys 2
milliards in commodities from F. These 2 milliards are
here required as means of circulation, and are paid out
against an equivalent in commodities. But F buys back
goods for 1 milliard from S. One milliard therefore
returns to S, as the balance which he has to pay to F is
only 1 milliard and not 2 milliards. He has now
replaced for F 1 milliard in commodities, and so F must pay
him back the 1 milliard, which now he would have paid
him in money for nothing. This case is remarkable
enough to spend a moment on it.

There are various possible cases of the circulation
assumed above of 3 milliards in commodities, of which 2
milliards are means of subsistence and 1 milliard
manufactures; we must however note: first that on
Quesnay’s assumption there is 1 milliard in money in the
hands of S and 1 milliard of money in the hands of F at the
moment when the circulation between the two of them begins;
secondly, we will assume by way of illustrating the
point that in addition to the 1 milliard which S receives
from L, S has in his till another 1 milliard in money.

| I.
First: The case as Quesnay puts it. S buys 1
milliard in commodities from F, for 1 milliard in money;
with the 1 milliard in money thus received from S, F buys 1
milliard in commodities from S; finally S, with the 1
milliard in money he has got back in this way, buys 1
milliard of commodities from F. F is therefore left
with the 1 milliard in money which to him represents capital
(in fact, along with the other 1 milliard in money which he
has got back from L, it forms the revenue with which again
next year he pays the rent in money; that is, 2 milliards in
money). 1 milliard in money has here circulated three
times— from S to F, from F to S, from S to F—and
each time in exchange for 1 milliard in commodities, that
is, for 3 milliards in all. If the money itself has
value, values to a total of 4 milliards are in
circulation. Money here functions only as means of
circulation; but for F, in whose hands it finally remains,
it is transformed into money and possibly into capital.

II. Secondly: The money functions merely as
means of payment. In this case S, who buys 2 milliards
in commodities from F, and F, who buys 1 milliard in
commodities from S, settle accounts with each other.
At the close of the transaction S has to pay a balance of 1
milliard in money. As in the former case, 1 milliard
in money comes into F’s money-box, but without having served
as means of circulation. The money is a transfer of
capital for him, as it only replaces his capital of 1
milliard in commodities. As before, values amounting
to 4 milliards are in circulation. But instead of
three movements of 1 milliard in money, there has only been
one, and the money has only paid for an amount of values in
commodity form that is equal to itself. In the former
case, it paid for three times as much. What would be
saved as compared with case I would be the two superfluous
movements of circulation.

III. Thirdly: To start with F comes forward
as the buyer with the 1 milliard in money (which he has had
from L), and buys commodities from S for 1 milliard.
Instead of lying fallow with him as a hoard for payment of
the next rent, now the 1 milliard circulates. S has
now 2 milliards in money (1 milliard from L and 1 milliard
from F). With these 2 milliards in money he buys
commodities to the amount of 2 milliards from F. Now
values to the amount of 5 milliards have been in circulation
(3 milliards in commodities, 2 milliards in money).
There has been a circulation of 1 milliard in money and 1
milliard in commodities, and a circulation of 2 milliards in
money and 2 milliards in commodities. Of these 2
milliards in money, the milliard originating with the farmer
circulates twice, the milliard originating with 5 only
once. Now 2 milliards in money return to F, of which
however only 1 milliard settles his balance; the other 1
milliard in money, which he himself had thrown into
circulation because he took the initiative as buyer, flows
back to him through circulation.

IV. Fourthly: S buys at once 2 milliards in
commodities from F, with 2 milliards in money (1 milliard
from L, and 1 milliard which he puts himself into
circulation from his till). F buys back from S 1
milliard in commodities, thus returning to him 1 milliard in
money; and F holds, as before, 1 milliard in money to settle
the balance between him and S. Values to the amount of
5 milliards have circulated. There are two acts of
circulation.

Of the 2 milliards in money which S returns to F, 1
milliard represents the money which F himself threw into
circulation, and only 1 milliard the money which S threw
into circulation. Here 2 milliards in money instead of
1 milliard in money come back to F, but in fact he gets only
1 milliard, as he himself had thrown the other 1 milliard
into circulation. That is, in case III. In case
IV 1 milliard in money returns to S, but it is the 1
milliard which he got from his money-box, not from selling
his commodities to L, and himself threw into
circulation.

In case I and indeed in case II there is never more than
1 milliard in money circulating; but in case I it circulates
three times and in case II it only once changes hands; this
is merely due to the fact that in case II a high development
of credit, and consequently economy in payments, is assumed;
while in case I the movement is rapid; however, each time
the money functions as means of circulation, and therefore
the value at the two poles must each time appear twice, once
in money and once in commodity. In case III and IV 2
milliards circulate, instead of 1 milliard as in I and
II. This is because on one occasion in both cases (in
case III by S as buyer who closes the circulation process,
in case IV by S as buyer who opens the circulation process)
commodity values to the amount of 2 milliards are at a
single stroke thrown into circulation; that is, 2 milliards
of commodities enter into circulation in a single act; it is
assumed, moreover, that the commodities have to be paid for
on the spot and not after the balance has been struck.

The most interesting thing about the movement is however
the 1 milliard in money which in case III is left in the
hands of the farmer, in case IV in the hands of the
manufacturer, although in both cases the balance of 1
milliard is paid to the farmer, and he gets not a farthing
more in case III, and not a farthing less in case IV.
In these transactions, of course, the exchange is always an
exchange of equivalents, and when we speak of a balance we
mean only the equivalent value which is paid for in money
instead of in commodities.

In case III F throws 1 milliard in money into
circulation, and gets in exchange for it from S the
equivalent in commodities, or 1 milliard in
commodities. But then S buys commodities from him for
2 milliards in money. The first 1 milliard in money
which he threw in thus comes back to him, because 1 milliard
in commodities has been taken from him in exchange.
This 1 milliard in commodities is paid for with the money
which be had paid out. He gets the second 1 milliard
in money in payment for the second 1 milliard in
commodities. This balance is owed to him in money,
because he had only bought in all 1 milliard of commodities,
and commodities to the value of 2 milliards had been bought
from him.

| In case IV S throws 2
milliards in money into circulation at once, for which he
takes from F commodities for 2 milliards. With the
money which S himself had paid him, F in turn buys from S
commodities for 1 milliard and so the 1 milliard in
money returns to S.

In case IV: S in fact gives F 1 milliard in commodities
(the equivalent for 1 milliard in money) and 2 milliards in
money, that is, 3 milliards; but S gets from F only 2
milliards in commodities. F has consequently to return
to him 1 milliard in money.

In case III: F gives S in commodities the equivalent of 2
milliards in money, and 1 milliard in money. That is,
3 milliards in money. But he gets from S only 1
milliard in commodities, the equivalent of 1 milliard in
money. S has consequently to return to him 2 milliards
in money; he pays back 1 milliard in the money which F
himself threw into circulation, and he himself throws 1
milliard into circulation. He keeps the balance of 1
milliard in money, but cannot keep 2 milliards in money.

In both cases S receives 2 milliards in commodities, and
F 1 milliard in commodities plus 1 milliard in money, that
is to say, the balance in money. In case III, in
addition to this, another 1 milliard comes to F, but this is
only the excess of the money which he has thrown into
circulation over what he has drawn from circulation in
commodities. Similarly with S in case IV.

In both cases S has to pay a balance of 1 milliard in
money, because he takes commodities to the value of 2
milliards out of circulation, and puts into it commodities
only to the value of l milliard. In both cases F has
to receive a balance of 1 milliard in money, because he has
thrown 2 milliards in commodities into circulation and only
drawn from it 1 milliard in commodities; the second 1
milliard must therefore be paid in money to him. In
both cases, it is only this 1 milliard in money that can
finally change hands. Since however 2 milliards are
actually in circulation, this must flow back to the person
who put it into circulation; and this holds good whether F,
in addition to receiving a balance of 1 milliard out of
circulation, has thrown into it another 1 milliard in money;
or whether S, who has to pay only a balance of 1 milliard in
money, has in addition advanced another 1 milliard in
money.

In case III 1 milliard in money comes into circulation in
excess of the quantity of money that would under different
circumstances be needed for the circulation of this quantity
of commodities, because F comes forward as the first buyer,
and must therefore throw money into circulation, whatever
his ultimate position may be. In case IV, in the same
way, 2 milliards in money come into circulation, instead of
only 1 milliard as in II, because first S comes forward as
buyer at the outset, and secondly buys 2 milliards all at
once. In both cases the money that circulates
between these buyers and sellers can finally only be equal
to the balance which one of them has to pay. For the
money which S or F has expended in excess of this amount is
paid back to him.

Let us assume that F buys commodities from S to the value
of 2 milliards. This case, then, would look like this:
F gives S 1 milliard in money for commodities. S buys
commodities from F to the value of 2 milliards in money, as
a result of which the first 1 milliard returns to F and l
milliard into the bargain. F in turn buys commodities
from S for 1 milliard in money, which brings this money back
to S. At the end of the process F would have
commodities to the amount of 2 milliards and the 1 milliard
that he had originally, before the circulation process
began; and S commodities for 2 milliards and 1 milliard in
money which he too originally had. The 1 milliard in
money of F, and the 1 milliard in money of S, would have
played their role only as means of circulation and then
would have flowed back—as money or in this case also
as capital—to both the persons who had advanced
them. Had they both used money as means of payment,
they would have set off 2 milliards in commodities against 2
milliards in commodities; their accounts would have
cancelled out and not a farthing would have circulated
between them.

Thus the money which circulates as means of circulation
between two persons who confront each other mutually as
buyers and sellers returns to its source; there are three
cases in which it can circulate.

[First:] The commodity values supplied balance
each other. In this case the money returns to the
person who advanced it to irculation and in this way used
his capital to meet the costs of circulation. For
example, if F and S each buys commodities for 2 milliards
from the other, and S opens the dance, he buys commodities
from F for 2 milliards in money. F returns to him the
2 milliards in money, buying with it 2 milliards in
commodities from him. Thus S has both before and after
the transaction 2 milliards in commodities and 2 milliards
in money. Or when, as in the case cited previously,
both advance the means of circulation to an equal amount,
each gets back what he had advanced to circulation—as
above, 1 milliard in money to F and 1 milliard to S.

Secondly: The commodity values exchanged between
the two parties do not cancel each other out. There is
a balance to be paid in money. If, as above in case I,
the circulation of the commodities has taken place in such a
way that no more money has entered into circulation
than is required for the payment of this balance— it
being always only this sum that passes to and fro between
the two parties—then it comes finally into the hands
of the last seller, in whose favour the balance is.

Thirdly: The commodity values exchanged between
the two parties are not equal to each other; there is a
balance to be paid; but the circulation of the commodities
takes place in such a form that more money circulates than
is required to settle the balance; in this case the money in
excess of this balance returns to the party who has advanced
it. In case III to the man who receives the balance,
in case IV to the one who has to pay it.

In the second category listed above the money only
returns when the receiver of the balance is the first
buyer, as for example between worker and capitalist.
It changes hands, as [in case] II, when the other party
comes forward as the first buyer.

| <Of course, all
this only takes place on the assumption that the definite
quantity of commodities is bought and sold between the same
persons, so that each of them is alternately buyer and
seller in relation to the other one, On the other hand let
us assume that the 3 milliards of commodities are equally
distributed among the commodity owners. A, A',
A'', the sellers, and they are confronted by the buyers
B, B', B''. If the three purchases take place
simultaneously, that is to say, alongside each other, 3
thousand in money must circulate, so that each A is in
possession of 1 thousand in money and each B is in
possession of 1 thousand in commodities. If the
purchases follow each other, succeeding each other in time,
the circulation of the same 1 thousand in money can only
effect these if the metamorphoses of the commodities are
interwoven, that is to say, when some persons function as
buyers and sellers, even if not [in relation] to the same
persons as in the case above, but as buyer in relation to
one person, and as seller in relation to the other.
Thus for example: (1) A sells to B for 1 thousand in money;
(2) A buys with this 1 thousand from B'; (3) B' with the 1
thousand in money buys from A'; (4) A' with the 1 thousand
in money from B''; (5) B'' with the 1 thousand in
money from A''. The money would have changed
hands five times between the six persons; but also
commodities to the value of 5 thousand would have
circulated. If commodities for 3 thousand are to be
circulated, it would be like this: (1) A [buys] from B for 1
thousand in money; (2) B from A' for 1 thousand in money;
(3) A' from B' for 1 thousand in money. Three changes
of place as between four persons. It is
M—C.>

The cases set out above do not contradict the law
explained earlier: “that with a given rapidity of
circulation of money and a given total sum of prices of
commodities the quantity of the circulating medium is
determined” (I, p. 85). In example 1 above, 1
thousand in money circulates three times, and in fact it
circulates commodities to the amount of 3 thousand.
The amount of money in circulation is consequently
3,000 (sum of prices)/3 (velocity) or
3,000 (sum of prices)/3 cycles
= 1,000 money.

In case III or IV the total prices of the commodities in
circulation are, it is true, equal to 3,000 in money; but
the rapidity of circulation is different. 2,000 in
money circulates once, that is, 1,000 in money plus 1,000 in
money. Of the 2,000, however, 1,000 circulates once
more. 2,000 in money circulates two-thirds of the
3,000 in commodities, and half of it, 1,000 in money,
circulates another third; one 1,000 in money circulates
twice, but another 1 000 in money circulates only
once. The twofold circulation of 1,000 in money
realises commodities whose prices are equal to 2,000 in
money; and the single circulation of 1,000 in money realises
commodities whose prices are equal to 1,000 in
money—both together, equal to 3,000 in
commodities. What then is the rapidity of circulation
of the money in relation to the commodities which it
circulates in this case? The 2,000 in money makes 1
1/2 cycles (this is the same thing as
first the total
sum circulates once, and then half of it again completes
one cycle), that is, 3/2. And in
fact:

3,000 (sum of prices)/3/2 cycles
= 2,000 in money.

What is it then that determines the different
rapidity of circulation of the money in this case?

Both in III and IV the difference arises from the fact
that, in contrast to I —where the total amount of
prices of the commodities circulating each time is never
greater and never smaller than 1/3 of
the total prices of the aggregate quantity of commodities
which circulate, commodities only to the amount of 1,000 in
money circulate at any time—in III and IV, however,
commodities for 2,000 circulate once, and commodities for
1,000 circulate once, that is, once two-thirds of the
existing quantity of commodities, and once one-third.
For the same reason, larger varieties of coin must circulate
in wholesale trade than in retail trade.

As I have already observed (I, “[The] Circulation
of Money”), the reflux of the money shows in
the first place that the buyer has in turn become
seller; and in fact it makes no difference whether in so
doing he sells to the same person from whom he has bought,
or not. If however the buying and selling is between
the same persons, then the phenomena appear which have been
the occasion of so many errors (Destutt de Tracy). The
buyer becoming seller shows that new commodities are to be
sold. Continuity in the circulation of commodities
—tantamount to its constant renewal (I,
p. 78)—is, therefore, reproduction. The buyer
can become in turn seller—as in the case of the
manufacturer in relation to the labourer—without this
denoting an act of reproduction. It is only the
continuity, the repetition of this reflux, in relation to
which it can be said that it denotes reproduction.

The reflux of money, when it represents the reconversion
of the capital into its money form, necessarily shows the
end of one cycle [i.e., turnover] and the beginning again of
new reproduction, if the capital as such continues the
process. In this case too he [the capitalist], as in
all other cases, was the seller, C—M, and then became
buyer, M—C; but it is only in M that his capital again
possesses the form in which it can be exchanged for its
reproductive elements, and here the C represents these
reproductive elements. M—C here represents the
transformation of the money-capital into productive or
industrial capital.

Furthermore, as we have seen, the reflux of the money to
its starting-point may show that the money balance in a
series of purchases and sales is in favour of the buyer with
whom the series of these processes opened. F buys from
S for 1,000 in money. S buys from F 2,000 in
money. Here the 1,000 in money flows back to F.
As for the other 1,000, there is merely a change of place of
the money between S and F.

| Finally, however, a
reflux of the money to its starting-point may take place
without indicating payment of a balance, both (1) when the
reciprocal payments cancel each other out, and consequently
there is no balance to be paid in money; and (2) when the
transactions do not cancel out, and therefore a
balance has to be paid. See the cases analysed
above. In all these cases it makes no difference
whether for example the same S confronts F; S representing
here in relation to F and F to S the total number of those
selling to him and buying from him (exactly as in the
example where payment of a balance is indicated by the
reflux of the money). In all these cases the money
flows back to the person who so to speak has advanced it to
circulation. It has done its job in circulation, like
bank-notes, and comes back to the person who laid it
out. Here it is only means of circulation.
The final capitalists settle with each other, and so it
comes back to the one who paid it out.

We have therefore still to deal later on with the
question we have held over; the capitalist draws more money
out of circulation than he threw into it.

### [6. Significance of the Tableau Économique in the History of Political Economy]

Back to Quesnay:

Adam Smith cites with some irony the Marquis de
Mirabeau’s hyperbolical statement:

“There have been since the world
began three great inventions… The first is the
invention of writing….The second is the
invention (!) of money…. ‘The
third is the economical table, the result of the
other two, which completes them both” ( [Smith,
Wealth of Nations, O.U.P. edition, Vol. II, p. .300],
Garnier, t. III, l. IV, ch. IX, p. 540).

But in fact it was an attempt to portray the whole
production process of capital as a process of
reproduction, with circulation merely as the form of
this reproductive process; and the circulation of money only
as a phase in the circulation of capital; at the same time
to include in this reproductive process the origin of
revenue, the exchange between capital and revenue, the
relation between reproductive consumption and final
consumption; and to include in the circulation of capital
the circulation between consumers and producers (in fact
between capital and revenue); and finally to present the
circulation between the two great divisions of productive
labour—raw material production and
manufacture—as phases of this reproductive process;
and all this depicted in a Tableau which in fact
consists of no more than five lines which link together six
points of departure or return— [and this was] in the
second third of the eighteenth century, the period when
political economy was in its infancy—this was an
extremely brilliant conception, incontestably the most
brilliant for which political economy had up to then been
responsible.

As regards the circulation of capital—its
reproductive process, the various forms which it assumes in
this process of reproduction, the connection between the
circulation of capital and circulation in general (that is,
not only the exchange of capital for capital, but of capital
for revenue)—Adam Smith in fact only took over the
inheritance of the Physiocrats and classified and specified
more precisely the separate items in the inventory.
But his exposition and interpretation of the movement as a
whole was hardly as correct as its presentation in outline
in the Tableau économique, in spite of Quesnay’s
false assumptions.

When moreover Adam Smith says of the Physiocrats:
“Their works have certainly been of some service to
their country” ([Wealth of Nations, O.U.P.
edition, Vol. II, p. 2991, [Garnier], l.c., p. 538), this
is an immoderately moderate statement of the significance
for example of Turgot, one of the immediate fathers of the
French revolution. |

* | The passage from Proudhon
referred to earlier runs: “The amount of mortgage
debts, according to the best-informed writers, is 12
milliards; some put it as high as 16 milliards. The
amount of debts on note of hand, at least 6.
Limited-liability companies, about 2. The public debt,
8 milliards. Total: 28 milliards. All these
debts—note this point—have their source in money
lent, or deemed to be lent, at 4, at 5, at 6, at 8, at 12,
and up to 15 per cent. I take 6 per cent as the
average interest, as far as concerns the first three
categories: that would be, then, on 20 milliards, 1,200
millions. Add the interest on the public debt, about
400 millions: in all, 1,600 millions annual interest, for a
capital of 1 milliard” (p. 152). That is to say;
160 per cent. For “the amount of ready money, I
will not say existing, but circulating in France, including
the cash balance of the Bank, does not exceed 1 milliard,
according to the most usual estimate” (p. 151).
“When the exchange has been completed, the money is
once more available, and can therefore give rise to a new
loan…The money-capital, going from exchange to
exchange, always returns to its source, and it follows that
it can always be reloaned by the same hand and always
profits the same person” (pp. 153-54).
Gratuité du crédit. Discussion
entre M. Fr. Bastiat et M. Proudhon, Paris, 1850. |


## [CHAPTER VII] Linguet

### [Early Critique of the Bourgeois-Liberal View of the “Freedom” of the Labourer]

| Linguet,
Théorie des lois civiles, etc.,
Londres, 1767.

In accordance with the plan of my work socialist and
communist writers are entirely excluded from the historical
reviews. These reviews are only intended to show on
the one hand in what form the political economists
criticised each other, and on the other hand the
historically determining forms in which the laws of
political economy were first stated and further
developed. In dealing with surplus-value I therefore
exclude such eighteenth-century writers as Brissot, Godwin
and the like, and likewise the nineteenth-century socialists
and communists. The few socialist writers whom I shall
come to speak of in this survey either themselves adopt the
standpoint of bourgeois economy or contest it from its own
standpoint.

Linguet however is not a socialist. His polemics
against the bourgeois-liberal ideals of the Enlighteners,
his contemporaries, against the dominion of the bourgeoisie
that was then beginning, are given—half-seriously,
half-ironically—a reactionary appearance. He
defends Asiatic despotism against the civilised European
forms of despotism; thus he defends slavery against
wage-labour.

Vol. I. The only statement directed against
Montesquieu: l’esprit des lois, c’est la
propriété,* shows the depth of his
outlook.

The only economists whom Linguet found to deal with were
the Physiocrats.

The rich have taken possession of all the conditions of
production; [hence] the alienation of the conditions of
production, which in their simplest form are the natural
elements themselves.

“In our civilised countries, all the
elements [of nature] are slaves” ([Linguet,
Théorie des lois civiles…, Londres,
1767], p. 188).

In order to get hold of some of this wealth appropriated
by the rich, it must be purchased with heavy labour, which
increases the wealth of these rich persons.

“Thus it is that all captive nature
has ceased to offer to these children resources of easy
access for the maintenance of their life. Its favours
must be paid for by assiduous toil, and its gifts by
stubborn labours” [p. 188].

(Here—in the gifts of nature—the Physiocratic
view is echoed.)

“The rich man, wino has arrogated
to himself the exclusive possession of it, only at this
price consents to restore even the smallest part of it to
the community. In order to be allowed to share in
its treasures, it is necessary to labour to increase
them” (p. 189). “One must, then,
renounce this chimera of liberty” (p. 190).
Laws exist in order to “sanctify a primary
usurpation” (of private property), “to prevent
new usurpations” (p. 192). “They are, as
it were, a conspiracy against the greater part of the human
race” [p. 195] (that is, against those who own no
property). “It is society which has produced the
laws, and not the laws which have produced society”
(p. 230). “Property existed before the
laws” (p. 236).

Society itself—the fact that man lives in society
and not as an independent, self-supporting
individual—is the root of property, of the laws based
on it and of the inevitable slavery.

On the one hand, there were peaceful and isolated
husband-men and shepherds. On the other hand—

“hunters accustomed to live by blood,
to gather together in bands the more easily to entrap and
fell the beasts on which they fed, and to concert together
on the division of the spoils” (p. 279).
“It is among the hunters that the first signs of
society must have appeared” (p. 278).
“Real society came into being at the expense of the
shepherds or husbandman, and was founded on their
subjection” by a band of hunters who had joined
hands (p. 289). All duties of society were resolved
into commanding and obeying “This degradation of a
part of the human race, after it had produced society, gave
birth to laws” (p. 294).

Stripped of the conditions of production, the labourers
are compelled by need to labour to increase the wealth of
others in order themselves to live.

“It is the impossibility of living by
any other means that compels our farm labourers to till the
soil whose fruits they will not eat, and our masons to
construct buildings in which they will not live. It is
want that drags them to those markets where they await
masters who will do them the kindness of buying them.
It is want that compels them to go down on their knees to
the rich man in order to get from him permission to enrich
him” (p. 274).

“Violence, then, has been the first
cause of society, and force the first bond that held it
together” (p. 302). “Their” (men’s)
“first care was doubtless to provide themselves with
food… the second must have been to seek to provide
themselves with it without labour”
(pp. 307-08). “They could only achieve this by
appropriating to themselves the fruit of other men’s
labour” (p. 308). “The first
conquerors only made themselves despots so that they could
be idle with impunity, and kings, in order to have something
to live on: and this greatly narrows and
simplifies…the idea of domination” (p.
309). “Society is born of violence, and property
of usurpation” (p. 347). “As soon as there
were masters and slaves, society was formed”
(p. 343). “From the beginning, the two | pillars of the civil union
were on the one hand the slavery of the greater part of the
men, and on the other, the slavery of all the
women… It was at the cost of three-fourths of
its members that society assured the happiness, the
opulence, the ease of the small number of property-owners
whom alone it had in view” (p. 365).

Vol. II: “The question, therefore, is
not to examine whether slavery is contrary to nature in
itself, but whether it is contrary to the nature of
society…it is inseparable from it”
(p. 256). “Society and civil servitude were
born together” (p. 257). “Permanent
slavery…the indestructible foundation of
societies” (p. 347).

“Men have only been reduced to depend
for their subsistence on the liberality of another man
when the latter by despoiling them has become rich
enough to be able to return a small portion to
them. His feigned generosity could be no more than a
restitution of some part of the fruits of their labours
which he had appropriated” (p. 242).
“Does not servitude consist in this obligation
to sow without reaping for oneself, to sacrifice one’s
well-being to that of another, to labour without hope?
And did not its real epoch begin from he moment when there
were men whom the whip and a few measures of oats when they
were brought to the stable could compel to
labour? It is only in a fully developed society that
food seems to the poor starveling a sufficient
equivalent for his liberty; but in a society in its
early stages free men would be struck with horror at this
unequal exchange. It could only be proposed for
captives. Only after they have been deprived of
the enjoyment of all their faculties can it” [the
exchange] “become a necessity for them”
(pp. 244-45).

“The essence of
society…consists in freeing the rich man from
labour, giving him new organs, untiring members, which
take upon themselves all the laborious operations the
fruits of which he is to appropriate. That is the
plan which slavery allows him to carry out without
embarrassment. He buys men who are to serve him”
(p. 461). “In suppressing slavery, no claim was
made that either wealth or its advantages were
suppressed… It was therefore necessary that
things should remain the same except in name, It has always
been necessary for the majority of men to continue to live
in the pay of and in dependence on the minority which has
appropriated to itself all wealth. Slavery has
therefore been perpetuated on the earth, but under a sweeter
name. Among us now it is adorned with the title of
service” (p. 462).

By these servants, Linguet says, he does not mean lackeys
and the like:

“The towns and the countryside are
peopled by another kind of servant, more widely spread, more
useful, more laborious, and known by the name of
journeymen, handicraftsmen, etc. They are not
dishonoured by the brilliant colours of luxury; they sigh
beneath the loathsome rags which are the livery of
penury. They never share in the abundance of which
their labour is the source. Wealth seems to grant
them a favour when it kindly accepts the presents that
they make to it. It is for them to be grateful for
the services which they render to it. It pours
on them the most outrageous contempt while they are clasping
its knees imploring permission to be useful to
it. It has to be pleaded with to grant this, and
in this peculiar exchange of real generosity for an
imaginary favour, arrogance and disdain are on the
side of the receiver, and servility, anxiety and
eagerness on the side of the giver. These are
the servants who have truly replaced the serfs among
us” (pp. 463-64).

“The point that has to be examined
is: what effective gain the suppression of slavery
has brought to them. I say with as much sorrow as
frankness: all that they have gained is to be every moment
tormented by the fear of death from hunger, a calamity that
at least never visited their predecessors in this lowest
rank of mankind” (p. 464). “He is free,
you say. Ah! That is his misfortune. He is
bound to no one; but also no one is bound to him. When
he is needed, he is hired at the cheapest price
possible. The meagre wage that he is promised
is hardly equal to the price of his subsistence for the
day which he gives in exchange. He is given
overlookers to compel him to fulfil his task
quickly; he is hard driven; he is goaded on, for fear
that a skilfully concealed and only too comprehensible
laziness may make him hold back half his strength; for fear
that the hope of remaining employed longer on the same
task may stay his hands and blunt his tools.
The sordid economy that keeps a restless watch on him
overwhelms him with reproaches at the slightest respite he
seems to allow himself, and claims to have been robbed
if he takes a moment’s rest. When he has finished he
is dismissed as be was taken on, with the coldest
indifference, and without any concern as to whether the
twenty or thirty sous that he has just earned for a hard
day’s labour | will be
enough to keep him if he finds no work the following
day” (pp. 466-67).

“He is free! That is precisely
why I pity him. For that reason, he is much less cared
for in the labours in which be is used. His life is
much more readily hazarded. The slave was precious to
his master because of the money he had cost him. But
the handicraftsman costs nothing to the rich voluptuary who
employs him. Men’s blood had some price in the days
of slavery. They were worth at least as much as they
could be sold for in the market. Since they have no
longer been sold they have no real intrinsic value. A
pioneer is much less valued in an army than a pack-horse,
because the horse is very costly and a pioneer can be had
for nothing. The suppression of slavery brought these
military calculations into civil life; and since that
epoch there has been no prosperous bourgeois who does not
calculate in this way, as heroes do” (p. 467)

“The day-labourers are born, grow up
and are trained for” (are bred for) “the service
of wealth without causing it the slightest expense, like the
game that it massacres over its estates. It seems as
if it really has the secret of which the unfortunate Pompey
vainly boasted. Wealth has only to stamp on the
ground, and from it emerge legions of hard-working men who
contend among themselves for the honour of being at its
disposal: if one among this crowd of mercenaries putting up
its buildings or keeping its gardens straight disappears,
the place that he has left empty is an invisible point which
is immediately covered again without any intervention from
anyone. A drop of the water of a great river is lost
without regret, because new torrents incessantly succeed
it. It is the same with labourers; the ease with which
they can be replaced fosters the rich man’s”
(this is the form used by Linguet; not yet capitalist)
“hard-heartedness towards them” (p. 468).

“These men, it is said, have no
master…pure abuse of the word. What does it
mean? they have no master—they have one, and the
most terrible, the most imperious of masters, that is,
need. It is this that reduces them to the most
cruel dependence. It is not one man in particular
whose orders they must obey, but the orders of all in
general. It is not a single tyrant whose whims
they have to humour and whose benevolence they have to
court— which would set a limit to their servitude and
make it endurable. They become the valets of anyone
who has money, which gives their slavery an infinite
compass and severity. It is said that if they do not
get on well with one master they at least have the
consolation that they can tell him so and the power to make
a change: but the slaves have neither the one nor the
other. They are therefore all the more wretched.
What sophistry! For bear in mind that the number of
those who make others work is very small and the
number of labourers on the contrary is immense”
(pp. 470-71). “What is this apparent liberty
which you have bestowed on them reduced to for them?
They live only by hiring out their arms. They must
therefore find someone to hire them, or die of hunger.
Is that to be free?” (p. 472).

“What is most terrible is that the
very smallness of this pay is another reason for reducing
it. The more the day-labourer is driven by want, the
cheaper he sells himself. The greater the urgency of
his need, the less profitable is his labour. The
despots for the moment whom he beseeches with tears to
accept his services feel no shame in, as it were, feeling
his pulse, to assure themselves that he has enough strength
left; they fix the reward that they offer him by the degree
of his weakness. The nearer they think he is to death
from starvation, the more they deduct from what could keep
him from it; and what the savages that they are give him is
less to prolong his life than to delay his death”
(pp. 482-83). The “independence” (of the
day-labourer) “is one of the most baneful scourges
that the refinement of modern times has produced. It
augments the wealth of the rich and the poverty of the
poor. The one saves everything that the other
spends. What the latter is forced to economise is not
from his superfluity but from what is indispensable to
him” (p. 483).

“If today it is so easy to maintain
these prodigious armies which join with luxury in order to
bring about the extinction of the human race, it is only due
to the suppression of slavery… It is only since
there have no longer been slaves that debauchery and beggary
make heroes at five sous a day” (pp. 484-85).

“I find this” (Asiatic slavery)
“a hundred times more preferable than any other way of
existing, for men reduced to having to win their livelihood
by daily labour” (p. 496).

“Their” (the slaves’ and the
labourers’) “chains are made of the same material and
only differently coloured. Here they are black, and
seem heavy: there they look less gloomy and seem hollower:
but weigh them impartially and you will find no difference
between them; both are equally forged by necessity.
They have precisely the same weight, or rather, if they are
a few grains more in one case, it is in the one whose
external appearance proclaims that it is lighter”
(p. 510).

He calls to the men of the French Enlightenment, in
regard to the labourers:

“Do you not see that the subjection,
the annihilation—since it must he said—of this
large part of the flock creates the wealth of the
shepherds?… Believe me, in his interest” (the
shepherd’s), “in yours, and even in theirs, leave
them” (the sheep) “with the conviction that they
have that this cur who yelps at them is stronger by himself
than they are all together. Let them flee with stupid
fright at the mere sight of his shadow. Everyone
benefits from it. It will make it easier for you to
gather them in to fleece them for yourself. They are
more easily guarded from being devoured by wolves.
[441] It is true, only to he eaten by men. But anyway
that is their fate from the moment they have entered a
stable. Before talking of releasing them from there,
start by overthrowing the stable, that is to say,
society” (pp. 512-13). |X-441||

* The sprit of the
laws is property.—Ed.


## Addenda

### [1. Hobbes on Labour, on Value and on the Economic Role of Science]

||XX-1291a| According to
Hobbes science, not operative labour, is the
mother of the arts.

“Arts of public use, as
fortification, making of engines, and other instruments of
war; because they confer to defence, and victory, are power;
and though the true mother of them, he science, namely
the mathematics; yet, because they are brought into the
light, by the hand of the artificer, they he esteemed, the
midwife passing with the vulgar for the mother, as his
issue” (Leviathan, in English Works of
Thomas Hobbes, edit. by Molesworth, London, 1839-44, t. III,
p. 75).

The product of mental labour—science—always
stands far below its value, because the labour-time needed
to reproduce it has no relation at all to the labour-time
required for its original production. For example, a
schoolboy can learn the binominal theorem in an hour.

Labour power:

“The value, or worth of a
man, is as of all other things, his price; that is to
say, so much as would be given for the use of his
power” (l.c., p. 76). “A man’s
labour” (that is, the use of his labouring power)
“also, is a commodity exchangeable for benefit,
as well as any other thing” (l.c., p. 233).

Productive and unproductive labour:

“It is not enough, for a man to
labour for the maintenance of his life; but also to
fight, if need be, for the securing of his
labour. They must either do as the Jews did after
their return from captivity, in re-edifying the temple,
build with one hand, and hold the sword in the other; or
else they must hire others to fight for them” (l.c.,
p. 333). |XX-1291a||

### [2.] Historical: Petty

### [Negative Attitude to Unproductive Occupations. Germs of the Labour Theory of Value. Attempt to Explain Wages, Rent of Land, the Price of Land and Interest on the Basis of the Theory of Value]

||XXII-1346| Petty, A
Treatise of Taxes, and Contributions, London, 1667.

Our friend Petty has quite a different “population
theory” from Malthus. According to him a check
ought to be put upon the “breeding” faculties of
parsons, and the “Celibacy” again put upon
them.

All this belongs to the [sectional] productive and
unproductive labour.

a) Parsons:

“For as much as there he more Males
than Females in England….it were good for the
Ministers to return to their Coelibat; or that none
should be Ministers, whilst they were* married… And then our
unmarried Parson might live as well with half,
as now with the whole of his Benefice” (pp. 7-8).

b) Merchants and Retailers:

“A large proportion of these also
might be retrenched, who properly and originally earn
nothing from the Publick; being only a kind of
Gamesters, that play With one another | for the labours of the
poor; yielding of themselves no fruit at all, otherwise
than as Veins and Arteries, to distribute forth and
back the blood and nutritive juyces of the Body Politick,
namely, the product of Husbandry and Manufacture”
(p.10).

c)Lawyers, physicians, officials, etc.:

“If the numerous Offices and Fees
relating to the Government, Law, and Church;
and if the number of Divines, Lawyers, Physicians,
Merchants, and Retailers were also lessened, all which do
receive great Wages for little work done to the
Publick, with how much greater ease would common expenses he
defrayed?” (p.11).

d) Paupers (supernumeraries):

“Who shall pay these men? I
answer, every body… I think ‘t is plain,
they ought neither to be starved, nor hanged, nor given
away” [to another nation] etc. (p. 12). Either
they are given “the superfluity”, or if there is
none, “in case there be no overplus…;
‘t is fit to retrench a little from the
delicacy of others feeding in quantity or quality”
(pp. 12-13). The labour imposed on them (the
supernumeraries) may be of any kind; only it must be
“without expense of Foreign Commodities”; the
important thing is to “keep their minds to discipline
and obedience, and their bodies to a patience of more
profitable labours when need shall require it” (p.
13). The best “Imployments be” [for them]
“The making of Bridges and Cawseys. The working
in Mines”, etc.*
(p. 12).

Population—wealth:

“Fewness of people, is real
poverty; and a nation wherein are eight Millions of
people, are more than twice as rich as the same scope of
Land wherein are but four” (p. 16).

On (a) above (Parsons). Petty handles the
priests with exquisite irony:

“Religion best flourisheth when the
Priests are most mortified, as…the Law…best
flourisheth when Lawyers have least to do”
(p. 57). He advises the parsons in any case
“not to breed more Church-men that the
Benefices as they now stand shared out will
receive”. For example, with 12,000 benefices in
England and Wales, “it will not be safe to breed up
24,000 Ministers”. For then the 12,000
unprovided for will enter into competition, “which
they cannot do more easily, than by persuading the people,
that the twelve thousand Incumbents do poyson or starve
their Souls” (an allusion to the English religious
war) “and misguide them in their way to Heaven”
(p. 57).

Origin of surplus-value and how to compute
it. His treatment is somewhat confused, but in all
the grappling with ideas striking passages can be found here
and there.

Petty distinguishes between natural price, political
price, true price currant (p. 67). By natural
price he means in fact value, and it is only this
that concerns us here, since | the determination of
surplus-value depends on the determination of
value. In this treatise he in fact determines the
value of commodities by the comparative quantity
of labour they contain.

“But before we talk too much of
Rents, we should endeavour to explain the misterious
nature of them, with reference as well to Money, the Rent
of which we call Usury; as to that of Lands and
Houses” (p. 23).

a) The first question is, what is the value of a
commodity, or more particularly, of corn?

“If a man can bring to London an
ounce of Silver out of the Earth in Peru, in the same
time that he can produce a Bushel of Corn, then one is
the natural price of the other; now if by reason of new and
more easie Mines a man can get two ounces of Silver as
easily as formerly he did one, then Corn will be as cheap as
ten shillings the Bushel, as it was before at five shillings
caeteris paribus” (p. 31). “Let the
production of a Bushel of […] Corn he supposed of
equel labour to that of producing an ounce of
Silver” (p. 66). This is, in the first
place, the “real and not an imaginary way of computing
the prices of Commodities” (p. 66).

ß) The second point, which has now to be examined,
is the value of labour.

“The Law… should allow the
Labourer but just wherewithal to live; for if you allow
double, then he works but half so much as he could have
done, and otherwise would; which is a loss to the Publick
of the fruit of so much labour” (p. 64).

The value of labour is therefore determined by the
necessary means of subsistence. The labourer is
impelled to surplus production and surplus-labour only by
being forced to use the whole of the labour-power within his
capacity in order to get even as much as be just needs to
live. However, the cheapness or dearness of his
labour is determined by two factors: natural fertility and
the standard of expenditure (needs) conditioned by the
climate.

“Natural dearness and
cheapness depends upon the few or more hands
requisite to necessaries of Nature: As Corn is cheaper
where one man produces Corn for ten, than where he
can do the like but for six; and withal, according as the
Climate disposes men to a necessity of spending more or
less” (p. 67).

g) For Petty the surplus exists only in two forms:
rent of land or rent of money (usury).
The latter he derives from the former. For him, as
later for the Physiocrats, the first is the true form
of surplus-value (but at the same time he explains that corn
is intended to cover all necessaries of life, as in the
“Lord’s Prayer” <Our Father> the word
“Bread doth”).

In developing his ideas he presents rent (the
surplus-value) not only as the excess drawn by the employer
beyond the necessary time of labour, but also as the excess
of surplus-labour of the producer himself over his wages and
the replacement of his own capital.

“Suppose a man could with his own
hands plant a certain scope of Land with Corn, that is,
could Digg, or Plough; Harrow, Weed, Reap, Carry home,
Thresh, and Winnow so much as the Husbandry of this Land
requires; and had withal Seed wherewith to sow the
same. I say, that when this man hath subducted his
seed out of the proceed of His Harvest” (that is,
in the first place deducted from the product an amount
equivalent to the constant capital), | “and also what himself
bath both eaten and given to others in exchange for Clothes,
and other Natural necessaries; that the Remainder of
Corn, is the natural and true Rant of the Land for
that year; and the medium of seven years, or
rather of so many years as makes up the Cycle, within
which Dearth and Plenties make their revolution, doth
give the ordinary Rent of the Land in Corn”
(pp. 23-24).

In fact for Petty, therefore, since the value of corn is
determined by the labour-time contained in it, and the rent
is equal to the total product minus wages and seed, rent is
equal to the surplus-produce in which the surplus-labour is
materialised. Rent here includes profit; the latter is
not yet separated from rent.

In the same ingenious way Petty goes on to ask:

“But a further, though collateral
question may be, how much English money this Corn
or Rent is worth; I answer, so much as the money
which another single man can save within the same
time, over and above his expence, if he employed himself
wholly to produce and make it; viz. Let another man go
travel into a Countrey where is Silver there Dig it, Refine
it, bring it to the same place where the other man planted
his Corn; Coyn it, etc., the same person, all the while of
his working for Silver, gathering also food for his
necessary livelihood, and procuring himself covering,
etc. I say, the Silver of the one must be esteemed
of equal value with the Corn of the other: the one,
being perhaps twenty Ounces and the other twenty
Bushels. From whence it follows that the price of a
Bushel of this Corn to he an Ounce of Silver”
(p. 24).

The difference in the kind of labour, Petty expressly
notes, is here quite immaterial; all that matters is the
labour-time.

“And forasmuch as possible there may
be more Art and Hazard in working about the Silver, then
about the* Corn, yet
all comes to the same pass; for let a hundred men work
ten years upon Corn, and the same number of men the
same time, upon Silver; I say, that the neat
proceed of the Silver is the price of the whole neat
proceed of the Corn, and like parts of the one, the
price of like parts of the other” (p. 24).

After thus explaining rent—which here is equivalent
to the total surplus-value, profit included—and
its expression in money, he then sets out, again in a very
brilliant way, to determine the money value of
land.

“Wherefore we would he glad to find
the natural value of the Fee-simple of Land, though
but no better than we have done that of the usus
fructus above mentioned… Having found the
Rent or value of the usus fructus per annum, the
question is, how many years purchase (as we usually
say) is the Fee-simple naturally worth? If we
say an infinite number, then an acre of Land would be equal
in value to a thousand acres of the same Land; which is
absurd, and infinity of Units being equal to an infinity of
Thousands: wherefore we must pitch upon some limited
number, and that I apprrehend […] the number of
years, which I conceive one man of fifty years old, another
of twenty-eight, and another of seven years old, all being g
alive together may be thought to live; that is to say, of a
Grandfather, Father and Child; few men having reason to take
care of more remote Posterity… Wherefore I
pitch the number of years purchase, that any Land is
naturally worth, to be the ordinary | extent of three such persons
their lives. Now in England we esteem three lives
equal to one and twenty years, and consequently the value
of Land, to be about the same number of years
purchase” (pp. 25-26).

After resolving rent into surplus-labour and
consequently surplus-value, Petty explains that land
is nothing but the capitalised rent, that is to say, a
definite number of years’ rent or the total amount of
the rents for a definite number of years.

In fact, rent is capitalised or reckoned as the
value of land in this way:

Let one acre yield an annual rent of £10. If
the rate of interest is 5 per cent, then £10
represents the interest on a capital of £200, and, as
the interest at 5 per cent replaces the capital in 20 years,
the value of the acre would be £200
(2O´£10). Capitalisation of rent therefore
depends on the rate of interest. If the rate of
interest were 10 per cent, it would represent the interest
on a capital of £100 or ten years’ purchase.

But as Petty starts from the rent of land as the
general form of surplus-value, which includes profit, he
cannot take the rate of interest on capital as something
given; on the contrary, he has to deduce it from rent as a
special form (as Turgot also does-quite consistently
from his own standpoint). In what way then is he to
determine the number of years—the number of years’
rent —which forms the value of land? A man is
only interested in buying as many yearly rentals as the
years during which lie has “to take care” of
himself and his immediate posterity; that is, as long as an
average man, grandfather, father and child, lives,
and on the “English” reckoning this is
twenty-one years. Therefore what lies beyond the
twenty-one years “usus fructus” has no
value for him. Consequently he pays for the usus
fructus for twenty-one years, and this constitutes the
value of the land.

In his ingenious way he gets himself out of the
difficulty; but the important thing here is,

firstly, that rent, as the expression of the total
agricultural surplus-value, is derived not from the
land but from Labour, [and is presented as] the surplus of
labour in excess of what is necessary for the subsistence of
the labourer;

secondly, that the value of land is nothing but
the rent purchased in advance for a certain number of
years—a transmuted form of rent itself, in
which for example twenty-one years surplus-value (or labour)
appears as the value of the land; in a word, the
value of land is nothing but capitalised
rent.

Such is Petty’s deep insight into the matter. From
the standpoint of the buyer of rent (i.e., of land)
rent thus appears merely as interest on his
capital used to buy it; and in this form rent has become
completely unrecognisable and appears as interest on
capital.

After Petty has thus determined the value of land
and the value of the annual rental, he is able to
derive the rent of money or usury as a secondary form.

“As for Usury, the least that
can be, is the Rent of so much Land as the Money
lent will buy, where the Security is undoubted”
(p. 28).

Here interest is presented as determined by the price
of rent, whereas on the contrary the price of
rent or the purchase value of land is determined
by interest. But this is quite consistent, as
rent is presented as the general form of
surplus-value and therefore interest on money must be
derived from it as a secondary form.

Differential rent. Of this too the first
notion is to be found in Petty. He derives it not from
the different fertility of pieces of land of the same
size, but from the different position, [the
different] distance from the market of pieces of land of
equal fertility, which as we know is one element in
differential rent. He says:

| “As great need
of Money heightens Exchange, so doth great need of Corn
raise the price of that likewise, and
consequently of the Rent of the Land that bears
Corn” (here therefore he says explicitly that the
price of corn determines rent, it being implicit in
the earlier analysis that rent does not determine the
value of corn) “and lastly of the Land
itself; as for example, if the Corn which feedeth
London, or an Army, be brought forty miles together,* then the Corn growing
within a mile of London, or the quarters of such Army,
shall have added unto its natural price, so much as
the charge of bringing it thirty nine miles doth amount
unto… Hence it comes to pass, that Lands
intrinsically alike near populous places, such as where
the Perimeter of the Area that feeds them is great, will not
only yield more Rent for these Reasons, but also more
years purchase than in remote places”,
etc. (p. 29).

Petty also mentions the second cause of differential
rent—the differing fertility of land and
therefore the differing productivity of labour on
equal areas of land:

“The goodness or badness, or
the value of Land depends upon the greater or lesser
share of the product given for it in proportion to the
simple labour bestowed to raise the said Product “
(p. 67).

Petty’s exposition of differential rent is therefore
better than that of Adam Smith. |XXII-1351||

||XXII-1397| [Petty,] A
Treatise of Taxes, and Contributions, London,
1667. Supplementary points.

1. On the quantity of circulating money
which a nation needs, pp. 16-17.

His view of total production is shown by the
following passage:

“If there he 1,000 men in a
Territory, and if 100 of these can raise necessary food and
rayment for the whole 1,000; if 200 more make as much
Commodities, as other Nations will give either their
Commodities or Money for, and if 400 more be imployed in the
Ornaments, pleasure, and magnificence of the whole? if
there be 200 Governours, Divines, Lawyers, Physicians,
Merchants, and Retailers, making in all 900, the question
is”, etc.—what happens to the paupers
(“supernumeraries”) (p. 12).

In his analysis of rent and of its valuation in money,
for which he takes as the basis equal labours
(quantities), Petty remarks:

“This, I say to he the
Foundation of equalising and balancing of
values; yet in the superstructures and practices
hereupon, I confess there is much variety and
intricacy” (p. 25).

| 2. What he was
much preoccupied with is the “natural Par between
Land and Labour”:

“Our Silver and Gold we call
by several names, as in England by Pounds, Shillings, and
Pence; all which may he called and understood by either of
the three. But that which I would say upon this matter
is, that all things ought to he valued by two natural
Denominations, which is Land and Labour; that is, we
ought to say, a Ship or Garment is worth such a measure of
Land, with such another measure of Labour; forasmuch as both
Ships and Garments were the Creatures of Lands and
mens Labours thereupon: This being true, we should be
glad to find out a natural Par between Land and
Labour, so as we might express the value by either of
them alone, as well or better than by both, and reduce one
into the other, as easily and certainly, as we reduce Pence
into Pounds” (p. 25).

For this reason Petty seeks the “natural
values of the Fee-Simple of Land”, after he
has found the monetary expression of rent.

Running alongside of each other through his work there
are three ways of determining value:

a) The magnitude of value, determined by equal
labour-time, labour being here considered as the
source of value.

b) Value as the form of social labour. Hence
money is the true form of value, although in other
passages he knocks down all the illusions of the Monetary
system. He is therefore defining the
concept.

c) Labour as the source of exchange-value is confused
with labour as the source of use-value; which presupposes
material provided by nature (land). In fact, he
“cuts” the “Par” between labour and
land by describing the Fee-simple of the latter as
capitalised rent—therefore not treating land as
material provided by nature for concrete labour.

3. With reference to the rate of interest he
says:

“Of the vanity and fruitlessness of
making Civil Positive Laws against the Laws of
Nature” (i.e., the laws arising from the nature of
bourgeois production) “I have spoken elsewhere”
(l.c., p. 29).

4. In regard to rent: surplus-value
consequent on the greater productivity of labour:

“If the said Shires by greater labour
than now is used, (as by Digging instead of Ploughing,
Setting instead of Sowing, picking of choice Seed instead of
taking it promiscuously, steeping it instead of using it
wholly unprepared, and manuring the ground with Salt instead
of rotten Straw, etc.) could be fertilised, then will the
Rent be as much more advanced, as the excess of
increase exceeds that of the labour” (p. 32).

([By increase of labour] he means here the price
or wages of labour.)

5. Raising [the value] of money (Chapter
XIV).

6. The passage quoted earlier “if you allow
double, then he works but half so much, etc.” must be
taken to mean: If the labourer received for six hours the
value of six hours, then he would receive double what
he now receives —the value of six for twelve. He
would then work only six, “which is a loss to the
Publick”, etc .

Petty, An Essay Concerning the Multiplication of
Mankind (1682). Division of labour
(pp. 35-36).

[Petty, The] Political Anatomy of Ireland
(1672) and Verbum Sapienti (London edition
1691).

1. “This brings me to the most important
Consideration in Political Oeconomies, viz, how to
make a Par and Equation between Lands and Labour, so
as to express the Value of any thing by either alone”
(pp. 63-64).

In fact, the task in this connection is only to resolve
the value of land itself into labour.

| 2. This work
was written later than the one examined earlier.

“The days food of an adult
Man, at a Medium, and not the days labour, is the
common measure of Value, and seems to be as regular and
constant as the value of fine Silver… Wherefore I
valued an Irish Gabbin at the number of days food,
which the Maker spent in building of it” (p.
65).

This later statement is quite Physiocratic.

“That some Men will eat more than
others, is not material, since by a days food we understand
1/100 part” [of the food that
100 men ] “of all Sorts and Sizes will eat, so as to
Live, Labour, and Generate” (p. 64).

But what Petty is searching for here in the
statistics of Ireland is not the common
measure of value, but the measure of value in the
sense that money is the measure of value.

3. Quantity of money and wealth of the nation
(Verbum Sapienti, p. 13).

4. Capital.

“What we call the Wealth, Stock, or
Provision of the Nation, being the effect of the former or
past labour, should not be conceived to differ from
efficiencies in being” (p. 9).

5. Productive power of labour

“We said, That half the People by a
very gentle labour, might much enrich the
Kingdom…upon what shall they employ themselves.
To which I answer in general, Upon producing Food and
Necessaries for the whole People of the Land, by few
hands; whether by labouring harder, or by the
introducing the Compendium, and Facilitations of Art,
which is equivalent to what men vainly hoped from
Polygamy. For as much as he that can do the
Work of five men by one, effects the same as the begetting
four adult Workmen” (p. 22). “Cheapest
food…will be when Food also is raised, by fewer
hands than elsewhere” (p. 23).

6. Purpose of men and goal (p. 24).

7. On money, see also the
Quantulumcunque (1682). |XXII-1399||

### [3.] Petty, Sir Dudley North, Locke

||XXII-1397| By comparing
North’s and Locke’s writings with Petty’s
Quantulumcunque (1682), A Treatise of Taxes, and
Contributions (1662), [and The Political] Anatomy of
Ireland (1672), their indebtedness to Petty can be seen
in connection with (1) lowering of interest: (2)
raising and abasing of money;

(3) North’s calling interest the rent of money,
etc.

North and Locke wrote their works at the same time and on
the same occasion: Lowering of Interest and
Raising of money. But [they have] opposite
views. With Locke it is the “want of
money” that is responsible for the high rate of
interest and in general for the fact that things do not
fetch their real prices, and the revenues to be paid out of
them. North shows the opposite, that it is not want of
money but of capital or revenue. We find in his works
the first definite concept of stock or
capital, or rather of money as a mere form
of capital, in so far as it is not means of
circulation. In Sir Dudley North’s writings we find
the first correct conception of interest as opposed to
Locke’s idea. |XXII-1397||

### [4.] Locke

### [Treatment of Rent and Interest from the Standpoint of the Bourgeois Theory of Natural Law]

||XX-1291a| Taking Locke’s
general doctrine of labour together with his doctrine of the
origin of interest and rent—for he
considers surplus-value only in these specific
forms—surplus-value is nothing but another person’s
labour, surplus-labour, which land and capital—the
conditions of labour—enable their owners to
appropriate. And ownership of a greater quantity of
conditions of labour than one person can himself put to use
with his own labour is, according to Locke, a
political invention that contradicts the law of
nature on which private property is founded. ||1292a|

<For Hobbes too labour is the sole source of
all wealth, apart from those gifts of nature which are to be
found already in a consumable state. God (nature)
“either freely giveth, or for labour
selleth to mankind” (Leviathan) [In: The
English Works of Thomas Hobbes… , now first
collected and edited by…Molesworth, Vol. III, London,
1839, p. 232]. But for Hobbes it is the sovereign who
distributes property in land at his pleasure.>

The relevant passages [in Locke] are as follows:

“Though the earth, and all
inferior creatures, he common to all men, yet every man has
a property in his own person: this nobody has any right to
but himself. The labour of his body, and the work of
his hands, we may say, are properly his. Whatsoever
then he removes out of the state that nature hath provided,
and left it in, he hath mixed his labour with, and joined to
it something that is his own, and thereby makes it his
property”(Of [Civil] Government,
Book II, Chapter V; Works, 7th edit., 1768, Vol. II,
p. 229).

“His labour hath taken it out of the
hands of nature, where it was common, and belonged equally
to all her children, and hath thereby appropriated it to
himself” (l.c., p. 230).

“The same law of nature, that does by
this means give us property, does also bound that property
too… As much as any one can make use of to any
advantage of life before it spoils, so much he may by his
labour fix a property in: whatever is beyond this, is more
than his share, and belongs to others” (l.c.).

“But the chief matter of property
being now not the fruits of the earth”, etc.,
“but the earth itself… As much
land as a man tills, plants, improves, cultivates, and can
use the product of, so much is his property. He by his
labour does, as it were, enclose it from the common”
(l.c.).

“Subduing or cultivating the earth,
and having dominion, we see are joined together. The
one gave title to the other” (l.c., p. 231).

“The measure of property nature has
well set by the extent of men’s labour, and the
conveniences of life: no man’s labour could subdue, or
appropriate all; nor could his enjoyment consume more than a
small part; so that it was impossible for any man, this way,
to intrench upon the right of another, or acquire to himself
a property, to the prejudice of his neighbour.
… This measure did confine every man’s possession to
a very moderate proportion, and such as he might appropriate
to himself, without injury to any body, in the first ages of
the world… And the same measure may be allowed
still without prejudice to any body, as full as the
world seems” (pp. 231-32).

Labour gives things almost all their value
<value here is equivalent to use-value, and labour
is taken as concrete labour, not as a quantum; but the
measuring of exchange-value by labour is in reality based on
the fact that the labourer creates use-value>. The
remainder of use-value which cannot be resolved into labour
is the gift of nature, and hence in its essence common
property. What Locke therefore tries to show is
not the contradiction—that property can nevertheless
be acquired by other procedures than labour—but how,
in spite of the common property in nature, individual
property could be created by individual labour.

“It is labour indeed that
put* the
difference of value on every thing…

Of the products of the earth useful to the life of
man…ninety-nine hundredths are wholly to be put on
the account of labour” (p. 234).

“It is labour then which puts the
greatest part of the value upon land” (p. 235).

“Though the things of nature are
given in common, yet man, by being master of himself,
and proprietor of his own person, and the actions or
labour of it, had still in himself the great foundation of
property” (p. 235).

One limit to property is therefore the limit of
personal labour; the other, that a man should not amass
more things than he can use. The latter limit however
is extended by exchange of perishable products for
money (apart from other exchanges):

“He might heap as much of these
durable things as he pleased; the exceeding of the
bounds of his just property” <apart from the
limit of his personal labour> “not lying in
the largeness of his possession, but the perishing of any
thing uselessly in it. And thus came in the use of
money, some lasting thing that men might* keep without spoiling, and that by
mutual consent men would take in exchange ||1293a| for the truly useful, but
perishable supports of life” (p. 236).

Thus arises the inequality of individual property, though
the limit of personal labour remains.

“This partage of things in an
inequality of private possessions, men have made practicable
out of the bound s of society, and without compact; only by
putting a value on gold and silver, and tacitly agreeing in
the use of money” (p. 237).

We must now compare with this the following passage from
Locke’s work on interest, not forgetting that according to
him natural law makes personal labour the limit of
property:

“Let us next see how it”
(money) “comes to be of the same Nature with Land, by
yielding a certain yearly Income, which we call Use or
Interest. For Land produces naturally something new
and profitable, and of value to Mankind; but money is a
barren Thing, and produces nothing, but by Compact,
transfers that Profit, that was the Reward of one Man’s
Labour, into another Man’s Pocket. That which
occasions this, is the unequal Distribution of Money; which
Inequality has the same Effect too upon Land, that it
has upon Money. … For as the unequal
Distribution of Land (you have more than you can, or will
manure, and another less) brings you a Tenant for your Land;
and the same unequal Distribution of Money… brings me
a Tenant for my Money: So my Money is apt in Trade, by
the Industry of the Borrower, to produce more than 6 per
cent, to the Borrower, as well as your Land, by the
Labour of the Tenant, is apt to produce more Fruits,
than his Rent comes to” (Folio edition of Locke’s
Works, 1740, Vol. II [p. 19].)

In this passage Locke has in part the polemical interest
of showing landed property that its rent is in no way
different from usury. Both “transfer that
Profit, that** was the
Reward of one Man’s Labour, into another Man’s Pocket”
through the unequal distribution of the conditions of
production.

Locke’s view is all the more important because it was the
classical expression of bourgeois society’s ideas of right
as against feudal society, and moreover his philosophy
served as the basis for all the ideas of the whole of
subsequent English political economy. |XX-1293a||

### [5.] North [Money as Capital. The Growth of Trade as the Cause of the Fall in the Rate of Interest]

||XXIII-1418| Sir Dudley
North: Discourses upon Trade, etc., London,
1691. (Supplementary notebook C).

This work, like Locke’s economic writings, is in direct
connection with and directly based on Petty’s works.

The work is mainly concerned with commercial
capital, and so it is not relevant here, though it shows
masterly skill in the field with which it deals.

It is particularly remarkable that from the time of the
Restoration of Charles II up to the middle of the
eighteenth century there were continual complaints from the
landlords about the fall in rents (just as the price of
wheat continually declined especially from?
onwards). Although the industrial capitalist class
played a considerable part in the compulsory reduction of
the rate of interest (from the time of Culpeper and Sir
Josiah Child), the real protogonist of this measure was the
landed interest. The “value of
land” and the “raising of it” were
proclaimed to be in the national interest. (Just as on
the other hand from about 1760 the rise in rents, in the
value of land and in the price of corn and provisions, and
the complaints of the manufacturers on this score, form the
basis of the economic investigations on this subject).

With few exceptions it is the struggle between moneyed
interest and landed interest that fills the century from
1650 to 1750, as the nobility, who lived in the grand style,
saw with disgust how the usurers had got their hands on them
and, with the building up of the modern credit system and
the national debt at the end of the seventeenth century,
faced them with overwhelming power in the sphere of
legislation, etc.

Already Petty speaks of the landlords’ complaints
about the fall in rents and their opposition to the
improvements (look up the passage). He defends the
usurer as against the landlord and puts rent of money and
rent of land on the same footing.

Locke reduces both to exploitation of
labour. He takes the same standpoint as Petty.
Both oppose the compulsory regulation of interest. The
landed interest had noted that the value of land rose
when interest fell. At a given level of rent, its
capitalised expression, i.e., the value of land,
falls or rises in inverse relation to the rate of
interest.

The third writer to follow this line of Petty’s is Sir
Dudley North, in the work referred to above.

This is the first form in which capital starts its
revolt against landed property, as in fact
usury was one of the principal agents in the
accumulation of capital—i.e., through its
co-proprietorship in the landlord’s revenues. But
industrial and commercial capital go more or less hand in
hand with the landlords against this outmoded form of
capital.

“As the Landed Man letts his Land, so
these” (who have “Stock for Trade
[…] who* either
have not the skill, or care not for the trouble of managing
it in Trade”) “lett their Stock; this
latter is call’d Interest, but is only Rent
for Stock” <here, as also in Petty’s writings, it
can be seen how rent, to those just emerging from the Middle
Ages, | appears as the
primary form of surplus-value)> “as the other is
for Land, And in several Languages, hiring of Money, and
Lands, are Terms of common use; and it is so also in some
Countries in England. Thus to be a Landlord, or
a Stock-lord is the same thing, the Landlord hath the
advantage only in this: That his Tenant cannot carry away
the Land, as the Tenant of the other may the Stock; and
therefore Land ought to yield less profit than Stock;
which is let out at the greater hazard “ (p.4).

Interest. North seems to have been the first
to have a correct conception of interest, for by
stock, as will be seen from the passages next quoted,
he means not only money, but capital (as indeed even Petty
distinguishes between stock and money. Locke
considered that interest was determined exclusively by the
quantity of money; so did Petty. See the passages
in Massie on this.).

“If there be more Lenders than
Borrowers, Interest will…fall; …it is not low
Interest makes Trade, but Trade increasing, the Stock of
the Nation makes Interest Low” (p.4).

“Gold and Silver, and, out of them,
Money are nothing but the Weights and Measures, by which
Traffick is more conveniently carried on, than could be done
without them: and also a proper Fund for a surplusage of
Stock to be deposited in” (p.16).

Price and money. As the price is nothing but
the equivalent of the commodity expressed in
money, and, when we are dealing with a sale,
the commodity realised in money—that is, it represents
the commodity as exchange-value in order to
change it subsequently into a use-value again—it is
one of the earliest recognitions of the fact that in this
transaction we are dealing with gold and silver only as a
form of existence of the exchange-value of
commodities, as a phase in their metamorphosis, not
with gold and silver as such. North puts this very
felicitously for his time.

“Money being…the Common Measure
of Buying and Selling, every body who hath any thing to
sell, and cannot procure Chapmen for it, is presently apt to
think, that Want of Money in the Kingdom, or Country
is the cause why his Goods do not go off; and so, want of
Money, is the common Cry; which is a great mistake…

“What do these People want, who cry
out for Money? I will begin with the
Beggar…it is not Money, but Bread, and other
Necessaries for Life that he wants…the Farmer
complains, for the want of Money…he thinks that were
more Money in the Country, he should have a Price for his
Goods. Then it seems Money is not his want, but a Price for
his Corn, and Cattel, which he would sell, but
cannot…why he cannot get a price? …1.
Either there is too much Corn and Cattel in the Country, so
that most who come to Market have need of selling, as he
hath, and few of buying; Or 2. There wants the usual vent
abroad, by Transportation, as in time of War, when Trade is
unsafe, or not permitted; Or 3. The Consumption fails, as
when men by reason of Poverty, do not spend so much in their
Houses as formerly they did; wherefore it is not the
increase of specifick Money, which would at all advance the
Farmers Goods, but the removal of nay of these three Causes,
which do truly keep down the Market.

“The Merchant and Shop-keeper want
Money in the same manner, that is, they want a Vent for the
Goods they deal in, by reason that the Markets fail”
(pp 11-12).

Further: Capital is value which produces
surplus-value, whereas in the building up of a hoard the
crystallised form of exchange-value as such is the
aim. One of the earliest discoveries of the classical
economists is therefore the antithesis between the
formation of a hoard and using money to make
profit, that is to say, the presentation of money as
capital.

“No Man is richer for having his
Estate all in Money, Plate, etc., lying by him, but on the
contrary, he is for that reason the poorer. That Man
is richest, whose Estate in a growing condition,
either in Land at Farm, Money at Interest, or Goods in
Trade” (p. 11).

<Similarly, John Bellers, Essays about the Poor,
Manufactures, Trade, Plantations, and Immorality, etc.,
London, 1699, says:

“Money neither increaseth, nor
is useful, but when it’s parted with, and as Money is
unprofitable to a private Person but as he disposeth of it,
for something more valuable, so what Money is more than of
absolute necessity for a home Trade, is dead Stock to a
Kingdom or Nation and brings no profit to that Country it’s
kept in” (p. 13).>

“Altho’ every one desires to have
it” (money) “yet none, or very few care for
keeping it, but they are forthwith contriving to dispose it;
knowing that from all the Money that lies dead, no benefit
is to be expected, but it is a certain loss” ([North,
l.c.], p. 21).

| Money as
world-money:

“A Nation in the World, as to Trade,
is in all respects like a City in a Kingdom, or Family in a
City” (p. 14). “In this course of Trade,
Gold and Silver are in no sort different from other
Commodities, but are taken from them who have Plenty, and
carried to them who want, or desire them” (p.13).

The quantity of money that can circulate is determined
by the exchange of commodities.

“If never so much be brought from
abroad, or never so much coyned at home, all that is more
than what the Commerce of the Nation requires, is but
Bullion, and will be treated as such; and coyned Money,
like wrought Plate at Second hand, shall sell but for the
Intrinsick” (pp.17-18).

Conversion of money into bullion, and vice versa (p.18)
(Supplementary notebook C, p. 13). Valuation and
weighing of money. Oscillatory movement
(Supplementary notebook C, p.14).

The usurer and landed interest and
trade:

“The Moneys imployed at Interest in
this Nation, are not near the Tenth part, disposed to
Trading People, wherewith to manage their Trades; but
are for the most part lent for the supplying of Luxury, and
to support the Expense of Persons, who though great Owners
of Lands, yet spend faster than their Lands bring in; and
being loath to sell, choose rather to mortgage their
Estates” (North, l.c., pp.6-7). |XXIII-1420||

### [6. Berkeley on Industry as the Source of Wealth]

||XIII-670a| “Whether
it were not wrong to suppose land itself to be
wealth? And whether the industry of the people is not
first to be considered, as that which constitutes wealth,
which makes even land and silver to be wealth, neither of
which would have any value, but as means and motives
to industry?” (The Querist, by Dr. George
Berkeley, London, 1750, Query 38). |XIII-670a||

### [7.] Hume and Massie

### [(A) Massie and Hume on Interest]

||XX-1293a| Massie’s
anonymous work An Essay on the Governing Causes of the
Natural Rate of Interest appeared in 1750. The
second part of Hume’s Essays, which contains the
[essay] “Of Interest” published 1752, that is,
two years later. Massie therefore has priority.
Hume attacks Locke, Massie attacks both Petty and Locke,
both of whom still held the view that the level of interest
depends on the quantity of money, and that in fact the real
object of the loan is money (not capital).

Massie laid down more categorically than did Hume, that
interest is merely a part of profit. Hume is
mainly concerned to show that the value of money makes no
difference to the rate of interest, since, given the
proportion between interest and money-capital—6 per
cent for example, that is, £6, rises or falls in value
at the same time as the value of the £100 (and.
therefore, of one pound sterling) rises or falls, but the
proportion 6 is not affected by this.

### [(B) Hume. Fall of Profit and Interest Dependent on the Growth of Trade and Industry]

Let us start with Hume.

“Every thing in the world is
purchased by labour” ([David Hume, “Of
Commerce”. In:] Essays, [and Treatises on
several Subjects,] Vol. I, Part II, London, 1764,
p. 289).

The rate of interest depends on the demand from borrowers
and the supply by lenders, that is, on demand and supply,
but after that essentially on the level of “profits
arising from commerce” (l.c., p. 329).

“The greater or less stock of labour
and commodities must have a great influence” (upon
interest); “since we really and in effect borrow
these, when we take money upon interest” (l.c.,
p. 337). “No man will accept of low profits,
where he can have high interest; and no man will accept of
low interest, where he can have high profits” (l.c.,
p. 335).

High interest and high profit are both the expression
“of the small advance of commerce and industry, not of
the scarcity of gold and silver” (l.c., p.329).
And “low interest” of the opposite.

||1294a| “In a state,
therefore, where there is nothing but a landed
interest” (or as he says later, “landed gentry
and peasants”) “the borrowers must be numerous,
and interest high” (p. 330), because wealth which is
only for enjoyment is driven by boredom to seek pleasures,
while on the other hand production, except for agriculture,
is very limited. The opposite is the case, when
commerce has developed. The passion for gain entirely
[dominates the] merchant. He “knows no such
pleasure as that of seeing the daily increase of his
fortune”. (The passion for exchange-value,
abstract wealth, weighs with him far more than that for
use-values.)

“And this is the reason why trade
encreases frugality, and why, among merchants, there is the
same overplus of misers above prodigals, as, among the
possessors of laud, there is the contrary”
(p. 333).

<Unproductive labour:

“Lawyers and physicians beget no
industry; and it is even at the expense of others they
acquire their riches; so that they are sure to diminish the
possessions of some of their fellow-citizens, as fast as
they encrease their own” (pp. 333-34).>

“Thus an encrease of commerce
[…] raises a great number of lenders, and by that
means produces lowness of interest”
(p. 334).

“Low interest and low
profits of merchandise are two events, that mutually
forward each other, and are both originally derived
from that extensive commerce, which produces opulent
merchants, and renders the monied interest
considerable. Where merchants possess great stocks,
whether represented by few or many pieces of metal, it must
frequently happen, that, when they either become tired of
business, or leave heirs unwilling or unfit to engage in
commerce, a great proportion* of these riches naturally seeks an
annual and secure revenue. The plenty diminishes the
price, and makes the lenders accept of a low interest.
This consideration obliges many to keep their stock in
trade, and rather be content with low profits than dispose
of their money at an under value. On the other hand,
when commerce has become** extensive, and employs*** large stocks, there
must arise rivalships among the merchants, which
diminish the profits of trade, at the same time that
they encrease the trade itself. The low profits of
merchandise induce the merchants to accept more willingly of
a low interest, when they leave off business, and begin to
indulge themselves in ease and indolence. It is
needless, therefore, to enquire which of these
circumstances, to wit,* low interest or low profits,
is the cause, and which the effect. They
both arise from an extensive commerce, and mutually forward
each other… An extensive commerce, by producing
large stocks, diminishes both interest and profits; and is
always assisted, in its diminution of the one, by the
proportional sinking of the other. I may add, that, as
low profits arise from the encrease of commerce and
industry, they serve in their turn to its farther
encrease,** by
rendering the commodities cheaper, encouraging the
consumption, and heightening the industry. And
thus… interest is the*** barometer of the State, and
its lowness is a sign almost infallible of the
flourishing of a people” (l.c., pp. 334-36).

### [(C) Massie. Interest as Part of Profit. The Level of Interest Explained by the Rate of Profit]

[Joseph Massie,] An Essay on the Governing Causes of
the Natural Rate of Interest; wherein the Sentiments of
Sir William Petty and Mr. Locke, on that Head, are
considered, London, 1750.

“It appears from these several
Extracts, that Mr. Locke attributes the Government of the
natural Rate of interest to the Proportion which the
Quantity of Money in a Country bears to the Debts of its
Inhabitants one amongst another, and to the Trade of it; and
that Sir William Petty makes it depend on the Quantity of
Money alone; so they only differ in regard to Debts”
(pp. 14-15). |XX-1294a||

||XXI-1300| Rich people,
“instead of employing their Money themselves, [..,]
let it out to other People for them to make Profit of,
reserving for the Owners a Proportion of the Profits
so****
made: But when the Riches of n Country are dispersed
into so many Hands, and so equally divided, as not to leave
many People enough to maintain two Families, by employing it
in Trade, there can be little borrowing; for 20,000
l.***** when
it belongs to one Man, may be lent, because the Interest of
it will keep a Family, but if it belongs to ten Men, it
cannot he lent, because the Interest […] will not
keep ten Families” (pp. 23-24).

“All Reasoning about natural Interest
from the Rate which the Government pays for Money,
is, and unavoidably must be fallacious; Experience has shown
us, they neither have a agreed nor preserved a
Correspondence with each other; and Reason tells us never
can; for the one has its Foundation in Profit, and
the other in Necessity; the former of which has
Bounds, but the latter none: The Gentleman who borrows Money
to improve his Land, and the Merchant or Tradesman who
borrow to carry on Trade, have Limits, beyond which they
will not go; if they can get 10 per cent by Money, they may
give 5 per cent for it; but they will not give 10; whereas
he who borrows through Necessity, has nothing else to
determine by, and this admits of no Rule at all”
(pp. 31-32).

“The Equitableness of taking
Interest, depends not upon a Man’s making or not making
Profit by what he borrows, but upon its” (the
money borrowed) “being capable of producing Profit if
right y employed” (p. 49). “If that
which Men pay as Interest for what they borrow, be
a part of the profits it is capable of producing, this
Interest must always be govern’d by those
Profits” (p. 49).

“What Proportion of these Profits do
of Right belong to the Borrower, and what to the Lender; and
this there is no other Method of determining, than by the
Opinions in Borrowers and Lenders in general; for Right and
Wrong in this Respect, are only what common Consent
makes” (p. 49).

“This Rule of dividing Profits
is not however to be apply’d particularly to every Lender
and Borrower, but to Lenders and Borrowers in
general… remarkably great and small Gains are the
Rewards of Skill, and the Want of Understanding, which
Lenders have nothing at all to do with; for as they
will not suffer by the one, they ought not to benefit by the
other. What has been said of particular Men in the
same Business is applicable to particular Sorts of
Business” (p. 50).

“The natural Rate of Interest
is governed by the Profits of Trade to
Particulars” (p. 51).

Why then was interest 4 per cent instead of 8 as it had
been earlier in England?

Because English merchants at that time “get* double the Profits
they now make” [p. 51].

Why 3 per cent in Holland, 5 and 6 in France, Germany,
Portugal, 9 per cent in the West and East Indies, 12 in
Turkey?

“One general Answer will do for the
whole, which is, that the Profits of Trade in these several
Countries differ from the Profits of Trade here, and so much
as to produce all those different Bates of Interest”
(p. 51).

But what is the fall in profit due to?

To competition, foreign and internal,
“a Decrease of Trade”** (through foreign competition)
“or to People in Trade lowering the Prices of their
Commodities upon each other…through Necessity to
get some Trade, or through Avarice to get most”
(pp. 52-53).

“The Profits of Trade in general, are
governed by the Proportion which the Number of
Traders bears to the Quantity of Trade”*** (p. 55).
“In Holland where the Number of People employ’d in
Trade, bears the greatest proportion to the whole number of
Inhabitants … Interest is […]
lowest […] in Turkey, where the Disproportion
is still greater, Interest is higher”* (pp. 55-56).

“What governs the Proportion between Trade and
Traders?” (p. 57). The “Motive** to
Trade”. “[I.] Natural
necessity. [II.] Liberty. [III. The]
Preservation of Men’s private Rights. [IV.]
Publick Safety” (pp. 57-58)

“There are no two Countries which
furnish an equal Number of the Necessaries of Life in equal
Plenty, and with the same Quantity of Labour;
[…] Men’s Wants increase or diminish with the
Severity or Temperateness of the Climate they live in;
[…] consequently, the Proportion of Trade
which the Inhabitants of different Countries are obliged to
carry on through Necessity, cannot be the same, nor is it
practicable to ascertain the Degree of Variation further
than by the Degrees of Heat and Cold; from whence one may
make this general Conclusion, that the Quantity of
Labour required for [the Maintenance of ] a certain
Number of People is greatest in cold Climates, and least in
hot ones; for in the former, Men not only want more Cloaths,
but the Earth more cultivating, than in the latter”
(p. 59). “One kind of Necessity which is
peculiar to Holland…arises from the Country being
over-peopled; which, with the great Labour required to
fence and drain their*** Land, makes their
Necessity to trade greater than it is in any other Part of
the habitable World” (p. 60).

### [(D) Conclusion]

Massie, even more definitely than Hume, presents interest
as a mere part of profit; both attribute the fall in
interest to the accumulation of capitals (Massie [speaks]
especially of competition) and the fall in profits resulting
from this. Both [say] equally little about the
origin of the Profit of trade itself. |XXI-1301||

### [8. Addendum to the Chapters on the Physiocrats]

### [(A) Supplementary Note on the Tableau Économique. Quesnay’s False Assumptions]

||XXIII-1433|

Productive class

Landlords

Sterile class

2 milliards

2 milliards

1 milliard

1 milliard

1 milliard

1 milliard

1 milliard

1 milliard

Annual advances 2 milliards
Total 5 milliards

Total 2 milliards

This is the simplest form of the Tableau
économique.

1. Money circulation (assuming payment is
made only annually). The money circulation starts out
from the spending class, the landlords who have no
commodities to sell, who buy without selling.

They buy to the amount of 1 milliard from the productive
class, to whom they send back the milliard in money received
in payment for rent. (This disposes of one-fifth of
the agricultural produce.) They buy to the amount of 1
milliard from the sterile class, who in this way get 1
milliard in money. (This disposes of half the product
of manufacture.) With the 1 milliard, the sterile
class buy means of subsistence from the productive class; so
that 1 milliard in money thus flows back to the
latter. (This disposes of a second fifth of the
agricultural produce.) With the same milliard in money
the productive class buy l milliard in manufactured
products; this replaces for them one-half of their
advances. (This disposes of the second half of the
produce of manufacture). The sterile class buy | raw materials with the same
milliard in money. (This disposes of another one-fifth
of the agricultural produce.) In this way the [2]
milliards in money have flowed back to the productive
class.

So what remains is two-fifths of the agricultural
produce. One-fifth is consumed in kind, but in what
form is the second one-fifth accumulated? That is to
be shown later.

2. Even from Quesnay’s point of view, according to
which the whole sterile class in fact consist only of
wage-labourers, the falsity of the assumptions made is
evident from the Tableau itself.

The original advances (fixed capital) made by the
productive class are assumed to be five times the size of
the annual advances. In the case of the sterile class
this item is not mentioned at all—which naturally does
not prevent it from existing.

Moreover, it is wrong to say that the reproduction is
equal to 5 milliards; the Tableau itself shows it to be 7
milliards; 5 in the case of the productive class and 2 in
the case of the sterile class.

### [(B) Partial Reversion of Individual Physiocrats to Mercantilist Ideas. Demand of the Physiocrats for Freedom of Competition]

The product of the sterile class is equal to 2
milliards. This product consists of 1 milliard in raw
materials (which therefore partly enter into the product,
and partly replace the wear and tear of the machinery which
has entered into the value of the product) and 1 milliard in
means of subsistence, which have been consumed in working
them up.

They sell this entire product to the landlords and the
productive class, in order firstly to replace the
advance (in raw materials), secondly to obtain
agricultural means of subsistence. Therefore not a
farthing’s worth of the manufactured products is left
for their own consumption, still less for interest or
profit. This in fact was noticed by Baudeau (or Le
Trosne); he explains it by the sterile class selling their
product above its value, so that what they
sell for 2 milliards is equivalent to 2 milliards minus
x. Their profit, and even what they consume in
manufactured goods as necessary means of subsistence, is
therefore explained only by the raising of the price of
the commodities above their value. And here the
Physiocrats necessarily fall back on the Mercantile
system’s profit upon alienation.

This is why free competition between the manufacturers is
so very essential, so that they do not take too great
advantage of the productive class, the agriculturists.
On the other hand this free competition is necessary in
order that agricultural produce may be sold at a
“good price”, that is, that it may rise
above its native price by sale abroad—the
assumption being a country which exports wheat, etc.

### [(C) Original Formulation of why it is Impossible to Increase Value in Exchange]

“Every purchase is a sale, and every
sale a purchase” (Quesnay, Dialogues sur le
commerce et sur les travaux des artisans, etc.,
éd. Daire, p. 170). “To buy is to sell, and
to sell is to buy” (Quesnay in Dupont de
Nemours, Origine, etc., 1767, p. 392).

“Price always precedes purchases
and sales. If the competition of sellers and
buyers brings about no change in it, it exists as it is
through other causes independent of trade”
(l.c., p. 148).

“It is always to he presumed that
it” (exchange) “is profitable to both”
(contracting parties), “since they mutually procure
for themselves the enjoyment of wealth which they could only
obtain through exchange. But always there is only
exchange of wealth of a certain value for other
wealth of equal value, and consequently no real
increase of wealth” (this should he: no real
increase of value) (l.c., p. 197).

Advances and capital are explicitly stated
to be identical. Accumulation of capitals as
the principal condition.

“The increase of capitals is then the
principal means of augmenting labour, and of the greatest
benefit to society”, etc. (Quesnay in Dupont de
Nemours, l.c., p. 391). |XXIII-1434||

### [9. Glorification of the Landed Aristocracy by Buat, an Epigone of the Physiocrats]

||XXII-1399| Buat (Comte
du), Éléments de la politique, ou
Recherche des vrais principes de l’économie sociale,
(6 volumes), London, 1773.

This feeble and diffuse writer, who takes the outward
form of Physiocracy for its essence and glorifies the landed
aristocracy— and in fact accepts it [Physiocracy] only
in so far as it serves this purpose—would not have to
be mentioned at all, but for the fact that the brutal
characteristics of the bourgeois emerge so sharply in his
work; quite as sharply, perhaps, as in Ricardo’s writings
later. His error in restricting the net product to
rent makes no difference to this.

What Buat says is repeated by Ricardo in relation to the
net product in general. The labourers belong to the
incidental expenses and exist only in order that the owners
of the net product may “form society”.
(See the relevant passages.) The free labourer’s lot
is conceived as only a changed form of slavery; but this is
necessary so that the higher strata may form
“society”.

surplus-value, as the purpose of production.>

| In this connection
we may recall the passage in Ricardo, directed against Adam
Smith, for whom that capital is the most productive which
employs the greatest number of labourers. On this,
compare Buat—t. VI, pp. 51-52, 68-70. Also on
the labouring class and slavery—t. II, pp. 288, 297,
309; t. III, pp. 74, 95-96, 103; t. VI, pp. 43, 51; on the
necessity for these labourers to work surplus-time, and on
the meaning of the strict
nécessaire—t. VI, pp. 52-53.

The one passage to be quoted here—because it deals
well with the prattle about the risk that the
capitalist always runs:

“They have risked much to gain
much? But they have risked men, and goods or
money. As for the men, […] if they have exposed
them to manifest peril for the sake of gain, they have done
a very wicked act, As for the goods, if there is any merit
in producing them, there should be no merit in risking them
for the profit of one individual”, etc. (t, II,
p. 297). |XXII-1400||

### [10. Polemics Against the Landed Aristocracy from the Standpoint of the Physiocrats (An Anonymous English Author)]

||XXIII-1449| The
Essential Principles of the Wealth of Nations, illustrated,
in Opposition to some False Doctrines of Dr. Adam Smith, and
others, London, 1797.

This man knew of Anderson, for he prints in his appendix
an extract from Anderson’s Agricultural Report for the
County of Aberdeen.

This is the only important English work directly
supporting the Physiocratic teaching. William Spence,
Britain Independent of Commerce, 1807, is a mere
caricature. This same fellow in 1814-15 was one of the
most fanatic defenders of the landed interest on the basis
of Physiocracy—which teaches free trade. The
fellow is not to be confused with Thomas Spence, the
deadly enemy of Private Property in Land.

The work [The Essential Principles] contains
firstly a very excellent and compressed resumé of the
Physiocratic doctrine.

He is right in tracing the origin of this view to
Locke and Vanderlint, and he describes the
Physiocrats as those who “very systematically,
though not correctly, illustrated” the doctrine
(p. 4). (See also on this p. 6; notebook H,
pp. 32-33.)

The summary quoted there brings out very nicely how the
privation theory—which the later apologists,
and partly even Smith, made the basis for the formation of
capital—arose precisely from the Physiocratic view
that no surplus-value is created in industry,
etc.:

“ The expence laid out in employing
and maintaining them” [handicraftsmen, manufacturers
and merchants] “does no more than continue the
existence of its own value, and is therefore
unproductive” (because unproductive of surplus-value)
“The wealth of society can never in the smallest
degree he augmented by artificers, manufacturers, or
merchants, otherwise than by their saving and
accumulating part of what is intended for their daily
subsistence; consequently it is by privation or
parsimony alone, that they can add any thing to the
general stock” (Senior’s theory of abstinence, Adam
Smith’s theory of savings). “Cultivators, on the
contrary, may live up to the whole of their income, and yet
at the same time […] enrich the State; for their
industry affords a surplus-produce called rent”
(p. 6).

“A class of men whose labour though
(it produces something) produces no more than what was
bestowed, in order to effect that labour, may with the
greatest propriety be called an unproductive
class” (p. 10).

Production of surplus-value to be clearly
distinguished from its transfer.

“The augmentation of
revenue” (this is accumulation) “is not,
but indirectly, the object of the Economists…
Their object is the production and reproduction of
[…] revenue” (p. 18).

And this is the great merit of Physiocracy. The
Physiocrats put themselves the question: how is
surplus-value (for him [the anonymous writer] it is
revenue) produced and reproduced? The question how it
is reproduced on an enlarged scale, that is,
increased, comes up only in the second place. Its
category, the secret of its production, | must first be revealed.

Surplus- value and commercial capital.

“When the question is about the
production of revenue, it is altogether illogical to
substitute for that the transfer of […]
revenue, which all commercial dealings are
[…] resolvable into” (p. 22). “What
does the word commerce imply but commutatio
mercium*… sometimes more
beneficial to the one than the other; but still what the one
gains the other loses, and their traffic really produces
no increase” (p. 23). “Should a Jew
sell a crown-piece for ten shillings, or a Queen Anne’s
farthing for a guinea, he would augment his own income, no
doubt, but he would not thereby augment the quantity of
the precious metals; and the nature of the traffic would
be the same, whether his virtuoso customer resided in the
same street with himself, or in France, or in China”
(p. 23).

The Physiocrats explain the profit of industry as
profit upon alienation (that is, in the Mercantilist
way). This Englishman therefore draws the right
conclusion that this profit is only a gain when industrial
commodities are sold abroad. From the Mercantilist
premise he draws the right Mercantilist conclusion.

“No man, as a manufacturer, however
he may gain himself, adds any thing to the national revenue,
if his commodity is sold and consumed at home; for the
buyer precisely loses…what the manufacturer
gains… There is an interchange
between the seller and the buyer, but no increase”
(p. 26). “To supply the want of a
surplus…the master-employer takes a profit of 50
per cent upon what he expends in wages, or sixpence in the
shilling on each manufacturer’s pay; … and if the
manufacture is sold ahroad … [this] would be the
national profit” (p. 27) of so and so many
“artificers ”.

Very good presentation of the reasons for Holland’s
wealth. Fisheries. (He should also have
mentioned stock-raising.) Monopoly of the spices of
the East. Carrying trade. Lending money
abroad. (Supplementary notebook H,
pp. 36-37).

“Manufacturers are […] a
necessary class” but not a “productive
class” (p. 35). They “occasion a
commutation or transfer of the revenue previously
provided by the cultivator, by giving a permanency to
that revenue under a new form” (p. 38).

There are only four essential classes. Productive
class or cultivators. Manufacturers.
Defenders. The class of instructors, which he
substitutes for the Physiocratic tithe owners or priests,
“for every civil society must be fed, […]
clothed, defended and instructed” (pp. 50-51).

The mistake of the Economists is that they

“deemed Receivers of land rents,
as mere Receivers of rents, a productive class in
society…they have in some degree compensated for
their error by intimating that the Church and King are to be
served out of those rents. Dr. Smith…suffering
it” (this error of the Economists) “to pervade
the whole of his own* enquiry,” (this is
correct) “directs his refutation to the sound part of
the Economical system” (p. 8).

| The landlords as
such are not only not productive, but not even an
essential class of society.

“The proprietors of land as
mere receivers of land rents are not an essential class of
society… By separating the rents of lands from
the constitutional purpose of the defence of the State, the
receivers of those rents instead of being an essential
class, render themselves one of the most unessential and
burdensome classes in society” (p. 51).

See his further treatment of this, which is very good,
[in] Supplementary notebook H, pp. 38-39—and
this polemic against the receivers of land rent from the
standpoint of the Physiocrats, as the final conclusion
from their doctrine, is very important.

[The author] shows that the real tax on land is
Turkish (l.c., p. 59).

The landlord taxes not only improvements of land,
but often the presumption of future improvement
(pp. 63-64). Tax on rents (p. 65).

The Physiocratic doctrine anciently established in
England, Ireland, feudal Europe, Empire of the Mogul
(pp. 93-94).

The landlord as tax-imposer (p. 118).

The limitations of Physiocracy break through in the
following (lack of understanding of the division of
labour): Let it be assumed that a clockmaker or calico
manufacturer cannot sell his clock or calico. [Then he
would be in difficult position. That however shows]
“that a manufacturer only enriches himself by being a
seller” (it shows only that he produces his
product as a commodity “and that when he ceases
to be a seller, his profits” (and what
of the profits of the farmer who is not a seller?)
“are immediately at a stand, because they are not
natural profits, but artificial. The
cultivator…may exist, and thrive, and
multiply, without selling any thing” (pp.
38-39). (But then he must also be a manufacturer.)

[Why does the author speak only of a clockmaker or a
calico manufacturer? It can equally well be] assumed
that a producer of coal, iron, flax, indigo, etc., cannot
sell these products, or even that a producer of corn cannot
sell his corn. Béardé de
l’Abbaye, cited above, is very good on this. He
[the anonymous author] has to stress production [for]
immediate consumption as against the production of
commodities—very much in contradiction with the
Physiocratic view that exchange-value was the
principal thing. But that runs right through the work
of this fellow. It is the bourgeois view within
the pre-bourgeois way of looking at things.

[He comes out] against Arthur Young’s high price,
[which the latter regards] as important for the
prosperity of agriculture; but this is at the same time
polemics against the Physiocrats (l.c., pp. 65-78 and
118).

Surplus-value cannot be derived from the nominal
raising of the price on the part of the seller.

Through “this* augmentation of the nominal value
of the produce…nor are sellers […]
enriched**
…since what they gain as sellers, they precisely
expend in quality of buyers” (p. 66).

This is similar to Vanderlint’s arguments:

“While a field admitting cultivation
can be found for every idler, let no idler be without a
field. Houses of industry are good things; but fields
of industry are much better” (p. 47).

[He is] against the farm system, and for long leases,
because landownership will otherwise only hinder production
and improvements (pp. 118-23). (Irish Right of
Tenantry.) |XXIII-1451||

### [11. Apologist Conception of the Productivity of All Professions]

||V-182| A philosopher
produces ideas, a poet poems, a clergyman sermons, a
professor compendia and so on. A criminal produces
crimes. If we look a little closer at the connection
between this latter branch of production and society as a
whole, we shall rid ourselves of many prejudices. The
criminal produces not only crimes but also criminal law, and
with this also the professor who gives lectures on criminal
law and in addition to this the inevitable compendium in
which this same professor throws his lectures onto the
general market as “commodities. This brings with
it augmentation of national wealth, quite apart from the
personal enjoyment which—as a competent Witness, Herr
Professor Roscher, [tells] us—the manuscript of the
compendium brings to its originator himself.

The criminal moreover produces the whole of the police
and of criminal justice, constables, judges, hangmen,
juries, etc.; and all these different lines of business,
which form equally many categories of the social division of
labour, develop different capacities of the human spirit,
create new needs and new ways of satisfying them.
Torture alone has given rise to the most ingenious
mechanical inventions, and employed many honourable
craftsmen in the production of its instruments.

The criminal produces an impression, partly moral and
partly tragic, as the case may be, and in this way renders a
“service” by arousing the moral and aesthetic
feelings of the public. He produces not only compendia
on Criminal Law, not only penal codes and along with them
legislators in this field, but also art, belles-lettres,
novels, and even tragedies, as not only Müllner’s
Schuld and Schiller’s Räuber show, but
also [Sophocles’] Oedipus and [Shakespeare’s]
Richard the Third. The criminal breaks the
monotony and everyday security of bourgeois life. In
this way he keeps it from stagnation, and gives rise to that
uneasy tension and agility without which even the spur of
competition would get blunted. Thus he gives a
stimulus to the productive forces. While crime takes a
part of the superfluous population off the labour market and
thus reduces competition among the labourers—up to a
certain point preventing wages from falling below the
minimum—the struggle against crime absorbs another
part of this population. Thus the criminal comes in as
one of those natural “counterweights” which
bring about a correct balance and open up a whole
perspective of “useful” occupations.

The effects of the criminal on the development of
productive power can be shown in detail. Would locks
ever have reached their present degree of excellence had
there been no thieves? Would the making of bank-notes
have reached its present perfection had there been no | forgers? Would the
microscope have found its way into the sphere of ordinary
commerce (see Babbage) but for trading frauds? Doesn’t
practical chemistry owe just as much to adulteration of
commodities and the efforts to show it up as to the honest
zeal for production? Crime, through its constantly new
methods of attack on property, constantly calls into being
new methods of defence, and so is as productive as strikes
for the invention of machines. And if one leaves the
sphere of private crime: would the world-market ever have
come into being but for national crime? Indeed, would
even the nations have arisen? And hasn’t the Tree of
Sin been at the same time the Tree of Knowledge ever since
the time of Adam?

In his Fable of the Bees (1705) Mandeville had
already shown that every possible kind of occupation is
productive, and had given expression to the line of this
whole argument:

“That what we call Evil in this
World, Moral as well as Natural, is the grand Principle that
makes us Sociable Creatures, the solid Basis, the Life
and Support of all Trades and Employments without
exception […] there we must look for the true origin
of all Arts and Sciences; and […] the moment, Evil
ceases, the Society must he spoil’d if not totally
dissolve’d*”
[2nd edition, London, 1723, p. 428].

Only Mandeville was of course infinitely bolder and more
honest than the philistine apologists of bourgeois
society. |V-183||

### [12.] Productivity of Capital. Productive and Unproductive Labour

### [(A) Productivity of Capital as the Capitalist Expression of the Productive Power of Social Labour]

||XXI-1317| We have seen not
only how capital produces, but how it itself is produced,
and how, as an essentially altered relation, it emerges from
the process of production and how it is developed in
it. On the one hand capital transforms the mode of
production; on the other hand this changed form of the mode
of production and a particular stage in the development of
the material forces of production are the basis and
precondition—the premise for its own formation.

Since living labour—through the exchange between
capital and labourer—is incorporated in capital, and
appears as an activity belonging to capital from the moment
that the labour-process begins, all the productive powers of
social labour appear as the productive powers of capital,
just as the general social form of labour appears in money
as the property of a thing. Thus the productive power
of social labour and its special forms now appear as
productive powers and forms of capital, of
materialised labour, of the material conditions of
labour—which, having assumed this independent form,
are personified by the capitalist in relation to living
labour. Here we have once more the perversion of the
relationship, which we have already, in dealing with money,
called fetishism.

The capitalist himself only holds power as the
personification of capital. (In Italian
book-keeping this role of his as a capitalist, as
personified capital, is even always contrasted with him as a
mere person, in which capacity he appears only as a personal
consumer and debtor of his own capital.)

The productivity of capital consists in the first
instance—even if one only considers the formal
subsumption of labour under capital—in the
compulsion to perform surplus-labour, labour beyond
the immediate need; a compulsion which the capitalist mode
of production shares with earlier modes of production, but
which it exercises and carries into effect in a manner more
favourable to production.

Even from the standpoint of this purely formal
relation—the general form of capitalist
production, which is common both to its less developed stage
and to its more developed stage—the means of
production, the material conditions of
labour—material of labour, instruments of labour (and
means of subsistence)—do not appear as subsumed to the
labourer, but the labourer appears as subsumed to
them. He does not make use of them, but they make use
of him. And it is this that makes them capital.
Capital employs labour. They are not means for
him to produce products whether in the form of direct means
of subsistence, or of means of exchange, commodities.
But he is a means for them—partly to maintain their
value, partly to create surplus-value, that is, to increase
it, absorb surplus-labour.

Already in its simple form this relation is an
inversion— personification of the thing and
materialisation of the person; for what distinguishes this
form from all previous forms is that the capitalist does not
rule over the labourer through any personal qualities he may
have, but only in so far as he is “capital”; his
domination is only that of materialised labour over living
labour, of the labourer’s product over the labourer
himself.

The relation grows still more complicated and apparently
more mysterious because, with the development of the
specifically capitalist mode of production, it is not only
these directly material things <all products of labour;
considered as use-values, they are both material conditions
of labour and products of labour; considered as
exchange-values, they are materialised general labour-time
or money> that get up on their hind legs to the labourer
and confront him as “capital”, but [also] the
forms of socially developed labour—co-operation,
manufacture (as a form of division of labour), the factory
(as a form of social labour organised on machinery as its
material basis)—all these appear as forms of the
development of capital, and therefore the productive
powers of labour built up on these forms of social
labour—consequently also science and the forces of
nature—appear as productive powers of
capital. In fact, the unity [of labour] in
co-operation, the combination [of labour ] through the
division of labour, the use for productive purposes in
machine industry of the forces of nature and science
alongside the products of labour—all this confronts
the individual labourers themselves as something
extraneous and objective, as a mere form of
existence of the means of labour that are independent of
them and control them, just as the means of labour
themselves [confront them,] in their simple visible form as
materials, instruments, etc., as functions of capital
and consequently of the capitalist.

The social forms of their own labour or the forms of
their own | social labour
are relations that have been formed quite independently of
the individual labourers; the labourers, as subsumed under
capital, become elements of these social formations
—but these social formations do not belong to
them. They therefore confront them as forms of
capital itself, as combinations belonging to capital, as
distinct from their individual labour-power, arising from
capital and incorporated in it. And this takes on a
form that is all the more real the more on the one hand
their labour-power itself becomes so modified by these forms
that it is powerless as an independent force, that is to
say, outside this capitalist relationship, and that
its independent capacity to produce is destroyed. And
on the other hand, with the development of machinery the
conditions of labour seem to dominate Labour also
technologically while at the same time they replace labour,
oppress it, and make it superfluous in its independent
forms.

In this process, in which the social character of
their labour confronts them to a certain degree as
capitalised (as for example in machinery the visible
products of labour appear as dominating labour), the same
naturally takes place with the forces of nature and science,
the product of general historical development in its
abstract quintessence—they confront the labourers as
powers of capital. They are separate in fact
from the skill and knowledge of the individual
labourer—and although, in their origin, they
too are the product of labour—wherever they
enter into the labour-process they appear as embodied in
capital. The capitalist who makes use of a machine
need not understand it. (See Ure.) But science
realised in the machine appears as capital in
relation to the labourers. And in fact all these
applications of science, natural forces and products of
labour on a large scale, these applications founded on
social labour, themselves appear only as means for
the exploitation of labour, as means of appropriating
surplus-labour, and hence confront labour as powers
belonging to capital. Capital naturally uses all these
means only to exploit labour; but in order to exploit it, it
must apply them in production. And so the development
of the social productive powers of labour and the
conditions for this development appear as acts of
capital, towards which the individual labourer not only
maintains a passive attitude, but which take place in
opposition to him.

Capital itself has a double character, since it consists
of commodities:

1. Exchange-value (money); but [it is]
self-expanding value, value which—because it is
value—creates value, grows as value, receives
an increment. This [growth] resolves itself into the
exchange of a given quantity of materialised labour for a
greater quantity of living labour,

2. Use-value; and here it shows itself
through its specific relations in the labour-process.
But precisely here it is no longer merely material of labour
and means of labour to which belongs labour, which
have absorbed labour, but along with labour [capital
includes] also the social combinations [of labour]
and the development of the means of labour corresponding to
these social combinations. Capitalist production first
develops on a large scale—tearing them away from the
individual independent labourer—both the objective and
subjective conditions of the labour-process, but it develops
them as powers dominating the individual labourer and
extraneous to him.

Thus capital becomes a very mysterious being. |

| Capital is therefore
productive: (1) as a force compelling surplus-labour,
(2) as the absorber and appropriator (personification) of
the productive powers of social labour and of the general
social productive forces, such as science.

The question arises, how or for what reason does labour
as opposed to capital appear productive or as productive
labour, since the productive powers of labour are
transposed into capital, and the same productive power
cannot be counted twice, once as the productive power of
labour and the second time as the productive power of
capital? <Productive power of labour—
productive power of capital. But labour-power
is productive through the difference between its
value and the value which it creates.>

### [(B) Productive Labour in the System of Capitalist Production]

Only bourgeois narrow-mindedness, which regards the
capitalist forms of production as absolute forms—hence
as eternal, natural forms of production—can confuse
the question of what is productive labour from the
standpoint of capital with the question of what labour is
productive in general, or what is productive labour in
general; and consequently fancy itself very wise in giving
the answer that all labour which produces anything at all,
which has any kind of result, is by that very fact
productive labour.

[Firstly:] Only labour which is directly
transformed into capital is productive; that is, only
labour which makes variable capital a variable magnitude and
consequently [makes the total capital C] equal to
C+Δ. If the variable capital before its exchange with
labour is equal to x, so that we have the equation y=x, then
the labour which transforms x into x+h, and consequently out
of y=x makes y’=x+h, is productive labour. This is the
first point to be elucidated. [That is,] labour
which produces surplus-value or serves capital as agency for
the creation of surplus-value, and hence for manifesting
itself as capital, as self-expanding value.

Secondly:The social and general productive powers
of labour are productive powers of capital; but these
productive powers relate only to the labour-process, or
affect only the use-value. They represent properties
inherent in capital as a thing, as its use-value. They
do not directly affect exchange-value. Whether
a hundred work together, or each one of the hundred works by
himself, the value of their product is equal to a hundred
days’ labour, whether represented in a large or small
quantity of products; that is to say, the productivity of
the labour does not affect the value.

| The varying
productivity of labour affects exchange-value only in one
way.

If the productivity of labour is increased for example in
a single branch of labour—for instance, if weaving
with power-looms instead of hand-looms becomes no longer
exceptional, and if the weaving of a yard with the
power-loom requires only half the labour-time required with
the hand-loom, then twelve hours’ labour of a hand-loom
weaver is no longer represented in a value of twelve hours,
but in one of six, since the necessary labour-time
has now become six hours. The hand-loom weaver’s
twelve hours now only [represent ] six hours of social
labour-time, although he still works twelve hours as he did
before.

But this is not what we are dealing with here. As
against this, take another branch of production, for example
type-setting, in which up to now no machinery is used.
Twelve hours in this branch produce just as much
value as twelve hours in branches of production in
which machinery, etc., is developed to the utmost.
Hence labour as producing value always remains the
labour of the individual, but expressed in the form
of general labour. Consequently productive
labour—as labour producing value—always
confronts capital as labour of the individual labour-power,
as labour of the isolated labourer, whatever social
combinations these labourers may enter into in the process
of production. While therefore capital, in relation to
the labourer, represents the social productive power of
labour, the productive labour of the workmen, in relation to
capital, always represents only the labour of the
isolated labourer.

Thirdly: Whereas the extortion of surplus-labour
and the appropriation to itself of the social productive
powers of labour seem to be a natural property of
capital—hence a property springing from its
use-value—it seems on the contrary to be a natural
property of labour to manifest its own social productive
powers as productive powers of capital and its own
surplus[-product] as surplus-value, as the self-expansion of
capital.

These three points must now be examined, and from them we
must deduce the distinction between productive and
unproductive labour.

[On (1).] The productivity of capital consists in
the fact that it confronts labour as wage-labour, and the
productivity of labour consists in the fact that it
confronts the means of labour as capital.

We have seen that money is transformed into
capital—that is , a certain exchange-value is
transformed into self-expanding exchange-value, into value
plus surplus-value—through one part of it being
converted into commodities which serve labour as means of
labour (raw materials, instruments, in short, the material
conditions of labour), and another part being used for the
purchase of labour-power. However, it is not
this first exchange between money and labour-power, or the
mere purchase of the latter, which transforms money into
capital. This purchase incorporates in the capital the
use of the labour-power for a certain time, or makes a
certain quantity of living labour one of the modes of
existence of capital, so to speak, the entelechy of
the capital itself.

In the actual production process the living labour is
transformed into capital through the fact that on the one
hand it reproduces the wages —that is, the value of
the variable capital —and on the other hand it creates
surplus-value; and through this process of transformation
the whole sum of money is transformed into capital, although
the part of it which varies directly is only the part
expended in wages. If the value was previously equal
to c+v, now it is equal to c+(v+x), which is the same thing
as (c+v)+x; or in other words: the original sum of money or
magnitude of value has expanded, has shown itself to be
value which at the same time maintains itself and also
increases.

<This has to be noted: the circumstance that only the
variable part of the capital produces its increment
in no way alters the fact that through this process the
whole original value has expanded, has grown greater by a
surplus-value, and that therefore the whole original sum of
money has been transformed into capital. For the
original value was equal to c+v (constant and variable
capital). In the process it becomes c+(v+x); the
latter is the reproduced part, which has come into existence
through the transformation of the living labour into
materialised labour —a transformation which is
conditioned and initiated through the exchange of v for
labour-power, or its transformation into wages. But
c+(v+x)=c+v (the original capital)+x. Moreover the
transformation of v into v+x, and therefore of (c+v) into
(c+v)+x, could only take place through the transformation of
a part of the money into c, The one part can only be
transformed into variable capital through the other
part being transformed into constant capital.>

In the actual process of production the labour is in
reality transformed into capital, but this
transformation is conditioned by the original
exchange between money and labour-power. It is through
this direct transformation of labour into
materialised labour, belonging not to the labourer
but to the capitalist, that money is first transformed into
capital—including that part of it which has received
the form of means of production, or conditions of
labour. Up to that point, the money—whether it
exists in its own form or in the form of commodities
(products) of a kind that can serve as means of production
of new commodities —is only an sich* capital.

| Only this definite
relation to labour transforms money or commodities into
capital, and that labour is productive labour which through
this its relation to the conditions of production—to
which corresponds a definite conduct in the actual process
of production—transforms money or commodities into
capital; that is to say, which maintains and increases the
value of materialised labour rendered independent in
relation to labour-power. Productive labour is only a
concise term for the whole relationship and the form and
manner in which labour-power figures in the capitalist
production process. The distinction from other kinds
of labour is however of the greatest importance, since this
distinction expresses precisely the specific form of the
labour on which the whole capitalist mode of production and
capital itself is based.

Productive labour is therefore—in the system of
capitalist production—labour which produces
surplus-value for its employer, or which transforms the
objective conditions of labour into capital and their owner
into a capitalist: that is to say, labour which produces its
own product as capital.

So when we speak of productive labour, we speak of
socially determined labour, labour which implies a quite
specific relation between the buyer and the seller of the
labour.

Now although the money which is in the hands of the buyer
of labour-power (or the commodities in his possession: [the
supply] of means of production and means of subsistence for
the labourer) only becomes capital through this process, is
only transformed into capital in this process—and
therefore these things are not capital before they enter
into the process, but are only destined to be
capital—they are nevertheless an sich capital.
They are in their essence capital because of the independent
form in which they confront labour-power and labour-power
confronts them—a relationship which conditions and
ensures the exchange with labour-power and the subsequent
process of the actual transformation of labour into
capital. They have from the outset the specific social
character in relation to the labourers which makes them into
capital and gives them command over labour. They are
therefore pre-conditions confronting labour as capital.

Productive labour, therefore, can be so described when it
is directly exchanged for money as capital, or, which is
only a more concise way of putting it, is exchanged directly
for capital, that is, for money which in its essence is
capital, which is destined to function as capital, or
confronts labour-power as capital. The phrase: labour
which is directly exchanged for capital, implies that labour
is exchanged for money as capital and actually transforms it
into capital. The significance of the direct nature of
the exchange will be seen more clearly in a moment.

Productive labour is therefore labour which reproduces
for the labourer only the previously determined value of his
labour-power, but as an activity creating value increases
the value of capital; in other words, which confronts the
labourer himself with the values it has created in the form
of capital.

### [(C) Two Essentially Different Phases in the Exchange Between Capital and Labour]

In the exchange between capital and labour, as we saw in
examining the production process, two essentially different
though interdependent phases have to be distinguished.

First: The first exchange between capital and labour is a
formal process, in which capital figures as money and labour
power as commodity. From a conceptual or legal
standpoint the sale of labour-power takes place in this
first process, although the labour is paid for only after it
has been performed—at the end of the day, of the week,
etc. This in no way alters this transaction, in which
the labour-power is sold. What in this transaction is
directly sold is not a commodity in which labour has already
realised itself, but the use of the labour-power itself, and
therefore in fact the labour itself, since the use of the
labour-power is its activity—labour. It is
therefore not an exchange of labour mediated through an
exchange of commodities. When A sells boots to B, both
exchange labour, the first, labour realised in boots, the
second, labour realised in money. But in this first
exchange, on one side materialised labour in its general
social form, that is, money, is exchanged for labour which
as yet exists only as a power; and what is brought and sold
is the use of this power, that is, the labour itself,
although the value of the commodity sold is not the value of
the labour (a meaningless phrase) but the value of the
labour-power. What takes place therefore is a direct
exchange between materialised labour and labour power, which
in fact resolves itself into living labour; that is, between
materialised labour and living labour. The
wage—the value of the labour-power—appears, as
explained earlier as the direct purchase price, the price of
labour.

In this first phase the relation between Labourer and
capitalist is that of seller and buyer of a commodity.
The capitalist pays the value of the labour-power,
that is, the value of the commodity which he
buys.

At the same time, however, the labour-power is only
bought because the labour which it can perform, and
undertakes to perform, is more than the labour required for
the reproduction of its labour-power; therefore the labour
performed by it represents a greater value than the value of
the labour-power.

| Secondly:
The second phase of the exchange between capital and
labour in fact has nothing to do with the first, and
strictly speaking is not an exchange at all.

In the first phase there is exchange of money for
commodity—exchange of equivalents—and labourer
and capitalist confront each other only as owners of
commodities. Equivalents are exchanged. (That is
to say, it makes no difference to the relation when
they are exchanged; and whether the price of the labour is
above or below the valve of the
labour-power or is equal to it alters nothing in the
transaction. It can therefore take place in
accordance with the general law of commodity exchange.)

In the second phase there is no exchange at all.
The owner of money has ceased to be a buyer of commodities
and the labourer has ceased to be a seller of
commodities. The owner of money now functions as
capitalist. He consumes the commodity which he has
bought, and the worker supplies it, since the use of his
labour-power is his labour itself. Through the earlier
transaction the labour itself has become part of
materialised wealth. The labourer performs it, but it
belongs to capital and is now only a function of the
latter. It is performed therefore directly under the
control and direction of capital; and the product in which
it is materialised is the new form in which the capital
appears, or in which rather it actually realises
itself as capital. In this process, therefore, labour
is directly materialised, is transformed
directly into capital, after it has been
formally incorporated in capital through the first
transaction. And indeed more labour is here
transformed into capital than the capital which had earlier
been expended on the purchase of labour-power. In this
process a part of unpaid labour is appropriated, and only
thereby does the money transform itself into capital.

But although in this phase no exchange in fact takes
place, the result, abstracting from the means that brought
it about, is that in the process —taking both phases
together—a certain quantity of materialised labour has
exchanged for a greater quantity of living labour.
This is expressed in the result of the process by the fact
that the labour which has materialised itself in its product
is greater in quantity than the labour materialised in the
labour-power, and hence greater than the materialised labour
paid to the labourer; or in other words by the fact that in
the actual process the capitalist gets back not only
the part of the capital which he laid out in wages, but a
surplus-value which costs him nothing. The
direct exchange of labour for capital here signifies:
(1) the direct transformation of the Labour into capital,
into a material component part of capital in the production
process; (2) the exchange of a certain quantity of
materialised labour for the same quantity of living labour
[plus] a surplus quantity of living labour which is
appropriated without exchange.

The statement that productive labour is labour
which is directly exchanged with capital
embraces all these phases, and is only a derivative formula
expressing the fact that it is labour which
transforms money into capital, which is exchanged with the
conditions of production as capital, that therefore
in its relationship with these conditions of production
labour is not faced by them as simple conditions of
production, nor does it face the conditions of production as
labour in general that has no specific social
character.

This statement covers: (1) the relation of money and
labour-power to each other as commodities, purchase and sale
as between the owner of money and the owner of labour-power;
(2) the direct subsumption of labour under capital; (3) the
real transformation of labour into capital in the production
process, or what is the same thing, the creation of
surplus-value for capital. Two kinds of
exchange take place between labour and
capital. The first expresses merely the purchase
of labour-power and therefore in reality of labour and
therefore of its product; the second, the direct
transformation of living labour into capital, in
other words the materialisation of living labour as the
realisation of capital.

### [(D) The Specific Use-value of Productive Labour for Capital]

The result of the capitalist production process is
neither a mere product (use-value) nor a commodity,
that is, a use-value which has a certain
exchange-value. Its result, its product, is the
creation of surplus-value for capital, and
consequently the actual transformation of money or
commodity into capital— which before the production
process they were only in intention, in their essence, in
what they were destined to be. In the production
process more labour is absorbed than has been bought.
This absorption, | this
appropriation of another’s unpaid labour, which is
consummated in the production process, is the direct
aim of the capitalist production process; for what
capital as capital (hence the capitalist as capitalist)
wants to produce is neither an immediate use-value for
individual consumption nor a commodity to be turned first
into money and then into a use-value. Its aim is the
accumulation of wealth, the self-expansion of
value, its increase; that is to say, the maintenance of
the old value and the creation of surplus-value. And
it achieves this specific product of the capitalist
production process only in exchange with labour, which for
that reason is called productive labour.

Labour which is to produce commodities must be
useful labour; it must produce a use-value, it must
manifest itself in a use-value. And
consequently only labour which manifests itself in
commodities, that is, in use-values, is labour for
which capital is exchanged. This is a self-evident
premise. But it is not this concrete character of
labour, its use-value as such—that it is for example
tailoring labour, cobbling, spinning, weaving,
etc.—which forms its specific use-value for capital
and consequently stamps it as productive labour in
the system of capitalist production. What forms its
specific use-value for capital is not its specific
useful character, any more than it is the particular useful
properties of the product in which it is materialised.
But what forms its specific use-value for capital is its
character as the element which creates exchange-value,
abstract labour; and in fact not that it represents some
particular quantity of this general labour, but that it
represents a greater quantity than is
contained in its price, that is to say, in the
value of the labour-power.

For it [capital], the use-value of labour-power is
precisely the excess of the quantity of labour which it
performs over the quantity of labour which is materialised
in the labour-power itself and hence is required to
reproduce it. Naturally, it supplies this quantity of
labour in the determinate form inherent in it as
labour which has a particular utility, such as spinning
labour; weaving labour, etc. But this concrete
character, which is what enables it to take the form of a
commodity, is not its specific use-value for
capital. Its specific use-value for capital consists
in its quantity as labour in general, and in the difference,
the excess, of the quantity of labour which it performs
over the quantity of labour which it costs.

A certain sum of money x becomes capital in that it
appears in its product as x+h; that is to say, in that the
quantity of labour contained in it as product is greater
than the quantity of labour which it originally
contained. And this is the result of the exchange
between money and productive labour; in other words,
only that labour is productive which, exchanged with
materialised labour, enables the latter to take the form of
an increased quantity of materialised labour.

The capitalist production process, therefore, is
not merely the production of commodities. It is
a process which absorbs unpaid labour, which makes raw
materials and means of labour—the means of production
—into means for the absorption of unpaid labour.

It follows from what has been said that the
designation of labour as productive labour has
absolutely nothing to do with the determinate content
of the labour, its special utility, or the particular
use-value in which it manifests itself.

The same kind of labour may be productive
or unproductive.

For example Milton, who wrote Paradise Lost for
five pounds, was an unproductive labourer. On
the other hand, the writer who turns out stuff for his
publisher in factory style, is a productive
labourer. Milton produced Paradise Lost for
the same reason that a silk worm produces silk. It was
an activity of his nature. Later he sold the
product for £5. But the literary proletarian of
Leipzig, who fabricates books (for example, Compendia of
Economics) under the direction of his publisher, is a
productive labourer; for his product is from the
outset subsumed under capital, and comes into being only for
the purpose of increasing that capital. A singer who
sells her song for her own account is an unproductive
labourer. But the same singer commissioned by an
entrepreneur to sing in order to make money for him is a
productive labourer; for she produces capital.

### [(E) Unproductive Labour. As Labour which Performs Services; Purchase of Services under Conditions of Capitalism. Vulgar Conception of the Relation Between Capital and Labour as an Exchange of Services]

| Here different
questions must be distinguished.

Whether I buy a pair of trousers or whether I buy cloth
and get a tailor to come to my house and pay him for this
service (that is, his tailoring labour) in converting
this cloth into trousers, is a matter of complete
indifference to me, if all I am interested in is the
trousers. I buy the trousers from the merchant-tailor
instead of taking the latter course, because this latter
course is more expensive, and the trousers cost less labour
and are therefore cheaper when the capitalist tailor
produces them than when I get them made by a jobbing
tailor. But in both cases I transform the money with
which I buy the trousers not into capital but into trousers;
and in both cases it is for me only a matter of using the
money as mere means of circulation, that is, of transforming
it into this particular use-value. Here therefore the
money does not function as capital, although in one
case it exchanges for a commodity and in the other
case it buys labour itself as a
commodity. It functions only as money, and more
precisely, as means of circulation.

On the other hand the jobbing tailor [who works for me at
my home] is not a productive labourer, although his
labour provides me with the product, the trousers, and him
with the price of his labour, the money. It may be
that the quantity of labour performed by the jobbing tailor
is greater than that contained in the price which he gets
from me. And this is even probable, since the price of
his labour is determined by the price which the
productive tailor gets. This however is all the
same so far as I am concerned. Once the price has been
fixed, it is a matter of complete indifference to me whether
he works eight or ten hours. What I am concerned with
is only the use-valve, the trousers; and naturally,
whether I buy them one way or the other, I am interested in
paying as little as possible for them, but in one case
neither less nor more than in the other; in other words, I
am interested in paying only the normal price for
them. This is an outlay for my consumption;
not an increase but a diminution of my money. It is in
no way a means to my enrichment, any more than any other way
of spending money for my personal consumption is a
means to enrichment for me.

One of the savants of Paul de Kock may tell me that
without buying trousers, just as without buying bread, I
cannot live, and therefore also I cannot enrich
myself; that the purchase of the trousers is therefore an
indirect means, or at least a condition, for my enrichment
—in the same way as the circulation of my blood or the
process of breathing are conditions for my enrichment.
But neither the circulation of my blood nor my breathing in
themselves make me any the richer; on the contrary, they
both presuppose a costly assimilation of food; if that were
not necessary, there would be no poor devils
about. The mere direct exchange of money for
labour therefore does not transform money into
capital or labour into productive labour.

What then is the special character of this
exchange? How is it different from the exchange of
money for productive labour? On the one hand, in that
the money is spent as money, as the
independent form of exchange-value, which is to be
transformed into a use-value, into means of
subsistence, into an object for personal consumption.
The money therefore does not become capital, but on the
contrary, it loses its existence as exchange-value in order
to be consumed and expended as use-value. On the other
hand, the labour only has any interest for me as a
use-value, as a service which converts cloth into
trousers, as the service which its particular useful
character provides for me.

In contrast to this, the service which the same tailor
employed by a merchant-tailor renders to this capitalist
does not consist at all in the fact that he converts
cloth into trousers, but that the necessary labour-time
materialised in a pair of trousers is say twelve hours,
while the wage that the journeyman tailor gets is equivalent
to six hours. The service which he renders the
capitalist is therefore that he works six hours for
nothing. That this takes place in the form of making
trousers only conceals the real relationship.
As soon as the merchant-tailor can, he therefore tries to
transform the trousers again into money, that is, into a
form in which the determinate character of tailoring labour
has entirely disappeared and in which the service rendered
is consequently expressed in the fact that instead of a
labour-time of six hours, | expressed in a certain sum of
money, there is now a labour-time of twelve hours, expressed
in double that sum of money.

I buy the tailoring labour for the service it renders me
as tailoring labour, in order to satisfy my need for
clothing and consequently to serve one of my
needs. The merchant-tailor buys it as a means
to making two talers out of one. I buy it
because it produces a particular use-value, renders me a
particular service. He buys it because it produces
more exchange-value than it costs, as a mere means for
exchanging less labour for more labour.

Where the direct exchange of money for labour takes place
without the latter producing capital, where it is therefore
not productive labour, it is bought as
service, which in general is nothing but a term for
the particular use-value which the labour provides, like any
other commodity; it is however a specific term for the
particular use-value of labour in so far as it does not
render service in the form of a thing, but in the
form of an activity, which however in no way
distinguishes it for example from a machine, for instance a
clock. Do ut facias, facio ut facias, facio ut des,
do ut des are here forms that can be used quite
indifferently to describe the same relation, while in
capitalist production the do ut facias expresses a
quite specific relation between the material value which is
given and the living activity which is appropriated.
Because therefore in the purchase of services the
specific relation between labour and capital is in no way
involved, being either completely obliterated or altogether
absent, it is naturally the favourite form used by Say,
Bastiat and their consorts to express the relation
between capital and labour.

The question how the value of these services is
regulated and how this value itself is determined by
the laws governing wages has nothing to do with the
examination of the relation we are considering, and belongs
to the chapter on wages.

It follows that the mere exchange of money for labour
does not make the latter productive labour, and that
on the other hand the content of this labour at first
makes no difference.

The labourer himself can buy labour, that is,
commodities, which are provided in the form of services; and
the expenditure of his wages on such services is an
expenditure which in no way differs from the expenditure of
his wages on any other commodities. The service which
he buys may be more or less necessary —for example,
the service of a physician or of a priest, just as he may
buy either bread or gin. As buyer—that is, as
representative of money confronting commodity—the
labourer is in absolutely the same category as the
capitalist where the latter appears only as buyer, that is
to say, where there is no more in the transaction than the
conversion of money into the form of commodity. How
the price of these services is determined, and what relation
it has to wages proper, how far it is regulated by the laws
of the latter and how far it is not, are questions to be
considered in the treatment of wages, and are quite
irrelevant for our present inquiry.

If thus the mere exchange of money for labour does not
transform the latter into productive labour, or, what
is the same thing, does not transform the former into
capital, so also the content, the concrete character,
the particular utility of the labour, seems at first to make
no difference—as we have just seen, the same labour of
the same journeyman tailor is in one case productive, in the
other not.

Certain services, or the use-values,
resulting from certain forms of activity or labour are
embodied in commodities; others on the contrary leave
no tangible result existing apart from the persons
themselves who perform them; in other words, their result is
not a vendible commodity. For example, the
service a singer renders to me satisfies my aesthetic need;
but what I enjoy exists only in an activity inseparable from
the singer himself, and as soon as his labour, the singing,
is at an end, my enjoyment too is at an end. I enjoy
the activity itself—its reverberation on my ear.
These services themselves, like the commodities which I buy,
may be necessary or may only seem necessary—for
example, the service of a soldier or physician or lawyer; or
they may be services which give me pleasure. But this
makes no difference to their economic character. If I
am healthy and do not need a doctor or am lucky enough not
to have to be involved in a lawsuit, then I avoid paying out
money for medical or legal services as I do the plague.

| Services may
also be forced on me—the services of officials,
etc.

If I buy the service of a teacher not to develop my
faculties but to acquire some skill with which I can earn
money—or if others buy this teacher for me—and
if I really learn something (which in itself is quite
independent of the payment for the service), then these
costs of education, just as the costs of my maintenance,
belong to the costs of production of my labour-power.
But the particular utility of this service alters nothing
in the economic relation; it is not a relation in which
I transform money into capital, or by which the supplier of
this service, the teacher, transforms me into his
capitalist, his master. Consequently it also does
not affect the economic character of this relation
whether the physician cures me, the teacher is successful in
teaching me, or the lawyer wins my lawsuit. What is
paid for is the performance of the service as such, and by
its very nature the result cannot be guaranteed by those
rendering the service. A large proportion of
services belongs to the costs of consumption
of commodities, as in the case of’ a cook, a maid,
etc.

It is characteristic of all unproductive labours
that they are at my command—as in the case of the
purchase of all other commodities for consumption—only
to the same extent as I exploit productive
labourers. Of all persons, therefore, the
productive labourer has the least command over the
services of unproductive labourers. On the
other hand, however, my power to employ productive
labourers by no means grows in the same proportion as I
employ unproductive labourers, but on the contrary
diminishes in the same proportion, although [one has ] most
to pay for the compulsory services (State,
taxes).

Productive labourers may themselves in relation to
me be unproductive labourers. For example, if I
have my house re-papered and the paper-hangers are
wage-workers of a master who sells me the job, it is just
the same for me as if I had bought a house already papered;
as if I had expended money for a commodity for my
consumption, But for the master who gets these labourers to
hang the paper, they are productive labourers, for they
produce surplus-value for him. |

| How very
unproductive, from the standpoint of capitalist
production, the labourer is who indeed produces vendible
commodities, but only to the amount equivalent to his own
labour-power, and therefore produces no surplus-value for
capital—can be seen from the passages in Ricardo
saying that the very existence of such people is a
nuisance. This is the theory and practice of
capital.

“Both the theory relative to capital,
and the practice of stopping labour at that point
where it can produce, in addition to the subsistence of the
labourer, a profit for* the capitalist, seem opposed to the
natural laws which regulate production “ (Thomas
Hodgskin, Popular Political Economy, London, 1827,
p. 238). |

| We have seen: This
process of production is not only a process of the
production of commodities, but a process of the
production of surplus-value, the absorption of
surplus-labour and hence a process of production of
capital. The first formal act of exchange between
money and labour or capital and labour is only
potentially the appropriation of someone else’s
living labour by materialised labour. The actual
process of appropriation takes place only in the actual
production process, behind which lies as a past stage that
first formal transaction—in which capitalist and
labourer confront each other as mere owners of
commodities, as buyer and seller. For which reason
all vulgar economists—like Bastiat —go no
further than that first formal transaction, precisely in
order by this trick to get rid of the specific capitalist
relation. The distinction is shown in a striking way
by the exchange of money for unproductive labour. Here
money and labour exchange with each other only as
commodities. So that instead of this exchange forming
capital, it is expenditure of revenue. |

### [(F) The Labour of Handicraftsmen and Peasants in Capitalist Society]

| What then is the
position of independent handicraftsmen or peasants who
employ no labourers and therefore do not produce as
capitalists? Either, as always in the case of peasants
<but for example not in the case of a gardener whom I get
to come to my house>, they are producers of
commodities, and I buy the commodity from
them—in which case for example it makes no difference
that the handicraftsman produces it to order while the
peasant produces his supply according to his means. In
this capacity they confront me as sellers of commodities,
not as sellers of labour, and this relation therefore has
nothing to do with the exchange of capital for labour;
therefore also it has nothing to do with the distinction
between productive and unproductive labour, which
depends entirely on whether the labour is exchanged for
money or for money as money as capital. They therefore
belong neither to the category of productive nor of
unproductive labourers, although they are producers
of commodities. But their production does not fall
under the capitalist mode of production.

It is possible that these producers, working with their
own means of production, not only reproduce their
labour-power but create surplus-value, while their position
enables them to appropriate for themselves their own
surplus-labour or a part of it (since a part of it is taken
away from them in the form of taxes, etc.). And here
we come up against a peculiarity that is characteristic of a
society in which one definite mode of production
predominates, even though not all productive relations have
been subordinated to it. In feudal society, for
example (as we can best observe in England because the
system of feudalism was introduced here from Normandy ready
made and its form was impressed on what was in many respects
a different social foundation), relations which were far
removed from the nature of feudalism were given a feudal
form; for example, simple money relations in which there was
no trace of mutual personal service as between lord and
vassal, It is for instance a fiction that the small peasant
held his land in fief.

It is exactly the same in the capitalist mode of
production. The independent peasant or handicraftsman
is cut up into two persons*. As owner of the means of
production he is capitalist; as labourer he is his own
wage-labourer. As capitalist he therefore pays himself
his wages and draws his profit on his capital; that is to
say, he exploits himself as wage-labourer, and pays himself,
in the surplus-value, the tribute that labour owes to
capital. Perhaps he also pays himself a third portion
as landowner (rent), in exactly the same way, as we shall
see later, that the industrial capitalist, when he works
with his own | capital,
pays himself interest, regarding this as something which he
owes to himself not as industrial capitalist but qua
capitalist pure and simple.

The determinate social character of the means of
production in capitalist production—expressing a
particular production relation —has so grown
together with, and in the mode of thought of bourgeois
society is so inseparable from, the material existence of
these means of production as means of production, that the
same determinateness (categorical determinateness) is
assumed even where the relation is in direct contradiction
to it. The means of production become capital only in
so far as they have become separated from labourer and
confront labour as an independent power. But in the
case referred to the producer—the labourer— is
the possessor, the owner, of his means of production.
They are therefore not capital, any more than in relation to
them he is a wage-labourer. Nevertheless they are
looked on as capital, and he himself is split in two, so
that he, as capitalist, employs himself as
wage-labourer.

In fact this way of presenting it, however irrational it
may be on first view, is nevertheless so far correct, that
in this case the producer in fact creates his own
surplus-value <on the assumption that he sells his
commodity at its value>, in other words, only his own
labour is materialised in the whole product. But that
he is able to appropriate for himself the whole
product of his own labour, and that the excess of the value
of his product over the average price for instance of his
day’s labour is not appropriated by a third person, a
master, he owes not to his labour —which does
not distinguish him from other labourers —but to his
ownership of the means of production. It is therefore
only through his ownership of these that he takes possession
of his own surplus-labour, and thus bears to himself as
wage-labourer the relation of being his own capitalist.

Separation appears as the normal relation in this
society. Where therefore it does not in fact apply, it
is presumed and, as has just been shown, so far correctly;
for (as distinct for example from conditions in Ancient Rome
or Norway or in the north-west of the United States) in this
society unity appears as accidental,
separation as normal; and consequently separation is
maintained as the relation even when one person unites the
separate functions. Here emerges in a very striking
way the fact that the capitalist as such is only a function
of capital, the labourer a function of labour-power.
For it is also a law that economic development distributes
functions among different persons; and the handicraftsman or
peasant who produces with his own means of production will
either gradually be transformed into a small capitalist who
also exploits the labour of others, or he will suffer the
loss of his means of production <in the first instance
the latter may happen although he remains their
nominal owner, as in the case of mortgages> and be
transformed into a wage-labourer. This is the tendency
in the form of society in which the capitalist mode of
production predominates.

### [(G) Supplementary Definition of Productive Labour as Labour which is Realised in Material Wealth]

In considering the essential relations of capitalist
production it can therefore be assumed that the entire world
of commodities, all spheres of material production—the
production of material wealth—are (formally or really)
subordinated to the capitalist mode of production <for
this is what is happening more and more completely; [since
it] is the principal goal, and only if it is realised will
the productive powers of labour be developed to their
highest point>. On this premise—which
expresses the limit [of the process] and which is therefore
constantly coming closer to an exact presentation of
reality—all labourers engaged in the production of
commodities are wage-labourers, and the means of production
in all these spheres confront them as capital. It can
then be said to be a characteristic of productive
labourers, that is, labourers producing capital, that
their labour realises itself in commodities, in
material wealth. And so productive labour,
along with its determining characteristic—which takes
no account whatever of the content of labour and is
entirely independent of that content—would be given a
second, different and subsidiary definition.

### [(H) Manifestations of Capitalism in the Sphere of Immaterial Production]

Non-material production, even when it is carried on
purely for exchange, that is, when it produces
commodities, may be of two kinds:

1. It results in commodities, use-values,
which have a form different from and independent of
producers and consumers; these commodities may therefore
exist during an interval between production and consumption
and may in this interval circulate as vendible
commodities, such as books, paintings, in a word, all
artistic products which are distinct from the artistic
performance of the artist performing them. Here
capitalist production is applicable only to a very
restricted extent: as for example when a writer of a joint
work—say an encyclopaedia—exploits a number of
others as hacks. |
In this sphere for the most part a transitional form
to capitalist production remains in existence, in
which the various scientific or artistic producers,
handicraftsmen or experts work for the collective trading
capital of the book-trade—a relation that has nothing
to do with the capitalist mode of production proper and even
formally has not yet been brought under its sway. The
fact that the exploitation of labour is at its highest
precisely in these transitional forms in no way alters the
case.

2. The production cannot be separated from the act
of producing, as is the case with all performing artists,
orators, actors, teachers, physicians, priests, etc.
Here too the capitalist mode of production is met with only
to a small extent, and from the nature of the case can only
be applied in a few spheres. For example, teachers in
educational establishments may be mere wage-labourers for
the entrepreneur of the establishment; many such educational
factories exist in England. Although in relation to
the pupils these teachers are not productive
labourers, they are productive labourers in relation
to their employer. He exchanges his capital for
their labour-power, and enriches himself through this
process. It is the same with enterprises such as
theatres, places of entertainment, etc. In such cases
the actor’s relation to the public is that of an artist, but
in relation to his employer he is a productive
labourer. All these manifestations of capitalist
production in this sphere are so insignificant compared with
the totality of production that they can be left entirely
out of account.

### [(I) The Problem of Productive Labour from the Standpoint of the Total Process of Material Production]

With the development of the specifically capitalist mode
of production, in which many labourers work together in the
production of the same commodity, the direct relation which
their labour bears to the object produced naturally varies
greatly. For example the unskilled labourers in a
factory referred to earlier have nothing directly to do with
the working up of the raw material. The workmen who
function as overseers of those directly engaged in working
up the raw material are one step further away; the works
engineer has yet another relation and in the main works only
with his brain, and so on. But the totality of
these labourers, who possess labour-power of different
value (although all the employed maintain much the same
level) produce the result, which, considered as the
result of the labour-process pure and simple, is
expressed in a commodity or material product;
and all together, as a workshop, they are the living
production machine of these products—just as,
taking the production process as a whole, they exchange
their labour for capital and reproduce the capitalists’
money as capital, that is to say, as value producing
surplus-value, as self-expanding value.

It is indeed the characteristic feature of the capitalist
mode of production that it separates the various kinds of
labour from each other, therefore also mental and manual
labour—or kinds of labour in which one or the other
predominates—and distributes them among different
people. This however does not prevent the material
product from being the common product of these
persons, or their common product embodied in material
wealth; any more than on the other hand it prevents or in
any way alters the relation of each one of these persons to
capital being that of wage-labourer and in this pre-eminent
sense being that of a productive labourer. All
these persons are not only directly engaged in the
production of material wealth, but they exchange their
labour directly for money as capital, and
consequently directly reproduce, in addition to their wages,
a surplus-value for the capitalist, Their labour consists of
paid labour plus unpaid surplus-labour.

### [(J) The Transport Industry as a Branch of Material Production. Productive Labour in the Transport Industry]

In addition to extractive industry, agriculture and
manufacture, there exists yet a fourth sphere of material
production, which also passes through the various stages of
handicraft industry, manufacture and mechanical industry;
this is the transport industry, transporting either
people or commodities. The relation of productive
labour—that is, of the wage-labourer—to
capital is here exactly the same as in the other spheres of
material production. Moreover, here a material change
is effected in the object of labour—a spatial
change, a change of place. In the case of the
transport of people this takes the form only of a
service rendered to them by the entrepreneur.
But the relation between buyer and seller of this
service has nothing to do with the relation of the
productive labourer to capital, any more than has the
relation between the buyer and seller of yarn.

If on the other hand we consider the process in relation
to commodities, | in this
case there certainly takes place, in the labour-process, a
change in the object of labour, the commodity.
Its spatial existence is altered, and along with this goes a
change in its use-value, since the location of this
use-value is changed. Its exchange-value increases in
the same measure as this change in use-value requires
labour—an amount of labour which is determined partly
by the wear and tear of the constant capital, that is, the
total materialised labour which enters into the commodity,
and partly by the quantity of living labour, as in the
process of increasing the value of all other
commodities.

When the commodity has reached its destination, this
change which has taken place in its use-value has vanished,
and is now only expressed in its higher exchange-value, in
the enhanced price of the commodity. And although in
this case the real labour has left no trace behind it in the
use-value, it is nevertheless realised in the exchange-value
of this material product; and so it is true also of this
industry as of other spheres of material production that the
labour incorporates itself in the commodity, even
though it has left no visible trace in the use-value of the
commodity.

Here we have been dealing only with productive
capital, that is, capital employed in the direct
process of production. We come later to capital in
the process of circulation. And only after
that, in considering the special form assumed by capital as
merchant’s capital, can the question be answered as
to how far the labourers employed by it are productive or
unproductive. |XXI-1331||

### [13. Draft Plans for parts I and III of Capital]

### [(A) Plan for Part I or Section I of Capital]

||XVIII-1140| The first
section “Production Process of Capital”
to be divided in the following way:

1. Introduction. Commodity. Money.

2. Transformation of money into capital.

3. Absolute surplus-value. (a) Labour-process
and the process of producing surplus-value. (b)
Constant capital and variable capital. (c) Absolute
surplus-value. (d) Struggle for the normal
working-day. (e) Simultaneous working-days (number of
simultaneously employed labourers). Amount of
surplus-value and rate of surplus-value (magnitude and
height?).

4. Relative surplus-value. (a) Simple
co-operation. (b) Division of labour. (c)
Machinery. etc.

5. Combination of absolute and relative
surplus-value. Relation (proportion) between
wage-labour and surplus-value. Formal and real
subsumption of labour under capital. Productivity of
capital. Productive and unproductive labour.

6. Reconversion of surplus-value into
capital. Primitive accumulation. Wakefield’s
colonial theory.

7. Result of the production process.

(Either under 6 or under 7 the change in the form of the
law of appropriation can be shown.)

8. Theories of surplus-value.

9. Theories of productive and unproductive
labour. |XVIII-1140||

### [(B) Plan for Part III or Section III of Capital]

||XVIII-1139| The third
section “Capital and Profit” to be
divided in the following way:

1. Conversion of surplus-value into profit.
Rate of profit as distinguished from rate of
surplus-value.

2. Conversion of profit into average profit.
Formation of the general rate of profit.
Transformation of values into prices of production.

3. Adam Smith’s and Ricardo’s theories on profit
and prices of production.

4. Rent (illustration of the difference between
value and price of production).

5. History of the so-called Ricardian law of
rent.

6. Law of the fall of the rate of profit.
Adam Smith, Ricardo, Carey.

7. Theories of profit.

(Query: whether Sismondi and Malthus should also be
included in the Theories of Surplus-Value.)

8. Division of profit into industrial profit and
interest. Merchant’s capital. Money-capital.

9. Revenue and its sources. The question of
the relation between the processes of production and
distribution also to be included here.

10. Reflux movements of money in the process of
capitalist production as a whole.

11. Vulgar economy.

12. Conclusion. Capital and
wage-labour. |XVIII-1139||.

### [(C) Plan for Chapter II of Part III of Capital]

||XVIII-1109| In the second
chapter of Part III, on “Capital and
Profit”, where the formation of the general rate
of profit is dealt with, the following must be
considered:

1. Different organic composition of capitals,
partly conditioned by the difference between variable and
constant capital in so far as this arises from the stage
of production—the absolute quantitative
relations between machinery and raw materials on the one
hand, and the quantity of labour which sets them in
motion. These differences relate to the
labour-process. The differences between fixed and
circulating capital arising from the circulation process
have also to be considered—differences which lead to
variations in the increase of value, in a given period of
time, as between different spheres.

2. Differences in the relative value of the parts
of different capitals which do not arise from their organic
composition. These arise from the difference of value
particularly of the raw materials, even assuming that the
raw materials absorb an equal quantity of labour in two
different spheres.

3. The result of those differences is diversity of
the rates of profit in different spheres of capitalist
production. It is true only for capitals of equal
composition, etc., that the rate of profit is the same and
the quantity of profit is in proportion to the size of the
capital employed.

4. For the total capital, however, what has been
explained in Chapter I holds good. In capitalist
production each capital is assumed to be a unit, an aliquot
part of the total capital. Formation of the
general rate of profit (competition).

5. Transformation of values into prices of
production. Difference between value, cost-price, and
production price.

6. To take up also the Ricardian point: the
influence of general variations in wages on the general rate
of profit and hence on prices of production. |XVIII-1109||

* In the manuscript:

* In the
manuscript: “Am besten sie zum Bauen van Strassen,
Brücken, Bergwerken etc. zu
verwenden.”—Ed.

* In the manuscript:
“than upon” instead of “then about
the”.—Ed.

* In the manuscript:

* In the manuscript:

* In the manuscript:

** In the
manuscript: “which”.—Ed.

* In the manuscript:

* In the manuscript:

** In the
manuscript this is followed by the word:

*** In the
manuscript this is followed by the word:

* In the
manuscript: “viz”.—Ed.

** In the
manuscript: “to the farther increase of commerce

*** In the
manuscript this is followed by the word:

**** In the
manuscript: “to be”.—Ed.

***** In the
manuscript: “2,000£”.—Ed.

* In the
manuscript: “got”.—Ed.

** In the
manuscript: “by a decrease of foreign
trade”.—Ed.

*** In the
manuscript: “Commerce”.—Ed.

* In the
manuscript: “…am grössten, interest am
höchsten”.—Ed.

** In the
manuscript: “motives”.—Ed.

*** In the
manuscript: “the”.—Ed.

* Commodity
exchange.—Ed.

* In the
manuscript: “this”.—Ed

* In the
manuscript: “the”.—Ed.

** In the
manuscript: “sellers not
enriched”.—Ed.

* In the
manuscript: “destroyed”.—Ed.

* In
essence.—Ed.

* In the
manuscript: “to”.—Ed.

* “In small
enterprises […] the employer is often his
own labourer” (Storch, [Cours
d’économie politique], t. I, Petersburg edition,
p. 242).


## [CHAPTER VIII] Herr Rodbertus. New Theory of Rent.

(Digression)

### [1. Excess Surplus-Value in Agriculture. Agriculture Develops Slower Than Industry under Conditions of Capitalism]

||X-445| Herr
Rodbertus. Dritter Brief an von Kirchmann von
Rodbertus. Widerlegung der Ricardoschen Lehre von der
Grundrente und Begründung einer neuen
Rententheorie, Berlin, 1851.

The following remark has to be made beforehand: supposing
the necessary wage is equal to 10 hours, then this is most
easily explained in the following manner. If 10 hours’
labour (i.e., a sum of money equal to 10 hours) enabled the
agricultural labourer, on an average, to purchase all the
necessary means of subsistence, agricultural, industrial
products, etc., then this is the average wage for unskilled
labour. We are thus concerned here with the value of
his daily product which must fall to his share. In the
first place this value exists in the form of the
commodity which he produces, i.e., [in] a certain
quantity of this commodity, in exchange for which,
after deducting what he himself consumes of the commodity
(if he [does consume any of it]), he can procure for himself
the necessary means of subsistence. Not only the
use-value which he himself produces, but industry,
agriculture, etc., thus come into the estimation of his
necessary “income. But this is inherent in the
concept of commodity. He produces a commodity,
not merely a product. We need therefore waste no words
about this.

Herr Rodbertus first investigates the situation in a
country where there is no separation between land
ownership and owner-ship of capital. And here he comes
to the important conclusion that rent (by which he means the
entire surplus-value) is simply equal to the unpaid
labour or the quantity of products which it represents.

In the first instance it is noteworthy that Rodbertus
only takes into account the growth of relative
surplus-value, i.e., the growth of surplus-value in so far
as it arises out of the growing productivity of labour and
not the growth of surplus-value derived from the
prolongation of the working-day itself. All absolute
surplus-value is of course relative in one respect.
Labour must be sufficiently productive for the worker not to
require all his time to keep himself alive. But from
this point the distinction comes into force.
Incidentally, if originally labour is but little productive,
the needs are also extremely simple (as with slaves) and the
masters themselves do not live much better than the
servants. The relative productivity of labour
necessary before a profit-monger, a parasite, can come, into
being is very small. If we find a high rate of profit
though labour is as yet very unproductive, and machinery,
division of labour etc., are not used, then this is the case
only under the following circumstances; either as in India,
partly because the requirements of the worker are extremely
small and he is depressed even below his modest needs, but
partly also because low productivity of labour is identical
with a relatively small fixed capital in proportion to the
share of capital which is spent on wages or, and this comes
to the same thing, with a relatively high proportion of
capital laid out in wages in relation to the total capital;
or finally, because labour-time is excessively long, The
latter is the case in countries (such as Austria etc.) where
the capitalist mode of production is already in existence
but which have to compete with far more developed
countries. Wages can be low here partly because the
requirements of the worker are less developed, partly
because agricultural products are cheaper or—this
amounts to the same thing as far as the capitalist is
concerned—because they have less value in terms of
money. Hence the quantity of the product of, say, 10
hours’ labour, which must go to the worker as necessary
wages, is small. If, however, he works 17 hours
instead of 12 then this can make up (for the low
productivity of labour]. In any case because in a
given country the value of labour is falling relatively to
its productivity, it must not be imagined that wages in
different countries are inversely proportional to the
productivity of labour. In fact exactly the opposite
is the case. The more productive one country is
relative to another in the world market, the higher will be
its wages as compared with the other. In England, not
only nominal wages but [also] real wages are higher than on
the continent. The worker eats more meat; he satisfies
more needs. This, however, only applies to the
industrial worker and not the agricultural labourer.
But in proportion to the productivity of the English workers
their wages are not higher (than the wages paid in other
countries].

Quite apart from the variation in rent according to the
fertility of the land, the very existence of
rent—i.e., the modern form of landed property—is
feasible because the average wage of the agricultural
labourer is below that of the industrial worker.
Since, to start with, by tradition (as the farmer turns
capitalist before capitalists turn farmers) the capitalist
passed on part of his gain to the landlord, he compensated
himself by forcing wages down below their level. With
the labourers’ desertion of the land, wages had to rise and
they did rise. But hardly has this pressure become
evident, when machinery etc. is introduced and the
land once more boasts a (relative) surplus population.
(Vide England.) Surplus-value can be increased, without the
extension of labour-time or the development of the
productive power of labour, by forcing wages below their
traditional level. And indeed this is the case
wherever agricultural production is carried on by capitalist
methods. Where it cannot be achieved by means of
machinery, it is done by turning the land over to sheep
grazing. Here then we already have a potential
basis of | rent since,
in fact, the agricultural labourer’s wage does not
equal the average wage. This rent would be feasible
quite independent of the price of the product, which
is equal to its value.

Ricardo is also aware of the second type of rent
increase, which arises from a greater product sold at the
same price, but he does not take it into account, since he
measures rent per quarter and not per acre. He would
not say that rent has risen (and in this way rent can
rise with falling prices) because 20 quarters [at] 2s, is
more than 10 [quarters at] 2s, or 10 quarters [at] 3s.

Incidentally, however the phenomenon of rent may be
explained, the significant difference between
agriculture and industry remains, in that in the latter,
excess surplus-value is created by cheaper production, in
the former, by dearer production. If the average price
of 1 lb. of yarn is 2s. and I can produce it for 1s. then,
in order to gain an increased market for it, I will
necessarily sell [it] for 1s. 6d. [or] at any rate below
2s. And what is more, this is absolutely necessary,
for cheaper production presupposes production on a larger
scale. So, compared with before, I am now glutting the
market, I must sell more than before. Although 1
lb. of yarn costs only 1s. this is only the case if I now
produce, say, 10,000 lbs. as against my previous 8,000
lbs. The low cost is only achieved because fixed
capital is spread over 10,000 lbs. If I were to sell
only 8,000 lbs., the depreciation of the machines alone
would raise the price per lb. by one-fifth, i.e., 20 per
cent. So I sell at below 2s. in order to be able to
sell 10,000 lbs. In doing so, I am still making an
excess profit of 6d., i.e., of 50 per cent on the value of
my product which is 1s. and already includes the normal
profit. In any case, I am hereby forcing down the
market-price with the result that the consumer gets the
product more cheaply. But in agriculture I sell at
2s. since, if I had sufficient fertile land, the less
fertile would not be cultivated. If the area of
fertile land were enlarged, or the fertility [of the] poorer
soil so improved that I could satisfy demand, then this game
would end, Not only does Ricardo not deny this, but he
expressly calls attention to it.

Thus if we admit that the varying fertility of the land
accounts not for rent itself, but only for the differences
in rent, there remains the law that while in industry, on an
average, excess profit arises from the lowering of the price
of the product, in agriculture the relative size of rent is
determined not only by the relative raising of the price
(raising the price of the product of fertile land above its
value) but by selling the cheaper product at he cost of the
dearer. This is, however, as I have already
demonstrated (Proudhon), merely the law of competition,
which does not emanate from the “soil” but from
“capitalist production” itself.

Furthermore, Ricardo would be right in another respect,
except that, in the manner of the economists, he turns a
historical phenomenon into an eternal law. This
historical phenomenon is the relatively faster development
of manufacture (in fact the truly bourgeois branch of
industry) as against agriculture. The latter has
become more productive but not in the same ratio as
industry. Whereas in manufacture productivity has
increased tenfold, in agriculture it has, perhaps,
doubled. Agriculture has therefore become relatively
less productive, although absolutely more productive.
This only proves the very queer development of bourgeois
production and its inherent contradictions. It does
not, however, invalidate the proposition that agriculture
becomes relatively less productive and hence, compared with
the value of the industrial product, the value of the
agricultural product rises and with it also rent. That
in the course of development of capitalist production,
agricultural labour has become relatively less productive
than industrial labour only means that the productivity of
agriculture has not developed with the same speed and to the
same degree.

Suppose the relation of industry A to industry B is as
1:1. Originally agriculture [was] more productive
because not only natural forces but also a machine created
by nature play a part in agriculture; right from the start,
the individual worker is working with a machine.
Hence, in ancient times and in the Middle Ages agricultural
products were relatively much cheaper than industrial
products, which is obvious (see Wade) from the ratio of the
two within the average wage.

At the same time let 1°: 1° indicate the
fertility of the two [branches of production]. Now if
industry A becomes 10°, [i.e.] its fertility increases
tenfold while industry B merely increases threefold, becomes
3°, then whereas the industries were previously as 1:1
they are now as 10:3 or as 1 :
3/10. The fertility of industry
B has decreased relatively by 7/10
although absolutely it has increased threefold. For
the highest rent [it is] the same—relatively to
industry—as if it had risen because the poorest land
had become 7/10 less fertile.

Now it does not by any means follow, as Ricardo supposes,
that the rate of profit has fallen because wages have risen
as a result of the relative increase in the price of
agricultural products |. For the average wage is
not determined by the relative but by the absolute value of
the products which enter into it. It does however
follow that the rate of profit (really the rate of
surplus-value) has not risen in the same ratio as the
productive power of manufacturing industry, and this is due
to agriculture (not the land) being relatively less
productive. This is absolutely certain. The
reduction in the necessary labour-time seems small compared
with the progress in industry. This is evident from
the fact that the agricultural products of countries like
Russia etc. can beat those of England. The lower value
of money in the wealthier countries (i.e., the low relative
production costs of money in the wealthier countries) does
not enter into it at all. For the question is, why it
does not affect their industrial products in competition
with poorer countries when it does affect their agricultural
products. (Incidentally, this does not prove that poor
countries produce more cheaply, that their agricultural
labour is more productive. Even in the United States,
the volume of corn at a given price has increased, as has
recently been proved by statistical information, not however
because the yield per acre has risen, but because more acres
have come under cultivation. It cannot be said that
the land is more productive where there is a great land mass
and where large areas, superficially cultivated, yield a
greater absolute product with the same amount of labour than
much smaller areas in the more advanced country.)

The fact that less productive land is brought
under cultivation does not necessarily prove that
agriculture has become less productive. On the
contrary, it may prove that it has become more productive;
that the inferior land is being cultivated, not [only]
because the price of the agricultural product has
sufficiently risen to compensate for the capital investment,
but also the converse, that the means of production have
developed to such an extent that the unproductive land has
become “productive” and capable of yielding not
only the normal profit but also rent. Land which is
fertile at a [given] stage of development of productive
power may be unfertile for a lower developmental stage.

In agriculture, the extension of
labour-time—i.e., the augmentation of absolute
surplus-value—is only possible to a limited
degree. One cannot work by gaslight on the land and so
on. True, one can rise early in spring and
summer. But this is offset by the shorter winter days
when, in any case, only a relatively small amount of work
can be accomplished. So in this respect absolute
surplus-value is greater in industry so long as the
normal working-day is not regulated by force of law. A
second reason for a smaller amount of surplus-value being
created in agriculture is the long period during which the
product remains in the process of production without any
labour being expended on it. With the exception of
certain branches of agriculture such as stock-raising, sheep
farming, etc., where the population is positively ousted
from the land, the number of people employed relatively to
the constant capital used, is still far greater—even
in the most advanced large-scale agriculture—than in
industry, or at least in the dominating branches of
industry. Hence in this respect even if, for the
above-mentioned reasons, the mass of surplus-value is
relatively smaller than it [would be] with the employment of
the same number of people in industry—this latter
condition is partly offset again by the wage falling below
its average level—the rate of profit can be greater
than in industry, But if there are, in agriculture, any
causes (we only indicate the above) which raise the rate of
profit (not temporarily but on an average as compared with
industry) then the mere existence of the landlord would
cause this extra profit to consolidate itself and accrue to
the landlord rather than enter into the formation of the
general rate of profit.

### [2. The Relationship of the Rate of Profit to the Rate of Surplus-Value. The Value of Agricultural Raw Material as an Element of Constant Capital in Agriculture]

In general terms the question to be answered with regard
to Rodbertus is as follows:

The general form of capital advanced is:

Constant capital

Variable capital

Machinery—Raw materials

Labour-power

In general the two elements of constant capital are the
instruments of labour and the subject of labour. The
latter is not necessarily a commodity, a product of
labour. It may therefore not exist as an element of
capital, although it is invariably an element in the
labour-process. Soil is the husbandman’s raw
material, the mine that of the miner, the water that of the
fisherman and even the forest is that of the hunter.
In the most complete form of capital, however, these three
elements of the labour-process also exist as three elements
of capital, i.e., they are all commodities, use-values which
have an exchange-value and are products of labour. In
this case all three elements enter into the process of
creating value, although machinery [enters into it] not to
the extent to which it enters into the labour-process but
only in so far as it is consumed.

The following question now arises: Can the absence of one
of these elements in a particular branch of industry enhance
the rate of profit (not the rate of surplus-value) in
that industry? In general terms, the formula itself
provides the answer:

The rate of profit equals the ratio of surplus-value to
the total capital advanced.

Throughout this investigation it is assumed that the
rate of surplus-value, i.e., the division of the
value of the product between the capitalist and the worker,
remains constant.

| The rate of
surplus-value is s/v; the rate of profit is
s/c+v. Since s’, the rate of
surplus-value, is given, v is given and s/v is
assumed to be a constant value. Therefore the
magnitude of s/c+v can only alter when c + v
changes and since v is given, this can only increase
or decrease because c decreases or increases.

And further, s/c+v will increase or decrease not
in the ratio of c : v but according to c’s
relation to the sum of c + v, If c equals
nought, then s/c+v = s/v. The rate of profit
[would] in this case equal the rate of surplus-value and
this is its highest possible amount, since no sort of
calculation can alter the magnitude of s and
v. Suppose v = 100 and s = 50,
then s/v = 50/100 =
1/2 = 50 per cent. If a constant
capital of 100 were added, then the rate of profit [would
be] 50/150+100 =
50/200 =1/4 = 25
per cent. The rate of profit would have decreased by
half. If 150 c were added to 100 v then
the rate of profit would be 50/100+150
= 50/250 = 1/5 =
20 per cent. In the first instance, total capital
equals v, i.e., equals variable capital, hence the
rate of profit equals the rate of surplus-value. In
the second instance, total capital equals 2 ×
v, hence the rate of profit is only half the rate of
surplus-value. In the third instance total capital is
2 1/2 × 100, that is 2
1/2 × v, that is
5/2 × v; v is now
only 2/5 of total capital.
Surplus-value equals half of v, i.e., half of 100,
hence is only half of 2/5 of total
capital, or 2/10 of total
capital. 250/10 = 25 and
2/10 of 250 = 50. But
2/10 = 20 per cent.

Hence to start with this much has been established.
Provided v remains constant and s/v too, then
it is of no consequence how c is composed. If
c has a certain magnitude, say 100, then it makes no
difference whether it consists of 50 units of raw material
and 50 of machinery or 10 of raw material and 90 of
machinery, or no raw material and 100 machinery or the other
way about. For the rate of profit is determined by the
relationship s/c+v; the relative value of the various
production elements contained in c is of no
consequence here. For instance, in the production of
coal the raw materials (after deducting coal itself which is
used as an auxiliary material) may be reckoned as nought and
the entire constant capital can be assumed to consist of
machinery (including buildings and tools). On the
other hand, with a tailor, machinery can be considered as
nought and here the whole of constant capital resolves into
raw materials (particularly where tailors running a large
business do not as yet use sewing-machines and, on the other
hand, even save buildings, as sometimes occurs nowadays in
London, by employing their workers as outworkers, This is a
new phenomenon, where the second division of labour
reappears in the form of the first).

If the colliery owner employs 1,000 units of machinery
and 1,000 units of labour and the tailor 1,000 of raw
materials and 1,000 of labour, then with an equal rate of
surplus-value, the rate of profit in both instances is the
same. If [we] assume that surplus-value is 20 per
cent, then the rate of profit would in both cases be 10 per
cent, namely: 200/2000 =
2/20 = 1/10 = 10
per cent. Hence there are only two instances in which
the ratio between the component parts of c, i.e., raw
materials and machinery, can affect the rate of profit:
1. If a change in this ratio modifies the absolute
magnitude of c. 2. If the ratio between
the component parts of c modifies the size of
v. This would imply organic changes in
production itself and not merely the tautologous statement
that if a particular part of c accounts for a smaller
portion, then the other must make up a larger portion of the
total amount.

In the real bill of an English farmer, wages
amount to £ 1,690, manure to £ 686, seeds
to £ 150, fodder for cows to £ 100.
Thus “raw material” comes to £ 936, which
is more than half the amount spent on wages. (See
F. W. Newman, Lectures on Political Economy, London,
1851, p. 166.)

“In Flanders” (in the
Belgian areas) “dung and hay are in
these parts imported from Holland” (for flax-growing,
etc. In turn they export flax, linseed,
etc.).” The refuse of the towns has therefore
become[a] a matter of
trade, and is regularly sold at high prices to
Belgium… At about twenty miles from Antwerp, up
the Schelde, the reservoirs may be seen for the manure that
is brought from Holland. The trade is managed by a
company of capitalists and the[b] Dutch boats”
etc. (Banfield).

And so even manure, plain muck, has become merchandise,
not to speak of bone-meal, guano, pottash etc. That
the elements of production are estimated in terms of
money is not merely due to the formal change in
production. New materials are introduced into the soil
and its old ones are sold for reasons of
production. This is not merely a formal
difference between the capitalist and the previous mode of
production. The seed trade has risen in importance to
the extent to which the importance of seed rotation has
become recognised. Hence it would be ridiculous to say
that no “raw material”—i.e., raw material
as a commodity— enters into agriculture whether it be
reproduced by agriculture itself or bought as a commodity,
acquired from outside. It would be equally absurd to
say that the machine employed by the engineer | who constructs machines does
not figure as an element of value in his capital.

A German peasant who year after year produces his own
elements of production, seeds, manure etc., and, with his
family, consumes part of his crops needs to spend money (as
far as production itself is concerned) only on the purchase
of a few tools for cultivating the land, and on wages.
Let us assume that the value of all his expenses is 100
[half of this having to be paid out in money]. He
consumes half [of the product] in kind (production costs
[are also included here]). The other half he sells
and he receives, say, 100, His gross income is thus 100 and
if he relates this to his capital of 50 then it amounts to
100 per cent [profit]. If one-third of the 50 is
deducted for rent and one-third for taxes (33
1/3 in all) then he retains 16
2/3, calculated on 50 this is 33
1/3 per cent. But in fact he has
only received 16 2/3 per cent [of the
100 he laid out originally]. The peasant has merely
miscalculated and has cheated himself. The capitalist
farmer does not make such errors.

Mathieu de Dombasle says in his Annales
agricoles etc. 4 ième livraison, Paris 1828 that
under the métairie contract (in [the province of]
Berry, for example) :

“the landlord supplies the land, the
buildings and usually all or part of the livestock and the
tools required for cultivation; the tenant for his part
supplies his labour and nothing, or almost nothing
else. The products of the land are shared in equal
parts” (l.c., p. 301). “The tenants are as
a rule submerged in dire poverty” (l.c.,
p. 302). “If the metayer, having laid out 1,000
francs, increases his gross product by 1,500 francs”
(i.e., a gross gain of 500 francs) “he must pass half
of it on to the landowner, retaining merely 750 and so loses
250 francs of his expenses” (l.c., p. 304).
“Under the previous system of cultivation the expenses
or costs of production were almost exclusively drawn in
kind, from the products themselves, for the consumption of
the animals and of the cultivator of the land and his
family; hardly any cash was paid out. Only these
particular circumstances could give rise to the belief that
landowner and tenant could divide amongst themselves the
whole of the harvest which had not been consumed during
production. But this process is only applicable to
this type of agriculture, namely, low-level
agriculture. But when it is desired to raise that
level, it is realised that this is only possible by making
certain advances which have to be deducted from the gross
product in order to be able to utilise them again in the
following year. Hence this kind of division of the
gross product becomes an insurmountable obstacle to any sort
of improvement” (l.c., p. 307).

### [3. Value and Average Price in Agriculture. Absolute Rent]

### [a) Equalisation of the Rate of Profit in Industry]

Herr Rodbertus seems to think that competition brings
about a normal profit, or average profit or general rate of
profit by reducing the commodities to their real
value; i.e., that it regulates their price relationships
in such a manner that the correlative quantities of
labour-time contained in the various commodities are
expressed in money or whatever else happens to be the
measure of value. This is of course not brought about
by the price of a commodity at any given moment being equal
to its value nor does it have to be equal to its
value. [According to Rodbertus, this is what happens:]
For example the price of commodity A rises above its value
and for a time remains, moreover, at this high level, or
even continues to rise. The profit of [the capitalist
who produces] A thus rises above the average profit in that
he appropriates not only his own “unpaid”
labour-time, but also a part of the unpaid labour-time which
other capitalists have “produced”. This
has to be compensated by a fall in profit in one or other
sphere of production provided the price of the other
commodities in terms of money remains constant. If the
commodity is a means of subsistence generally consumed by
the worker, then it will depress the rate of profit in all
other branches; if it enters as a constituent part into the
constant capital, then it will force down the rate of profit
in all those spheres of production where it forms an element
in constant capital.

Finally, the commodity may neither be an element in any
constant capital, nor form a necessary item in the
workers’ means of subsistence (for those commodities which
the worker can choose to buy or abstain from buying, he
consumes as a consumer in general and not as a worker) but
it may be one of the consumer goods, an article for
individual consumption in general. If, as such, it is
consumed by the industrial capitalist himself, then the rise
in its price in no way affects the amount of surplus-value
or the rate of surplus-value. Now if the capitalist
wanted to maintain his previous standard of consumption,
then that part of profit (surplus-value) which he uses for
individual consumption would rise in relation to that which
he sinks into industrial reproduction. The latter
would decrease. As a result of the price rise, or the
rise in profit above its average rate, in A, the volume of
profit in B, C, etc. would diminish within a certain space
of time (which is also determined by reproduction). If
article A was exclusively consumed by other than industrial
capitalists, then they would consume more than before of
commodity A as compared with commodities B, C, etc.
The demand for commodities B, C, etc. would fall; their
price would fall and, in this case, the price rise in A, or
the rise in profit in A above the average rate, would have
brought about a fall in the profit in B, C, etc. below the
average rate by forcing down the money prices of B, C,
etc. (in contrast to the previous instances where the money
price of B, C, etc. |
remained constant). Capitals would migrate from B, C,
etc., where the rate of profit has sunk below the [average]
level, to A’s sphere of production. This would apply
particularly to a portion of the new capital which is
continually entering the market and which would naturally
tend to penetrate into the more profitable sphere A.
Consequently, after some time, the price of article A would
fall below its value and would continue to do so for a
longer or shorter period, until the reverse movement set in
again. The opposite process would take place in the
spheres B, C, etc., partly as a result of the reduced
supplies of articles B, C, etc., because of the exodus of
capital, i.e., because of the organic changes taking place
in these spheres of production themselves, and partly as a
result of the changes which have occurred in A and which in
turn are affecting B, C, etc. in the opposite direction.

Incidentally, it may well be that in this
process—assuming the value of money to be
constant—the money prices of B, C, etc., never regain
their original level, although they may rise above the value
of commodities B, C, etc. and hence the rate of profit in B,
C, etc. may also rise above the general rate of
profit. Improvements, inventions, greater economy in
the means of production, etc. are introduced not at times
when prices rise above their average level, but when they
fall below it, i.e., when profit falls below its normal
rate. Hence during the period of failing prices of B,
C, etc., their real value may fall, in other words
the minimum labour-time required for the production of these
commodities may decrease. In this case, the commodity
can only regain its former money price if the rise in its
price over its value equals the margin, i.e., the difference
between the price which expresses its new value and the
price which expressed its higher former value. Here
the price of the commodity would have changed the
value of the commodity by affecting supply, and the costs of
production.

The result of the above-mentioned movement: If we take
the average of the increases and decreases in the price of
the commodity above or below its value, or the period of
equalisation of rises and fails—periods which are
constantly repeated—then the average price is
equal to the value of the commodity. The
average profit in a particular sphere is therefore also
equal to the general rate of profit; for although, in this
sphere, profit rose above or fell below its old rate with
the rise or fall in prices—or with the increase or
decrease in costs of production while the price remained
constant—on an average, over the period, the commodity
was sold at its value. Hence the profit
yielded is equal to the general rate of profit. This
is Adam Smith’s conception and, even more so,
Ricardo’s, since the latter adheres more firmly to
the real concept of value. Herr Rodbertus acquires it
from them. And yet this conception is wrong.

What is the effect of the competition between
capitals? The average price of the commodities
during a period of equalisation is such that these prices
yield the same profits to the producers of commodities in
every sphere, for instance, 10 per cent. What else
does this mean? That the price of each commodity
stands at one-tenth above the price of the production costs,
which the capitalist has incurred, i.e., the amount he has
spent in order to produce the commodity. In general
terms this just means that capitals of equal size yield
equal profits, that the price of each commodity is one-tenth
higher than the price of the capital advanced, consumed or
represented in the commodity. It is however quite
incorrect to say that capitals in the various spheres of
production produce the same surplus-value in relation to
their size, even if we assume that the absolute working-day
is equally long in all spheres, i.e., if we assume a set
rate of surplus-value. <We leave aside here the
possibility of one capitalist enforcing longer working hours
than another, and we assume a fixed absolute
working-day for all spheres. The variation in absolute
working-days is partly offset by the varying intensity of
labour etc., and partly these differences only signify
arbitrary excess profits, exceptional cases, etc.)

Bearing in mind the above assumption, the amount of
surplus-value produced by capitals of equal size
varies firstly according to the correlation of their
organic components, i.e., of variable and constant capital;
secondly according to their period of circulation in
so far as this is determined by the ratio of fixed capital
to circulating capital and also [by] the various periods of
reproduction of the different sorts of fixed capital;
thirdly according to the duration of the actual
period of production as distinct from the duration of
labour-time itself, which again may lead to substantial
differences between the length of the production period and
circulation period. (The first of these correlations,
namely, that between constant and variable capital, can
itself spring from a great divergency of causes; it may, for
example, be purely formal so that the raw material worked up
in one sphere is dearer than that worked up in another, or
it may result from the varying productivity of labour,
etc.)

Thus, if the commodities were sold at their values or if
the average prices of the commodities were equal to
their values, then the rate of profit in the various spheres
would have to vary a great deal. In one case it would
be 50, in others 40, 30, 20, 10, etc. Taking the total
volume of commodities for a year in sphere A, for instance,
their value would be equal to the capital advanced in them
plus the unremunerated labour they contain. Ditto in
spheres B and C. But since A, B and C contain
different amounts of unpaid labour, for instance, A more
than B and B more than C, the commodities A might perhaps
yield 3 S (S = surplus-value) to their producers, B = 2 S
and C = S. Since the rate of profit is determined by
the ratio of surplus-value to capital advanced, and as on
our assumption this is the same in A, B, C, etc., then | if C is the capital advanced,
the various rates of profit will be 3S/C, 2S/C,
S/C. Competition of capitals can therefore only
equalise the rates of profit, for instance in our example,
by making the rates of profit, equal to 2S/C, 2S/C, 2SC, in
the spheres A, B, C. A would sell his commodity at 1 S
less and C at 1 S more than its value. The average
price in sphere A would be below, and in sphere C would be
above, the value of the commodities A and C.

As the example of B shows, it can in fact happen
that the average price and the value of a commodity
coincide. This occurs when the surplus-value created
in sphere B itself equals the average profit; in other
words, when the relationship of the various components of
the capital in sphere B is the same as that which exists
when the total sum of capitals, the capital of the
capitalist class, is regarded as one magnitude on
which the whole of surplus-value [is] calculated,
irrespective of the sphere in which it has been
created. In this aggregate capital the periods of
turnover, etc. are equalised; one can, for instance,
consider that the whole of this capital is turned over
during one year. In that case every section of the
aggregate capital would in accordance with its
magnitude participate in the aggregate surplus-value and
draw a corresponding part of it. And since every
individual capital is to be regarded as shareholder in this
aggregate capital, it would be correct to say first
that its rate of profit is the same as that of all
the others [because] capitals of the same size yield the
same amount of profit; secondly, and this arises
automatically from the first point, that the volume of
profit depends on the size of the capital, on the number of
shares the capitalist owns in that aggregate capital.
Competition among capitals thus seeks to treat every capital
as a share of the aggregate capital and correspondingly to
regulate its participation in surplus-value and hence also
in profit. Competition more or less succeeds in this
by means of its equalisations (we shall not examine here the
reason why it encounters particular obstacles in certain
spheres). But in plain language this just means that
the capitalists strive (and this striving is competition) to
divide among themselves the quantity of unpaid
labour—or the products of this quantity of
labour—which they squeeze out of the working class,
not according to the surplus-labour produced directly by a
particular capital, but corresponding firstly
to the relative portion of the aggregate capital which a
particular capital represents and secondly according
to the amount of surplus-labour produced by the aggregate
capital. The capitalists, like hostile brothers,
divide among themselves the loot of other people’s labour
which they have appropriated so that on an average one
receives the same amount of unpaid labour as another.

Competition achieves this equalisation by regulating
average prices. These average prices themselves,
however, are either above or below the value of the
commodity so that no commodity yields a higher rate of
profit than any other. It is therefore wrong to say
that competition among capitals brings about a general rate
of profit by equalising the prices of commodities to their
values. On the contrary it does so by converting
the values of the commodities into average prices, in which
a part of surplus-value is transferred from one
commodity to another, etc. The value of a
commodity equals the quantity of paid and unpaid labour
contained in it. The average price of a
commodity equals the quantity of paid labour it
contains (materialised or living) plus a average
quota of unpaid labour. The latter does not depend on
whether this amount was contained in the commodity itself or
on whether more or less of it was embodied in the value of
the commodity.

### [b) Formulation of the Problem of Rent]

It is possible—I leave this over for a later
inquiry which does not belong to the subject-matter of this
book—that certain spheres of production function under
circumstances which work against a reduction in their values
to average prices in the above sense, and do not
permit competition to achieve this victory. If this
were the case for instance with agricultural rent or rent
from mines (there are rents which are altogether only
explicable by monopoly conditions, for instance the water
rent in Lombardy, and in parts of Asia, also house rent in
so far as it represents rent from landed property) then it
would follow that while the product of all industrial
capitals is raised or lowered to the average price, the
product of agriculture [would] equal its value, which would
be above the average price. Might there be obstacles
here, which cause more of the surplus-value created
in this sphere of production to be appropriated as property
of the sphere itself, than should be the case according to
the laws of competition, more than it should receive
according to the quota of capital invested in this branch of
industry?

Supposing industrial capitals which are producing 10 or
20 or 30 per cent more surplus-value | than industrial capitals of
equal size in other spheres of production, not just
temporarily, but because of the very nature of their
spheres of production as opposed to others; supposing I say,
they were able to hang on to this excess surplus-value in
the face of competition and to prevent it from being
included in the general accounts (distribution) which
determine the general rate of profit, then, in this case,
one could distinguish between two recipients in the spheres
of production of these capitals, the one who would get the
general rate of profit, and the other who would get the
surplus exclusively inherent in this sphere. Every
capitalist could pay, hand over, this excess to the
privileged one, in order to invest his capital here, and he
would retain for himself the general rate of profit, like
every other capitalist, working under the same
conditions. If this were the case in agriculture etc.,
then the splitting of surplus-value into
profit and rent would by no means indicate
that labour as such is actually more
“productive” ([in the sense of production] of
surplus-value) here than in manufacture. Hence [it
would not be necessary] to ascribe any magic powers to the
soil; this, moreover, is in any case absurd, since value
equals labour, therefore surplus-value cannot possibly equal
soil (although relative surplus-value may be due to the
natural fertility of the soil, but under no circumstances
could this result in a higher price for the products
of the soil. Rather the opposite). Nor would it
be necessary to have recourse to Ricardo’s theory, which is
disagreeably linked with the Malthusian trash, has repulsive
consequences and, though in theory it is not especially
opposed to my views on relative surplus-value, it deprives
them of much of their practical significance.

Ricardo’s point is this: Rent (for instance, in
agriculture) can be nothing other than an excess above
general profit where—as he
presupposes—agriculture is run on capitalist lines,
where [there] is [a] farmer. Whether that which
the landlord receives is actually equal to this rent in the
bourgeois-economic sense is quite irrelevant. It may
be purely a deduction from wages (vide Ireland) or it may be
partly derived from the reduction of the farmer’s profit
below the average level of profits. Which of these
possible factors happens to be operative is of no
consequence whatsoever. Rent, in the bourgeois
system, only exists as a special, characteristic form of
surplus-value in so far as it is an excess over and above
(general) profit.

But how is this possible? The commodity wheat, like
every other commodity, is [according to Ricardo] sold at its
value, i.e., it is exchanged for other commodities in
relation to the labour-time embodied in it. (This is
the first erroneous assumption which complicates the problem
by posing it artificially. Only in exceptional
circumstances are commodities exchanged at their
value. Their average prices are determined in a
different way. See above.> The farmer who grows
wheat makes the same profit as all the other
capitalists. This proves that, like all the others, he
appropriates that portion of labour-time for which he has
not paid his workers. Where, on top of this, does the
rent come from? It must represent labour-time.
Why should surplus-labour in agriculture resolve into profit
and rent while in industry it is just profit? And, how
is this possible at all, if the profit in agriculture equals
the profit in every other sphere of production?
<Ricardo’s faulty conception of profit and the way in
which he confuses it with surplus-value have also a
detrimental effect here. They make the whole thing
more difficult for him.>

Ricardo solves this difficulty by assuming that
in principle it is non-existent. <This
indeed is in principle the only possibility of
overcoming any difficulty. But there are two ways of
doing this. Either one shows that the contradiction to
the principle is an illusion which arises from the
development of the thing itself, or one denies the
existence of the difficulty at one point, as Ricardo
does, and then takes this as a starting-point from which one
can proceed to explain its existence at some other
stage.>

He assumes a point at which the farmer’s capital, like
everyone else’s, only yields profit. <This capital
may be invested in a non-rent paying or individual farm, or
in a non-rent paying part of the land of a farm. In
fact it can be any capital which is employed in the
cultivation of land that does not pay rent.> This,
moreover, is the starting-point, and it can also be
expressed as follows: Originally the farmer’s capital only
pays profit, no rent <although this
pseudo-historical form is of no consequence and in
other “laws” is common to all bourgeois
economists>. It is no different from any other
industrial capital. Rent only enters into it because
the demand for grain rises and now, in contrast to other
branches of industry, it becomes necessary to resort to
“less” fertile ground. The farmer (the
supposed original farmer) suffers, like any other industrial
capitalist, in so far as he has to pay his workers more
because of the rise in [the price of] food. But he
gains because of the rise in price of his commodity above
its value, firstly, to the extent to which the value of
other commodities which enter into his constant capital
falls relatively to his commodity and so he buys them more
cheaply, and secondly, in so far as he owns the
surplus-value in the form of his dearer commodity.
Thus this farmer’s profit rises above the average rate of
profit, which has, however, fallen. Hence another
capitalist moves onto the less fertile land, No. II which,
with this lower rate of profit, can supply produce at the
price of I or perhaps even a little more cheaply. Be
that as it may, we now have, once more, | the normal situation on II,
that surplus-value merely resolves itself into profit.
But we have explained the rent for I by the existence of a
twofold price of production: the production price of II
[which] is simultaneously the market price of I. A
temporary surplus gain has been [achieved], just as with the
factory-made commodity which is produced under more
favourable conditions. The price of corn, which in
addition to profit comprises rent, in fact consists only of
materialised labour, and is equal to its value; it is
however equal not to the value embodied in itself, but to
the value of II. It is impossible to have two market
prices [side by side] <While Ricardo introduces
farmer No, II because of the fall in the rate of profit,
Stirling introduces him because wages [have] fallen
not risen following upon the price of corn. This fall
in wages allows No. II to cultivate a piece [of land]
No. II at the old rate of profit, although the soil is less
fertile.> Once the existence of rent has been established
in this way, the rest follows easily. The
difference between rents according to varying
fertility, etc., of course remains correct. This does
not necessarily imply that less and less fertile land has to
come under cultivation.

So here we have Ricardo’s theory. The higher price
of corn, which yields an excess profit to I, does not yield
even as much as the earlier rate of profit for II. It
is thus clear that product II contains more value than
product I, i.e., it is the product of more labour-time, it
embodies a greater quantity of labour. Therefore more
labour-time must be supplied to manufacture the same
product—say, for instance, a quarter of wheat.
And the rise in rent will be relative to this decreasing
fertility of the land, or the growth in the quantity of
labour which must be employed to produce, say, a quarter of
wheat. Of course Ricardo would not talk of a rise in
rent if there were just an increase in the number of
quarters from which rent is paid, but only if the price of
the individual quarter rose from say 30s. to
60s. True, he does sometimes forget that the
absolute volume of rent can grow with a reduced rate of
rent, just as the absolute amount of profit can increase
with a decreasing rate of profit.

Others seek to by-pass this difficulty (Carey for
instance) by directly denying its existence. Rent
[they say] is only interest on the capital which, at an
earlier stage, was incorporated in the land.
Therefore, again only a form of profit. Here then the
very existence of rent is denied and so indeed
explained away.

Others, for instance Buchanan, regard it just as a
consequence of monopoly. See also
Hopkins. With them it is merely a
surcharge above the value.

For Mr. Opdyke, a typical Yankee,* landed property or rent becomes
“the legalised reflection of the
capital”.[c]

With Ricardo the examination is rendered more difficult
by the two false assumptions. <Ricardo it is true
was not the inventor of the theory of rent. West and
Malthus had put it into print before him. The source,
however, is Anderson. But what distinguished
Ricardo is the way in which he links rent with his theory of
value (although West did not entirely miss the real
interconnection either). As his later polemic about
rent with Ricardo shows, Malthus himself did not understand
the theory he had adopted from Anderson.> If we start
from the correct principle that the value of commodities is
determined by the labour-time necessary for their production
(and that value in general is nothing other than
materialised social labour-time) then it follows that the
average price of commodities is determined by the
labour-time required for their production. This
conclusion would be the right one if it had been proved that
average price equals value. But I show
that just because the value of the commodity is
determined by labour-time, the average price of the
commodities (except in the unique case in which the
so-called individual rate of profit in a particular
sphere of production, i.e., the profit determined by the
surplus-value yielded in this sphere of production itself,
[is] equal to the average rate of profit on total capital)
can never be equal to their value although this
determination of the average price is only derived from the
value which is based on labour-time.

In the first place, then, it follows that even
commodities whose average price (if we disregard the value
of constant capital) resolves only into wages and profit, in
such a way that these stand at their normal rate, i.e., are
average wages and average profit, can be sold above or below
their own value, The fact that the commodity yields rent on
top of profit | does not
prove that the commodity is sold above its intrinsic
value, any more than the circumstance of the surplus-value
of a commodity only expressing itself in the category of
normal profit proves that the commodity is sold at its
value. If a commodity can yield an average rate of
profit or general rate of profit on capital which
is below its own rate of profit determined by its
real surplus-value, then it follows that if on top of this
average rate of profit commodities in a particular sphere
of production yield a second amount of surplus-value
which carries a separate name, for instance, rent,
then the sum of profit plus rent need not be higher than the
surplus-value contained in the commodity. Since
profit can be less than the intrinsic surplus-value of the
commodity, or the quantity of unpaid labour it embodies,
profit plus rent need not be larger than the intrinsic
surplus-value of the commodity.

Why this occurs in a particular sphere of
production as opposed to other spheres has of course still
to be explained. But the problem has been
simplified. This commodity (the commodity yielding
rent] differs from the others in the following way: In a
number of these other commodities average price is
above their intrinsic value, but only in order to
raise their rate of profit to the level of the
general rate. In another section of these other
commodities the average price stands at a level below
their intrinsic value, but only to the extent required to
reduce their rate of profit to concur with the
general rate. Finally in a third section of these
other commodities, average price equals their intrinsic
value, but only because if sold at their
intrinsic value they yield the general rate of
profit. But the commodity which yields rent differs
from all these three instances. Whatever the
circumstances, it is sold at a price which will yield
more than average profit—as determined by the
general rate of profit on capital.

Now the question arises, which, or how many, of these
three instances can occur. Supposing the whole of
the surplus-value the commodity contains is realised in
its price. In that case, it excludes the third
instance, namely, those commodities whose entire
surplus-value is realised in their average price, because
they only yield ordinary profit. We may, therefore,
dismiss this one. Similarly, on this
presupposition, we can exclude the first instance, where the
surplus-value realised in the price of the commodity is
above its intrinsic surplus-value. For it is
assumed, that “the surplus-value contained in it is
realised” in its price. This instance is thus
analogous with case 2 of those commodities whose intrinsic
surplus-value is higher than the surplus-value realised in
their average price. As with these commodities the
profit represents a form of this surplus-value—in this
case profit on the capital employed—which has been
reduced to the level of the general rate of profit.
The excess intrinsic surplus-value of the commodity over
and above this profit is, however, in contrast to
commodity 2, also realised in these exceptional
commodities, but accrues not to the owner of the capital,
but to the owner of the land, the natural agent, the mine,
etc.

Or [what happens if we assume that] the price is forced
up to such a degree that it carries more than the average
rate of profit? This is, for instance, the case with
actual monopoly prices. This
assumption—applied to every sphere of production
where capital and labour may be freely employed [and] whose
production, so far as the volume of capital employed is
concerned, is subject to the general laws—would not
only be a petitio principii, but would directly
contradict the foundations of [economic] science and of
capitalist production—the former being merely the
theoretical expression of the latter. For such an
assumption presupposes the very phenomenon which is to be
explained, namely, that in a particular sphere of
production, the price of a commodity must carry more
than the general rate of profit, more than the average rate
of profit, and to this end must be sold above its
value. It presupposes that agricultural products are
excluded from the general laws of value of
commodities and of capitalist production. It,
moreover, presupposes this, because the peculiar presence of
rent side by side with profit prima facie makes it
appear so. Hence this is absurd.

So there is nothing left but to assume that special
circumstances exist in this particular sphere of production,
which influence the situation and cause the prices of the
commodities to realise [the whole] of their intrinsic
surplus-value, This in contrast to [case] 2 of the other
commodities, where only as much of their intrinsic
surplus-value is realised by their prices as is yielded by
the general rate of profit, where their average prices fall
so far below their surplus-value that they only yield the
general rate of profit, or in other words their average
profit is no greater than that in all other spheres of
production of capital.

In this way the problem has already become much
simpler. It is no longer a question of explaining how
it comes about that the price of a commodity yields rent as
well as profit, thus apparently evading the general
law of value and by raising its price above its intrinsic
surplus-value, carrying more than the general rate of
profit for a given capital. The question is why,
in the process of equalisation of commodities at average
prices, this particular commodity does not have to pass on
to other commodities so much of its intrinsic
surplus-value that it only yields the average
profit, but is able to realise a portion of its own
surplus-value which forms an excess over and above
average profit; so that it is possible for a farmer, who
invests capital in this sphere of production, to sell the
commodity at prices which yield him the ordinary profit and
at the same time enable him to pay the excess in
surplus-value realised over and above this profit to
a third person, the landlord.

| Put in this way, the
very formulation of the problem carries its own
solution.

### [c) Private Ownership of the Land as a Necessary Condition for the Existence of Absolute Rent. Surplus-Value in Agriculture Resolves into Profit and Rent]

It is quite simply the private ownership of land,
mines, water, etc. by certain people, which enables them to
snatch, intercept and seize the excess surplus-value over
and above profit (average profit, the rate of profit
determined by the general rate of profit) contained in the
commodities of these particular spheres of production, these
particular fields of capital investment, and so to prevent
it from entering into the general process by which the
general rate of profit is formed. Moreover, some of
this surplus-value is actually collected in every industrial
enterprise, since rent for the land used (by factory
buildings, workhouses etc.) figures in every instance, for
even where the land is available free, no factories are
built, except in the more or less populated areas with good
means of communication.

Supposing the commodities produced by the poorest
cultivated land belonged to category 3, i.e., those
commodities whose average price equals their value, in other
words, the whole of their inherent surplus-value is realised
in their price because only thus do they yield the
ordinary profit; in this case the land would pay no rent and
land ownership would be purely nominal. If a
payment were made for the use of the land, then it
would only prove that small capitalists, as is partly the
case in England (see Newman), are satisfied with
making a profit below the average. The same
applies whenever the rate of rent is higher than the
difference between the inherent surplus-value of a
commodity and the average profit. There is even
land whose cultivation at most suffices to pay wages, for,
although here the labourer works for himself the whole of
his working-day, his labour-time is longer than the socially
necessary labour-time. It is so
unproductive—relative to the generally prevailing
productivity in this branch of work—that,
although the man works for himself for 12 hours, he hardly
produces as much as a worker under more favourable
conditions of production does in 8 hours. This is the
same relationship as that of the hand-loom weaver who
competes with the power-loom. Although the product of
this hand-loom weaver was equal to 12 hours of labour, it
was only equal to 8 or less hours of socially
necessary labour and his product therefore only [had]
the value of 8 necessary labour hours. If in such an
instance the cottager pays a rent then this is purely a
deduction from his necessary wage and does not
represent surplus-value, let alone an excess over and above
average profit.

Assume that in a country like the United States, the
number of competing farmers is as yet so small and the
appropriation of land so much just a matter of form that
everyone has the opportunity to invest his capital in land
and the cultivation of the soil, without the permission of
hitherto-existing owner-cultivators or farmers. In
these circumstances it is possible over a considerable
period—with the exception of that landed property
which by its very situation in populated areas carries a
monopoly— that the surplus-value which the farmer
produces on top of average profit is not realised in the
price of his product, but that lie may have to share it with
his brother capitalists in the same way as this is done with
the surplus-value of all commodities which would give an
excess profit, i.e., raise the rate of profit above the
general rate, if their surplus-value were realised in their
price. In this case the general rate of profit would
rise, because wheat, etc., like other manufactured
commodities, would be sold below its value.
This selling below its value would not constitute an
exception, but rather would prevent wheat from forming an
exception to other commodities in the same category.

Secondly, assume that in a given country the land is all
of a particular quality, so that if the whole of the
surplus-value from the commodity were realised in its price,
it would yield the usual profit on capital. In this
case no rent would be paid. The absence of rent would
in no way affect the general rate of profit, it would
neither raise it nor lower it, just as it is not influenced
by the fact that other non-agricultural products are to be
found in this category. Since the commodities belong
to this category just because their inherent
surplus-value equals the average profit [they]
cannot alter the level of this profit, on the contrary they
conform with it and do not influence it at all, although it
influences them.

Thirdly, assume that all the land consists of a
particular type of soil, but this is so poor that the
capital employed in it is so unproductive that its product
belongs to that kind of commodity whose surplus-value [lies]
below average profit. Since wages would rise
everywhere as a result of the unproductiveness of
agriculture, surplus-value could in this case of course only
be higher where absolute labour-time can be prolonged, where
the raw material, such as iron, etc., is not the product of
agriculture or, further, where it [is] like cotton, silk
etc., an imported article and a product of more fertile
soil. In this case, the price of the [agricultural]
commodity would include a surplus-value higher than that
inherent in it, to enable it to yield the usual
profit. The general rate of profit would consequently
fall, despite the absence of rent.

Or assume in case 2, that the soil is very
unproductive. Then surplus-value of this agricultural
product, by its very equality with average profit would show
that the latter is altogether low since in agriculture
perhaps 11 of the 12 working hours are required to produce
just the wages, and the surplus-value only equals 1 hour or
less.

| These various
examples illustrate the following:

In the first case, the absence or lack of rent is
bound up with, or concurs with, an increased rate of
profit—as compared with other countries where the
phenomenon of rent has developed.

In the second case the lack or absence of rent does not
affect the rate of profit at all.

In the third case, compared with other countries where
rent exists, it is bound up with and indicative of a low,
a relatively low, general rate of profit.

It follows from this that the development of a particular
rent in itself has nothing to do with the productivity of
agricultural labour, since the absence or lack of rent
can be associated with a rising, falling or constant rate of
profit.

The question here is not: Why is the excess
surplus-value above average profit retained in
agriculture etc.? On the contrary, we should rather
ask: Why should the opposite take place here?

Surplus-value is nothing other than unpaid labour; the
average or normal profit is nothing other than the quantity
of unpaid labour which each capital of a given magnitude of
value is supposed to realise. If we say that average
profit is 10 per cent then this means nothing other than
that a capital of 100 commands 10 units of unpaid labour; or
100 units of materialised labour command a tenth of their
amount in unpaid labour. Thus excess of
surplus-value over average profit implies that a
commodity ( its price or that part of its price which
consists of surplus-value) contains a quantity of unpaid
labour [hich is] greater than the quantity of unpaid labour
that forms average profit, which therefore in the average
price of the commodities forms the excess of their price
over the costs of their production. In each
individual commodity the costs of production represent the
capital advanced, and the excess over these production costs
represents the unpaid labour which the advanced
capital commands; hence the relationship of this excess in
price over the costs of production shows the rate at
which a given capital—employed in the production
process of commodities—commands unpaid labour,
irrespective of whether the unpaid labour contained in the
commodity of the particular sphere of production is
equal to this rate or not.

Now what forces the individual capitalist, for instance,
to sell his commodity at an average price, which yields him
only the average profit and makes him realise less unpaid
labour than is in fact worked into his own commodity?
This average price is thrust upon him; it is by no
means the result of his own free will; he would prefer to
sell the commodity above its value. It is
forced upon him by the competition of other capitals.
For every capital of the same size could also be rushed into
A, the branch of production in which the relationship of
unpaid labour to the invested capital, for instance,
£100, is greater than in production spheres B, C,
etc. whose products also satisfy a social need just as much
as the commodities of production sphere A.

When there are spheres of production in which certain
natural conditions of production, such as, for example,
arable land, coal seams, iron mines, water falls,
etc.—without which the production process cannot be
carried out, without which commodities cannot be produced in
this sphere—are in the hands of others than the
proprietors or owners of the materialised labour, the
capitalists, then this second type of proprietor of the
conditions of production will say:

If I let you have this condition of production for your
use, then you will make your average profit; you will
appropriate the normal quantity of unpaid labour. But
your production yields an excess of surplus-value, of unpaid
labour, above the rate of profit. This excess you will
not throw into the common account, as is usual with you
capitalists, but I am going to appropriate it myself.
It belongs to me. This transaction should suit you,
because your capital yields you just the same in this sphere
of production as in any other and besides, this is a very
solid branch of production. Apart from the 10 per cent
unpaid labour which constitutes the average profit, your
capital will also provide a further 20 per cent of
additional unpaid labour here. This you will
pay over to me and in order to do so, you add 20 per cent
unpaid labour to the price of the commodity, and this you
simply do not account for with the other capitalists.
Just as your ownership of one condition of
production—capital, materialised labour—enables
you to appropriate a certain quantity of unpaid labour from
the workers, so my ownership of the other condition of
production, the land, etc., enables me to intercept and
divert away from you and the entire capitalist class, that
part of unpaid labour which is excessive to your average
profit. Your law will have it that under normal
circumstances, capitals of equal size appropriate equal
quantities of unpaid labour and you capitalists can force
each other | into this
position by competition among yourselves. Well, I
happen to be applying this law to you. You are not to
appropriate any more of the unpaid labour of your workers
than you could with the same capital in any other sphere of
production. But the law has nothing to do with the
excess of unpaid labour which you have
“produced” over the normal quota. Who is
going to prevent me from appropriating this
“excess”? Why should I act according to
your custom and throw it into the common pot of capital to
be shared out among the capitalist class, so that everyone
should draw out a part of it in accordance with his share in
the aggregate capital? I am not a capitalist.
The condition of production which I allow you to utilise is
not materialised labour but a natural phenomenon. Can
you manufacture land or water or mines or coal pits?
Certainly not. The means of compulsion which can be
applied to you in order to make you release again a part of
the surplus-labour you have managed to get hold of does not
exist for me. So out with it! The only thing
your brother capitalists can do is to compete against you,
not against me. If you pay me less excess profit than
the difference between the surplus-time you have made
and the quota of surplus-labour due to you according to the
rule of capital, your brother capitalists will appear on the
scene and by their competition will force you to pay me
fairly the full amount I have the power to squeeze
out of you.

The following problems should now be set forth: 1.
The transition from feudal landownership to a different
form, commercial land rent, regulated by capitalist
production, or, on the other hand, the conversion of this
feudal landed property into free peasant property.
2. How rent comes into existence in countries such as
the United States, where originally land has not been
appropriated and where, at any rate in a formal sense, the
bourgeois mode of production prevails from the
beginning. 3. The Asiatic forms of landownership
still in existence. But all this does not belong
here.

According to this theory then, the private ownership of
objects of nature such as the land, water, mines etc., the
ownership of these conditions of production, this essential
ingredient of production emanating from nature, is not a
source from which flows value, since value is only
materialised labour. Neither is it the source from
which excess surplus-value flows, i.e., an excess of unpaid
labour over and above the unpaid labour contained in
profit. This ownership is, however, a source of
revenue. It is a claim, a means, which in the sphere
of production that the property enters as a condition of
production enables the owner to appropriate that part of the
unpaid labour squeezed out by the capitalist which would
otherwise be tossed into the general capital fund as excess
over normal profit. This ownership is a means of
obstructing the process which takes place in the rest of the
capitalist spheres of production, and of holding on to the
surplus-value created in this particular sphere, so that it
is divided between the capitalist and the landowner in that
sphere of production itself. In this way landed
property, like capital, constitutes a claim to unpaid
labour, gratis labour. And just as with capital, the
worker’s materialised labour appears as a power over him, so
with landed property, the circumstance which enables the
landowners to take part of the unpaid labour away from the
capitalists, makes landownership appear as a source of
value.

This then explains the existence of modern
ground-rent. With a given capital investment,
the variation in the amount of rent is only to be explained
by the varying fertility of the land. The variation in
the amount of rent, given equal fertility, can only
be case, rent rises because its rate increases in proportion
to the explained by the varying amount of capital
invested, In the first capital employed(also according
to the area of the land). In the second case, it
rise’s because with the same or even with a different rate
(if the second dose of capital is not equally productive)
the amount of rent increases.

For this theory it is immaterial whether the least
fertile land yields a rent or not. Further, it is by
no means necessary for the fertility of agriculture to
decline, although the diversity in productivity, if not
artificially overcome (which is possible), is much greater
than in similar spheres of industrial production. When
we speak of greater or lesser fertility, we are still
concerned with the same product. The
relationship of the various products, one to another, is
another question.

Rent as calculated on the land itself is the rental, the
amount of rent. It can rise without an increase in the
rate of rent. If the value of money remains unchanged,
then the relative value of agricultural product’s can rise,
not because agriculture is becoming less productive, but
because, although its productivity is rising, it is rising
slower than in industry. On the other hand, a rise in
the money price of agricultural products, while the value of
money remains the same, is only possible if their value
rises, i.e., if agriculture becomes less productive
(provided it is not caused by temporary pressure of demand
upon supply as with other commodities).

In the cotton industry, the price of the raw material
fell continuously with the development of the industry
itself; the same applies to iron, etc., coal, etc. The
growth of rent here was possible, not because its rate rose,
but only because more capital was employed.

Ricardo is of the following opinion: The powers of
nature, such as air, light, electricity, steam, water are
gratis; the land is not, because it is limited. So
already for this reason alone, agriculture is less
productive than other industries. If the land were
just as common, unappropriated, available in any quantities,
as the other element’s and powers of nature, then it would
be much more productive.

| In the first place,
if the land were so easily available, at everyone’s free
disposal, then a principal element for the formation of
capital would be missing. A most important
condition of production and—apart from man himself and
his labour—the only original condition of production
could not be disposed of, could not be appropriated.
It could not thus confront the worker as someone else’s
property and make him into a wage-labourer. The
productivity of labour in Ricardo’s sense, i.e., in the
capitalist sense, the “producing” of someone
else’s unpaid labour would thus become impossible. And
this would put an end to capitalist production
altogether.

So far as the powers of nature indicated by Ricardo are
concerned, it is true that these are partly to be had for
nothing and do not cost the capitalist anything. Coal
costs him something, but steam costs him nothing so long as
he gets water gratis. But now, for example, let us
take steam. The properties of steam always
exist. Its industrial usefulness is a new scientific
discovery which the capitalist has appropriated. As a
consequence of this scientific discovery, the productivity
of labour and with it relative surplus-value rose. In
other words, the quantity of unpaid labour which the
capitalist appropriated from a day’s labour grew with the
aid of steam. The difference between the productive
power of steam and that of the soil is thus only that the
one yields unpaid labour to the capitalist and the other to
the landowner, who does not take it away from the worker,
but from the capitalist. The capitalist is therefore
so enthusiastic about this element “belonging to no
one.

Only this much is correct: Assuming the capitalist mode
of production, then the capitalist is not only a necessary
functionary, but the dominating functionary in
production. The landowner, on the other hand, is quite
superfluous in this mode of production. Its only
requirement is that land should not be common
property, that it should confront the working class as a
condition of production, not belonging to it, and the
purpose is completely fulfilled if it becomes
state-property, i.e., if the state draws the rent. The
landowner, such an important functionary in production in
the ancient world and in the Middle Ages, is a useless
superfetation in the industrial world. The radical
bourgeois (with an eye moreover to the suppression of all
other taxes) therefore goes forward theoretically to a
refutation of the private ownership of the land, which, in
the form of state property, he would like to turn into the
common property of the bourgeois class, of capital.
But in practice he lacks the courage, since an attack on one
form of property—a form of the private ownership of a
condition of labour—might cast considerable doubts on
the other form. Besides, the bourgeois has himself
become an owner of land.

### [4. Rodbertus’s Thesis that in Agriculture Raw Materials Lack Value Is Fallacious]

Now to Herr Rodbertus.

According to Rodbertus, no raw material enters into
agricultural calculations, because, so Rodbertus assures us,
the German peasant does not reckon that seeds, feeding
stuffs, etc. cost him anything. He does not
count these as costs of production; in fact he
miscalculates. In England, where the farmer has been
doing his accounts correctly for more than 150 years, there
should accordingly be no ground-rent. The conclusion
therefore should not be the one drawn by Rodbertus, that the
farmer pays a rent because his rate of profit is higher than
in manufacture, but that he pays it because, as a result of
a miscalculation, he is satisfied with a lower rate
of profit. Dr. Quesnay, himself the son of a tenant
farmer and closely acquainted with French farming, would not
have received this idea kindly. [In his Tableau
Economique], Quesnay includes the raw material which the
tenant farmer needs, as one of the items in the annual
outlay of 1,000 million, although the farmer reproduces it
in kind.

Although hardly any fixed capital or machinery is to be
found in one section of manufacture, in another
section—the entire transport industry, the industry
which produces change of location, [using] wagons, railways,
ships, etc.—there is no raw material but only tools of
production. Do such branches of industry yield a rent
apart from profit? How does this branch of industry
differ from, say, the mining industry? In both of them
only machinery and auxiliary materials are used, such as
coal for steamships and locomotives and mines, fodder for
horses, etc. Why should the rate of profit be
calculated differently in one sector than in the
other? [Supposing] the advances to production which
the peasant makes in kind are a fifth of the total
capital he advances, to which we would then have to add
four-fifths in advances for the purchase of machinery and
labour-power, the total expenditure amounting to 150
quarters. If he then makes 10 per cent profit [this
would be] equal to 15 quarters, i.e., the gross product
would be 165 quarters. If he now deducted a fifth,
equal to 30 quarters and calculated the 15 quarters only on
120, then he would have made a profit of 12
1/2 per cent.

Alternatively, we could put it in this way: The value of
his product, or his product, is equal to 165 quarters
(£ 330). He reckons his advances to be 120
quarters (£ 240), 10 percent on this equals 12
quarters (£ 24). But his gross product amounts
to 165 quarters; from which thus 132 quarters are to be
deducted, which leaves 33 quarters. But from these, 30
quarters are deducted in kind. This leaves an extra
profit of 3 quarters (£ 6). His total profit is
15 quarters (£ 30) instead of 12 quarters (£
24). So he can pay a rent of 3 quarters or £ 6
and fancy that he has made a profit of 10 per cent
like every other capitalist. But this 10 per cent
exists only in his imagination. In fact, he has made
advances of 150 quarters, not of 120 quarters and on these,
10 per cent amounts to 15 quarters or £ 30. In
fact he received 3 quarters too few, i.e., a quarter
of the 12 quarters which he actually received | , or a fifth of the total
profit which he should have received, because he did not
consider a fifth of his advances to be advances.
Therefore, as soon as he learnt to calculate according to
capitalist methods, he would cease to pay rent, which would
merely amount to the difference between his rate of
profit and the normal rate of profit.

In other words, the product of unpaid labour embodied in
the 165 quarters amounts to 15 quarters, which equals
£ 30, representing 30 labour weeks. Now if these
30 labour weeks or 15 quarters or £ 30 were calculated
on the total advances of 150 quarters, then they would only
form 10 per cent; if they were calculated only on 120
quarters, then they would represent a higher percentage,
because 10 per cent on 120 quarters would be 12 quarters and
15 quarters are not 10 per cent of 120 quarters but 12
1/2 per cent. In other words:
Since the peasant did not include some of his advances in
the account as a capitalist would have done, he calculates
the accumulated surplus-labour on too small a portion of his
advances. Hence it represents a higher rate of profit
than in other branches of industry and can therefore yield a
rent which is based solely on a miscalculation. The
game would be over if the peasant realised that it is by no
means necessary first to convert his advances into real
money, i.e., to sell them, in order to assess
them in money, and hence to regard them as commodities.

Without this mathematical error (which may be
committed by a large number of German peasants but never by
a capitalist farmer) Rodbertus’s rent would be an
impossibility. It only becomes possible where
raw material enters into costs of production, but not where
it does not. It only becomes feasible where the
raw material enters [into production] without
entering into the accounts, But it is not possible
where it does not enter [into production], although
Herr Rodbertus wants to derive his explanation of the
existence of rent not from a miscalculation,
but from the absence of a real item of
expenditure.

Take the mining industry or the fisheries. Raw
material does not figure in these, except as auxiliary
material, which we can omit, since the use of machinery
always implies (with very few exceptions) the consumption of
auxiliary material, the food of the machine. Assuming
that the general rate of profit is 10 per cent and £
100 are laid out in machinery and wages; why should the
profit on £ 100 amount to more than £ 10,
because the £ 100 have not been expended on raw
material, machinery and wages, but have been expended on raw
material and wages only? If there is to be any sort of
difference, this could only arise because in the various
instances, the ratio of the values of constant capital
and variable capital is in fact different. This
varying ratio would result in varying surplus-value, even if
the rate of surplus-value is taken to be
constant. And if varying surplus-values are related to
capitals of equal size, they must of course yield
unequal profits. But on the other hand the general
rate of profit means nothing other than the equalisation of
these inequalities, abstraction from the organic components
of capital and redistribution of surplus-value, so that
capitals of equal size yield equal profits.

That the amount of surplus-value depends on the size
of the capital employed does not hold
good—according to the general laws of
surplus-value—for capitals in different spheres
of production, but for different capitals in the
same sphere of production, in which it is assumed that
the organic component parts of capital are in the
same proportion. If one says for example: The volume
of profit in spinning corresponds to the size of the
capitals employed (which is also not quite correct, unless
one adds that productivity is assumed to be
constant), this in fact merely means that, given the
rate of exploitation of the spinners, the total amount of
exploitation depends on the number of exploited
spinners. If, on the other hand, one says that the
volume of profit in different branches of production
corresponds to the size of the capitals employed, then this
means that the rate of profit is the same for each capital
of a given size, i.e., the volume of profit can only change
with the size of this capital. In other words, the
rate of profit is independent of the organic relationship of
the components of a capital in a particular sphere of
production; it is altogether independent of the amount of
surplus-value which is realised in these particular spheres
of production.

Mining production ought to be considered right from the
start as belonging to industry and not to agriculture.
Why? Because no product of the mine is used, in kind,
as an element of production; no product of the mine enters
in kind, straight from the mine, into the constant capital
of the mining industry (the same applies to fishing and
hunting, where the outlay consists to a still higher degree
of the instruments of labour and wages or labour itself
|). In other words,
because every production element in the mine—even if
its raw material originates in the mine— not only
alters its form, but becomes a commodity, i.e., it must be
bought, before it can re-enter mining as an element
of production. Coal forms the only exception to this,
But it only appears as a means of production at a stage of
development when the exploiter of the mine has graduated as
a capitalist, who uses double entry book-keeping, in which
he not only owes himself his advances, i.e., is a debtor
against his own funds, but his own funds are debtors against
themselves, Thus just here, where in fact no raw material
figures in expenditure, capitalist accounting must prevail
from the outset, making the illusion of the peasant
impossible .

Now let us take manufacture itself, and in particular
that section where all the elements of the labour-process
are also elements in the process of the creation of value;
i.e., where all the production elements enter into the
production of the new commodity as items of expenditure, as
use-values that have a value, as commodities.
There is a considerable difference between the manufacturer
who produces the first intermediate product and the second
and all those that follow in the process towards the
finished product. The raw material of the latter type
of manufacturers enters the production process not only as a
commodity, but is already a commodity of the second degree;
it has already taken on a different form from the first
commodity, which was a raw product in its natural form, it
has already passed through a second phase of the production
process. For example, the spinner: His raw material is
cotton, a raw product which is already a commodity.
The raw material of the weaver however is the yarn produced
by the spinner; that of the printer or dyer is the woven
fabric, the product of the weaver; and all these products,
which reappear as raw materials in further phases of the
process are at the same time commodities. |

| We seem to have
returned here to the question with which we have already
been concerned on two other occasions, once when discussing
John Stuart Mill, and again during the general analysis of
the relationship between constant capital and revenue.
The continual recurrence of this question shows that there
is still a hitch somewhere. Really this belongs into
Chapter III on profit. But it fits in better here.

For example:

4,000 lbs. cotton equals £100;

4,000 lbs. yarn equals £200;

4,000 yards calico equals £400.

On the basis of this assumption, 1 lb. cotton = 6d., yarn
= 1s., 1 yard [calico] = 2s.

Given a rate of profit of 10 per cent, then

A in £100, the outlay = £90
10/11 and the profit = £9
1/11

B in £200, the outlay = £181
9/11 and the profit = £18
2/11

C in £400, the outlay = £363
7/11 and the profit = £36
4/11

A = cotton [the product of the] peasant (I); B =
yarn [the product of the] spinner (II), C = woven
fabric [the product of the] weaver (III).

Under this assumption it does not matter whether A’s
£ 90 10/11 itself includes a
profit or not. It will not do so if it constitutes
self-replacing constant capital. It is equally
irrelevant for B, whether the £ 100 [the value of
product A] includes profit or not, and ditto with C in
relation to B.

The relationship of C (the cotton-grower) or I, of S
(spinner) or II and of W (weaver) or III is as follows:

I) Outlay = £9010/11

Profit =£ 9 1/11

Total = £100

II) Outlay = £100 (I) + £819/11

Profit = £18 2/11

Total = £200

III)

Outlay = £200 (II) + £1637/11

Profit = £36 4/11

Total = £400

The grand total equals 700.

Profit equals £9 1/11 +
£18 2/11 + £36
4/11 [=£637/11]

Capital advanced in all three sections: £90
10/11 + £181
9/11 + £363
7/11 = £636
4/11

Excess of 700 over 636 4/11 = 63
7/11. But [the ratio of] 63
7/11 : 636 4/11
is as 10 : 100.

Continuing to analyse this rubbish, we obtain the
following:

I) Outlay = £90 10/11

Profit =£ 9 1/11

Total = £100

II) Outlay = £100 (I) + £81 9/11

Profit = 10+£8 2/11

Total = £200

III)
Outlay = £200 (II) + £163 7/11

Profit = 20+£16 4/11

Total = £400

I does not have to repay any profit, because it is
assumed that his constant capital of
£9010/11 does not include any
profit, but represents purely constant capital. The
entire product of I figures as constant capital in II’s
outlay. That part of constant capital which equals 100
yields a profit of £ 9 1/11 to
I. The entire product [of] II which amounts to 200,
enters into III’s outlay, and thus yields a profit of
£ 18 2/11. However, this
does not in any way alter the fact that I’s profit is not
one iota larger than II’s or III’s, because the capital
which he has to replace is smaller to the same degree and
the profit corresponds to the volume of the capital,
irrespective of the composition of the capital.

Now let us assume that III produces everything
himself. Then the position seems to change,
because his outlay now appears as follows:

90 10/11 in the production of
cotton; 181 9/11 in the production of
yarn and 363 7/11 in the production of
the woven fabric. He buys all three branches of
production and must therefore continually employ a definite
amount of constant capital in all three. If we now
total this up we get: 90 10/11 + 181
9/11 + 363 7/11
= 636 4/11. 10 per cent of this
is exactly 63 7/11, as above, only
that one individual pockets the lot, whereas previously the
63 7/11 were shared among I, II and
III.

| How did the wrong
impression arise a little while ago?

But first, one other comment.

If from the 400, we deduct the profit of the weaver,
which is included in it and which amounts to 36
4/11, then we are left with
400–364/11 =
3637/11, his outlay. This outlay
includes 200 paid out for yarn, Of these 200, 18
2/11 are the profit of the
spinner. If we now deduct these 18
2/11 from the outlay of 363
7/11, we are left with 345
5/11. But the 200 which are
returnable to the spinner, also contain 9
1/11 profit for the
cotton-grower. If we deduct these from the 345
5/11, we are left with 336
4/11. And if we deduct these 336
4/11 from the 400—the total
value of the woven fabric—then it becomes evident that
it contains a profit of 63 7/11.

But a profit of 63 7/11 on 336
4/11 is equal to 18
34/37 per cent.

Previously we calculated these 63
7/11 on 636
4/11, and obtained a profit of 10 per
cent. The excess of the total value of 700 over 636
4/11 was in fact 63
7/11.

According to the present calculation, therefore, 18
34/37 per cent would be made on 100 of
this same capital, whereas according to the previous
calculation only 10 per cent.

How does this tally?

Supposing I, II and III are one and the same person, but
that this individual does not employ three capitals
simultaneously, one in cotton-growing, one in spinning and
one in weaving. Rather, as soon as he ceases to grow
cotton, he begins to spin it and as soon as he has spun, he
finishes with this and begins to weave.

Then his accounting would look like this:

He invests £ 90 10/11 in
cotton-growing. From this he obtains 4,000 lbs. of
cotton, In order to spin these he needs to lay out a further
£ 81 9/11 in machinery,
auxiliary materials and wages. With this he makes the
4,000 lbs. of yarn. Finally he weaves these into 4,000
yards which involves him in a further outlay of £ 163
7/11. If he now adds up his
expenditure, the capital which he has advanced amounts to
£ 90 10/11 + £ 81
9/11 + £ 163
7/11, i.e., £ 336
4/11. 10 per cent on this would
be 33 7/11, because 336
4/11 : 33 7/11
is as 100 : 10. But £ 336
4/11 + £ 33
7/11 = £ 370. He would
thus sell the 4,000 yards at £ 370 instead of at
£ 400, i.e., at £ 30 less, i.e., at a price
which is 7 1/2 per cent lower than
before. If the value indeed were £ 400, he could
thus sell at the usual profit of 10 per cent and in addition
pay a rent of £ 30, because his rate of profit would
not be 33 7/11 but 63
7/11 on his advances of 336
4/11, i.e., 18
34/37 per cent, as we saw earlier
on. And this in fact appears to be the manner in which
Herr Rodbertus makes out his calculation of rent.

What does the fallacy consist of? First of all it
is evident that if spinning and weaving are combined, they
should [according to Rodbertus] yield a rent, just as if
spinning is combined with cultivation or if agriculture is
carried on independently.

Evidently two different problems are involved here.

Firstly we are calculating the £ 63
7/11 only on one capital of £
336 4/11, whereas we should be
calculating it on three capitals of a total value of £
636 4/11.

Secondly in the last capital, that of III, we are
reckoning his outlay to be £ 336
4/11, instead of £ 363
7/11.

Let us go into these points separately.

Firstly: If III, II and I are united in one
person, and if he spins up the entire product of his cotton
harvest, then he does not use any part of this harvest at
all to replace his agricultural capital. He does not
employ part of his capital in | cotton-growing—in
expenditure on cotton-growing, seeds, wages,
machinery—and another part in spinning, but he first
puts a part of his capital into cotton-growing, then this
part plus a second into spinning, and then the whole of
these two first parts, now existing in the form of yarn,
plus a third part, into weaving. Now when the fabric
of 4,000 yards has been woven, how is he to replace its
elements? While he was weaving he wasn’t spinning, and
he had no material from which to spin; while he was spinning
he did not grow any cotton. Therefore his elements of
production cannot be replaced. To help
ourselves along, let us say: Well, the fellow sells the
4,000 yards and then “buys” yarn and the
elements of cotton out of the £ 400. Where does
this get us? To a position where we are in fact
assuming that three capitals are simultaneously employed and
engaged and laid out in production. But yarn cannot be
bought unless it is available and in order to buy cotton it
must be available as well. And so that they are
available to replace the woven yarn and the spun cotton,
simultaneously with the capital employed in weaving,
capitals must be invested which are turned into cotton and
yarn at the same time as the yarn is turned into woven
fabric.

Thus, whether III combines all three branches of
production or whether three producers share them, three
capitals must be available simultaneously. If he wants
to produce on the same scale, he cannot carry on
spinning and cotton-growing with the same capital which he
used for weaving. Every one of these capitals is
engaged and their reciprocal replacement does not affect the
problem under discussion. The replacement capitals are
the constant capital which must be invested and operating in
each of the three branches simultaneously. If the
£ 400 contain a profit of £ 6
37/11, then this is only because
besides his own profit of £ 36
4/11, we allow III to gather in the
profit which he has to pay to II and I and which, according
to the assumption, is realised in his commodity. But
the profit was not made on his £ 363
7/11. The peasant made it on his
additional £ 90 10/11 and the
spinner on his £ 181 9/11.
When he pockets the whole amount himself, he likewise has
not made it on the £ 363 7/11
that he invested in weaving, but on this capital and on his
two other capitals invested in spinning and
cotton-growing.

Secondly: If we reckon III’s outlay to be £
3364/11 instead of
£3637/11, then this arises from
the following:

We take his outlay on cotton-growing to be only £
90 10/11 instead of 100, But he needs
the whole product and this equals £ 100 and not 90
10/11. It contains the profit of
9 1/11. Or else he would be
employing a capital of £ 90
10/11 which would bring him no
profit. His cotton-growing would yield him no
profit but would just replace his expenditure of £ 90
10/11. In the same way, spinning
would not bring him any profit, but the whole of the product
would only replace his outlay.

In this case, his expenditure would indeed be reduced to
90 10/11 + 81
9/11 + 163 7/11
= 336 4/11. This would be the
capital he has advanced. 10 per cent on this would be
£ 33 7/11. And the value
of the product would be £ 370. The value would
not be one farthing higher because, according to the
supposition, portions I and II have not brought in any
profit. Accordingly III would have done much better to
leave I and II well alone and to keep to the old method of
production. For instead of the £ 63
7/11 which were previously at the
disposal of I, II and III, III now has only £ 33
7/11 for himself whereas previously,
when his fellows were alongside of him, he had £ 36
4/11. He would indeed be a very
bad hand at business. He would only have saved an
outlay of £ 9 1/11 in II because
he had made no profit in I, and he would have saved an
outlay of £ 182/11 in III, by
not making a profit in II. The
£9010/11 in cotton-growing and
the 81 9/11 + 90
10/11 in spinning would both have only
replaced themselves. Only the third capital of 90
10/11 + 81 9/11
+ 163 7/11 invested in weaving, would
have yielded a profit of 10 per cent. This would mean
that [£] 100 would yield 10 per cent profit in
weaving, but not one farthing in spinning and
cotton-growing. This would be very pleasant for III,
so long as I and II are persons other than himself, but by
no means so, if, in order to save these petty profits and
pocket them himself, he has united these three branches
of business in one and the same person, namely, his worthy
self. The saving of advances for profit (or that
component part of the |
constant capital of one capitalist which is profit for the
others) arose therefore from the fact that [the products of]
I and II contained no profits and that I and II performed no
surplus-labour but regarded themselves merely as
wage-labourers who only had to replace their costs of
production, i.e., the outlay in constant capital and
wages. Thus, in these circumstances—provided I
and II were not prepared to work for III, since if they did,
profit would go to his account—less labour
would have been done in any case, and it would not matter to
III whether the work for which he has to pay is only laid
out in wages, or in wages and profit. This is all the
same to him, in so far as he buys and pays for the product,
the commodity.

Whether constant capital is wholly or partially replaced
in kind, in other words, whether it is replaced by
the producers of the commodity for which it serves as
constant capital, is of no consequence. First of all,
all constant capital must in the end be replaced in kind:
machinery by machinery, raw material by raw material,
auxiliary material by auxiliary material. In
agriculture, constant capital may also enter as a
commodity, i.e., be mediated directly by purchase and
sale. In so far as organic substances enter into
reproduction, the constant capital must of course be
replaced by products of the same sphere of production.
But it need not be replaced by the individual producers
within this sphere of production. The more agriculture
develops, the more all its elements enter into it as
commodities, not just formally, but in actual fact. In
other words, they come from outside, for instance, seeds,
fertilisers, cattle, animal substances, etc., are the
products of other producers. In industry, for example,
the continual movement to and fro of iron into the machine
shop and machines into the iron mines, is just as constant
as is the movement of wheat from the granary to the land and
from the land to the granary of the farmer. The
products in agriculture are replaced directly. Iron
cannot replace machines, But iron, to the value of the
machine, replaces the machine for one [producer], and [the
machine replaces] the iron for the other, in so far as the
value of his machine is replaced by iron.

It is difficult to see what difference it is supposed to
make to the rate of profit if the peasant, who lays out the
£ 90 10/11 on a product of
£ 100, were to compute that, for instance, he spends
£ 20 on seeds etc., £ 20 on machinery etc., and
£ 50 10/11 on wages. What
he wants is a profit of 10 per cent on the total sum.
The £ 20 of the product which he sets against seeds do
not include any profit. Nevertheless, this is just as
much £ 20 as the £ 20 in machinery, in which
there may be a profit of 10 per cent, although this may be
only formal. In actual fact the £ 20 in
machinery, like the £ 20 in seeds, may not contain a
single farthing of profit. This is the case if these
£ 20 are merely a replacement for components of the
machine builder’s constant capital, which he draws from
agriculture, for instance.

Just as it would be wrong to say that all machinery goes
into agriculture as its constant capital, so it is incorrect
to say that all raw material goes into manufacture. A
very large part of it remains fixed in agriculture and only
represents a reproduction of constant capital. Another
part of it goes directly into revenue in the form of food
and some of it, like fruit, fish, cattle etc., does not
undergo a “manufacturing process” at all.
It would therefore be incorrect to burden industry with the
entire bill for all the raw materials
“manufactured” by agriculture. Of course
in those branches of manufacture where the raw material
features as an advance, alongside wages and machinery, the
capital advanced must be greater than in those
branches of agriculture which supply the raw material
used. It could also be assumed that if these branches
of manufacture had their own rate of profit
(different from the general rate) it would be smaller here
than in agriculture because less labour is employed.
For, with a given rate of surplus-value, more constant
capital and less variable capital necessarily bring in a
lower rate of profit. This, however, applies equally
to certain branches of manufacture as against others and to
certain branches of agriculture (in the economic sense) as
against others. It is in fact least likely to occur in
agriculture proper, because, although it supplies raw
material to industry, it differentiates between raw
materials, machinery and wages in its own expenditure
account, but industry by no means pays agriculture for the
raw material, i.e., for that part of constant capital
which it replaces from within itself and not by exchange
with industrial products.

### [5. Wrong Assumptions in Rodbertus’s Theory of Rent]

| Now to a brief
resumé of Herr Rodbertus.

First he describes the situation as he imagines it, where
the owner of the land is at the same time the capitalist and
slave-owner. Then there comes a separation. That
part of the “product of labour” which has been
taken from the workers—the “one natural
rent”—is now split up into “rent of land
and capital gain” ([Rodbertus, Sociale Briefe an
von Kirchmann. Dritter Brief, Berlin, 1851,]
pp. 81–82). (Mr. Hopkins—see
notebook—explains this in even more simple and blunt
terms.)

Then Herr Rodbertus divides the “raw product”
and “manufactured product” (p.89) between the
landowner and the capitalist—petitio
principii. One capitalist produces raw products
and the other manufactured products. The landowner
produces nothing, neither is he the “owner of
raw products”. That [i.e., that the landowner is
the “owner of raw products”] is the conception
of a German “landed proprietor” such as Herr
Rodbertus is. In England, capitalist production began
simultaneously in manufacture and in agriculture.

How a “rate of capital gain” (rate of profit)
comes about, is explained by Herr Rodbertus purely from the
fact that money now provides a “measure”
of gain, making it possible to “express the
relationship of gain to capital” (p. 94) and thus
“supplying a standard gauge for the equalisation of
capital gains” (p. 94). He has not even a remote
idea that this uniformity of profit is in contradiction
to the equality of rent and unpaid labour in each branch
of production, and that therefore the values of commodities
and the average prices must differ. This rate of
profit also becomes the norm in agriculture because the
“return on property cannot be calculated upon
anything other than capital” (p. 95) and by far the
“larger part of the national capital is
employed” (p. 95) in manufacture. Not a word
about the fact that with the advent of capitalist
production, agriculture itself is revolutionised, not only
in a formal sense but really, and the landowner is
reduced to a mere receptacle, ceasing to fulfil any function
in production. According to Rodbertus

“in manufacture, the value
of the entire product of agriculture is included in the
capital as raw material, whereas this cannot be the
case in primary production” (p. 95).

The entire bit is incorrect.

Rodbertus now asks himself whether apart from the
industrial profit, the profit on capital, there remains
“a rent” for the raw product, and if so
“for what reasons” (p. 96).

He even assumes

“that the raw product like the
manufactured product exchanges according to its labour
costs, that the value of the raw product is only equal
to its labour cost” (p. 96).

True, as Rodbertus says, Ricardo also assumes this.
But it is wrong, at least prima facie, since
commodities do not exchange according to their values, but
at average prices, which differ from their values, and this,
moreover, is a consequence of the apparently contradictory
law, the determination of the value of commodities by
“labour-time”. If the raw product carried
a rent apart from and distinct from average profit, this
would only be possible if the raw product were not
sold at the average price and why this happens would then
have to be explained. But let us see how Rodbertus
operates.

“I have assumed that the
rent” (the surplus-value, the unpaid
labour-time) “is distributed according to the v a l
u e of the raw product and the manufactured product, and
that this value is determined by labour costs”
(labour-time) (pp. 96–97).

To begin with we must examine this first
assumption. In fact this just means that the
surplus-values contained in the commodities are in
the same proportion as their values, or, in other
words, the unpaid labour contained in the
commodities is proportionate to the total quantities of
labour they contain. If the quantity of
labour contained in the commodities A and B is as 3 : 1,
then the unpaid labour—or
surplus-values—contained in them is as 3 : 1.
Nothing could be further from the truth. Given the
necessary labour-time, for instance 10 hours, one commodity
may be the product of 30 workers while the other is the
product of 10. If the 30 workers only work 12 hours,
then the surplus-value created by them [amounts to] 60
hours, which is 5 days (5×12), and if the 10 [others]
work 16 hours a day, then the surplus-value created by them
is also 60 hours. According to this, the value of
product A would be 30×12 = 120×3 = 360 [working
hours] which is 30 working days <12 hours are 1 working
day>. And the value of commodity B would be equal
to 160 working hours which is 13 1/3
working days. The values of commodities A and B
[are as] 360 : 160, as 36 : 16, as 9 : 4, as 3 : 1
1/3. The surplus-values
contained in the commodities, however, are as 60 : 60 = 1 :
1. They are equal, although the values are as 3 : 1
1/3.

| [Firstly] therefore,
the surplus-values of the commodities are not proportionate
to their values, if the absolute surplus-values, the
extension of labour-time beyond the necessary labour, i.e.,
the rates of surplus-value, are different.

Secondly, assuming the rates of surplus-value to be the
same, and leaving aside other factors connected with
circulation and the reproductive process, then the
surplus-values are not dependent on the relative quantities
of labour contained in the two commodities, but on the
proportion of the part of capital laid out in wages to the
part which is laid out in constant capital, raw material and
machinery. And this proportion can be entirely
different with commodities of equal values, whether they be
“agricultural products” or “products of
manufacture”, which in any case has nothing to do with
this business, at least not on the face of it.

Rodbertus’s first assumption, that, if the values of
commodities are determined by labour-time, it follows that
the quantities of unpaid labour contained in various
commodities—or their surplus-values—are directly
related to their values is therefore fundamentally
wrong. It is therefore also incorrect to say that

“rent is distributed according
to the value of the raw product and the manufactured
product”, if “this value is determined by
labour costs”(pp. 96–97).

“Of course it follows from this that
the size of these portions of rent is not determined by the
size of the capital on which the gain is calculated,
but by the direct labour, whether it be agricultural
or manufacturing + that amount of labour which must be added
on account of the wear and tear of tools and machines”
(p. 97).

Wrong again. The volume of surplus-value (and in
this case surplus-value is the rent, since rent is
here regarded as the general term, as opposed to profit and
ground-rent) depends only on the immediate labour involved
and not on the depreciation of fixed capital. Just as
it does not depend on the value of the raw material or
indeed on any part of the constant capital.

The wear and tear does, of course, determine the rate at
which fixed capital must be reproduced. (At the same
time, its production depends on the formation of new
capital, on the accumulation of capital.) But the
surplus-labour which is performed in the production of fixed
capital does not affect the sphere of production into which
this fixed capital enters as such, any more than does the
surplus-labour which goes into the production of, say, the
raw materials. It is rather equally valid for all of
them, agriculture, production of machines and manufacture,
that their surplus-value is determined only by the amount of
labour employed, if the rate of surplus-value is given, and,
by the rate of surplus-value, if the amount of labour
employed is given. Herr Rodbertus seeks to “drag
in” wear and tear in order to chuck out “raw
materials”.

On the other hand, Herr Rodbertus maintains
that the size of the rent can never he influenced by
“that part of capital which consists of material
value”, since “for instance, the labour cost of
wool as a raw material cannot affect the labour cost of a
particular product such as yarn or fabric”
(p. 97).

The labour-time which is required for spinning and
weaving is as much, or rather as little, dependent on the
labour-time— i.e., the value—of the
machine, as it is on the labour-time which the raw material
costs. Both machine and raw material enter into the
labour process; neither of them enters into the process of
creating surplus-value.

“On the other hand, the value of the
primary product, or the material value, does figure as
capital outlay in the capital upon which the owner
has to calculate his gain, the part of the rent falling on
the manufactured product. But in agricultural
capital this part of capital is missing.
Agriculture does not require any material which is the
product of a previous production, in fact it actually begins
the production, and in agriculture, that part of the
property which is analogous with material, would be the land
itself, which is however assumed to be without cost”
(pp. 97–98).

This is the conception of the German peasant. In
agriculture (excluding mining, fishing, hunting but by no
means stock-raising) seeds, feeding stuffs, cattle,
mineral fertilisers etc. form the material for manufacturing
and this material | is the
product of labour. This
“outlay” grows proportionately to the
development of industrialised agriculture. All
production—once we are no longer dealing with mere
taking and appropriating—is reproduction and hence
requires “the product of a previous production as
material”. Everything which is the result of
production is at the same time a prerequisite of
production. And the more large-scale agriculture
develops the more it buys products of “a previous
production” and sells its own. In agriculture
these expenses feature as commodities in a formal
sense—converted into commodities by being reckoned in
money—as soon as the farmer becomes at all dependent
on the sale of his product; as soon as the prices of various
agricultural products (like hay for example) have
established themselves, for division of the spheres of
production takes place in agriculture as well. Queer
things must be happening in the mind of a peasant if lie
reckons the quarter of wheat which he sells as
income, but does not reckon the quarter which he puts
into the soil as expenditure. Incidentally,
Herr Rodbertus ought to try somewhere to “begin the
production”, for instance of flax or silk, without
“products of a previous production”. This
is absolute nonsense.

And therefore also the rest of Rodbertus’s
conclusions:

“The two parts of capital that
influence the size of the rent are thus common to
agriculture and industry. The part of capital,
however, that does not influence the size of the
rent—but on which gain, i.e., the rent determined by
those parts of capital, is also calculated—is to be
found in industrial capital alone. According to the
assumption, the value of the raw product like that of the
manufactured product is dependent on labour cost and since
rent accrues to the owners of the primary product and of the
manufactured product proportionately to this value.
Therefore the rent yielded in raw material production and
industrial production is relative to the quantities of
labour which the respective product has cost, but the
capitals employed in agriculture and in industry, on which
the rent is distributed as gain—namely in
manufacture entirely, in agriculture according to the rate
of gain prevailing in manufacture—are not in
the same proportion as those quantities of labour and the
rent determined by them. Although an equal amount
of rent accrues to the primary product and to the industrial
product, industrial capital is larger than agricultural
capital by the entire value of the raw material it
contains. Since the value of this raw material
augments the industrial capital on which the available
rent is calculated as gain, but not the gain itself, and
thus simultaneously helps to lower the rate of capital
gain, which also prevails in agriculture, there
must necessarily be left over in agriculture a part of the
rent accruing there which is not absorbed by the
calculation of gain based on this rate of gain”
(pp. 98–99).

First wrong proposition: If industrial products
and agricultural products exchange according to their
values (i.e., in relation to the labour-time required
for their production), then they yield to their owners equal
amounts of surplus-value or quantities of unpaid
labour. Surplus-values are not proportional to
values.

Second wrong proposition: Since Rodbertus
presupposes a rate of profit (which he calls rate of
capital gain) the supposition that commodities exchange
in the proportion of t h e i r v a l u e s
is incorrect. One proposition excludes the
other. For a (general) rate of profit to exist,
the values of the commodities must have been
transformed into average prices or must be in the
process of transformation. The particular rates of
profit which are formed in every sphere of production on
the basis of the ratio of surplus-value to capital
advanced, are equalised in this general rate. Why
then not in agriculture? That is the question.
But Rodbertus does not even formulate this question
correctly, because firstly he presupposes that there
is a general rate of profit and secondly he
assumes that the particular rates of profit (hence
also their differences) are not equalised and thus
that commodities exchange at their values.

Third wrong proposition: The value of the raw material
does not enter into agriculture. Rather here, the
advances of seeds etc. are component parts of constant
capital and are calculated as such by the
farmer. To the same degree that agriculture becomes a
mere branch of industry—i.e., that capitalist
production is established on the land— | to the degree to which
agriculture produces for the market, produces
commodities, articles for sale and not for its own
consumption—to the same degree it calculates its
outlay and regards each item of expenditure as a commodity,
whether it buys it from itself (i.e., from
production) or from a third person. The
elements of production naturally become commodities
to the same extent as the products do, because, after
all, these elements are those very same products.
Since wheat, hay, cattle, seeds of all kinds etc. are thus
sold as commodities—and, since this sale is the
essential thing, not their use as a means of
subsistence—they also enter into production as
commodities and the farmer would have to be a real
blockhead not to be able to use money as the unit of
account. This is, however, only the formal aspect of
the calculation. But simultaneously [the position]
develops [in such a way] that the farmer buys his
outlay, seeds, cattle, fertilisers, mineral
substances etc. while he sells his receipts, so that
for the individual farmer these advances are also advances
in the formal sense in that they are bought
commodities. (They have always been commodities
for him, component parts of his capital. And when he
has returned them, in kind, to production, he has regarded
them as sold to himself in his capacity as
producer.) Moreover, this takes place to the same
extent as agriculture develops and the final product is
produced increasingly by industrial methods and according to
the capitalist mode of production.

It is therefore wrong to say that there is a part of
capital which enters into industry but not into
agriculture.

Suppose then, according to Rodbertus’s (false)
proposition, that the “portions of rent”
(i.e., shares of surplus-value) yielded by the agricultural
product and the industrial product are given, and that they
are proportionate to the values of the agricultural
product and the industrial product. Supposing, in
other words, industrial products and agricultural products
of equal values yield equal surplus-values to
their owners, i.e., contain equal quantities of unpaid
labour, then no disparity arises owing to a part of
capital entering into industry (for raw material) which does
not enter into agriculture, so that, for instance, the same
surplus-value would be calculated in industry on a capital
augmented by this amount and hence result in a
smaller rate of profit. For the same item of
capital goes into agriculture. There only remains the
question of whether it does so in the same
proportion. But this brings us to mere
quantitative differences whereas Herr Rodbertus wants a
“qualitative” difference. These
same quantitative differences occur between different
industrial spheres of production. They
compensate one another in the general rate of profit.
Why not as between industry and agriculture (if there are
such differences)? Since Herr Rodbertus allows
agriculture to participate in the general rate of
profit, why not in the process of its formation?
But of course that would mean the end of his argument.

Fourth wrong proposition: It is wrong and
arbitrary of Rodbertus to include wear and tear of
machinery etc., that is an element of Constant
capital, in variable capital, that is, in the
part of capital which creates surplus-value and in
particular determines the rate of surplus-value, and at the
same time, not to include raw material. He
makes this accounting error in order to arrive at the
result he wanted from the outset.

Fifth wrong proposition: If Herr Rodbertus wants
to differentiate between agriculture and industry, then that
element of capital which consists of fixed capital
such as machinery and tools belongs entirely to
industry. This element of capital, in so far as
it becomes part of any capital, can only enter into
constant capital; and can never increase
surplus-value by a single farthing.

On the other hand, as a product of industry, it is
the result of a particular sphere of production. Its
price, or the value which it forms within the whole of
social capital, at the same time represents a certain
quantity of surplus-value (just as is the case with raw
material). Now it does enter into the agricultural
product, but it stems from industry. If Herr Rodbertus
reckons raw material to be an element of capital in industry
which comes from outside, then he must charge machines,
tools, vessels, buildings etc. as an element of capital in
agriculture, which comes from outside. He [must]
therefore say that industry comprises only wages and raw
materials (because fixed capital, in so far as it is not raw
materials, is a product of industry, its own product)
whereas agriculture comprises only wages | and machinery etc., i.e.,
fixed capital, because raw material, in so far as it
is not embodied in tools etc., is the product of
agriculture. It would then be necessary to examine how
the absence of this “item” affects the account
in industry.

Sixthly: It is quite true that mining, fishing,
hunting, forestry (in so far as the trees have not been
planted by man) etc., in short, the extractive
industries—concerned with the extraction of raw
material that is not reproduced in kind—use
no raw materials, except auxiliary
materials. This does not apply to
agriculture.

But it is equally [true] that the same does hold
good for a very large part of industry, namely the
transport industry, in which outlay consists
only of machinery, auxiliary materials and wages.

Finally, there are certainly other branches of
industry, such as tailoring etc., which, relatively
speaking, only absorb raw materials and wages, but no
machinery, fixed capital etc.

In all these instances, the size of the profit,
i.e., the ratio of surplus-value to capital
advanced, would not depend on whether the advanced
capital—after deduction of variable capital, or the
part of capital spent on wages—consists of
machinery or raw material or both, but it would depend on
the magnitude of the capital advanced relative to the part
of the capital spent on wages. Different rates of
profit (apart from the modifications brought about by
circulation) would thus exist in the different spheres of
production, the result of their equalisation being the
general rate of profit.

Rodbertus surmises that there is a difference between
surplus-value and its special forms, in particular
profit. But he misses the point because, right from
the beginning, he is concerned with the explanation of a
particular phenomenon (ground rent) and not [with]
the establishment of a general law.

Reproduction occurs in all branches of production;
but only in agriculture does this industrial reproduction
coincide with natural reproduction. It does not do so
in extractive industry. That is why, in the
latter, the product does not in its natural form become an
element in its own reproduction (except in the form of
auxiliary material).

What distinguishes agriculture, stock-raising, etc. from
other industries is, firstly, not the fact that a
product becomes a means of production, since that happens to
all industrial products which have not the definite form of
individual means of subsistence. And even as such they
become means of production of the producer who
reproduces himself or maintains his labour-power by
consuming them.

Secondly, the difference is not the fact
that agricultural products enter into production as
commodities, i.e., as component parts of capital;
they go into production just as they come out of it.
They emerge from it as commodities and they re-enter it as
commodities. The commodity is both the prerequisite
and the result of capitalist production.

Hence thirdly, there only [remains] the
fact that they enter as their own means of production into
the production process whose product they are. This is
also the case with machinery. Machine builds
machine. Coal helps to raise coal from the
shaft. Coal transports coal etc. In agriculture
this appears as a natural process, guided by man, although
he also causes it to some extent. In the other
industries it appears to be a direct effect of industry.

But Herr Rodbertus is on the wrong track altogether if he
thinks that he must not allow agricultural products
to enter into reproduction as
“commodities” because of the peculiar way
in which they enter it as “use-values”
(technologically). He is evidently thinking of the
time when agriculture was not as yet a trade, when only the
excess of its production over what was consumed by
the producer became a commodity and when even those
products, in so far as they entered into production, were
not regarded as commodities. This is a
fundamental misunderstanding of the application of the
capitalist mode of production to industry. For the
capitalist mode of production, every product which has
value—and is therefore in itself a
commodity—also figures as a commodity in the
accounts.

### [6. Rodbertus’s Lack of Understanding of the Relationship Between Average Price and Value in Industry and Agriculture. The Law of Average Prices]

Supposing, for example, that in the mining industry, the
constant capital, which consists purely of machinery,
amounts to £ 500 and that the capital laid out in
wages also amounts to £ 500. Then, if the
surplus-value is 40 per cent, i.e., £ 200, the profit
[would be] 20 per cent. Thus:

constant capital

variable capital

surplus-value

Machinery

500

500

200

If the same variable capital were laid out in those
branches of manufacture (or of agriculture) in which raw
materials play a part, and furthermore, if the utilisation
of this variable capital (i.e, the employment of this
particular number of workers) required machinery etc., to
the value of £ 500, then indeed a third element, the
value of the raw materials, would have to be added, say
again, £ 500. Hence in this case:

constant capital

variable capital

surplus-value

Machinery

Raw materials

500

+

500

= 1,000

500

200

The £ 200 would now have to be reckoned on £
1,500 and would only be 13 1/3 per
cent. This example would still apply, if in the first
case the transport industry had been quoted as an
illustration. On the other hand, the rate of profit
would remain the same in the second case if machinery cost
100 and raw materials 400.

| What, therefore, Herr
Rodbertus imagines is that in industry 100 are laid out in
machinery, 100 in wages and x in raw materials, whereas in
agriculture 100 are laid out in wages and 100 in
machinery. The scheme would be like this:

I. Agriculture

Constant capital

Variable capital

Surplus-value

Rate of profit

Machinery

100

100

50

50/200 =
1/4

II. Industry

Constant capital

Variable capital

Surplus-value

Rate of profit

Raw materials

Machinery

x

100

[=x+100]

100

50

50/200 + x

It must therefore be, at any rate, less than
1/4, Hence the rent in I.

Firstly then, this difference between agriculture
and manufacture is imaginary, non-existent: it has
no bearing on that form of rent which determines all
others.

Secondly, Herr Rodbertus could find this
difference between the rates of profit in any two individual
branches of industry. The difference is dependent on
the proportion of constant capital to variable
capital and the proportion in turn may or may not be
determined by the addition of raw materials. In those
branches of industry which use raw materials as well as
machinery, the value of the raw materials, i.e., the
relative share which they form of the total capital, is of
course very important, as I have shown earlier. This
has nothing to do with ground-rent.

“Only when the value of the raw
product falls below the cost of labour is it possible
that in agriculture too the whole portion of rent
accruing to the raw product is absorbed in the gain
calculated on capital. For then this portion of
rent may be so reduced that although agricultural capital
does not comprise the value of raw material, the ratio
between these two is similar to that existing between
the portion of rent accruing to the manufactured product and
the manufacturing capital, although the latter contains the
value of material, Hence only in those circumstances is it
possible that in agriculture too, no rent is left over
besides capital gain, But in so far as, in practice, as a
rule, conditions gravitate towards the law that value equals
labour cast, so, as a rule, ground-rent is also
present. The absence of rent and the existence of
nothing but capital gain, is not the original state of’
affairs, as Ricardo maintains, but only an exception”
(p. 100).

Thus, continuing with the above example; but taking raw
materials as £ 100, to have something tangible, we
get:

I. Agriculture

Constant capital

Variable capital

Surplus-value

Value

Price

Profit

Machinery

100

100

50

250

233 1/3

[331/3=] 162/3 per cent

II. Industry

Constant capital

Variable capital

Surplus-value

Value

Price

Profit

Raw materials

Machinery

100

100

100

50

350

350

50 = 162/3 per cent

Here the rate of profit in agriculture and industry would
be the same, therefore nothing would be left over for rent,
because the agricultural product is sold at £ 16
2/3 below its
value. Even if the example were as correct as
it is false for agriculture, then the circumstance
that the value of the raw product falls “below
the cost of labour” would in any case only correspond
to the law of average prices. Rather it needs
to be explained why “as an exception”
this is to a certain extent not the case in
agriculture and why here the total surplus-value (or at
least to a larger extent than in the other branches of
industry, a surplus above the average rate of profit)
remains in the price of the product of this
particular branch of production and does not participate
in. the formation of the general rate of profit.
It becomes evident here that Rodbertus does not understand
what the (general) rate of profit and the average price
are.

In order to make this law quite clear, and this is
far more important than Rodbertus, we shall take five
examples. We assume the rate of surplus-value to be
the same throughout.

It is not at all necessary to compare commodities of
equal value; they are to be compared only at their
value. To simplify matters, the commodities
compared here are taken as produced by capitals of equal
size.

Constant Capital

Variable Capital (wages)

Surplus-value

Rate of surplus-value

Profit

Rate of profit

Value of product

Machinery

Raw materials

I

100

700

200

100

50 per cent

100

10 per cent

1,100

II

500

100

400

200

50 per cent

200

20 per cent

1,200

III

50

350

600

300

50 per cent

300

30 per cent

1,300

IV

700

none

300

150

50 per cent

150

15 per cent

1,150

V

none

500

500

250

50 per cent

250

25 per cent

1,250

We have here, in the categories I, II, III, IV and V
(five different spheres of production), commodities whose
respective values are £ 1,100, £ 1,200,
£ 1,300, £ 1,150 and £ 1,250. These
are the money prices at which these commodities would
exchange if they were exchanged according to their
values. In all of them the capital advanced is
of the same size, namely £ 1,000. If
these commodities were exchanged at their values, then the
rate of profit in I would be only 10 per cent; in II, twice
as great, 20 per cent; in III, 30 per cent; in IV, 15 per
cent; in V, 25 per cent. If we add up these particular
rates of profit they come to 10 per cent+20 per cent+30 per
cent+15 per cent+25 per cent, which is 100 per cent.

If we consider the entire capital advanced in all five
spheres of production, then one portion of this (I) yields
10 per cent, another (II) 20 per cent etc. The average
yielded by the total capital equals the average yielded by
the five portions, and this is:

100 (the total sum of the rates of profit)/5
(the number of different rates of profit)

i.e., 20 per cent.

In fact we find that the £ 5,000 capital advanced
in the five spheres yield a profit of
100+200+300+150+250=1,000; 1,000 on 5,000 is
1/5 which is 20 per cent.
Similarly: if we work out the value of the total
product, it comes to £ 6,000 and the excess on the
£ 5,000 capital advanced is £ 1,000, which is 20
per cent in relation to the capital advanced, that is
1/6 or 16 2/3
per cent of the total product. (This again is
another calculation.) However, so that in fact each of
the capitals advanced, i.e., I, II, III etc.—or what
comes to the same thing, that capitals of equal
size—should receive a part of the surplus-value
yielded by the aggregate capital only in proportion to
their magnitude, i.e., only in proportion to the share they
represent in the aggregate capital advanced, each of
them should get only 20 per cent profit and each must get
this amount. | But
to make this possible, the products of the various spheres
must in some cases be sold above their value and in
other cases more or less below their value. In
other words, the total surplus-value must be distributed
among them not in the proportion in which it is made in the
particular sphere of production, but in proportion to
the magnitude of the capitals advanced. All
must sell their product at £ 1,200, so that the excess
of the value of the product over the capital advanced is
1/5 of the latter, i.e., 20 per
cent.

According to this apportionment:

Value of Product

Surplus-value

Average price

[Relation of average price to value]

Relation of profit to surplus-value in per cent

Calculated Profit

I

1,100

100

1,200

Excess of average price over value 100

Excess of profit over surplus-value 100 per cent

200

II

1,200

200

1,200

Value equal to price 0

0

200

III

1,300

300

1,200

Decrease in average price below value 100

Decrease in profit below surplus-value
331/3 per cent

200

IV

1,150

150

1,200

Excess of price over value 50

Excess of profit over surplus-value 331/3 per cent

200

V

1,250

250

1,200

Excess of value over price 50

Excess of surplus-value over profit 25 per cent.
Decrease in profit below surplus-value 20 per cent

200

This shows that only in one instance (II) the average
price equals the value of the commodity, because by
coincidence, the surplus-value equals the normal
average profit of 200. In all other instances a
greater or a lesser amount of surplus-value is taken away
from one [sphere] and given to another, etc.

What Herr Rodbertus had to explain was, why this [is]
not the case in agriculture, hence [why] its
commodities should be sold at their value and not
their average price.

Competition brings about the equalisation of profits,
i.e., the reduction of the values of the commodities
to average prices. The individual capitalist,
according to Mr. Malthus, expects an equal profit from every
part of his capital—which, in other words,
means only that he regards each part of his capital (apart
from its organic function) as an independent source
of profit, that is how it seems to him.
Similarly, in relation to the class of capitalists, every
capitalist regards his capital as a source of profit
equal in volume to that which is being made by every
other capital of equal size. This means that
each capital in a particular sphere of production is only
regarded as part of the aggregate capital which has been
advanced to production as a whole and demands its share
in the total surplus-value, in the total amount of unpaid
labour or labour products—in proportion to its size,
its stock—in accordance to the proportion of the
aggregate capital it constitutes. This illusion
confirms for the capitalist—to whom everything in
competition appears in reverse—and not only for
him, but for some of his most devoted pharisees and scribes,
that capital is a source of income independent of
labour, since in fact the profit on capital in each
particular sphere of production is by no means solely
determined by the quantity of unpaid labour which it itself
“produces” and throws into the pot of
aggregate profits, from which the individual capitalists
draw their quota in proportion to their shares in the total
capital.

Hence Rodbertus’s nonsense. Incidentally, in some
branches of agriculture—such as
stock-raising—the variable capital, i.e., that which
is laid out in wages, is extraordinarily small compared with
the constant part of capital.

“Rent, by its very nature, is
always ground-rent” (p. 113).

Wrong. Rent is always paid to the landlord; that’s
all. However, if, as so often occurs in practice, it
is partially or wholly a deduction from normal profit or a
deduction from normal wages (true surplus-value, i.e.,
profit plus rent, is never a deduction f r o
m wages, but is that part of the product of the
worker which remains after deduction of the wage
from this product) then from an economic point of
view, it is not rent of land. In practice this is
proved as soon as |
competition restores the normal Wage and the normal
profit.

Average prices, to which competition constantly
tends to reduce the values of commodities, are thus
achieved by constant additions to the value of
the product of one sphere of production and deductions
from the value of the product of another
sphere—except in the case of II in the above
table—in order to arrive at the general rate of
profit. With the commodities of the particular
sphere of production where the ratio of variable capital to
the total sum of capital advanced (assuming the rate of
surplus-labour to be given) corresponds to the average ratio
of social capital—value equals average price; neither
an addition to nor a deduction from value is
therefore made. If, however, owing to special
circumstances which we will not go into here, in certain
spheres of production a deduction is not made from
the value of the commodities (although it stands
above the average price, not just temporarily but on
an average) then this retention of the entire
surplus-value in a particular sphere of
production— although the value of the commodity
is above the average price and therefore yields a
rate of profit higher than the average—is to be
regarded as a privilege of that sphere of production.
What we are concerned with here and have to explain as a
peculiar feature, as an exception, is not that
the average price of commodities is reduced
below their value—this [would be] a general
phenomenon and a necessary prerequisite for
equalisation—but why, in contrast to other
commodities, certain commodities are sold at their
value, above the average price.

The average price of a commodity equals its cost of
production (the capital advanced in it, be it in wages,
raw material, machinery or whatever else) plus average
profit. Hence if, as in the above example, average
profit is 20 per cent which is 1/5,
then the average price of each commodity is C (the
capital advance) +P/C (the average rate of
profit). If C+P/C equals the value of
this commodity, i.e., if S, the surplus-value created
in this sphere of production, equals P, then the
value of the commodity equals its average price. If
C+P/C is smaller than the value of the
commodity, i.e., if the surplus-value S, created in
this sphere, is larger than P, then the value of the
commodity is reduced to its average price and part of
its surplus-value is added on to the value of other
commodities. Finally, if C+P/C is greater than
the value of the commodity, i.e., S is smaller
than P, then the value of the commodity is
raised to its average price and surplus-value created in
other spheres of production is added to it.

Finally, should there be commodities which are sold at
their value, although their value is greater than
C+P/C, or whose value is at any rate not reduced to
such an extent as to bring it down to the level of the
normal average price C+P/C, then certain conditions
must be operative, which put these commodities into an
exceptional position. In this case the profit realised
in these spheres of production stands above the
general rate of profit. If the capitalist receives the
general rate of profit here, the landlord can get the
excess profit in the form of rent.

### [7. Rodbertus’s Erroneous Views Regarding the Factors Which Determine the Rate of Profit and the Rate of Rent]

What I call rate of profit and rate of interest or rate
of rent, Rodbertus calls

“Level of Profit on Capital and
Interest” (p. 113).

This level “depends on their ratio to
capital… In all civilised nations a capital of
100 is taken as a unit, which provides the standard
measurement for the level to be calculated. Thus, the
larger the figure that expresses the relation between the
gain or interest falling to the capital of 100, in other
words, the ‘more per cent’ a capital yields, the
higher are profit and interest”
(pp. 113–14).

“The level of ground-rent and of
rental follows from their proportion to a particular
piece of land” (p. 114).

This is bad. The rate of rent is, in the first
place, to be calculated on the capital, i.e., as the
excess of the price of a commodity over its
costs of production and over that part of the
price which forms the profit. Because it
helps him to understand certain phenomena Herr Rodbertus
makes the caculation with an acre or a morgen, the apparent
form of the thing, | in
which the intrinsic connection is lost. The rent
yielded by an acre is the rental, the absolute amount of
rent. It may rise if the rate of rent remains the
same or is even lowered.

“The level of the value of
land follows from the capitalisation of the rent of a
particular piece of land, The greater the amount of capital
derived from the capitalisation of the rent of a piece of
land of a given area, the higher is the value of the
land” (p. 114).

The word “level” is nonsense here. For
to what does it express a relationship? That 10 per
cent yields more than 20 is obvious; but the unit of
measurement here is 100. Altogether the
“level of the value of land” is the same
general phrase as the high or low level of
commodity prices in general.

Herr Rodbertus now wants to investigate:

“What then determines the level of
capital profit and of ground-rent?” (p. 115)

### [a) Rodbertus’s First Thesis]

First of all he examines: What determines “the
level of rent in general”, i.e., what regulates
the rate of surplus-value?

“I) With a given value of a product,
or a product of a given quantity of labour or, which again
amounts to the same thing, with a given national product,
the level of rent in general bears an inverse
relationship to the level of wages and a direct relationship
to the level of productivity of labour in general. The
lower the wages, the higher the rent; the higher the
productivity of labour in general, the lower the wages and
the higher the rent” (pp. 115–16).

The “level” of
rent—the rate of surplus-value—says Rodbertus,
depends upon the “size of this portion left
over for rent” (p. 117), i.e., after deducting wages
from the total product, in which “that part of
the value of the product which serves as replacement
of capital…can be disregarded” (p. 117).

This is good (I mean that in this consideration of
surplus-value the constant part of capital is
“disregarded”).

The following is a somewhat peculiar notion:

“when wages fall, i.e., from now on
form a smaller share of the total value of the product, the
aggregate capital on which the other part of
rent” <i.e., the industrial profit>
“is to be calculated as profit, becomes smaller.
Now it is, however, solely the ratio between the value that
becomes capital profit or ground-rent, and the capital, or
the land area on which it has to be calculated as
such, which determines the level of profit and
rent. Thus if wages allow a greater value to be left
over for rent, a greater value is to be reckoned as profit
and ground-rent, even with a diminished capital and
the same area of land. The resulting ratio of both
increases and, therefore, the two together, or rent in
general, has risen… It is assumed that the value
of the product remains the same… Because the
wage, which the labour costs, diminishes, the labour, which
the product costs, does not necessarily diminish”
(pp. 117–18).

The last bit is good. But it is incorrect to say
that when the variable capital that is laid out in wages
decreases, the constant capital must diminish.
In other words, it is not true that the rate of
profit <the quite inappropriate reference to area of
land etc. is omitted here) must rise because the rate of
surplus-value rises. For instance, wages fall
because labour becomes more productive and in all cases this
expresses itself in more raw material being worked up by the
same worker in the same period of time; this part of
constant capital therefore grows, ditto machinery and its
value. Hence the rate of profit can fall with the
reduction in wages. The rate of profit is
dependent on the amount of surplus-value, which is
determined not only by the rate of surplus-value, but also
(by] the number of workers employed.

Rodbertus correctly defines the necessary wage as equal
to

“the amount of necessary
subsistence, that is to a fairly stable definite quantity of
material products for a particular country and a
particular period” (p. 118).

| Herr Rodbertus then
puts forward in a most intricately confused,
complicated and clumsy fashion, the propositions set up by
Ricardo on the inverse relationship of profit and wages and
the determination of this relationship by the productivity
of labour. The confusion arises partly because,
instead of taking labour-time as his measure, he foolishly
takes quantities of product and makes non-sensical
differentiations between “level of the value of the
product” and “magnitude of the value of
the product”.

By “level of the value of the product”
this stripling means nothing other than the relation of the
product to the labour-time. If the same amount
of labour-time yields many products then the value of the
product, i.e., the value of separate portions of the
product is low, if the reverse, then the reverse. If
one working-day yielded 100 lbs. yarn and later 200
lbs. then in the second case the value of the yarn would be
half what it was in the first. In the first case its
value is 1/100 of a working-day; in
the second, the value of the lb. of yarn is
1/200 of a working-day. Since
the worker receives the same amount of product, whether its
value be high or low, i.e., whether it
contains more or less labour, wages and profit move
inversely, and wages take more or less of the total product,
according to the productivity of labour. He expresses
this in the following intricate sentences:

“…if the wage, as necessary
subsistence, is a definite quantity of material products,
then, if the value of the product is high, the wage must
have a high value, if it is low, it must constitute a low
value and, since the value of the product available for
distribution is assumed as constant, the wage will absorb a
large part if the value of the product is high, a small part
of it, if its value is low and finally, it will therefore
leave either a large or a small share of the value of the
product for rent. But if one accepts the rule that the
value of the product equals the quantity of labour which it
cost, then the level of the value of the product is
again determined purely by the productivity of labour or
the relationship between the amount of product and the
quantity of labour which is used for its production…if
the same quantity of labour brings forth more product, in
other words, if productivity increases, then the same
quantity of product contains less labour and conversely, if
the same quantity of labour brings forth less product, in
other words, if productivity decreases, then the same
quantity of product contains more labour. But the
quantity of labour determines the value of the
product and the relative value of a particular
quantity of product determines the level of
the value of the product… Hence
“the higher the productivity of labour in general,
the higher” must “be rent in general”
(pp. 119–20).

But this is only correct if the product, for whose
production the worker is employed, belongs to that species
which—according to tradition or
necessity—figures in his consumption as a means of
subsistence. If this is not the case, then the
productivity of this labour has no effect on the relative
height of wages and of profit, or on the amount of
surplus-value in general. The same share in the
value of the total product falls to the worker as wages,
irrespective of the number of products or the quantity of
the product in which this share is expressed. The
division of the value of the product in this case is
not altered by any change in the productivity of labour.

### [b) Rodbertus’s Second Thesis]

“II) If with a given value of the
product, the level of rent in general is given, then the
level of ground-rent and of capital profit, bear an inverse
relationship to one another, and also to the productivity of
extractive labour and manufacturing labour
respectively. The higher or lower the rent, the lower
or higher the capital profit and vice versa; the higher or
lower the productivity of extractive labour or of
manufacturing labour, the lower or higher the rent or
capital profit, and alternately also the higher or lower is
the capital profit or rent” (p. 116).

First ([in thesis] I) we had the Ricardian (law] that
wages and profit are related inversely.

Now the second Ricardian [law]—differently evolved
or, rather, “made involved”— that profit
and rent have an inverse relation.

It is obvious, that when a given surplus-value is
divided between capitalist and landowner, then the larger
the share of one, the smaller will be that of the other and
vice versa. But Herr Rodbertus adds something of his
own which requires closer examination.

In the first place, Herr Rodbertus regards it as a new
discovery that surplus-value in general (“the
value of the product of labour which is in fact
available for sharing out as rent”>, the entire
surplus-value filched by the capitalist,
“consists of the value of the raw product+the value of
the manufactured product” (p. 120).

Herr Rodbertus first reiterates his
“discovery” of the absence of “the value
of the material” in | agriculture. This time
in the following flood of words:

“That portion of rent which accrues
to the manufactured product and determines the rate of
capital profit is reckoned as profit not only on the capital
which is actually used for the production of this product
but also on the whole of the raw product value which figures
as value of the material in the capital fund
of the manufacturer. On the other hand, as regards
that portion of rent which accrues to the raw product and
from which the profit on the capital used in raw material
production is calculated according to the given rate
of profit in manufacture” (yes! given rate
of profit!) “leaving a remainder for ground-rent, such
a material value is missing” (p. 121).

We repeat: quod non!

Assume that a ground-rent exists—which Herr
Rodbertus has not proved and cannot prove by his
method—that is to say, a certain portion of the
surplus-value of the raw product falls to the landlord.

Further assume that: “the level of rent in
general” (the rate of surplus-value) “in
a particular value of the product is also given” (p.
121). This amounts to the following: For instance, in
a commodity of £ 100, say half, £ 50, is unpaid
labour; this then forms the fund from which all categories
of surplus-value, rent, profit etc. are paid. Then it
is quite evident that one shareholder in the £ 50 will
draw the more, the less is drawn by the other and vice
versa, or that profit and rent are inversely
proportional. Now the question is, what determines the
apportionment between the two?

In any case it remains true that the revenue of the
manufacturer (be he agriculturist or industrialist) equals
the surplus-value which he draws from the sale of his
manufactured product (which he has pilfered from the workers
in his sphere of production), and that rent of land (where
it does not, as with the waterfall which is sold to
the industrialist, stem directly from the manufactured
product, which is also the case with rent for
houses etc., since houses can hardly be termed raw
product) only arises from the excess profit (that part
of surplus-value which does not enter into the general rate
of profit) which is contained in the raw products and which
the farmer pays over to the landlord.

It is quite true that when the value of the raw product
rises [or falls], the rate of profit in those branches of
industry which use raw material will rise or fall inversely
to the value of the raw product. As I showed in a
previous example, if the value of cotton doubles, then with
a given wage and a given rate of surplus-value, the rate of
profit will fall. The same applies however to
agriculture. If the harvest is poor and production is
to be continued on the same scale (we assume here that the
commodities are sold at their value) then a greater
part of the total product or of its value would have to be
returned to the soil and after deducting wages, if these
remain stationary, the farmer’s surplus-value would consist
of a smaller quantity of product, hence also a smaller
quantity of value would be available for sharing out between
him and the landlord. Although the individual product
would have a higher value than before, not only the amount
of product, but also the remaining portion of value
would be smaller. It would be a different matter if,
as a result of demand, the product rose above its
value, and to such an extent that a smaller quantity of
product had a higher price than a larger quantity of
product did before. But this would be contrary
to our stipulation that the products are sold at their
value.

Let us assume the opposite. Supposing he cotton
harvest is twice as rich and that that part of it which is
returned direct to the soil, for instance as fertiliser and
seed, costs less than before. In this case the portion
of value which is left for the cotton-grower after deduction
of wages is greater than before. The rate of profit
would rise here just as in the cotton industry. True,
in one yard of calico, the proportion of value formed by the
raw product would now be smaller than before and [that]
formed by the manufacturing process would be larger.
Assume that calico costs 2s. a yard when the value of the
cotton it contains is 1s. Now if cotton goes down from
1s. to 6d., (which, on the assumption that its value
equals its price, is only possible because its cultivation
has become more productive) then the value of a yard of
calico is 18d. It has decreased by a quarter which is
25 per cent. But where the cotton-grower previously
sold 100 lbs. at is., he is now supposed to sell 200 at
6d. Previously the value [was] 100s.; now too it is
100s. Although previously cotton formed a greater
proportion of the value of the product—and the rate of
surplus-value in cotton growing itself decreased
simultaneously—the cotton-grower obtained only 50
yds. of calico for his 100s. cotton at 1s. per lb.; now that
the lb. [is sold] at 6d., he receives 66
2/3 yds, for his 100s.

On the assumption that the commodities are sold at their
value, it is wrong to say that the revenue of the
producers who take part in the production of the product is
necessarily dependent on the portion of value | represented by their products
in the total value of the product.

Let the value of the total product of all manufactured
commodities, including machinery, be £ 300 in one
branch, 900 in another and 1,800 in a third.

If it is true to say that the proportion in which the
value of the whole product is divided between the value of
the raw product and the value of the manufactured product
determines the proportion in which the
surplus-value—the rent, as Rodbertus says—is
divided into profit and ground-rent, then this must also be
true of different products in different spheres of
production where raw material and manufactured products
participate in varying proportions.

Suppose out of a value of £ 900, manufactured
product accounts for £ 300 and raw material for
£ 600, and that £ 1 equals 1 working-day.
Furthermore, the rate of surplus-value is given as,
say, 2 hours on 10, with a normal working-day of 12 hours,
then the £ 300 [manufactured product] embodies 300
working-days, and the £ 600 [raw product] twice as
much, i.e., 2×300. The amount of surplus-value
in the one is 600 hours, in the other 1,200. This only
means that, given the rate of surplus-value, its
volume depends on the number of workers or the number
of workers employed simultaneously. Furthermore, since
it has been assumed (not proved) that of the
surplus-value which enters into the value of the
agricultural product a portion falls to the landlord as
rent, it would follow that in fact the amount of
ground-rent grows in the same proportion as the value of
the agricultural product compared with the
“manufactured product” .

In the above example the ratio of the agricultural
product to the manufactured product is as 2:1, i.e.,
600:300. Suppose [in another case] it is as
300:600. Since the rent depends on the surplus-value
contained in the agricultural product, it is clear that if
this [amounts to] 1,200 hours in the first case as against
600 in the second, and if the rent constitutes a
certain part of this surplus-value, it must be
greater in the first case than in the second.
Or—the larger the portion of value which the
agricultural product forms in the value of the total
product, the larger will be its share in the
surplus-value of the whole product, for every portion
of the value of the product contains a certain portion of
surplus-value and the larger the share in the
surplus-value of the whole product which falls to the
agricultural product, the larger will be the rent, since
rent represents a definite proportion of the
surplus-value of the agricultural product.

Let the rent be one-tenth of the agricultural
surplus-value, then it is 120 [hours] if the value of the
agricultural product is £ 600 out of the £ 900
and only 60 [hours] if it is £ 300. According to
this, the volume of rent would in fact alter with the
amount of the value of the agricultural product, hence also
with the relative value of the agricultural product in
relation to the manufactured product. But the
“level” of the rent and of the
profit— their rates—would have absolutely
nothing to do with it whatsoever. In the first
case the value of the product is £ 900 of which
£ 300 is manufactured product and £ 600
agricultural product. Of this, 600 hours surplus-value
accrue to the manufactured product and 1,200 to the
agricultural product. Altogether 1,800 hours. Of
these, 120 go to rent and 1,680 to profit. In the
second case the value of the product is £ 900, of
which £ 600 is manufactured product and £ 300
agricultural product. Thus 1,200 [hours] surplus-value
for manufacture and 600 for agriculture. Altogether
1,800. Of this 60 go to rent and 1,200 to profit for
manufacture and 540 for agriculture. Altogether
1,740. In the second case, the manufactured product is
twice as great as the agricultural product (in terms of
value). In the first case the position is
reversed. In the second case the rent is 60, in the
first it is 120. It has simply grown in the same
proportion as the value of the agricultural product.
As the volume of the latter increased so the volume of the
rent increased. If we consider the total
surplus-value, 1,800, then in the first case the rent is
1/15 and in the second it is
1/30.

If here with the increased portion of value that
falls to agricultural product the volume of rent also
rises and with this, its volume, increases its
proportional share in the total
surplus-value—i.e., the rate at which
surplus-value accrues to rent also rises compared to that at
which it accrues to profit—then this is only so,
because Rodbertus assumes that rent participates
in the surplus-value of the agricultural product in
a d e f i n i t e p r o p o r t i o n.
Indeed this must be so, if this fact is given or
presupposed. But the fact itself by no means
follows from the rubbish which Rodbertus pours forth about
the “value of the material” and which I have
already cited above at the beginning of page 476.

But the level of the rent does not rise in
proportion to the [surplus-value in the] product in
which it participates, because now, as before, this
[proportion is] one-tenth; its volume grows because
the product grows, and because it grows in volume,
without a rise in its “level”, its
“level” rises in comparison with the quantity of
profit or the share of profit in the ||4781 value of the
total product. Because it is presupposed that a
greater part of the value of the total product yields
rent, i.e., a greater part of surplus-value is
turned into rent, that part of surplus-value which is
converted into rent is of course greater. This has
absolutely nothing to do with the “value of the
material”, But that a

“greater rent” at the
same time represents a “higher rent”,
“because the area or number of acres on which it is
calculated remains the same and hence a greater amount of
value falls to the individual acre” (p. 122)

is ridiculous. It amounts to measuring the
“level” of rent by a “standard of
measurement” that obviates the difficulties of the
problem itself.

Since we do not know as yet what rent is, had we put the
above example differently and had left the same rate of
profit for the agricultural product as for the
manufactured product, only adding on one-tenth for rent,
which is really necessary since the same rate of
profit is assumed, then the whole business would look
different and become clearer.

Manufactured product

Agricultural product

I

£600 [7,200 hours]

£300 [3,600 hours]

1,200 [hours] surplus-value for manufacture, 600 for agriculture and 60 for rent. Altogether 1,860 [hours; of these] 1,800 for profit.

II

£300 [3,600 hours]

£600 [7,200 hours]

600 [hours] surplus-value for manufacture, 1,200 for agriculture and 120 for rent. Altogether 1,920 [hours; of these] 1,800 for profit.

In case II the rent is twice that in I because the
agricultural product, the share of the value of the product
on which it sponges, has grown in proportion to the
industrial product. The volume of profit remains the
same in both cases, i.e., 1,800. In the first case
(the rent] is 1/31 of the total
surplus-value, in the second case it is
1/16

If Rodbertus wants to charge the “value of the
material” exclusively to industry, then above all, it
should have been his duty to burden agriculture alone with
that part of constant capital which consists of machinery,
etc. This part of capital enters into agriculture as a
product supplied to it by industry— as a
“manufactured product”, which forms the means of
production for the “raw product”.

Since we are dealing here with an account between two
firms, so far as industry is concerned, that part of the
value of the machinery which consists of “raw
material” is already debited to it under the
heading of “raw material” or “value of the
material”. We cannot therefore book this twice
over. The other portion of value of the
machinery used in manufacture, consists of added
“manufacturing labour” (past and present) and
this resolves into wages and profit (paid and unpaid
labour). That part of capital which has been advanced
here (apart from that contained in the raw material of the
machines) therefore consists only of wages.
Hence it increases not only the amount of capital advanced,
but also the profit, the volume of surplus-value to be
calculated upon this capital.

(The error usually made in such calculations is that, for
instance, the wear and tear of the machinery or of the tools
used is embodied in the machine itself, in its value and
although, in the last analysis, this wear and tear can be
reduced to labour— either labour contained in
the raw material or that which transformed the raw material
into machine, etc.—this past labour never again
enters into profit or wages, but only acts as a produced
condition of production (in so far as the necessary
labour-time for reproduction does not alter) which, whatever
its use-value in the labour-process, only figures as value
of constant capital, in the process of creating
surplus-value. This is of great importance and has
already been explained in the course of my examination of
the exchange of constant capital and revenue. But
apart from this, it needs to be further developed in the
section on the accumulation of capital.)

So far as agriculture is concerned—that is, purely
the production of raw products or so-called primary
production—in balancing the accounts between the
firms “primary production” and
“manufacture” that part of the value of
constant capital which represents machinery, tools, etc.,
can on no account be regarded in any other way than as an
item which enters into agricultural capital without
increasing its surplus-value. If, as a result
of the employment of machinery etc., agricultural labour
becomes more productive, the higher the price of this
machinery etc., the smaller will be the increase in
productivity. It is the use-value of the machinery and
not its value which increases the productivity of
agricultural labour or of any other sort of labour.
Otherwise one might also say that the productivity of
industrial labour is, in the first place, due to the
presence of raw material and its properties. But again
it is the use-value of the raw material, not its value,
which constitutes a condition of production for
industry. Its value, on the contrary, is a
drawback. Thus what Herr Rodbertus says about the
“value of the material” in respect to the
industrial capital, is literally, | mutatis mutandis valid
for machinery etc.

“For instance the labour costs
of a particular product, such as w h e a t or
cotton, cannot be affected by the labour costs of t h
e p l o u g h o r g i n a s m
a c h i n e s” (or the labour costs of a drainage
canal or stable buildings). “On the other hand,
the value of the m a c h i n e or the m a
c h i n e v a l u e does figure in the amount of
capital on which the owner has to calculate his gain, the
rent that falls to the r a w p r o d u c
t.” (Cf. Rodbertus, p. 97.)

In other words: That portion of the value of wheat and
cotton representing the value of the wear and tear of the
plough or gin, is not the result of the work of ploughing or
of separating the cotton fibre from its seed, but the result
of the labour which manufactured the plough and the
gin. This component part of value goes into the
agricultural product without being produced in
agriculture. It only passes through agriculture, which
uses it merely to replace ploughs and gins by buying new
ones from the maker of machines.

The machines, tools, buildings and other manufactured
products required in agriculture consist of two component
parts : 1. the raw materials of these manufactured
products [2. the labour added to the raw
materials.] Although these raw materials are the
product of agriculture, they are a part of its product which
never enters into wages or into profit. Even if there
were no capitalist, the farmer still could not chalk up this
part of his product as wages for himself. He would in
fact have to hand it over gratis to the machine
manufacturer so that the latter would make him a machine
from it and besides he would have to pay for the labour
which is added to this raw material (equal to wages plus
profit). This happens in reality. The machine
maker buys the raw material but in purchasing the machine,
agricultural producer must buy back the raw material.
It is just as if he had not sold it at all, but had lent it
to the machine maker to give it the form of the
machine. Thus that portion of the value of the
machinery employed in agriculture which resolves into
raw material, although it is the product of agricultural
labour and forms part of its value, belongs to production
and not to the producer, it therefore figures in his
expenses, like seed. The other part, however,
represents the manufacturing labour embodied in the
machinery and is a “product of manufacture”
which enters into agriculture as a means of production, just
as raw material enters as a means of production into
industry.

Thus, if it is true that the firm “primary
production” supplies the firm “manufacturing
industry” with the “value of the material”
which enters as an item into the capital of the
industrialist, then it is no less true that the firm
“manufacturing industry” supplies the firm
“primary production” with the value of the
machinery which enters wholly (including that part which
consists of raw material) into the farmer’s capital
without this “component part of value” yielding
him any surplus-value. This circumstance is a reason
why the rate of profit appears to be smaller in
“high agriculture”, as the English call it, than
in primitive agriculture, although the rate of surplus-value
is greater.

At the same time this supplies Herr Rodbertus with
striking proof of how irrelevant it is to the nature of a
capital advance, whether that portion of the product
which is laid out in constant capital is replaced in kind
and therefore only accounted for as a commodity—as
money value—or whether it has really been alienated
and has gone through the process of purchase and sale.
Supposing the producer of raw materials handed over gratis
to the machine builder the iron, copper, wood etc., embodied
in his machine, so that the machine builder in selling him
the machine would charge him for the added labour and the
wear and tear of his own machine, then this machine would
cost the agriculturist just as much as it costs him now and
the same component part of value would figure as
constant capital, as an advance, in his production.
Just as it amounts to the same thing whether a farmer sells
the whole of his harvest and buys seed from elsewhere with
that portion of its value which rep-resents seed (raw
material) perhaps to effect a desirable change in the type
of seed and to prevent degeneration by inbreeding— or
whether he deducts this component part of value directly
from his product and returns it to the soil.

But in order to arrive at his results, Herr Rodbertus
misinterprets that part of constant capital which consists
of machinery.

A second aspect that has to be examined in connection
with [case] II of Herr Rodbertus is this: He speaks of the
manufactured and agricultural products which make up the
revenue, which is something quite different from
those manufactured and agricultural products which make up
the total annual product. Now supposing it were
correct to say of the latter that after deducting the whole
of that part of the agricultural capital which consists of
machinery etc. | and that
part of the agricultural product which is returned direct to
agricultural production, the proportion in which the
surplus-value is distributed between farmer and
manufacturer—and therefore also the proportion in
which the surplus-value accruing to the farmer is
distributed between himself and the landlord—must be
determined by the share of manufacture and of agriculture in
the total value of the products; then it is still highly
questionable whether this is correct if we are speaking of
those products which form the common fund of
revenue. Revenue (we exclude here that part which
is reconverted into new capital) consists of products
which go into individual consumption and the question is,
how much do the capitalists, farmers and landlords draw out
of this pot. Is this quota determined by the share of
manufacture and raw production in the value of the
product that constitutes revenue? Or by the quotas in
which the value of the total revenue is divisible into
agricultural labour and manufacturing labour?

The mass of products which make up revenue, as I have
demonstrated earlier, does not contain any products that
enter into production as instruments of labour (machinery),
auxiliary material, semi-finished goods and the raw material
of semi-finished goods, which form a part of the annual
product of labour. Not only the constant
capital of primary production is excluded but also the
constant capital of the machine makers and the entire
constant capital of the farmer and the capitalist which does
not enter into the process of the creation of value
though it enters into the labour-process. Furthermore,
it excludes not only constant capital, but also the part of
the unconsumable products that represents the revenue
of their producers and enters into the capital of the
producers of products consumable as revenue, for the
replacement of their used up constant capital.

The mass of products on which the revenue is spent
and which in fact represents that part of wealth which
constitutes revenue, in terms of both use-value and
exchange-value—this mass of products can, as I
have demonstrated earlier, be regarded as consisting only of
newly-added (during the year) labour.
Hence it can be resolved only into revenue, i.e., wages and
profit (which again splits up into profit, rent,
taxes, etc.), since not a single particle of it contains
any of the value of the raw material which goes into
production or of the wear and tear of the machinery which
goes into production, in a word, it contains none of the
value of the means of production. Leaving aside the
derivative forms of revenue because they merely show that
the owner of the revenue relinquishes his proportional share
of the said products to another, be it for services etc. or
debt etc.—let us consider this revenue and assume that
wages form a third of it, profit a third and rent a third
and that the value of the product is £ 90. Then
each will be able to draw the equivalent of £ 30 worth
of products from the whole amount.

Since the amount of products which forms the revenue
consists only of newly-added (i.e., added during the
year) labour, it seems very simple that if the product
contains two-thirds agricultural labour and one-third
manufacturing labour, then manufacturers and agriculturists
will share the value in this proportion. One-third of
the value would fall to the manufacturers and two-thirds to
the agriculturists and the proportional amount of the
surplus-value realised in manufacture and agriculture (the
same rate of surplus-value is assumed in both) would
correspond to these shares of manufacture and agriculture in
the value of the total product. But rent again [would]
grow in proportion to the farmer’s volume of profit since it
sits on it like a parasite. And yet this is
wrong. Because a part of the value which consists of
agricultural labour forms the revenue of the
manufacturers of that fixed capital etc., which replaces the
fixed capital worn out in agriculture. Thus the ratio
between agricultural labour and manufacturing labour in the
component parts of value of those products which
constitute the revenue, in no way indicates the
ratio in which the value of this mass of products or
this mass of products itself is distributed between the
manufacturers and the farmers, neither does it indicate the
ratio in which manufacture and agriculture
participate in total production.

Rodbertus goes on to say:

“But again it is only the
productivity of labour in primary production or manufacture,
which determines the relative level of the value of the
primary product and manufactured product or their respective
shares in the value of the total product. The value of
the primary product will be the higher, the lower the
productivity of labour in primary production and vice
versa. In the same way, the value of the manufactured
product will be the higher, the lower the productivity in
manufacture and vice versa. Since a high value of the
raw product effects a high ground-rent and low capital gain,
and a high value of the manufactured product effects a high
capital gain and low ground-rent, if the level of rent in
general is given, the level of ground-rent and of capital
gain must not only bear an inverse relationship to one
another, but also to the productivity of their respective
labour, that in primary production and that in
manufacture” (p. 123).

If the productivity of two different spheres of
production is to be compared, this can only be done
relatively. In other words, one starts at any
arbitrary point, for instance, when the values of hemp and
linen, i.e., the correlative quantities of labour-time
embodied in them, are as 1:3. If this ratio alters,
then it is correct to say that the’ productivity of
these different types of labour has altered. But it is
wrong to say that because the labour-time required for the
production of an ounce of gold | equals three and that for a
ton of iron also equals three, gold production is
“less productive” than iron production.

The relative value of two commodities shows that the one
costs more labour-time than the other; but one cannot say
that because of this one branch is “more
productive” than the other. This would only be
correct if the labour-time were used for the production of
the same use-values in both instances.

It would be entirely wrong to say that manufacture is
three times as productive as agriculture if the value of the
raw product is to that of the manufactured product as
3:1. Only if the ratio changes say to 4:1 or 3:2 or
2:1, i.e., when it rises or falls, could one say that
the relative productivity in the two branches has
altered.

### [c) Rodbertus’s Third Thesis]

III) “The level of capital
gain is solely determined by the level of the value
of the product in general and by the level of the value
of the raw product and the manufactured product in
particular; or by the productivity of labour in general and
by the productivity of labour employed in the production of
raw materials and of manufactured goods in particular.
The level of ground-rent is, apart from this, also
dependent on the magnitude of the value of the
product or the quantity of labour, or productive
power, which, with a given state of productivity,
is used for production” (pp. 116–17).

In other words: The rate of profit depends solely
on the rate of surplus-value and this is determined
solely by the productivity of labour. On the
other hand, given the productivity of labour, the rate of
ground-rent also depends on the amount of labour
(the number of workers) employed.

This assertion contains almost as many falsehoods as
words. Firstly the rate of profit is by
no means solely determined by the rate of
surplus-value. But more about this shortly.
First of all, it is wrong to say that the rate of
surplus-value depends solely on the productivity of
labour. Given the productivity of labour, the
rate of surplus-value alters according to the length of
the surplus labour-time. Hence the rate of
surplus-value depends not only on the productivity of labour
but also on the quantity of labour employed because
the quantity of unpaid labour can grow (while
productivity remains constant) without the quantity of
paid labour, i.e., that part of capital laid out in
wages, growing. Surplus-value—absolute or
relative (and Rodbertus only knows the latter from
Ricardo)—cannot exist unless labour is at least
sufficiently productive to leave over some sur-plus
labour-time apart from that required for the worker s own
reproduction. But assuming this to be the case,
with a given minimum productivity, then the rate of
surplus-value alters according to the length of surplus
labour-time.

Firstly, therefore, it is wrong to say that
because the rate of surplus-value is solely determined by
the productivity of the labour exploited by capital, the
rate of profit or the “level of capital
gain” is so determined. Secondly: The
rate of surplus-value—which, if the
productivity of labour is given, alters with the
length of the working-day and, with a given normal
working-day, alters with the productivity of
labour—is assumed to be given.
Surplus-value itself will then vary according to the
number of workers from whose every working-day a
certain quantity of surplus-value is extorted, or according
to the volume of variable capital expended on
wages. The rate of profit, on the other hand,
depends on the ratio of this surplus-value [to] the
variable capital plus the constant capital. If the
rate of surplus-value is given, the amount
of surplus-value does indeed depend on the amount of
variable capital, but the level of profit, the
rate of profit, depends on the ratio of this
surplus-value to the total capital advanced. In this
case the rate of profit will thus be determined by the price
of the raw material (if such exists in this branch of
industry) and the value of machinery of a particular
efficiency.

Hence what Rodbertus says is fundamentally wrong:

“Thus, as the amount of capital gain
increases consequent upon the increase in product value, so
also in the same proportion increases the amount of capital
value on which the gain has to be reckoned, and the hitherto
existing ratio between gain and capital is not altered at
all by this increase in capital gain” (p. 125).

This is only valid if it [signifies] the tautology
that: given the rate of profit <very different
from the rate of surplus-value and surplus-value
itself.>, the amount of capital employed is
immaterial, precisely because the rate of profit is
assumed to be constant. But as a rule the rate
of profit can increase although the productivity of
labour remains constant, or it can fall even
though the productivity of labour rises and rises moreover
in every department.

And now again the silly remark <pp. 125–26> about
ground-rent, the assertion that the mere increase of rent
raises its rate, because in every country’ it is
calculated on the basis of an “unalterable number of
acres” (p. 126). If the volume of profit grows
(given the rate of profit), then the amount of
capital from which it is drawn, grows. On the other
hand, if rent increases, then [according to Rodbertus] only
one factor changes, namely rent itself, while its standard
of measurement, “the number of acres”, remains
unalterably fixed.

| “Hence rent can
rise for a reason which enters into the economic development
of society everywhere, namely the increase in labour used
for production, in other words, the increasing
population. This does not necessarily have to
he followed by a rise in the raw product value since
the drawing of rent from a greater quantity of
primary product must already have this effect”
(p. 127).

On p.128, Rodbertus makes the strange discovery that even
if the value of the raw product fell below its normal
level, causing rent to disappear completely, it would be
impossible

“for capital gain ever to amount
to 100 per cent” (i.e., if the commodity is sold
at its value) “however high it may be, it must always
amount to considerably less” (p. 128).

And why?

“Because it” (the capital gain)
“is merely the result of the division of the value of
the product. It must, accordingly, always he a
fraction of this unit” (pp. 127–28).

This, Herr Rodbertus, depends entirely upon the nature of
your calculation.

Let the constant capital advanced be 100, the wages
advanced 50 and let the product of labour over and above
this 50 be 150. We would then have the following
calculation:

Constant capital

Variable capital

Surplus-value

value

cost of

production

Profit

Per cent

100

50

150

300

150

150

100

The only requirement to produce this situation is that
the worker should work for his master three quarters of his
working-day, it is therefore assumed that one quarter of his
labour-time suffices for his own reproduction. Of
course, if Herr Rodbertus takes the total value of the
product, which equals 300, and does not consider the excess
it contains over the costs of production, but says that this
product is to be divided between the capitalist and
the worker, then in fact the capitalist’s portion can only
amount to a part of this product, even if it came to
999/1,000. But the calculation
is incorrect, or at least useless in almost every
respect. If a person lays out 150 and makes 300 he is
not in the habit of saying that he has made a profit of 50
per cent on the basis of reckoning the 150 on 300 instead of
150.

Assume, in the above example, that the worker has worked
12 hours, 3 for himself and 9 for the capitalist. Now
let him work 15 hours, i.e., 3 for himself and 12 for the
capitalist. Then, according to the former production
ratio, an outlay of 25 on constant capital would have to be
added (less in fact, because the outlay on machinery would
not grow to the same degree as the quantity of
labour). Thus:

Constant capital

Variable capital

Surplus-value

value

cost of

production

Profit

Per cent

125

50

200

375

175

200

1142/7

Then Rodbertus comes up again with the growth of
“rent to infinity”, firstly because he
interprets its mere increase in volume as a rise, and
therefore speaks of its rise when the same rate of rent is
paid on a larger amount of product. Secondly because
he calculates on “an acre” as his standard of
measurement. Two things which have nothing in
common.

The following points can be dealt with quite briefly,
since they have nothing to do with my purpose.

The “value of land” is the
“capitalised ground-rent”. Hence
this, its expression in terms of money, depends on the level
of the prevailing rate of interest. Capitalised at 4
per cent, it would have to be multiplied by 25 (since 4 per
cent is 1/25 of 100); at 5 per cent by
20 (since 5 per cent is 1/20 of
100). This would amount to a difference in land value
of 20 per cent (p. 131). Even with a fall in the
value of money, ground-rent and hence the value of
land would rise nominally, since—unlike the
increase in interest or profit (expressed in money)
—the monetary expression of capital does not rise
evenly. The rent, however, which has risen in terms of
money has to be related “to the unchanged number of
acres of the piece of land” (p. 132).

Herr Rodbertus sums up his wisdom as applied to Europe in
this way:

1. “…with the European
nations, the productivity of labour in general—labour
employed in primary production and manufacturing—has
risen…as a result of which, the part of the national
product used for wages has diminished, the part left over
for rent has increased…so rent in general has
risen” (pp. 138–39).

2. “…the increase in
productivity is relatively greater in manufacture
than in primary production … an equal value of
national product will therefore at present yield a larger
rent share to the raw product than to the manufactured
product. Therefore notwithstanding the rise in rent in
general, in fact only ground-rent has risen while capital
gain has fallen” (p. 139).

Here Herr Rodbertus, just like Ricardo, explains the rise
of rent and the fall of the rate of profit one by the other;
the fall of one is equal to the rise of the other and the
rise of the latter is explained by the relative
unproductiveness |
of agriculture. Indeed, Ricardo says somewhere
quite expressly that it is not a matter of absolute but of
“relative” unproductiveness. But even if
he had said the opposite, it would not comply with the
principle he establishes since Anderson, the original
author of the Ricardian concept, expressly declares that
every piece of land is capable of absolute improvement.

If “surplus-value” (profit and rent) in
general has risen then it is not merely possible that the
rate of the total rent has fallen in proportion to constant
capital, but it will have fallen because productivity has
risen. Although the number of workers employed has
grown, as has the rate at which they are exploited, the
amount of capital expended on wages as a whole has fallen
relatively, although it has risen absolutely; because
the capital which as an advance—a product of the
past—is set in motion by these workers and as a
prerequisite of production forms an ever growing
share of the total capital. Hence the rate of profit
and rent taken together has fallen, although not only its
volume (its absolute amount) has grown, but also the rate at
which labour is being exploited has risen. This Herr
Rodbertus cannot see, because for him constant capital is an
invention of industry of which agriculture is ignorant.

But so far as the relative magnitude of profit and
rent is concerned, it does not by any means follow that,
because agriculture is relatively less productive than
industry, the rate of profit has fallen
absolutely. If, for instance, its relationship to rent
was as 2:3 and is now as 1:3, then whereas previously it
formed two-thirds of rent, it now forms only one-third, or
previously [profit] formed two-fifths of the total
surplus-value and now only a quarter, [or] previously
8/20 and now only
5/20; it would have fallen by
3/20 or [by] 15 per cent.

Assume that the value of 1 lb. of cotton was 2s. It
falls to 1s. 100 workers who previously span 100
lbs. in one day, now spin 300.

Previously, the outlay for 300 lbs. amounted to 600s.;
now it is only 300s. Further, assume that in both
cases machinery equals 1/10, or
60s. Finally, previously 300 lbs. cost 300s. as an
outlay for 300 workers, now only l00s. for 100
[workers]. Since the productivity of the workers
“has increased”, and we must suppose that they
are paid here in their own product, assume that whereas
previously the surplus-value was 20 per cent of wages, it is
now 40.

Thus the cost of the 300 lbs. is:

in the first case:

Raw material 600, machinery 60, wages 300, surplus-value
60, altogether 1,020s.

in the second case:

Raw material 300, machinery 60, wages 100, surplus-value
40, altogether 500s.

In the first case: The costs of production 960,
profit 60, rate of profit 6
1/4 [per cent].

In the second case: [The costs of production] 460,
profit 40, rate of profit 8
16/23 [per cent].

Suppose the rent is a third of 1 lb., then in the first
case it equals 200s., i.e., £10; in the second it is
100s. or £5. The rent has fallen here because
the raw product has become cheaper by 50 per cent. But
the whole of the product has become cheaper by more than 50
per cent. The industrial labour added in I [is to the
value of the raw material] as 300 : 600 = 6 : 10 = 1 : 1
2/3; in II, as 140 : 300 = 1 : 2
1/7. Industrial labour has
become relatively more productive than agricultural labour;
yet in the first case the rate of profit is lower and the
rent higher than in the second. In both cases rent
amounts to one-third of raw materials.

Assume that the amount of raw materials in II doubles so
that 600 lbs. are spun and the ratio would be:

II. 600 lbs. [cotton] = 600s. raw material,
120s. machinery, 200s. wages, 80s. surplus-value.
Altogether 920s. production costs, 80s. profit, rate of
profit 8 16/23 per cent.

The rate of profit [has] risen compared with I.
Rent would be just the same as in I. The 600
lbs. would cost only 1,000, whereas before they cost
2,040.

| It does not by any
means follow from the relative dearness of the agricultural
product that it yields a [higher] rent. However, if
one assumes—as Rodbertus can be said to assume, since
his so-called proof is absurd—that rent clings as a
percentage on to every particle of value of the agricultural
product, then indeed it follows that rent rises with the
increasing dearness of agricultural produce.

“…as a result of the increased
population, the value of the total national product has also
grown to an extraordinary extent … today, therefore,
the nation draws more wages, more profit,
more ground-rent … furthermore, this
increased amount of ground-rent has raised it,
whereas the increased amount of wages and profit
could not have a similar effect” (p. 139).

### [8. The Kernel of Truth in the Law Distorted by Rodbertus]

Let us strip Herr Rodbertus of all nonsense (not to speak
of such defective conceptions as I have detailed more fully
above, for instance that the rate of surplus-value
(“level of rent”) can only rise when
labour becomes more productive, i.e., the
overlooking of absolute surplus-value,
etc.);

namely the absurd conception that the “value of
the material” does not form part of the
expenditure in (capitalist) agriculture in the strict
sense.

The second piece of nonsense: that he does not
regard the machinery etc., the second part of the
constant capital of agriculture and manufacture, as a
“component part of value”, which—just as
the “value of the material”—does not arise
from the labour of the sphere of production into which it
enters as machinery, and upon which the profit made in each
sphere of production is also calculated, even though the
value of the machinery does not add a farthing to the
profit, as little as the “value” of the material
although both are means of production and as such enter into
the labour process.

The third piece of nonsense: that he does not
charge to agriculture the entire “value”
of the “machinery” etc. which enters into
it as an item of expenditure and that he does not regard
that element of it which does not consist of raw material as
a debit of agriculture to industry, which does not therefore
belong to the expenditure of industry as a whole and in
payment for which, a part of the raw material of agriculture
must be supplied gratis to industry.

The fourth piece of nonsense : his belief that in
addition to machinery and its auxiliary materials the
“value of the material” enters into all branches
of industry, whereas this is not the case in the entire
transport industry any more than it is in the extractive
industry.

The fifth piece of nonsense: that he does not see
that although, besides variable capital, “raw
material” does enter into many branches of manufacture
(and this the more they supply finished produce for
consumption) the other component part of constant capital
disappears almost completely or is very small, incomparably
smaller than in large-scale industry or agriculture.

The sixth piece of nonsense: that he confuses the
average prices of commodities with their values.

Stripped of all this, which has allowed him to derive
his explanation of rent from the farmer’s wrong
calculation and his own wrong calculation, so that rent
would have to disappear to the extent to which the farmer
accurately calculates the outlay he makes,
then only the following assertion remains as the real
kernel:

When the raw products are sold at their values,
their value stands above the average prices of the
other commodities or above their own average price,
this means their value is greater than the costs of
production plus average profit, thus leaving an excess
profit which constitutes rent. Furthermore,
assuming the same rate of surplus-value, this means
that the ratio of variable capital to constant capital is
greater in primary production than it is, on an average, in
those spheres of production which belong to industry (which
does not prevent it from being higher in some branches of
industry than it is in agriculture). Or, putting it
into even more general terms: agriculture belongs to that
class of industries, whose variable capital is greater
proportionately to constant capital than in industry, on an
average. Hence its surplus-value, calculated on its
costs of production, must be higher than the average in the
industrial spheres. Which means again, that its
particular rate of profit stands above the average
rate of profit or the general rate of
profit. Which means again: when the rate of
surplus-value is the same and the surplus-value itself is
given, then the particular rate of profit in each sphere of
production depends on the proportion of variable capital to
constant capital in that particular sphere.

This would therefore only be an application of the law
developed by me in a general form to a particular
branch of industry.

| Consequently:

1. One has to prove that agriculture belongs to
those particular spheres of production whose commodity
values are above their average prices, whose
profit, so long as they appropriate it themselves and do not
hand it over for the equalisation of the general rate of
profit, thus stands above the average profit,
yielding them, therefore, in addition to this, an excess
profit. This point 1 appears certain to apply to
agriculture on an average, because manual labour is still
relatively dominant in it and it is characteristic of the
bourgeois mode of production to develop manufacture more
rapidly than agriculture. This is, however, a
historical difference which can disappear. At
the same time this implies that, on the whole, the means of
production supplied by industry to agriculture fall in
value, while the raw material which agriculture supplies to
industry generally rises in value, the constant capital in a
large part of manufacture has consequently a proportionately
greater value than that in agriculture. In the main,
this will probably not apply to the extractive industry.

2. It is wrong to say, as Rodbertus does:
If—according to the general law—the agricultural
product is sold on an average at its value then it
must yield an excess profit, alias rent; as though
this selling of the commodity at its value, above its
average price, were the general law of capitalist
production. On the contrary, it must be shown
why in primary production—by way of exception
and in contrast to the class of industrial
products whose value similarly stands a b o v e their
average price—the values are not reduced to
the average prices and therefore yield an excess profit,
alias rent. This is to be explained simply by
property in land. The equalisation takes place
only between capitals, because only the action of capitals
on one another has the force to assert the inherent laws of
capital. In this respect, those who derive rent from
monopoly are right. Just as it is the
monopoly of capital alone that enables the capitalist
to squeeze surplus-labour out of the worker, so the monopoly
of land ownership enables the landed proprietor to squeeze
that part of surplus-labour from the capitalist, which would
form a constant excess profit. But those who
derive rent from monopoly are mistaken when they imagine
that monopoly enables the landed proprietor to force the
price of the commodity above its value. On the
contrary, it makes it possible to maintain the value of
the commodity above its average price; to sell the
commodity not above, but at its value.

Modified in this way, the proposition is correct.
It explains the existence of rent, whereas Ricardo
only explains the existence of differential rents and
actually does not credit the ownership of land with
any economic effect. Furthermore, it does away
with the superstructure, which with Ricardo himself was
anyhow only arbitrary and not necessary for his
presentation, namely, that the agricultural industry becomes
gradually less productive; it admits on the contrary that it
becomes more productive. On the bourgeois basis
however agriculture is relatively less productive, or
slower to develop the productive power of labour, than
industry, Ricardo is right when he derives his “excess
surplus-value” not from greater productivity but from
smaller productivity.

### [9. Differential Rent and Absolute Rent in Their Reciprocal Relationship. Rent as an Historical Category. Smith’s and Ricardo’s Method of Research]

So far as the difference in rents is concerned,
provided equal capital is invested in land areas of equal
size, it is due to the difference in natural
fertility, in the first place, specifically with regard
to those products which supply bread, the chief nutriment;
provided the lad is of equal size and fertility, differences
in rent arise from unequal capital investment.
The first, natural, difference causes not only the
difference in the size but also in the level or rate of
rent, relatively to the capital which has been laid
out. The second, industrial difference, only
effects a greater rent in proportion to the volume of
capital which has been laid out. Successive capital
investments on the same land may also have different
results. The existence of different excess
profits or different rents on land of varying
fertility does not distinguish agriculture from
industry. What does distinguish it is that those
excess profits in agriculture become permanent
fixtures, because here they rest on a natural basis
(which, it is true, can be to some extent levelled
out). In industry, on the other hand—given the
same average profit—these excess profits can only turn
up fleetingly and they only appear because of
a change-over to more productive machines and combinations
of labour. In industry it is always the most recently
added, most productive capital that yields an excess
profit by reducing average prices. In
agriculture excess profit may be the result, and
very often must be the result, not of the absolute
increase in fertility of the best fields, but the relative
increase in their fertility, because less productive
land is being cultivated. In industry the higher
relative productiveness, the excess profit (which
disappears), must always be due to the absolute
increase in productiveness, or productivity, of the newly
invested capital compared with the old. No capital can
yield an excess profit in industry (we are not
concerned here with a momentary rise in demand),
because less productive capitals are newly
entering into the branch of industry.

| It can,
however, also happen in agriculture (and Ricardo admits
this) that more fertile land—land which is either
naturally more fertile or which becomes more fertile under
newly developed advances in technique than the old land
under the old [conditions]—comes into use at a later
stage and even throws a part of the old land out of
cultivation (as in the mining industry and with colonial
products), or forces it to turn to another type of
agriculture which supplies a different product.

The fact that the differences in rents (excess
profits) become more or less fixed distinguishes
agriculture from industry. But the fact that the
market-price is determined by the average conditions
of production, thus raising the price of the product which
is below this average, above its price and even above
its value, this fact by no means arises from the
land, but from competition, from capitalist
production. Hence this is not a law of nature, but
a social law.

This theory neither demands the payment of rent
for the worst land, nor the non-payment of rent.
Similarly, it is possible that a lease rent is paid
where no rent is yielded, where only the ordinary
profit is made, or where not even this is made.
Here the landowner draws a rent although economically
none is available.

Rent (excess profit) is paid only for the better (more
fertile) land. Here rent “as such”
does not exist. In such cases excess
profit—just as the excess profit in
industry—rarely becomes fixed in the form of rent (as
in the West of the United States of North
America). |

| This is the case
where, on the one hand, relatively great areas of disposable
land have not become private property and, on the
other, the natural fertility is so great that the values of
the agricultural products are equal to (sometimes
below) their average prices, despite the
scant development of capitalist production and
therefore the high proportion of variable capital to
constant capital. If their values were higher,
competition would reduce them to this level. It is
however absurd to say, as for example Rodbertus does, that
the state [appropriates the ground-rent because it] levies,
for instance, a dollar or so per acre, a low, almost nominal
price. One could just as well say that the state
imposes a “trade tax” on the pursuit of every
branch of industry. In this case Ricardo’s law
exists. Rent exists only for relatively fertile
land—although mostly not in a fixed but in a fluid
state, like the excess profit in industry. The land
that pays no rent does so, not because of its low
fertility, but because of its high fertility.
The better kinds of land pay rent, because they possess
more than average fertility, as a result of their
relatively higher fertility.

But in countries where landed property exists, the
same situation, namely that the last cultivated land pays
no rent, may also occur for the reverse
reasons. Supposing, for instance, that the
value of the grain crops was so low (and that its low
value was in no way connected with the payment of
rent), that owing to the relatively low fertility of
the last cultivated land the value of its crop were only
equal to the average price, this means that, if the
same amount of labour were expended here as on the land
which carried a rent, the number of quarters would be
so small (on the capital laid out), that with the average
value of bread products, only the average price of
wheat would be obtained.

| Supposing for
example, that the last land which carries rent (and
the land which carries the smallest rent represents
pure rent; the others already differential rent)
produces [with] a capital investment of £100, [a
product] equal to £120 or 360 quarters of wheat at
£ 1/3. In this case 3
quarters equal £ 1. Let £ 1 equal one
week’s labour. £ 100 are 100 weeks’ labour and
£ 120 are 120 weeks’ labour. 1 quarter is
1/3 of a week which is 2 days and of
these 2 days or 24 hours (if the normal working-day is 12
hours) 1/5, or 4
4/5 hours, are unpaid labour which is
equal to the surplus-value embodied in the quarter. 1
quarter equals £ 1/3 which is 6
2/3s. or 6
6/9s.

If the quarter is sold at its value and the average
profit is 10 per cent then the average price of the
360 quarters would be £110 and the average price per
quarter 6 1/9s. The value would
be £10 above the average price. And since the
average profit is 10 per cent the rent would be equal to
half the surplus-value, i.e., £ 10 or
5/9s. per quarter. Better types
of land, which would yield more quarters for the same outlay
of 120 labour weeks (of which, however, only 100 are paid
labour, be it materialised or living), would, at the price
of 6 6/9s. per quarter, yield a higher
rent. But the worst cultivated land would yield a rent
of £ 10 on a capital of £ 100 or of
5/9s. per quarter of wheat.

Assume that a new piece of land is cultivated, which only
yields 330 quarters with 120 labour weeks. If the
value of 3 quarters is £ 1, then that of 330 quarters
is £ 110. But 1 quarter would now be equal to
2 days and 2 2/11 hours,
while before it was equal to only two days.
Previously, 1 quarter was equal to 6
6/9s. or 1 quarter was equal to
6s. 8d.; now, since £ 1 equals 6 days, it is equal to
7s. 3d. 1 1/11 farthing. To be
sold at its value the quarter would now have to be
sold at 7d. 1 1/11 farthing more, at
this price it would also yield the rent of
5/9s. per quarter. The
value of the wheat produced on the better land is
here below the value of that produced on the
worst land. If this worst land sells at the price per
quarter of the next best or rent yielding land then it sells
below its value but at its average price,
i.e., the price at which it yields the normal profit of 10
per cent. It can therefore be cultivated and yield the
normal average profit to the capitalist.

There are two situations in which the worst land would
here yield a rent apart from profit.

Firstly if the value of the quarter of
wheat were above 6 6/9s. (its
price could be above 6 6/9s.,
i.e., above its value, as a result of demand; but this does
not concern us here. The 6
6/9s., the price per quarter, which
yielded a rent of £ 10 on the worst land cultivated
previously, was equal to the value of the wheat grown
on this land, which yields a non-differential rent),
that is [if] the worst land previously cultivated and all
others, while yielding the same rent, were
proportionately less fertile, so that their value were
higher above their average price and the average
price of the other commodities. That the new
worst land does not yield a rent is thus not due to
its low fertility but to the relatively high
fertility of the other land. As against the
new type of land with the new capital investment, the worst,
[previously] cultivated, rent-yielding lad represents
rent in general, the non-differential
rent. And that its rent is not higher is due to the
[high] fertility of the rent-yielding land.

Assume that there are three other classes of land besides
the last rent-yielding land. Class II (that above I,
the last rent-yielding land) carries a rent of one-fifth
more because this land is one-fifth more fertile than class
I; class III again one-fifth more because it is one-fifth
more fertile than class II, and the same again in class IV
because it is a fifth more fertile than class III.
Since the rent in class I equals £ 10, it is 10 +
1/5 = £ 12 in class II, 12 +
1/5 =£ 14
2/5 in class III and 14
2/5 + 1/5 =
£17 7/25 in class IV.

If IV’s fertility were less, the rent of III-I inclusive
| would be greater and
that of IV also greater absolutely (but would the
proportion be the same?). This can be taken in two
ways. If I were more fertile then the rent of II,
III, JV would be proportionately smaller. On the
other hand, I is to II, II is to III and III is to IV as
the newly added, non-rent-yielding type of land is to
I. The new type of land does not carry a rent because
the value of the wheat from I is not above the
average price [of that] from the new land. It would
be above it if I were less fertile. Then the new land
would likewise yield a rent. But the same applies to
I, If II were more fertile then I would yield no rent or a
smaller rent. And it is the same with II and III and
with III and IV, Finally we have the reverse: The absolute
fertility of IV determines the rent of III. If IV
were yet more fertile, III, II, I would yield a smaller
rent or no rent at all. Thus the rent yielded by I,
the undifferentiated rent, is determined by the fertility
of IV, just as the circumstance that the new land yields no
rent is determined by the fertility of I.
Accordingly, Storch’s law is valid here, namely,
that the rent of the most fertile land determines
the rent of the last land to yield any rent at all, and
therefore also the difference between the land which yields
the undifferentiated rent and that which yields no rent at
all.

Hence the phenomenon that here the fifth class, the newly
cultivated land I’ (as opposed to I) yields no rent,
is not to be ascribed to its own lack of fertility,
but to its relative lack of fertility compared with
I, therefore, to the relative fertility of I as compared
with I’.

[Secondly ] The value [of the product] of the
rent-yielding types of land I, II, III, IV, that is
6s. 8d. per quarter (to make it more realistic, one could
say bushel instead of quarter), equals the average
price of I’ and is below its own value. Now
many intermediary stages are in fact possible.
Supposing on a capital investment of £ 100, I’ yielded
any quantity of quarters between its real return of 330
bushels and the return of I which is 360 bushels, say 333,
340, 350 up to 360—x bushels. Then
the value of the quarter at 6s. 8d. would be above the
average price of I’ (per bushel) and the last cultivated
land would yield a rent. That it yields the average
profit at all, it owes to the relatively low fertility
of I, and therefore of I-IV. That it yields no
rent, is due to the relatively high fertility of I and to
its own relatively low fertility. The last cultivated
land I’ could yield a rent if the value of the bushel were
above 6s. 8d., that is, if I, II, III, IV were less
fertile, for then the value of the wheat would be
greater. It could however also yield a rent if the
value were given at 6s. 8d., i.e., if the fertility of I,
II, III and IV were the same. This would be the
case if it were more fertile itself, yielded more than 330
bushels and if the value of 6s. 8d. per bushel were
thus above its average price; in other words,
its average price would then be below 6s. 8d., and
therefore below the value of the wheat grown on I,
II, III, IV. If the value is above the average price,
then there is an excess profit above the average profit,
hence the possibility of a rent.

This shows: When comparing different spheres of
production—for instance industry and
agriculture—the fact that value is above average price
indicates lower productivity in the sphere of
production that yields the excess profit, the excess of
value over the average price. In the same
sphere, on the other hand, [it indicates] greater
productivity of one capital in comparison with other
capitals in the same sphere of production. In the
above example, I yields a rent, only because in agriculture
the proportion of variable capital to constant capital is
greater than in industry, i.e., more new labour has to be
added to the materialised labour—and because of the
existence of landed property this excess of value
over average price is not levelled out by competition
between capitals. But that I yields a rent at all is
due to the fact that the value of 6s. 8d. per bushel is not
below its average price, and that its fertility is
not so low that its own value rises above 6s. 8d. per
bushel. Its price moreover is not
determined by its own value but by the value of the
wheat grown on II, III, IV or, to be precise, by that grown
on II. Whether the market-price is merely equal
to its own average price or stands above it, and
whether its value is above its average price, depends
on its own productivity.

Hence Rodbertus’s view that in agriculture every capital
which yields the average profit must yield rent is
wrong. This false conclusion follows from his | false basis. He reasons
like this: The capital in agriculture, for instance, yields
£ 10. But because, in contrast to industry,
raw materials do not enter into it, the
£ 10 are reckoned on a smaller sum. They
represent therefore more than 10 per cent. But the
point is this: It is not the absence of raw materials (on
the contrary, they do enter into agriculture proper; it
wouldn’t matter a straw if they didn’t enter into it,
provided machinery etc. increased proportionally)
which raises the value of the agricultural products above
the average price (their own and that of other
commodities). Rather is this due to the higher
proportion of variable to constant capital compared with
that existing, not in particular spheres of
industrial production, but on an average in
industry as a whole. The magnitude of this
general difference determines the amount and the
existence of rent on No. I, the absolute, non-differential
rent and hence the smallest rent. The price of
wheat from I’, the newly cultivated land which does not
yield a rent, is, however, not determined by the
value of its own product, but by the value of I, and
consequently by the average market-price of the wheat
supplied by I, II, III and IV.

The privilege of agriculture (resulting from landed
property), that it sells its product not at the average
price but at its value if this value is
above the average price, is by no means valid for
products grown on different types of land as against one
another, for products of different values produced within
the same sphere of production. As against
industrial products, they can only claim to be sold at their
value. As against the other products of the same
sphere, they are determined by the market-price, and it
depends on the fertility of I whether the value—which
equals the average market-price here—is sufficiently
high or low, i.e., whether the fertility of I is
sufficiently high or low, for I’, if it is sold at
this value, to participate little, much or not at all
in the general difference between the value and the average
price of wheat. But, since Herr Rodbertus makes no
distinction at all between values and average prices, and
since he considers it to be a general law for all
commodities, and not a privilege of agricultural products,
that they are sold at their values—he must of
course believe that the product of the least fertile land
has also to be sold at its individual value.
But it loses this privilege in competition with products of
the same type.

Now it is possible for the average price of I’ to be
above 6s. 8d. per bushel, the value of I. It can be
assumed (although this is not quite correct), that for land
I’ to be cultivated at all, demand must increase. The
price of wheat from I must therefore rise above its
value, above 6s. 8d., and indeed persistently
so. In this case land I’ will be cultivated, If it can
make the average profit at 6s. 8d. although its value is
above 6s. 8d. and if it can satisfy demand, then the
price will be reduced to 6s. 8d., since demand now again
corresponds to supply, and so I must sell at 6s. 8d. again,
ditto II, III, IV; hence also I’. If, on the other
hand, the average price in I’ amounted to 7s. 8d. so
that it could make the usual profit at this price only
(which would be far below its individual value) and if the
demand could not be otherwise satisfied, then the value of
the bushel would have to consolidate itself at 7s. 8d. and
the demand price of I would rise above its value. That
of II, III, IV, which is already above their
individual value, would rise even higher. If, on the
other hand, there were prospects of grain imports which
would by no means permit of such a stabilisation, then I’
could nevertheless be cultivated if small farmers were
prepared to be satisfied with less than the average
profit. This is constantly happening in both
agriculture and industry. Rent could be paid in this
case just as when I’ yields the average profit, but it would
merely be a deduction from the farmer’s profit. If
this could not be done either, then the landlord could lease
the land to cottagers whose main concern, like that of the
hand-loom weaver, is to get their wages out of it and to pay
the surplus, large or small, to the landlord in the form of
rent. As in the case of the hand-loom weaver, this
surplus could even be a mere deduction, not from the product
of labour, but from the wages of labour. In all
these instances rent could be paid. In one case it
would be a deduction from the capitalist’s profit. In
the other case, the landlord would appropriate the
surplus-labour of the worker which would otherwise be
appropriated by the capitalist. And in the final case
he would live off the worker’s wage as the capitalists are
also often wont to do. But large-scale capitalist
production is only possible where the last cultivated
land yields at least the average profit, that is where the
value of I enables I, to realise at least the average
price.

One can see how the differentiation between value
and average price surprisingly solves the question
and shows that Ricardo and his opponents are right.

||XI-490| If I, the land
which yields absolute rent, were the only cultivated land,
then it would sell the bushel of wheat at its value,
at 6s. 8d. or 6 6/9s. and not reduce
it to the average price of 6 1/9s. or
6s. 1 1/3d. If all land were of
the same type and if the cultivated area increased tenfold,
because demand grew, then since I yields a rent of £10
per £100, the rent would grow to £ 100, although
only a single type of land existed. But its
rate or level would not grow, neither compared with the
capital advanced nor compared with the area of
land cultivated. Ten times as many acres would
be cultivated and ten times as much capital advanced.
This would therefore merely be an augmentation of the
rental, of the volume of rent, not of its
level. The rate of profit would not fall; for the
value and price of the agricultural products would remain
the same. A capital which is ten times as large can
naturally hand over a rent which is ten times larger than a
capital which is one-tenth its size. On the other
hand, if ten times as much capital were employed on the same
area of land with the same result, then the rate of rent
compared with the capital laid out would have remained
the same; it would have risen in proportion to the
area of land, but would not have altered the rate of profit
in any way.

Now supposing the cultivation of I became more
productive, not because the land had altered but because
more constant capital and less variable capital is being
laid out, that is more capital is being spent on machinery,
horses, mineral fertilisers etc. and less on wages; then the
value of wheat would approach its average price and the
average price of the industrial products, because the excess
in the ratio of variable to constant capital would have
decreased. In this case rent would fall and the rate
of profit would remain unaltered. If the mode of
production changed in such a way that the ratio of variable
to constant capital became the same as the average ratio in
industry, then the excess of value over the average price of
wheat would disappear and with it rent, excess profit.
Category I would no longer pay a rent, and landed property
would have become nominal (in so far as the altered mode of
production is not in fact accompanied by additional capital
being embodied in the land, so that, on the termination of
the lease, the owner might draw interest on a capital which
he himself had not advanced; this is indeed a principal
means by which landowners enrich themselves, and the dispute
about tenantry-right in Ireland revolves around this very
point). Now if, besides I, there also existed II, III,
IV, in all of which this mode of production were applied,
then they would still yield rents because of their greater
natural fertility and the rent would be in proportion to the
degree of their fertility. Category I would in this
case have ceased to yield a rent and the rents of II, III,
IV would have fallen accordingly, because the general ratio
of productivity in agriculture had become equal to that
prevailing in industry. The rent of II, III, IV would
correspond with the Ricardian law; it would merely be
equivalent to, and would exist only as an excess
profit of more fertile compared to less fertile land, like
similar excess profits in industry, except in the latter
they lack the natural basis for consolidation.

The Ricardian law would prevail just the same, even if
landed property were non-existent. With the
abolition of landed property and the retention of capitalist
production, this excess profit arising from the difference
in fertility would remain. If the state appropriated
the land and capitalist production continued, then rent from
II, III, IV would be paid to the state, but rent as such
would remain. If landed property became people’s
property then the whole basis of capitalist production
would go, the foundation on which rests the confrontation of
the worker by the conditions of labour as an independent
force.

A question which is to be later examined in connection
with rent: How is it possible for rent to rise in
value and in amount, with more intensive
cultivation, although the rate of rent falls in relation to
the capital advanced? This is obviously only possible
because the amount of capital advanced rises.
If rent is 1/5 and it becomes
1/10, then 20 ×
1/5 = 4 and 50 ×
1/10 = 5. That’s all. But
if conditions of production in intensive cultivation became
the same as those prevailing on an average in industry,
instead of only approximating to them, then rent for
the least fertile land would disappear and for the most
fertile it would be reduced merely to the difference in the
land. Absolute rent would no longer exist.

Now let us assume that, following upon a rise in demand,
new land, II, were cultivated in addition to I.
Category I pays the absolute rent, II would pay a
differential rent, but the price of wheat (value for
I, excess value for II) remains the same. The rate of
profit, too, [is supposed] not to be affected, And so on
till we come to IV. Thus the level, the rate of
rent is also rising if we take the total capital laid out in
I, II, III, IV. But the average rate of profit from
II, III, IV would remain the same as that from I, which
equals that in industry, the general rate of profit.
Thus if | we go on to more
fertile land, the amount and rate of rent can grow, although
the rate of profit remains unchanged and the price of wheat
constant. The rise in level and amount of rent would
be due to the growing productivity of the capital in II,
III, IV, not to the diminishing productivity in I. But
the growing productivity would not cause a rise in profits
and a fall both in the price of the commodity and in wages,
as happens necessarily in industry.

Supposing, however, the reverse process took place: from
IV to III, II, I, Then the price would rise to 6s. 8d. at
which it would still yield a rent of £ 10 on £
100 on I. For the rent of wheat on IV [amounts to]
£ 17 7/25 on £ 100, of
which, however, 7 7/25 are the excess
of its price over the value of I. Category I gave 360
bushels at £ 100 (with a rent of £ 10 and the
value of the bushel at 6s. 8d.) . II—432
bushels. III—518 2/5
bushels and IV—622 2/25
bushels. But the price per bushel of 6s. 8d yielded
IV an excess rent of 7 7/25 per
100. IV sells 3 bushels for £ 1 or 622
2/25 bushels at £ 207
9/25. But its value is only
£ 120, as in I; whatever is above this amount is
excess of its price over its value. IV would sell the
bushel at its value or rather, [he would sell it at its
value] if he sold it, at 3s. 10
8/27d. and at this price he would have
a rent of £ 10 on £ 100. The movement from
IV to III, III to II and II to I, causes the price per
bushel (and with it the rent) to rise until it eventually
reaches 6s. 8d. with I, where this price now yields the same
rent that it previously yielded with IV. The rate of
profit would fall with the rise in price, partly owing to
the rise in value of the means of subsistence and raw
materials. The transition from IV to III could happen
like this: Due to demand, the price of IV rises above its
value, hence it yields not only rent but excess rent.
Consequently III is cultivated which, with the normal
average profit, is not supposed to yield a rent at this
price, If the rate of profit has not fallen as a result of
the rise in price of IV, but wages, have, then III will
yield the average profit. But due to the [additional]
supply from III, wages should rise to their normal level
again; (then] the rate of profit in III falls etc.

Thus the rate of profit falls with this downward movement
on the assumptions which we have made, namely, that
III cannot yield a rent at the price of IV and that III can
only be cultivated at the old rate of profit because wages
have momentarily fallen below their [normal] level.

Under these conditions [it is again possible for] the
Ricardian law [to apply]. But not necessarily, even
according to his interpretation. It is merely
possible in certain circumstances. In reality
the movements are contradictory.

This has disposed of the essence of the theory of
rent.

With Herr Rodbertus, rent arises from eternal nature, at
least of capitalist production, because of his “value
of the material”. In our view rent arises from
an historical difference in the organic component
parts of capital which may be partially ironed out and
indeed disappear completely, with the development of
agriculture. True, the difference in so far as it is
merely due to variation in actual fertility of the land
remains even if the absolute rent disappeared.
But—quite apart from the possible ironing out of
natural variations—differential rent is linked
with the regulation of the market-price and therefore
disappears along with the price and with capitalist
production. There would remain only the fact that
land of varying fertility is cultivated by social
labour and, despite the difference in the amount of labour
employed, labour can become more productive on all types of
land. But the amount of labour used on the worse land
would by no means result in more labour being paid for [the
product] of the better land as now with the bourgeois.
Rather would the labour saved on IV be used for the
improvement of III and that saved from III for the
improvement of II and finally that saved on II would be used
to improve I. Thus the whole of the capital eaten up
by the landowners would serve to equalise the labour used
for the cultivation of the soil and to reduce the amount of
labour in agriculture as a whole.

| {Adam Smith, as we
saw above, first correctly interprets value and the relation
existing between profit, wages, etc. as component parts of
this value, and then he proceeds the other way round,
regards the prices of wages, profit and rent as antecedent
factors and seeks to determine them independently, in order
then to compose the price of the commodity out of
them. The meaning of this change of approach is that
first he grasps the problem in its inner relationships, and
then in the reverse form, as it appears in
competition. These two concepts of his run counter to
one another in his work, naively, without his being aware of
the contradiction. Ricardo, on the other hand,
consciously abstracts from the form of competition, from the
appearance of competition, in order to comprehend the laws
as such. On the one hand he must be reproached for not
going far enough, for not carrying his abstraction to
completion, for instance, when he analyses the value of the
commodity, he at once allows himself to be influenced by
consideration of all kinds of concrete conditions. On
the other hand one must reproach him for regarding the
phenomenal form as immediate and direct proof or exposition
of the general laws, and for failing to interpret it.
In regard to the first, his abstraction is too incomplete;
in regard to the second, it is formal abstraction which in
itself is wrong.}

### [10. Rate of Rent and Rate of Profit. Relation Between Productivity in Agriculture and in Industry in the Different Stages of Historical Development]

Now to return briefly to the remainder of Rodbertus.

“The increase in wages, capital gain
and ground-rent respectively, which arises from the increase
in the value of the national product can raise neither the
wages nor the capital gain of the nation, since more wages
are now distributed among more workers and a greater amount
of capital gain accrues to capital increased in the same
proportion; ground-rent, on the other hand, must rise since
this always accrues to land whose area has remained the
same. It is thus possible to explain satisfactorily
the great rise in land value, which is nothing other than
ground-rent capitalised at the normal rate of interest,
without having to resort to a fall in productivity of
agricultural labour, which is diametrically opposed to the
idea of the perfectibility of human society and to all
agricultural and statistical facts” (pp. 160–61).

First of all it should be noted that Ricardo [at whom
this passage is aimed] nowhere seeks to explain the
“great rise in land value”. This is no
problem at all for him. He says further, and Ricardo
even noted this explicitly (see later in connection with
Ricardo), that—given the rate of rent—rent can
increase with a constant value of corn or agricultural
produce. This increase again presents no problem for
him. The rise in the rental while the rate of rent
remains the same, is no problem for him either. His
problem lies in the rise in the rate of rent, i.e., rent in
proportion to the agricultural capital advanced, and hence
the rise in value not of the amount of agricultural produce,
but the rise in the value, for example, of the quarter of
wheat, i.e., of the same quantity of agricultural produce;
in consequence of this the excess of its value over the
average price increases and thereby also the excess of rent
over the rate of profit. Herr Rodbertus here begs the
Ricardian problem (to say nothing of his erroneous
“value of the material”).

The rate of rent can indeed rise relatively to the
capital advanced, in other words, the relative value of the
agricultural product can rise in proportion to the
industrial product, even though agriculture is constantly
becoming more productive. And this can happen for two
reasons.

Firstly take the above example, the
transition from I to II, III, IV, i.e., to ever more fertile
land (but where the additional supply is not so great as to
throw I out of cultivation or to reduce the difference
between value and average price to such an extent that IV,
III, II pay relatively lower rents and I no rent at
all). If I’s rent amounts to 10, II’s to 20, III’s to
30 and IV’s to 40 and if £ 100 are invested in all
four types of land, then I’s rent would be
1/10 or 10 per cent on the capital
advanced, II’s would be 2/10 or 20 per
cent, III’s would be 3/10 or 30 per
cent and IV’s rent would be 4/10 or 40
per cent. Altogether £ 100 on 400 capital
advanced, which gives an average rate of rent of
100/4=25 per cent. Taking the
entire capital invested in agriculture, the rent amounts now
to 25 per cent. Had only the cultivation of land I
(the unfertile land) been extended, then the rent would be
40 on 400, 10 per cent just as before, and it would not have
risen by 15 per cent. But in the first case (if 330
bushels resulted from an outlay of £ 100 on I) only
1,320 bushels would have been produced at the price
of 6s. 8d. per bushel. In the second case [i.e., when
all four classes of land are cultivated], 1,500 bushels have
been produced at the same price. The same capital has
been advanced in both cases.

But the rise in the level of the rent here is only
apparent. For if we calculate the capital outlay in
relation to the product, then 100 [would have been] needed
in I to produce 330 and 400 to produce 1,320
bushels. But now only 100+90+80+70, i.e., £ 340
are needed to produce 1,320 bushels. £ 90 in II
produce as much as 100 in I, 80 in III as much as 90 in II
and 70 in IV as much as 80 in III. The rate of rent
[has] risen in II, III, IV, compared with I.

If we take society as a whole, it means that a capital of
340 [was] employed to raise the same product, instead
of a capital of 400, that is 85 per cent [of the previous]
capital.

| The 1,320 bushels
[would] only be distributed, in a different way from those
in the first case. The farmer must hand over as much
on 90 as previously on 100, as much on 80 as previously on
90 and as much on 70 as previously on 80. But the
capital outlay of 90, 80, 70, gives him just the same amount
of product as he previously obtained on 100. He hands
over more, not because he must employ more capital in order
to supply the same product, but because he employs less
capital; not because his capital has become less productive,
but because it has become more productive and he is still
selling at the price of I, as though he still required the
same capital as before in order to produce the same quantity
of product.

[Secondly.] Apart from this rise in the rate of
rent—which corresponds to the uneven rise in
excess profit in individual branches of industry, though
here it does not become fixed— there is only one other
possibility of the rate of rent rising although the
value of the product remains the same, that is, labour does
not become less productive. It occurs either when
productivity in agriculture remains the same as
before but productivity in industry rises and this rise
expresses itself in a fall in the rate of profit, in other
words when the ratio of variable to constant capital
diminishes. Or, alternatively, when productivity is
rising in agriculture as well though not at the same rate as
in industry but at a lower rate. If productivity in
agriculture rises as 1:2 and in industry as 1:4, then it is
relatively the same as if it had remained at one in
agriculture and had doubled in industry, In this case the
ratio of variable capital to constant capital would be
decreasing in industry twice as fast as in agriculture.

In both cases the rate of profit in industry would fall,
and because it fell the rate of rent would
rise. In the other instances the rate of profit does
not fall absolutely (rather it remains constant) but
it falls relatively to rent. It does so not because it
itself is decreasing but because rent, the rate of
rent in relation to the capital advanced, is rising.

Ricardo does not differentiate between these cases.
Except in these cases (that is where the rate of profit,
although constant, falls relatively because of the
differential rents of the capital employed on the more
fertile types of land or where the general ratio of constant
to variable capital alters as a result of the increased
productivity of industry and hence increases the
excess of value of agricultural products above their average
price) the rate of rent can only rise if the rate of profit
falls without industry becoming more productive. This
is, however, only possible if wages rise or if raw material
rises in value as a result of the lower productivity of
agriculture. In this case both the fall in the rate of
profit and the rise in the level of rent are brought about
by the same cause—the decrease in the productivity of
agriculture and of the capital employed in
agriculture. This is how Ricardo sees it. With
the value of money remaining the same, this must then
show itself in a rise in the prices of the raw
products. If, as above, the rise is relative,
then no change in the price of money can raise the money
prices of agricultural products absolutely as compared with
industrial products. If money fell by 50 per cent then
l quarter which was previously worth £ 3 would now be
worth £ 6, but 1 lb. yarn which was previously worth
1s. would now be worth 2s. The absolute rise in
the money prices of agricultural products compared with
industrial products can therefore never be explained by
changes in [the value of] money.

On the whole it can be assumed that under the cruder,
pre-capitalist mode of production, agriculture is more
productive than industry,
because nature assists here as a machine and an organism,
whereas in industry the powers of nature are still almost
entirely replaced by human action (as in the craft type of
industry etc.). In the period of the stormy growth of
capitalist production, productivity in industry develops
rapidly as compared with agriculture, although its
development presupposes that a significant change as
between constant and variable capital has already
taken place in agriculture, that is, a large number of
people have been driven off the land. Later,
productivity advances in both, although at a uneven
pace. But when industry reaches a certain level the
disproportion must diminish, in other words, productivity in
agriculture must increase relatively more rapidly than in
industry. This requires: 1. The replacement of
the easy-going farmer by the businessman, the fanning
capitalist; transformation of the husbandman into a pure
wage-labourer; large-scale agriculture, i.e., with
concentrated capitals. 2. In particular however:
Mechanics, the really scientific basis of large-scale
industry, had reached a certain degree of perfection during
the eighteenth century. The development of chemistry,
geology and physiology, the sciences that directly
form the specific basis of agriculture rather than of
industry, | does not take
place till the nineteenth century and especially the later
decades.

It is nonsense to talk of the greater or lesser
productivity of two different branches of industry
when merely comparing the values of their commodities.
If, [in] 1800, the pound of cotton was 2s. and of yarn 4s.,
and if, in 1830, the value of cotton was 2s. or 18d. and
that of yarn 3s. or 1s. 8d. then one might compare the
proportion in which the productivity in both branches had
grown—but only because the rate of 1800 is taken as
the starting-point. On the other hand, because the
pound of cotton is 2s, and that of yarn is 3, and hence the
labour which produces the cotton is as great again as the
[newly-added labour] of spinning, it would be absurd to say
that the one is twice as productive as the other. Just
as absurd as it would be to say that because canvas can be
made more cheaply than the artist’s painting on the canvas,
the labour of the latter is less productive than that of the
former.

Only the following is correct, even if it comprises the
capitalist meaning of productive—productive of
surplus-value along with the relative amounts of the
product:

If, on an average, according to the conditions of
production, £ 500 is needed in the form of raw
material and machinery etc.<at given values> in order
to employ 100 workers [whose wages] amount to £ 100 in
the cotton industry, and, on the other hand, £ 150 is
needed for raw materials and machinery in order to employ
100 workers [whose wages] amount to £ 100, in the
cultivation of wheat, then the variable capital in I would
form 1/6 of the total capital
of £ 600, and 1/5 of the
constant capital; in II, the variable capital would
constitute 2/5 of the total capital of
£ 250 and 2/3 of constant
capital. Thus every £ 100 which is laid out in I
can only contain £ 16 2/3
variable capital and must contain £ 83
1/3 constant capital; whereas in II it
comprises £ 40 of variable capital and £ 60 of
constant, In I, variable capital forms
1/6 or 16 2/3
per cent and in II, 40 per cent. Clearly the histories
of prices are at present quite wretched. And they can
be nothing but wretched until theory shows what needs to be
examined. If the rate of surplus-value were given at,
say, 20 per cent then the surplus-value in I would amount to
£ 3 1/3 (hence profit
31/3 per cent). In II, however,
£8 (hence profit 8 per cent). Labour in I would
not be so productive as in II because it would be more
productive (in other words, not so productive of
surplus-value, because it is more productive of
produce). Incidentally, it is cleary only possible to
have a ratio of 1 :1/6, for example,
in the cotton industry, if a constant capital (this depends
on the machines etc.) amounting to say £ 10,000 has
been laid out, hence wages amounting to 2,000, making a
total capital of 12,000. If only 6,000 were laid out,
of which wages would be 1,000, then the machinery would be
less productive etc. At 100 it could not be done at
all. On the other had it is possible that if £
23,000 is laid out, the resulting increase in the efficiency
of the machinery and other economies etc. are so great that
the £ 19,166 2/3 is not entirely
allocated to constant capital, but that more raw material
and the same amount of labour require less machinery
etc. ([in terms of] value) which is assumed to cost £
1,000 less than before. Then the ratio of variable to
constant capital grows again, but only because the absolute
[amount of] capital has grown. This is a check against
the fall in the rate of profit. Two capitals of 12,000
would produce the same quantity of commodities as the one of
23,000, but firstly the commodities would be dearer since
they required an outlay of £ 1,000 more, and secondly
the rate of profit would be smaller because within the
capital of £ 23,000, the variable capital is more than
1/6 of the total capital, i.e., more
than in the sum of the two capitals of £ 12,000.

| (On the one hand,
with the advance of industry, machinery becomes more
effective and cheaper; hence, if only the same
quantify of machinery were employed as in the past, this
part of constant capital in agriculture would diminish; but
the quantity of machinery grows faster than the reduction in
its price, since this element is as yet little developed in
agriculture. On the other hand, with the greater
productivity of agriculture, the price of raw
material—see cotton—falls, so that raw material
does not increase as a component part of the process of
creating value to the same degree as it increases as a
component part of the labour-process.) |

* * *

| Already Petty
tells us that the Landlord of his time feared improvements
in agriculture because they would cause the price of
agricultural products and (the level of) rent to fall; ditto
the extension of the land and the cultivation of
previously unused land which is equivalent to an extension
of the land. (In Holland this extension of the land is
to be understood in an even more direct way.) He
says:

“…that the draining of Fens,
improving of Forestsa,
inclosing of Commons, Sowing of St. Foyne and Clovergrass,
be grumbled against by Landlords, as the way to depress the
Price of Victuals([William Petty], “Political
Arithmetick” [in: Several Essays in Political
Arithmetick,] London, 1699, p. 230.)

(“…the Rent of all England […] Wales,
and the Low-Lands of Scotland, be about Nine Millions per
Annum ) (Ibid., p. 231.)

Petty fights this view and D’Avenant goes | even further and shows how
the level of rent may decrease while the amount of
rent or the rental increases, He says:

“Rents may fall in some Places, and
Counties, and yet the Land of the Nation” (he means
value of the land) “improve all the while: As for
Example, when Parks are dispark’d, and Forests, and Commons
are taken in, and enclos’d; when Fen-Lands are drein’d, and
when many Parts” (of the country) “are
meliorated by Industry, and manuring[e] it must certainly depretiate that
Ground which has been Improv’d to the full before, or[f] c was capable of no
farther Improvement […] the Rental[g] of private Men does thereby sink,
yet the general Rental[h] of the Kingdom by such Improvements,
at the same time rises.” (Charles D’Avenant,
Discourses on the Publick Revenues, and on the Trade of
England, Part II, London, 1698,
pp. 26–27.)”… fall in private Rents from 1666
to 1688 […] but the Rise in the Kingdomes general
Rental was greater in Proportion during that time, than in
the preceeding Years, because the Improvements upon Land
were greater and more universal, between those two Periods,
than at any time before (l.c. p. 28).

It is also evident here, that the Englishman always
regards the levef of rent as rent related to capital and
never to the total land in the kingdom (or to the
acre in general, like Herr Rodbertus).

[a] Instead of
“of the towns has therefore become” in the
manuscript: “In Dutch towns is”.—Ed.

[b] Instead of
“and the” in the manuscript:
“on”.—Ed

* | <As Opdyke calls landed
property “the legalised reflection of the
capital”, so “capital is the legalised
reflection of other people’s labour”.> |

[c] Instead
of “reflection of the capital” in
the manuscript: “reflection of the value of
capital”.—Ed.

[d] In the
manuscript: “woods”.—Ed.

[e] In the
manuscript: “manufacturing” instead of
“manuring”.—Ed.

[f] In the
manuscript: “and” instead of
“or”.—Ed.

[g] In the
manuscript: “income from rent” instead of
“Rental”.—Ed.

[h] In the
manuscript: “rent” instead of
“Rental”.—Ed.


## [CHAPTER IX] Notes on the History of the Discovery of the So-Called Ricardian Law of Rent.

### [Supplementary Notes on Rodbertus]

(Digression)

### [1. The Discovery of the Law of Differential Rent by Anderson. Distortion of Anderson’s Views by His Plagiarist, Malthus, in the Interests of the Landowners]

Anderson was a practical farmer. His first work, in
which the nature of rent is discussed in passing, appeared in
1777, at a time when, for a large section of the public, Sir James
Steuart was still the leading economist, and while everyone’s
attention was focused on the Wealth of Nations, which had
appeared a year earlier. As against this, the work of the
Scottish farmer, which had been occasioned by an immediate practical
controversy and which did not ex professo deal with rent but
only incidentally elucidated its nature, could not attract any
attention. In this work, Anderson only dealt with rent
accidentally, not ex professo. This theory of his appears
again, in the same incidental fashion, in one or two of his collected
essays which he himself published in three volumes under the title of:
Essays Relating to Agriculture and Rural Affairs, 3 vols.,
Edinburgh, 1775-1796. Similarly in his
Recreations in Agriculture, Natural History, Arts, etc., London
(to be looked up in the British Museum) which were published in the
years 1799 to 1802, all these writings are directly intended for
farmers and agriculturists. [It would have been] different if
Anderson had had an inkling of the importance of his find and had put
it before the public separately, as an “Inquiry into the Nature
of Rent”, or if he had had the least bit of talent in trading
his own ideas, as his fellow countryman, McCulloch, did so
successfully with other people’s. The reproductions of his
theory which appeared in 1815 were published forthwith as independent
theoretical inquiries into the nature of rent, as the very
titles of the respective works of West and Malthus show:

Malthus: An Inquiry into the Nature and Progress of
Rent.

West: Essay on the Application of Capital to Land.

Furthermore, Malthus used the Andersonian theory of rent to give
his population law, for the first time, both an economic and a real
(natural-historical) basis, while the nonsense about geometrical and
arithmetical progression borrowed from earlier writers, was a purely
imaginary hypothesis. Mr. Malthus at once “improved”
the matter, Ricardo even made this doctrine of rent, as he
himself says in his preface, one of the most important links in the
whole system of political economy and—quite apart from the
practical aspect—gave it an entirely new theoretical
importance.

Ricardo evidently did not know Anderson since, in the preface to
his Principles of Political Economy, he treats West and Malthus
as the originators. Judging by the original manner in which he
presents the law, West was possibly as little acquainted with
Anderson as Tooke was with Steuart. With Mr. Malthus it is
different. A close comparison of his writings shows that he
knows and uses Anderson. He was in fact plagiarist by
| profession. One need only
compare the first edition of his work on population with the
work of the Reverend Townsend which I have quoted previously, to he
convinced that he does not work him over as an independent producer,
but copies him and paraphrases him like a slavish plagiarist, although
he does not mention him anywhere by name and
conceals his existence.

The manner in which Malthus used Anderson is characteristic.
Anderson had defended premiums on exports of corn and duties on corn
imports, not out of any interest for the landlords, but because he
believed that this type of legislation “would
reduce the average price of corn” and ensure an even
development of the productive forces in agriculture. Malthus
accepted this practical application of Anderson’s because—being
a staunch member of the Established Church of England—he was a
professional sycophant of the landed aristocracy, whose rents,
sinecures, squandering, heartlessness etc. he justified
economically. Malthus defends the interests of the
industrial bourgeoisie only in so far as these are identical with the
interests of landed property, of the aristocracy, i.e., against
the mass of the people, the proletariat. But where these
interests diverge and are antagonistic to each other, he sides with
the aristocracy against the bourgeoisie. Hence his defence of
the “unproductive worker”, over-consumption
etc.

Anderson, on the other hand, explained the difference between land
which pays rent and that which does not, or between lands which pay
varying rents, by the relatively low fertility of the land
which hears no rent or a smaller rent compared with that
which bears a rent or a greater rent. But he stated expressly
that these degrees of relative productivity of different types
of land, i.e., also the relatively low productivity of the worse types
of land compared with the better, had absolutely nothing to do with
the
absolute productivity of agriculture.
On the contrary, he stressed not only that the absolute
productivity of all types of land could be constantly
improved and must be improved with the progress in population, but he
went further and asserted that the
differences in productivity of various types of land can
be progressively reduced. He said that the present degree
of development of agriculture in England gives no indication at all of
its possibilities. That is why he said that in one
country the prices of corn may be high and rent Low, while in another
country the price of corn may be low and rent may he high, and this is
in accordance with his principle, since the level and the existence of
rents is in both countries determined by the difference between
the fertile and the unfertile land, in neither of them by the absolute
fertility; in each only by the degree of difference in fertility of
the existing types of land, and not by the average fertility of these
types of land, From this he concluded that the absolute fertility of
agriculture has nothing to do with rent. Hence later, as we
shall see below, he declared himself a decided adversary of the
Malthusian theory of population and it never dawned on him that his
own theory of rent was to serve as the basis of this
monstrosity. Anderson reasoned that the rise in corn prices in
England between 1750 and 1801 as compared with the years 1700 to 1750
was by no means due to the cultivation of progressively less fertile
types of land, but to the influence of legislation on agriculture
during these two periods.

What then did Malthus do?

Instead of his (also plagiarised) chimera of the geometrical and
arithmetical progression, which he retained as a “phrase”,
he made Anderson’s theory the confirmation of his population
theory. He retained Anderson’s practical application of the
theory in so far as it was in the interests of the
landlords—this fact alone proves that he understood as little of
the connection of this theory with the system of bourgeois economy as
Anderson himself. Without going into the counter-evidence which
the discoverer of the theory put forward, he turned it against the
proletariat. The theoretical and practical advance which could
have been made from this theory was: theoretical—for the
determination of the value of the commodity etc. and gaining an
insight into the nature of landownership; practical—against the
necessity of private ownership of the land, on the basis of
bourgeois production and, more immediately, against all state
regulations such as corn laws, which enhanced this ownership of
land. These advances from Anderson’s theory, Malthus left to
Ricardo. The one practical conclusion which he drew from it was
a defence of the protective tariffs which the landlords demanded in
1815— a sycophantic service for the aristocracy and a new
justification for the poverty of the producers of wealth, a new
apology for the exploiters of labour. In this respect it was a
sycophantic service for the industrial capitalists.

Utter baseness is a distinctive trait of Malthus—a
baseness which can only he indulged in by a parson | who sees human suffering as the
punishment for sin and who, in any ease, needs a “vale of tears
on earth”, but who, at the same time, in view of the living he
draws and aided by the dogma of predestination, finds it altogether
advantageous to “sweeten” their sojourn in the vale of
tears for the ruling classes. The “baseness” of this
mind is also evident in his scientific work.
Firstly in his shameless and mechanical
plagiarism. Secondly in the cautious, not
radical, conclusions which he draws from scientific
premises.

### [2. Ricardo’s Fundamental Principle in Assessing Economic Phenomena Is the Development of the Productive Forces. Malthus Defends the Most Reactionary Elements of the Ruling Classes. Virtual Refutation of Malthus’s Theory of Population by Darwin]

Ricardo, rightly for his time, regards the capitalist mode of
production as the most advantageous for production in general, as the
most advantageous for the creation of wealth. He wants
production for the sake of production and this with good
reason. To assert, as sentimental opponents of Ricardo’s
did, that production as such is not the object, is to forget that
production for its own sake means nothing but the development of human
productive forces, in other words the development of the richness
of human nature as an end in itself. To oppose the welfare
of the individual to this end, as Sismondi does, is to assert that the
development of the species must be arrested in order to
safeguard the welfare of the individual, so that, for instance,
no war may be waged in which at all events some individuals
perish. Sismondi is only right as against the economists who
conceal or deny this contradiction.) Apart from the
barrenness of such edifying reflections, they reveal a failure to
understand the fact that, although at first the development of the
capacities of the human species takes place at the cost of the
majority of human individuals and even classes, in the end it breaks
through this contradiction and coincides with the development of the
individual; the higher development of individuality is thus only
achieved by a historical process during which individuals are
sacrificed for the interests of the species in the human kingdom, as
in the animal and plant kingdoms, always assert themselves at the cost
of the interests of individuals, because these interests of the
species coincide only with the interests of certain
individuals, and it is this coincidence which constitutes the
strength of these privileged individuals.

Thus Ricardo’s ruthlessness was not only scientifically
honest but also a scientific necessity from his point of
view. But because of this it is also quite immaterial to him
whether the advance of the productive forces slays landed property or
workers. If this progress devalues the capital of the industrial
bourgeoisie it is equally welcome to him. If the development of
the productive power of labour halves the value of the existing
fixed capital, what does it matter, says Ricardo. The
productivity of human labour has doubled, Thus here is scientific
honesty. Ricardo’s conception is, on the whole, in the
interests of the industrial bourgeoisie, only because, and
in so far as their interests coincide with that of production
or the productive development of human labour. Where the
bourgeoisie comes into conflict with this, he is just as
ruthless towards it as he is at other times towards the
proletariat and the aristocracy.

But Malthus! This wretch only draws such conclusions from
the given scientific premises (which he invariably steals), as
will be ‘agreeable” (useful) to the aristocracy
against the bourgeoisie and to both against the
proletariat. Hence he does not want production for the
sake of production, but only in so far as it maintains or extends
the
status quo, and serves the interests of the ruling classes.

Already his first work, one of the most remarkable literary
examples of the success of plagiarism at the cost of the original
work, had the practical purpose to provide “economic”
proof, in the interests of the existing English government and the
landed aristocracy that the tendency of the French Revolution
and its adherents in England to perfect matters was
utopian. In other words, it was a panegyric pamphlet for the
existing conditions, against historical development and,
furthermore, a justification of the war against revolutionary
France.

His writings of 1815, on protective tariffs and rent, were partly
means to confirm the earlier apology of the poverty of the producers,
in particular, however, to defend reactionary landed property against
‘enlightened’ “literal” and
“progressive” capital and especially to justify an
intended retrogressive step in English legislation in the
interests of the aristocracy against the industrial bourgeoisie.
Finally, | his Principles of
Political Economy directed against Ricardo had
essentially the purpose of reducing the absolute demands of
‘industrial capital” and the laws under which its
productivity develops, to the ‘desirable limits”
“favourable” to the existing interests of the landed
aristocracy, the “Established Church” (to which Mal-thus
belonged), government pensioners and consumers of taxes. But
when a man seeks to accommodate science to a viewpoint which is
derived not from science itself (however erroneous it may be) but from
outside, from alien, external interests, then 1 call him
“base”.

It is not a base action when Ricardo puts the proletariat on the
same level as machinery or beasts of burden or commodities because
(from his point of view) their being purely machinery or beasts of
burden is conducive to “production” or because they really
are mere commodities in bourgeois production. This is
stoic, objective, scientific. In so far as it does not involve
sinning against his science, Ricardo is always a
philanthropist, just as he was in practice too.

The parson Malthus on the other hand, reduces the worker to a beast
of burden for the sake of production and even condemns bin to death
from starvation and to celibacy. But when these same demands of
production curtail the landlord’s “rent” or threaten to
encroach on the ‘tithes” of the Established Church, or on
the interests of the “consumers of taxes”; and also when
that part of the industrial bourgeoisie whose interests stand in the
way of progress is being sacrificed to that part which represents the
advance of production—and therefore whenever it is a question of
the interests of the aristocracy against the bourgeoisie or of the
conservative and stagnant bourgeoisie against the progressive—in
all these instances “parson” Malthus does not sacrifice
the particular interests to production but seeks, as far as he
can, to sacrifice the demands of production to the particular
interests of existing ruling classes or sections of classes. And
to this end he falsifies his scientific conclusions. This
is his
scientific baseness, his sin against science, quite apart from
his shameless and mechanical plagiarism. The scientific
conclusions of Malthus are ‘considerate” towards
the ruling classes in general and towards the reactionary elements of
the ruling classes in particular; in other words he falsifies
science for these interests, But his conclusions are ruthless
as far as they concern the subjugated classes. He is not only
ruthless; he
affects ruthlessness; he takes a cynical pleasure in it and
exaggerates his conclusions in so far as they are directed
against the poor wretches, even beyond the point which would be
scientifically justified from his point of view.*

The hatred of the English working classes for Malthus—the
“mountebank-parson” as Cobbett rudely called
him (Cobbett, though England’s greatest political writer of
this century, lacked the Leipzig professorial scholarship and was a
pronounced enemy of the “learned language”)—was thus
fully justified and the people’s instinct was correct here, in that
they felt he was no man of science, but a bought advocate of
their opponents, a shameless sycophant of the ruling classes.

The inventor of an idea may exaggerate it in all honesty; when the
plagiarist exaggerates it, he always makes “a business” of
such an exaggeration.

Because the first edition of Malthus’s work On Population
contains not a single new scientific
word, it is to be regarded purely as an obtrusive Capuchin’s
sermon, an Abraham a Santa Clara version of the discoveries of
Townsend, Steuart, Wallace, Herbert etc. Since in fact it only
wants to impress by its popular form, popular hate
rightly turns against it.

As compared to the wretched bourgeois economists who preach
harmony, Malthus’s only merit lies in his pointed emphasis on the
disharmonies, which, though none of them were discovered by him
were all emphasised, amplified and publicised by him with complacent
sacerdotal cynicism.

| Charles Darwin, in the
introduction to his On the Origin of Species by Means of Natural
Selection, or the Preservation of Favoured Races in the Struggle for
Life (5th thousand), London, 1860, says the following:

“In the next chapter the Struggle for
Existence amongst all organic beings throughout the world, which
inevitably follows from the high geometrical ratio of their increase,
will be treated of. This is the doctrine of Malthus
applied to the whole animal and vegetable kingdoms”
(pp. 4-5).

In his splendid work, Darwin did not realise that by
discovering the “geometrical” progression in the animal
and plant kingdom, he overthrew Malthus’s theory.
Malthus’s theory is based on the fact that he set Wallace’s
geometrical progression of man against the chimerical
“arithmetical” progression of animals and
plants. In Darwin’s work, for instance on the extinction of
species, we also find quite apart from his fundamental principle) the
detailed refutation, based on natural history, of the Malthusian
theory. But in so far as Malthus’s theory rests upon Anderson’s
theory of rent, it was refuted by Anderson himself.

### [3. Roscher’s Falsification of the History of Views on Ground-Rent. Examples of Ricardo’s Scientific Impartiality. Rent from Capital Investment in Land and Rent from the Exploitation of Other Elements of Nature. The Twofold Influence of Competition]

| Anderson’s first publication,
in which he develops the theory of rent as a by-product, was a
practical polemic, not on rent but on protection. It
appeared in 1777 and its very title, An
Enquiry into the Nature of the Corn Laws, with a View to the New
Corn Bill Proposed for Scotland, Edinburgh, 1777, shows firstly,
that it pursues a practical purpose, secondly, that it is related to
an imminent act of legislation, in which the interests of the
manufacturers and the landlords are diametrically opposed.

The law of 1773 (in England; to be looked up in McCulloch’s
Catalogue), was due (so it appears) to be introduced into
Scotland in 1777 (see in the Museum).

“The law of 1773 was constructed,” says
Anderson, wilt the “avowed intention of lowering the
price of corn to our manufacturers, by encouraging the importation of
corn from abroad[a] for the
purpose of feeding[b] our own
people at a cheaper rate.” James Anderson, A Calm
Investigation of the Circumstances that have led to the Present
Scarcity of Grain in Britain, London, 1801, p. 50.)

Thus Anderson’s publication was a polemic on behalf of the
interests of the agriculturists (protection) (inclusive of the
landlords) against the interests of the manufacturers. And he
published it “avowedly” as such a partisan piece of
writing. The theory of rent comes in here only
incidentally. In his later writings which are to a greater or
lesser degree continuously concerned with this battle of
interests he merely repeats the theory of rent once or twice in
passing. He never pretends to a scientific interest in it and it
does not even become an
independent subject in his presentation. Accordingly one
may judge the correctness of the following remarks of Wilhelm
Thukydides Roscher who was evidently not acquainted with
Anderson’s writings:

“Remarkable, how a doctrine which in 1777
remained
almost unnoticed, was immediately defended and attacked with
the greatest interest in 1815 and the following years because it
touched upon the contradiction between monied and landed interest
which had meanwhile so sharply developed.” (Die Grundlagen
der Nationalökonomie, 3rd edition, 1858, pp. 207-98.)

This sentence contains as many falsehoods as words.
Firstly, unlike West, Malthus and Ricardo, Anderson did not put
forward his opinion as a “doctrine”.
Secondly, it remained not ‘almost”, but
“entirely” unnoticed.
Thirdly, it first came in incidentally in a work whose s o l
e purpose it was to deal with the contradiction between
manufacturers and landlords—a contradiction which was
considerably developed in 1777 and the ‘work only “touched
upon” this practical battle of interests and left
“untouched” the general | theory of political economy.
Fourthly, in 1815 one of the reproducers of this theory,
Malthus, expounded it just as much in support of the corn laws as
Anderson had done.
The same doctrine was used in support of landed property
by its discoverer and [by] Malthus, but was turned against
landed property by Ricardo. Thus, at most, one might say that
some of those who put it forward were
defending the interests of landed property while others who put
it forward fought those same interests, but one could not say
that this theory was attacked by the defenders of landed property in
1815 (for Malthus defended it before Ricardo), or that it was
defended by the attackers of landed property for Ricardo did
not have to “defend” this theory against Malthus, since he
himself regarded Malthus as one of its discoverers and as his own
forerunner. He only had to “combat” the practical
conclusions that were drawn by Malthus).
Fifthly, the contradiction between “monied”
and “landed interest”, ‘touched upon”
by Wilhelm Thukydides Roscher had up to that moment, absolutely
nothing to do either with Anderson’s theory of rent or with its
reproduction, defence and attack. As Wilhelm Thukydides could
have gathered from John Stuart Mill (Essays on Some Unsettled
Questions of Political Economy, London, 1844, pp. 109-10), by
“monied class” the Englishman understands l. the
money-lenders; and 2. these money-lenders are people who either
live altogether on interest or are
money-lenders by profession, such as bankers, bill-brokers
etc. Mill also observes that all these people who form the
“monied class” are opposed to, or at any rate are distinct
from, the “producing class” (by which Mill
understands “industrial capitalists” besides the working
men). Hence Wilhelm Thukydides should see that the interests of
the “producing class”, including the manufacturers, the
industrial capitalists, and the interests of the monied class are two
very different matters and that these classes are different
classes. Furthermore, Wilhelm Thukydides should see that a
battle between the industrial capitalists and the landlords was thus
by no means a battle between the “monied interest”
and the “landed interest”. If Wilhelm
Thukydides knew the history of the corn laws of 1815 and the struggle
over these, then he would already have known from Cobbett that the
borough-mongers (landed interest) and the loan-mongers (monied
interest) combined against the industrial interest. But Cobbett
is “crude”. Furthermore, Wilhelm Thukydides should
know from the history of 1815 to 1847 that in the battle over the corn
laws, the majority of the monied interest and some even of the
commercial interest (Liverpool for instance) were to be found amongst
the
allies of the landed interest against the manufacturing
interest. |

| (At most Herr Roscher might
have been surprised that the same “doctrine” served
in favour of “landed interest” in 1777 and
against it in 1815 and that it caused a stir only
then. |

| If I were to elucidate in equal
detail all similar gross falsifications of history which Wilhelm
Thukydides commits in his literary historical notes, then I would have
to write as fat a volume as his Grundlagen, and indeed, such a
work would not be worth the paper it was written upon”.
But the harmful effects which such learned ignorance as that of a
Wilhelm Thukydides can have on researchers in other fields of
knowledge, can be seen in the example of Herr Adolf
Bastian. In his work Der Mensch in der Geschichte,
1860, Vol. I, p. 374, Note, he quotes the above sentence of Wilhelm
Thukydides as documentary proof for a “psychological”
assertion. Incidentally, one cannot say of Bastian that
“materiam superabat opus”[c]. Rather, in this case, the
“opus” does not master its own raw material.
Besides, I have found out through the few sciences which I
“know”, that Herr Bastion who knows
“all” sciences, very often relies on such
authorities as Wilhelm Thukydides, which is in any case unavoidable in
a “pantologist’.

| I hope I shall not be accused
of “unkindness” towards Wilhelm Thukydides. Note the
“unkindness” with which this pedant himself treats
science! Anyhow, I have the same right to speak of his
“total untruths” as he has to speak in his self-satisfied
and condescending manner of Ricardo’s “half-truths”.
Furthermore, Wilhelm Thukydides is by no means “honest” in
his research and cataloguing. Anyone who is not
“respectable” does not exist for him historically
either. For instance, Rodbertus does not exist for him as a
theoretician of rent because he is a ‘communist”.
Besides, Wilhelm Thukydides is also inaccurate when it comes to
“respectable writers”. For instance, Bailey exists
for McCulloch, who even regards his work as epoch-making. For
Wilhelm Thukydides he does not exist. If the science
 of political economy is to he furthered and popularised in
Germany, people like Rodbertus should found a journal which would be
open to all scholars (not pedants, prigs and vulgarisers) and whose
main purpose it would be to demonstrate the ignorance of the
specialists in the science itself as well as in its history.

| Anderson was in no way
concerned with any inquiry into the relationship of his theory of rent
to the system of political economy. This is not in the least
surprising, since his first book appeared one year after Adam Smith’s
Wealth of Nations, i.e., at a moment when the “system of
political economy” was only first being consolidated, for
Steuart’s system too had only appeared a few years before, But so far
as the material is concerned, which Anderson examined, within the
confines of the specific subject he was considering, this was
decidedly more extensive than Ricardo’s. Just as in his
theory of money, the reproduction of Hume’s theory, Ricardo
specifically only took into account the events from 1797 to 1809, so
in the theory of rent, the reproduction of Anderson’s theory, he
considered only the economic phenomena relating to the rise in corn
prices between 1800 and 1815.

The following paragraphs are very important because they clearly
reflect Ricardo’s character:

“I shall […] greatly regret that
considerations for any particular class, are allowed to cheek
the progress of the wealth and population of he country.” (David
Ricardo, An Essay on the Influence of a Low Price of Corn on the
Profits of Stock, second edition, London, 1815, p. 49.)

With free import of corn, “land is abandoned”
(l.c., p. 46). In other words landed property is sacrificed to
the development of production.

In connection with the free import of corn (he writes) however:

“That some capital would be lost cannot
be disputed, but is the possession or preservation of capital
the end, or the means? The means, undoubtedly. What we
want is an abundance of commodities” (wealth in general)
“and if it could he proved that by the sacrifice of a part of
our capital we should augment the annual produce of those objects
which contribute to our enjoyment and happiness we ought not
[…] to repine at the loss of a part of our
capital,” David Ricardo, On Protection to
Agriculture, 4th ed., London, 1822, p. 60.)

Ricardo terms as “our capital” that capital
which belongs neither to us nor to him but which has
been permanently invested in the land by the capitalists.
But we signifies a cross-section of the nation. The increase
in “our” wealth is the increase in social
wealth, which is an end as such, irrespective of who are the
participants in this wealth!

“To an individual with a capital of
£20,000, whose profits were £2,000 per annum, it would be
a mailer quite indifferent whether his capital would employ a hundred
or a thousand men, whether the commodity produced, sold for
£l0,000, or for £20,000, provided, in all cases, his
profits were not diminished below £2,000. Is not the real
interest of the nation similar? Provided its net real income,
its rent and profits be the same, it is of no importance whether the
nation consists of ten or of twelve millions of inhabitants.”
(David Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, p. 416.)

Here the “proletariat” is sacrificed to wealth.
In so far as it is irrelevant to the existence of wealth, its
existence is a matter of indifference to wealth. Here
mass—mass of human beings— is worth nothing. These
three instances exemplify |
Ricardo’s scientific impartiality.

{The element in which the capital employed in agriculture is
invested, is the soil (nature) etc. Hence rent is here
equal to the excess of the value of the product of labour
created in this element, over its average price. If, on
the other hand, an element of nature (or material) which is privately
owned by an individual, is employed in another sphere of
production whose (physical) basis it does not form, then the rent, if
it only comes into being through the employment of this element,
cannot consist in the excess of the value of this product over
the average price, but only in the excess of the general
average price of this product over its own overage price.
For instance, a waterfall may replace the steam-engine for a
manufacturer and save him consumption of coal. While in
possession of this waterfall, he would, for instance, constantly be
selling yarn above its overage
price and making an excess profit. If the waterfall
belongs to a landowner, this excess profit accrues to him as
rent. In his hook on rent, Mr. Hopkins observes that in
Lancashire the waterfalls not only yield rent but, according to the
degree of the natural motive power, they yield differential
rent. Here rent is purely the excess of the average
market-price of the product over its individual average
price.} |

| {In competition there
are two distinct movements towards equalisation. Capitals
within the same sphere of production equalise the prices of the
commodities produced
within this sphere to the same market-price,
irrespective of the relationship of the value of these commodities to
this price. The average market-price should equal
the
value of the commodity, [were] it not for the equalisation
between different spheres of production. As between these
different spheres, competition equalises the va1ues to the average
prices, in so far as the reciprocal interaction of the capitals is
not hampered, disrupted by a third element—landownership,
etc.}

### [4. Rodbertus’s Error Regarding the Relation Between Value and Surplus-Value When the Costs of Production Rise]

Rodbertus is altogether mistaken when he thinks that
because one commodity is dearer than another, thus
realising more labour-time, it must therefore—given
the same rate of surplus-value or the equal exploitation
of the workers in the different
spheres—also contain more unpaid
labour-time, surplus labour-time. If the
same labour yields 1 quarter on unfertile land and 3 on
fertile (in a good or a had year alike); if the same labour
yields 1 oz of gold in land very rich in gold whereas in
less rich or exhausted land it yields only
1/3 oz; if the same labour-time which
produces 1 lb. of wool spins 3 lb. of wool, then, to begin
with, the values of the 1 quarter and the 3 quarters, of the
1 oz of gold and the 1/3 oz, of the 1
lb. of wool and the 3 lbs. of woollen yarn (minus the value
of the wool it contains) are of equal magnitude. They
contain equal quantities of labour-time, therefore,
according to the assumption, equal quantities of
surplus labour-time. True, the quantity of
surplus-labour embodied in the 1 quarter [grown on unfertile
land] is greater, but then it is only 1 quarter whereas in
the other case it is 3 quarters, or 1 lb. of wool whereas in
the other case it is 3 lbs. of woollen yarn (minus the value
of the material). The volume [of
surplus-labour] is therefore the same, and the
proportional quantity of surplus-value, comparing the
individual commodities one with another, [is] also
equal. According to the assumption, the amount of
labour contained in the 1 quarter or the 1 lb. of wool, is
the same as that contained in the 3 quarters or the 3
lbs. of yarn. The capital laid out in wages is
therefore greater to exactly the same degree as the
surplus-value. The 1 lb. of wool contains three times
as much labour as the 1 lb. of yarn. Though the
surplus-value is three times as great, the capital laid out
in wages on which it is based is also three times as
great. The proportion thus remains the
some.

Rodbertus calculates quite wrongly here, or wrongly
compares the capital laid out in wages with the | greater or lesser quantity of
commodities which these wages represent. But this
calculation is completely wrong, if, as he presupposes,
wages or the rote of surplus-value are given, The same
quantity of labour, say, 12 hours, may result in x or
3x commodities. In one case, 1x
commodities contain as much labour and surplus-labour as
3x in the other; but in no case would more than 1
working-day be spent and in no case would the rate of
surplus-value be more than, say,
1/5. In the first instance
1/5 of the one x would be
x to as in the second 1/5 of
the 3x would be to 3x. And if we were
to call each of the three x: x', x'', x''' then there would be
4/5 paid and 1/5
unpaid labour in each x', x'' x'''.
It is quite right, on the other hand, that if just as much
commodity were to be produced under the unproductive
conditions as under “more productive, the commodity
would contain more labour and so also more
surplus-labour. But then, proportionately, a greater
capital would also have to be laid out. In order to
produce 3x, three times as much capital would have to
he laid out (in wages) as is required to produce 1x.

Now it is true that manufacture cannot work up more raw
material than agriculture supplies. Thus, for
instance, it cannot spin more pounds of wool than have been
produced. If the productivity in wool spinning is
trebled, then, provided the conditions of the production of
wool remained the same, three times as much time as
previously would have to he spent, three times as much
capital would have to be expended on labour in wool
production, whereas only the same amount of the
spinners’ labour-time would be required to spin up this
trebled quantity of wool. But the rate [of
surplus-value] would remain the same. The same
spinning labour would have the same value as before and
contain the same surplus-value. The wool-producing
labour would have a trebled surplus-value but the
labour embodied in it, or the capital advanced in wages,
would accordingly have trebled as well. The three
times greater surplus-value would thus be calculated on a
three times greater capital. But this is no
reason for saying that the rate of surplus-value is
1ower in spinning than in wool production. One would
only say that the capital laid out in wages is three times
as great in one as in the other (since it is assumed here
that the changes in the spinning and in the production of
wool are not due to any change in their constant
capital).

It is necessary to make a distinction here. The
same labour plus constant capital gives a smaller
output in an unfavourable than a favourable season,
in unproductive than in productive soil, in a poorer than in
a richer mine. In the former case the product
is thus dearer, contains more labour and more
surplus-labour in the same number of products.
But in the latter case, the number of these products is the
greater. Furthermore, the ratio between paid
and unpaid labour in each individual product in the two
categories is not affected by this, for though the
individual product contains less unpaid labour, according to
the assumption, it also contains less paid labour in the
same proportion. For it has been assumed here that
there is no change in the proportions of the organic
component parts of capital—of variable and constant
capital. It is assumed that the same amount of
variable and constant capital supplies varying,
greater or smaller, quantities of product under varying
conditions.

Herr Rodbertus appears to confuse this all the time, and
as a matter of course to conclude from the mere increase in
the price of the product that it contains a greater
surplus-value. As to the rate, this is
wrong even according to the assumption. As to the
total, however, it is only right if more capital is advanced
in one case than in the other, that means if as much is
produced now of the dearer product as previously of the
cheaper or if the increased quantity of the cheaper product
(as above with spinning) presupposes a correspondingly
increased quantity of the dearer product.

### [5. Ricardo’s Denial of Absolute Rent—a Result of His Error in the Theory of Value]

| That rent, hence also
the value of land, can rise, although the rate of
rent remains the same or even decreases, that therefore
the productivity of agriculture also increases—this
Ricardo sometimes forgets, though he knows it. Anyhow,
Anderson knows it and Petty and D’Avenant already knew
it. That is not the question.

Ricardo abstracts from the question of absolute
rent which he denies on theoretical grounds
because he starts out from the false assumption that
if the value of commodities is determined by labour-time,
the average prices of commodities must equal their
values (which is why he comes to the wrong practical
conclusion. that competition from more fertile types
of land must throw the less fertile out of cultivation, even
if they bore rent previously). If values of
commodities and average prices of commodities were
identical then absolute rent—i.e., rent on the worst
cultivated land or on that originally
cultivated—would be equally impossible. What is
the average price of the commodity? The total
capital (constant plus variable) laid out in its production
plus the labour-time contained in the average profit, say 10
per cent. Supposing, that a capital produced a
higher value than the average price, just
because it was operating in a particular element, an
element of nature, say land, then the value of this
commodity would be above its value and this excess
value would contradict the conception of value being
equal to a certain quantity of labour-time. An element
of nature, something heterogeneous from social labour-time
would he creating value. But this cannot
be. Hence capital invested in land pure and simple
cannot bear a rent. The worst land is
land pure and simple. If the better land
bears a rent, then this only shows that the difference
between the individually necessary labour and that
which is socially necessary becomes permanently
established in agriculture because it has a natural basis,
whereas in industry it is constantly disappearing.

Absolute rent cannot be permitted to exist, but
only differential rent. To admit the existence
of absolute rent would be to admit that the same quantity
of labour (materialised, laid out in constant capital
and bought with wages) creates varying values
according to the element in which [the labour is expended]
or according to the material which it works up. But if
one admits this diversity in value although in each
sphere of production the same amount of labour-time
materialises itself in the product, then one admits that
value is not determined by labour-time but by
something heterogeneous. These different magnitudes
of value would invalidate the concept of value, they
would invalidate the proposition that the substance of value
is social labour-time, hence its differences can only be
quantitative and these quantitative differences can only be
equal to the differences in the amounts of social
labour-time applied.

The maintenance of value—the determination
not only of the amount of value by the varying amount of
labour-time, but also of the substance of value by social
labour—thus requires the denial of absolute
rent. The denial of absolute rent can, however, be
expressed in two ways.

Firstly. The worst land cannot bear a
rent. The rent from the better types of land can be
explained as arising from the market-price which is the same
for products which have been produced on more favourable
types of land as for those which have been produced on less
favourable. But the worst land is land pure and
simple. It is not differentiated in itself.
It differs from industrial capital investment only in that
it is a special sphere of capital investment.
If it bore a rent then this would arise from the fact that
the same quantity of labour would produce
different values, if applied in different spheres
of production; this means that the quantity of labour in
itself does not determine the value, and products which
contain the same amount of labour are not equal [in terms of
value].

| [Secondly.] Or
one might say that the land which was cultivated
originally must not bear rent. For what is the
originally cultivated land? The land which is
“originally’ cultivated is neither better nor
worse land; it is land pure and simple.
Undifferentiated land. Originally, capital investment
in agriculture can only differ from investment in industry
because of the spheres in which these capitals are
invested. But since equal quantities of labour are
represented in equal values, there is absolutely no
reason why the capital invested in land should yield a rent
in addition to profit, unless the same quantity of
labour applied in this sphere produced a higher
value, so that the excess of this value over the value
yielded in manufacture would produce an excess profit, equal
to rent. But this would amount to saying that the land
as such creates value, thus invalidating the concept of
value itself.

The land which is cultivated originally therefore
cannot originally bear a rent, if the whole theory of
value is not to he discarded. Furthermore, this ties
up very easily (although not necessarily, as Anderson
shows) with the idea that originally people of course
chose not the worst but rather the best land for
cultivation, With the advance of civilisation and
population, the land which originally hears no rent, does so
at a later stage, because people are forced to descend to
worse types of land and thus in this descent to Avernus, to
ever worse land, rent must arise on the originally
cultivated, most fertile land. And then, step by
step, on the land which follows it, while the worst
land which always represents simply land—the
particular sphere of capital investment—never
bears a rent. All this has a more or less logical
coherence.

If, on the other hand, one knows that average prices and
values are not identical, that the average price of a
commodity may be either equal to its value or bigger or
smal1er, then the question, the problem itself, disappears
and with it also the hypotheses for its
solution. The only remaining question is why, in
agriculture, the value of the commodity, or at
any rate its price, is above its average price
though not above its value. But this
question no longer bears any relation to the fundamentals of
the theory, the determination of value as such.

Ricardo knows of course that the “relative
values” of commodities are modified according to the
varying proportion of fixed capital and capital laid out in
wages, which enter into their production. <But
these are not opposites; fixed capital and circulating
capital are opposites, and circulating capital comprises not
only wages but also raw materials and auxiliary
materials. For example, the same ratio may exist
between capital laid out in wages and fixed capital in the
mining and fishing industries, as between that laid out in
wages and in raw materials in tailoring.> But Ricardo
also knows that these relative values are equalised by
competition. In fact he only makes the
differentiation, so that the same average profit
should result from these different capital
investments. In other words these relative
values of which he speaks are only the average
prices. It does not even occur to him that
value and average price are different.
He only gets as far as their identity. Since
however this identity does not exist when the
ratio of the organic component parts of capital varies, he
accepts it as an unexplained fact brought about by
competition. Hence too, he does not come up against
the question: Why do the values of agricultural products not
equalise in average prices? | On the contrary he assumes
that they do so and poses the problem from that point
of view.

It is quite incomprehensible why fellows á la
Wilhelm Thukydides should be so ardently for Ricardo’s
theory of rent. From their point of view,
Ricardo’s “half truths”, as Thukydides
condescendingly calls then, lose their whole
value.

For Ricardo the problem only exists because value is
determined by labour-time. With those fellows this is
not the case. According to Roscher, nature as
such has value. See Later. In other words,
he has absolutely no idea what value is. What prevents
him therefore from allowing the value of land to
enter into production costs from the outset and to form the
rent; what prevents him from presupposing the value of land,
i.e., rent as an explanation for rent?

With these fellows, the phrase “production
costs” is meaningless. We see this with
Say. The value of the commodity is determined by the
costs of production, capital, land, labour. But these
are determined by demand and supply. In other words,
no determination is taking place. Since the land
performs productive “services”, why should not the price of
these “services” be determined by demand and
supply, just as the services performed by labour or
capital? And since the “land services” are
in the possession of certain sellers, why should their
article not have a market-price, in other words why should
not rent exist as an element of price?

One can see how lime reason Wilhelm Thukydides had for
getting so well-meaningly “vexed” over the
Ricardian theory.

### [6. Ricardo’s Thesis on the Constant Rise in Corn Prices. Table of Annual Average Prices of Corn from 1641 to 1859]

But apart from absolute rent, the following question
remains for Ricardo:

The population grows and with it the demand for
agricultural products. Therewith their price rises, as
happens in similar cases in industry. But in industry,
this rise in price ceases as soon as demand has become
effective and brought about an increased supply of
commodities. The product now falls to the old, or
rather below the old, level of value. But in
agriculture this additional product is thrown on to
the market neither at the same price nor at a 1ower
price. It costs more and effects a constant
rise in market-prices and along with that, a raising of
rent. How is this to be explained if not by the fact
that ever less fertile types of land are being used, that
ever more labour is required in order to produce the same
product, that agriculture becomes progressively more
sterile? Why, apart from the influence of the
depreciation [of money], did agricultural products rise in
England from 1797 to 1815 with the rapid development of the
population? That they fell again later proves
nothing. That supplies from foreign markets were cut
off proves nothing. On the contrary. This in
fact created the right conditions for demonstrating
the effect of the law of rent as such. For it was the
very cutting off of foreign supplies which forced the
country to have recourse to ever less fertile
land. This cannot be explained by an absolute
increase in rent, because not only did the rental rise
but also the rate of rent. The quarter of wheat,
etc. rose in price.

It cannot be explained by depreciation because
although this might well explain why, with greater
productivity in industry, industrial products fell, hence
why the relative price of agricultural products rose, it
would not explain why in addition to this relative
rise, the prices of agricultural products were
continuously rising absolutely. Similarly, it cannot
be explained as a consequence of the fall in the rate
of profit. This would never explain a change in
prices, but only a change in the distribution
of value or of price between landlord, manufacturer
and worker.

So far as depreciation is concerned, assume that
£ 1 now equals £2. A quarter of wheat
which was previously equal to £2 is now equal to
£4. If the industrial product fell to
1/10, and previously its value was
20s., then it would be now 2s. But these 2s. are now
equal to 4s. True, depreciation could have something
to do with this, the poor harvests as well.

| But quite apart from
all this it can he assumed that, considering the state of
agriculture at that time, unfertile land (for wheat) was
being cultivated. The sane land was later fertile, in
that the rate of differential rents decreased, as is proved
by the best barometer, namely, wheat prices.

The highest prices [occur in the years] 1800 and 1801 and
1811 and 1812; the first were years of poor growth, the
second, [years] of the peak of depreciation. Similarly
1817 and 1818 were years of depreciation. But if these
years are omitted, probably (to be checked up later) what
was left would give the average price.

In comparing wheat prices etc. in different periods, it
is at the same time important to compare the amounts
produced at so much per quarter, because this shows to
what extent the additional production of corn influences the
price.

I

Average Wheat Prices

Yearly average price
Highest price
Lowest price

1641-1649

60s. 52/3d.

[75s. 6d. (1645)]

[42 s. 8d. (1646)]

1650-1659

45s. 89/10d.

63s. 1d. (1650)

23s. 1d. (1651)

1660-1669

44s. 9d.

65s. 9d. (1662)

32s. 0d. (1666 & 1667)

1670-1679

44s. 89/10d.

61s. 0d. (1674)

33s. 0d. (1676)

1680-1689

35s. 78/10d.

41s. 5d. (1681)

22s. 4d. (1687)

1690-1699

50s. 4/10d.

63s. 1d. (1695)

30s. 2d. (1691)

If we fake the period 1650 to 1699 then (yearly) average
price for these 50 years is 44s. 21/5d.

During the period (9 years) from 1641 to 1649, the
biggest yearly average price is 75s. 1d. for 1649, year of
the revolution, then 71s. 1d. for 1649, 65s. 5d. for 1847
and the lowest price, 42s. 8d. for 1646.

II

Yearly average price

The highest

and lowest

prices in each decennial period

1700-1709

35s. 1/10d.

69s. 9d. (1709)

25s. 4d. (1707)

1710-1719

43s. 67/10d.

69s. 4d. (1710)

31s. 1d. (1719)

1720-1729

37s. 37/10d.

48s. 5d. (1728)

30s. 10d. (1723)

1730-1739

31s. 55/10d.

58s. 2d. (1735)

23s. 8d. (1732)

1740-1749

31s. 79/10d.

45s. 1d. (1740)

22s. 1d. (1743 & 1744)

Average price (yearly) for the 50 years [from] 1700 to
1749: 35s. 920/50 d.

| III

Yearly average price

The highest

and lowest

prices in each decennial period

1750-1759

36s. 45/10d.

53s. 49d. (1757)

28s.10d. (1750)

1760-1769

40s. 49/10d.

53s. 9d. (1768)

26s. 9d. (1761)

1770-1779

45s. 32/10d.

52s. 8d. (1744)

33s. 8d. (1779)

1780-1789

46s. 92/10d.

52s. 8d. (1783)

35s. 8d. (1780)

1790-1799

57s. 65/10d.

78s. 7d. (1796)

43s. 0d. (1792)

Yearly average for the 50 years [from] 1760 to 1799:
45s. 313/50 d.

IV

Yearly average price

The highest

and lowest

yearly average prices in each decennial period

1800-1809

84s. 85/10d.

119s. 6d. (1801)

113s. 10d. (1800)

58s. 10d. (1803)

1810-1819

91s. 48/10d.

126s. 6d. (1812)

109s. 9d. (1813)

106s. 5d. (1810)

65s. 7d. (1815)

74s. 4d. (1814)

74s. 6d. (1819)

1820-1829

58s. 97/10d.

68s. 6d. (1825)

44s. 7d. (1822)

1830-1839

56s. 85/10d.

66s. 4d. (1831)

39s. 4d. (1835)

1840-1849

55s. 114/10d.

69s. 5d. (1847)

44s. 6d. (1849)

1850-1859

53s. 47/10d.

74s. 9d. (1855)

40s. 4d.(1850)

Yearly average for the 50 years [from] 1800 to 1849:
69s. 6 9/50 d.

Yearly average for the 60 years [from] 1800 to 1859:
66s. 914/15d.

Hence yearly average

1640-1649

60s 52/3d.

1650-1699

44s. 21/5d.

1700-1749

35s. 929/50d.

1750-1799

45s. 313/50d.

1800-1849

69s. 69/50d.

1850-1859

53s. 47/10d

* * *

West says himself:

“…in an improved state of
agriculture produce may be raised on the second or third
quality of land at the little cost as it could under the old
system upon the first quality.” (Sir Edward West,
Price of Corn and wages of Labour, London, 1826,
p. 98.)

### [7. Hopkins’s Conjecture about the Difference Between Absolute Rent and Differential Rent; Explanation of Rent by the Private Ownership of Land]

Hopkins grasps correctly the difference between
absolute and differential rent:

“The principle of competition, which
renders it impossible, that there should be two rates of
profit in the same country […], does […]
determine[…] their[d] [..] relative
rents…” but not the general average of
rent[e]. (Thomas Hopkins,
On Rent of Land, and Its Influence on Subsistence and
Population…, London, 1828, p. 30.)

||508a| Hopkins makes
the following distinction between productive and
unproductive labour or, as he says, between primary and
secondary:

“If all labourers were
employed for the same end, or object, as the diamond cutter
and the opera singer, in a short time there would be no
wealth to subsist them because none of the
wealth produced would then become capital. If a
considerable proportion were so employed, wages would be
low; be cause, but a comparatively small part of what was
produced would be used as capital;—but if only a few
of the labourers were so employed, and of course, nearly all
were ploughmen, shoemakers, weavers, etc. […, then
much capital would be produced and wages would[f] be proportionally high” (l.c.,
pp. 84-85). “With the diamond cutter and the
singer, must be classed all those who labour for the
landlords, or annuitants, and who receive a part of their
income as wages: all, in fact, whose labours
terminate merely in producing those things which
gratify landlords and annuitants, and who receive in return
for their labours, a part of the rent of the landlord, or of
the income of the annuitant. These are all productive
labourers, but all their labours are for the purpose of
converting wealth which exists, in the shape of rents and
annuities, into some other form, that shall, in that other
form, more gratify the landlord and annuitant, and therefore
they are secondary producers. All other
labourers are primary producers”(l.c.,
p. 85.)

Diamonds and song are both congealed labour and
can—like all commodities—be converted into
money and as money into capital. But in
this transformation of money into capital we must
distinguish two things. All commodities can be
converted into money and as money into capital, because in
the form of money their use-value and their
particular natural form become extinct. They are
materialised labour in that social form in which it is
exchangeable for any real labour, therefore convertible into
any form of real labour. On the other hand, whether
the commodities which are the product of labour can as such
become elements of productive capital once again, depends on
whether the nature of their use-values permits them to
re-enter the process of production—be it as objective
conditions of labour (tools and material) or as subjective
conditions (means of subsistence of the worker), (in other
words [as] elements of constant or of variable capital).

In Ireland, according to a moderate estimate and the
census of 1821, the whole net produce which goes to the
landlords, the government and the tythe-owners, amounts to
£20 3/4 million, the
whole wages, however, only to £14,114.000.[g]

“The cultivators” in Italy
“generally paying from one-half to more than one-half
of the produce as rent to the landlord, with moderate skill
in agriculture, and a scanty supply of fixed capital.
The greater part of the population is […] composed of
secondary producers and proprietors,[h] and generally the primary producers
are a poor and degraded class” (l.c., pp.
101-102).

The same was the case in France under Louis XIV [XV and
XVI]. According to Young, rent, tythes and taxes
amounted to £140,905,304. Cultivation moreover
was very poor. The population of France, at this time,
is stated to have been 26,363,074. Now” if there
had been “six millions of labouring families (which is
too high a figure), each family would have had to furnish
annually, either directly or indirectly, an average of
upwards of £23 of net wealth to the landlords.
The church and the government.[i] According to Young, and taking into
account various other factors, the laboring family
“produced annually £42 l0s.; £23 of which
were paid away to others, and £19 l0s. remained to
subsist itself” (l.c., pp. 102-04).

The Dependence of Population on Capital.

“The error of Mr. Malthus and his
followers is to be found in the assumption, that a reduction
of the labouring population would not be followed by a
correspondent reduction of capital”(l.c., p.l18.)
“…Mr. Malthus” forgets “that this
demand [for labourers is] limited by the means of paging
wages and” that “these means do not arise
spontaneously, but are always previously created by
labour” (l.c., p. 122).

This conception of the accumulation of capital is
correct. But the means can grow, i.e., the quantity of
surplus produce or surplus-labour can grow, without a
proportionate growth in the quantity of labour.

“It is somewhat extraordinary[j] that that [there is] a strong
inclination […] to represent net wealth
as beneficial to the labouring class, because it
gives […] employment though it is evidently
| not on account of being
net, that if has that power, but because it is
wealth,—that which has been brought into existence
by labour: while, at the time,[k] an additional quantity of labour is
represented as injurious to the labouring classes,
though that labour produces three times as much as it
consumes” (l.c., p. 120).

‘If by the use of superior machines,[l] the whole primary
produce could he raised from 200 to 250 or 300, while
net wealth and profit took only 140, it is clear that
there would remain as a fund for the wages of the primary
producers 110 or 160 instead of 60” (l.c.,
p. 128).

“The condition of labourers is
rendered bad either by crippling their productive
power, or by taking from them what they have produced”
(l.c., p. 129).

“No says Mr. Malthus ‘the
weight of your burthen has nothing whatever to do
with your distress; that arises solely there being too
many persons carrying it…’” l.c.,
p. 184).

“In the general principle, then, that
cost of production regulates the exchangeable value
of all commodities, original materials are not
included: but the claim which the owners of these
have upon produce, causes rent to enter into
value(Thomas Hopkins, Economical Enquiries Relative to
the Laws Which Regulate Rent Profit, Wages, and the
Value of Money, London, 1822, p. 11).

“Rent, or a charge for use,
arises naturally out of ownership, or the
establishment of a right of property” (l.c.,
p. 13).

“Any thing may yield a rent if
possessed of the following qualifies:— First,—It
must exist in a degree of scarcity. Secondly,—It
must have the power to aid labour in the great work of
production” (l.c., p. 14). Of course one must
not take the case “…where land… [is] so
plentiful, compared with the labour and stock to
be employed upon it (abundance and scarcity of land are
of course relative, and are related to the disposable
quantity of labour and capital) ‘that no charge for
rent could be made, because it was not scarce” (l.c.,
p. 21).

“The landowner[m] […] may obtain, in some
countries 50 per cent […] in others 10 per cent.[n] In some of the
fertile regions of the East, man can subsist upon one-third
of the produce of his labour employed upon the land:
[…] but in parts of Switzerland and Norway, an
exaction of 10 per cent might depopulate the country
… we see no natural bounds to the rent that
may be exacted, but in the limited abilities of the
payers…“ (l.c., p. 31), and “where[o] inferior soils
exist, the competition of those inferior soils against
the superior” (l.c., pp. 33.34).

“There is much common land in England
[…], the natural fertility of which is equal to what
a large part of the land now cultivated was, prior to its
being taken into cultivation; and yet the expence of
bringing such common lands into cultivation is so great,
as to cause them not to yield the ordinary interest for
the money expended in improving them, leaving nothing
as rent for the natural fertility of the soil: and this
[…] with all the advantages of an immediate
application of labour, aided by stock skilfully applied, and
furnished with manufactures cheaply produced; added to the
very important circumstance, of good roads being already
formed in the neighbourhood[p]… the present land
proprietors may be considered the owners of all the
accumulated labour which has for ages been expending,[q] in bringing
the country to its present productive
state” (l.c., p. 35).

This is a very important circumstance in relation to
rent, especially when the population suddenly grows
significantly, as it did from 1780 to 1815, consequent upon
the advance in industry, and hence a large portion of
hitherto uncultivated land is suddenly brought into
cultivation. The newly cultivated land may be as
fertile as or even more fertile than old land was, before
centuries of cultivation had accumulated in it.
But what is demanded of the new land—if [this product]
is not to be sold at a dearer price—is that its
fertility must he equal firstly to the natural
fertility of the cultivated | land and secondly to
the artificial fertility which has been engendered by
cultivation, hut which has now become its natural
fertility. The newly cultivated land would thus
have to be much more fertile than the old had been
before its cultivation.

But it will be said:

The fertility of the cultivated land originates in the
first place from its natural fertility. Thus it
depends on the natural condition of the newly cultivated
land whether or not it possesses this fertility arising from
and owing to nature. In either ease it costs
nothing. The other part of the fertility of cultivated
land is an artificial product, owing to cultivation, the
investment of capital. But this part of productivity
involves costs of production which are repaid as interest on
the fixed capital which has been sunk into the land.
This part of rent is merely interest on the fixed capital
tied up in the land. Hence it enters into the costs of
production of the product of the previously cultivated
land. Hence only the same capital needs to be thrown
into the newly cultivated land for it to obtain this second
part of fertility; and as with the first, the interest on
the capital which has been employed to bring forth this
fertility will enter into the price of the product.
Why then should it not he possible to cultivate new
land—unless it is more fertile—without the price
of the product rising? If the natural fertility is the
same, then the difference is brought about only by the
capital invested and, in both cases alike, the interest on
this capital enters into costs of production to the same
extent.

However, this reasoning is wrong. A portion of the
costs of bringing the land into cultivation etc, is
no longer liable to be paid for, because, as Ricardo
has already observed, the fertility thus created has partly
coalesced with the natural quality of the soil (this
applies to the costs of clearing, draining, levelling, the
chemical change of the soil resulting from continued
chemical processes etc.). Thus if [the product of] the
newly cultivated land is to sell at the same price as [that
of] the last cultivated land— the land must he
sufficiently fertile for this price to cover that
part of the costs of bringing it into cultivation which
enters into its own costs of production but which has ceased
to enter into the costs of the previously cultivated
land, because it has coalesced with the natural fertility of
the land.

‘“A stream, favourably situated,
furnishes an instance of a rent being paid for an
appropriated gift of nature, of as exclusive a kind
as any that can be named. This is well understood in
manufacturing districts, where considerable rents are paid
for small streams of water, particularly if the fall is
considerable. The power obtained from such streams
being equal to that afforded by large steam-engines, it is
as advantageous to use them, though subject to the payment
of a heavy rent, as it is to expend large sums in the
erection and working of steam-engines. Of streams,
too, there are some larger, some smaller. Contiguity
to the seat of manufacture is also an advantage which
commands a higher rent. In the counties of York and
Lancaster there is probably a much greater difference
between the rents paid for the smallest and the largest
streams of water, than there is between the rents paid for
50 of the least and 50 of the most fertile acres that are in
common cultivation” (l.c., pp. 37-38).

### [8. The Costs of Bringing Land into Cultivation. Periods of Rising and Periods of Falling Corn Prices (1641-1859)]

If we compare the average prices given earlier and deduct
firstly what is due to depreciation (1809-13) and secondly
what is due to particularly bad seasons such as 1800 and
1801, then [we shall find] that a very important element is
the amount of new land cultivated at a given moment
or during a given period. A rise in price on the
cultivated land here indicates a growth in population
and hence an excess in price (as compared with costs): on
the other hand, the same increase in demand brings about the
cultivation of fresh land. If proportionately
the amount [of newly cultivated land] has greatly increased,
then the rising price, and the higher price, in the
early period merely shows that a large part of the costs
of bringing land into cultivation enters into the
additional quantity of food produced. If the price had
not risen, this production [of additional food] would not
have taken place. Its effect, a fall in price, can
only come into evidence later, because the price of the
recently created food comprises an element of the cost of
production or price, that has long become extinct in the
older applications of capital to land, or in the older
portions of cultivated soil. The difference would be
even greater if consequent upon the increased productivity
of labour, the cost of appropriating soil to cultivation,
had not greatly fallen, as compared to the costs of
cultivation in former, bygone periods.

| The transformation of
new land, whether more or equally or less fertile than old
land, into such a state (and this state is given by the
general rate of adaptation to culture prevailing on the
existing land under cultivation) as to make it
suitable for the application of capital and
labour—under the game conditions under which
capital and labour is employed on the average quantity of
cultivated soil—this adaptation must he paid for by
the costs of converting waste land into cultivated
land. This difference of cost must be borne by the
newly cultivated land. If it does not enter into the
price of its produce, there are only two eases possible,
under which such a result can be realised.
Either the produce of the newly cultivated land is
not sold at its real value. Its price stands
below its value, as is in fact the case with most of the
land bearing no rent, because its price is not constituted
by its own value, but by the value of the produce
derived from more fertile soils. Or the newly
cultivated land must be so fertile, that, if it was
sold at its immanent, own value, according to the quantity
of labour realised in it, it would be sold at a less price
than the price of produce grown on the formerly cultivated
soil.

If the difference between the inherent value [of
its product] and the market-price settled by the
value of the cultivated soil is such, that it amounted
for instance to 5 per cent and if on the other hand the
interest, entering into its costs of production on
the part of the capital employed to bring it up to the level
of productive ability common to the old soils, amounted also
to 5 per cent, then the newly cultivated land would grow
produce, which at the old market-price would he able to pay
the usual wages, profits and rents. If the interest of
the capital employed amounted to 4 per cent only while its
degree of fertility exceeded 4 per cent, as compared to the
older soils, the market-price, after the deduction of the 4
per cent interest for the capital employed to bring the new
land into a ‘cultivable” state would leave a
surplus, or it might be sold at a lower price than the
market-price settled by the value of the least
fruitful soil. Rents consequently would generally be
lowered, together with the market-price of the produce.

Absolute rent is the excess of value over
the average price of raw produce.
Differential rent is the excess of the
market-price of the produce grown on favoured soils
over the value of their own produce.

If, therefore, the price of raw produce
rises or remains constant in periods in which a relatively
large part of the additional food, required by the increase
of population, is produced on soil which from uncultivated
state has been converted into a state of cultivation, this
constancy or rise of prices does not prove that the
fertility of the land has decreased, but only that it has
not increased to such a degree as to counteract the fresh
element of production—formed by the interest of
capital applied with a view to bringing the uncultivated
land to a level of the common conditions of production,
under which the old soils—in a given state of
development—are cultivated.

If the relative quantity of the newly cultivated soil is
different in different periods, then even a constant or
rising price does not prove that the new soil is
unfertile or yields less produce, but only that an
element of cost, which has become extinct in the old
cultivated soils enters into the value of the products of
the newly cultivated land. This new element of cost
moreover remains, although under the new conditions of
production, the costs of bringing new soil into cultivation
have fallen considerably, compared with the costs of
bringing the old soil from its original, natural
state of fertility to its present state. It is
therefore necessary to establish the relative
proportion of enclosures during the different | periods.

The above list (pp. 507-08) moreover shows:

That of the decennial periods examined, the
period 1641-1649 reaches a higher level than
any other decennial period up to 1860, with the exception of
the decennial periods 1800-1809 and 1810-1819.

So far as the fifty-year periods are concerned,
that of 1650-1699 is at a higher level than that of
1700-1749 and that of 1750-1799 higher
than that of 1700-1749 and lower than that of 1800-1849 (or
1859).

Prices constantly fall in the period from 1810 to 1859,
whereas in the period from 1750 to 1799, despite the lower
average price over the 50 years, an upward movement (takes
place); the upward movement is just as consistent as the
downward movement between 1810 and 1859.

In fact, compared with the period of 1641-1649, there is,
on the whole, a continuous fall in decennial average prices,
until this fall reaches its peak (lowest point) in
the last two decennial periods of the first half of the 18th
century.

From the middle of the eighteenth century onwards,
an upward movement takes place. It commences from a
price (36s. 4 5/10d. 1750-1759),
which is lower than the 50 years average price of the second
half of the seventeenth century and approximately
corresponds (to or is) a little higher than the average
price of the 50 year period 1700-1749 (35s. 9
29/50d.), the first half of the
eighteenth century. This upward movement continues at
an increasing pace in the two decennial periods 1800-1809
and 1810-1819. In the latter it reaches its
acme. From that point on, the consistent downward
movement begins again. If we take the average of the
period of rise from 1750 to 1819, then its average price (a
little over 57s. per quarter) [is] equal to the
starting-point of the period of fail from 1820 (namely a
little over 58s, for the decennial period 1820-1829); just
as the starting-point for the second half of the 18th
century [equals] the average price of its first half.

Any mathematical example will show how individual
circumstances, a poor harvest, depreciation of money,
etc. can affect the average figure. For instance,
30+20+5+5+5=65. Average is 13, although the last three
numbers here [are] always only equal to 5. As against
this, 12+11+10+9+8[=50], average is 10, although, if one
struck off the exceptional 30 and 20 in the first series,
the average of any three years in [the] second [series]
would he greater.

If one deducts the differential costs for the capital
successively employed in bringing new land into cultivation,
which for a certain period enters as an item into cost, then
perhaps the prices of 1820-1859 [would be] lower than any of
the earlier ones. And this to some extent may well be
the notion in the heads of those fellows who explain rent as
interest for fixed capital sunk into the soil.

### [9. Anderson versus Malthus. Anderson’s Definition of Rent. His Thesis of the Rising Productivity of Agriculture and Its Influence on Differential Rent]

Anderson says in:

A Calm Investigation of the Circumstances that have
led to the Present Scarcity of Grain in Britain, London,
1801:

“From 1700 to 1750, there has been a
regular […] fall of price […] front £2
18s, 1d, to £I 12s. 6d. per quarter of wheat;
[…] from 1750 to 1800 […] progressional rise
[…] from £1 12s. 6d. to £5 l0s. per
quarter” (p. 11).

Thus, unlike West, Malthus, Ricardo, he did not
one-sidedly consider the phenomenon of a rising scale of
corn prices (from 1750 to 1813), but rather the double
phenomenon, a whole century, of which the first half shows a
constantly falling and the second half a constantly rising
scale of corn prices. He says very definitely:

“the population […] was on the
increase during the first half of this century[r] a as well as the
last” (l.c., p. 12).

He is a decided enemy of the theory of population and
says explicitly that the land is capable of increasing and
perennial improvement.

The soil can be continuously improved by chemical
influences and cultivation” (l.c., p. 38)

| “…under
a judicious system of management, that productiveness[s] may be made
to augment, from year to year, for a succession of time to
which no limits can be assigned, fill at last it may be made
to attain a degree of productiveness, of which we cannot,
perhaps, at this time conceive an idea” l.c.,
pp. 35-36).

“…it may be with certainty
said, that the present population is such a trifle compared
to that” which this island can maintain, as to be much
below any degree of serious consideration” (l.c.,
p. 37).

“Wherever population increases
[…], the produce of the country must be augmented
along with it unless some moral influence is permitted to
derange the economy of nature” (l.c.,
p. 41).

The “theory of population” represents
“the most pernicious prejudice” (l.c.,
p. 54). Anderson seeks to prove historically that the
“productivity of agriculture” rises with a
growing and falls with a declining population (I.e., pp. 55,
56, 60, 61 et seq.).

With a correct conception of rent, the first point
to arise was of course that it does not originate from the
land but from the product of agriculture, that
is, from labour, from the price of the product of
labour, for instance of wheat; in other words, from the
value of the agricultural product, from the labour
applied to the land, not from the land, and Anderson quite
correctly emphasises this.

“It is not […] the rent of the
land that determines the price of its produce, but it is the
price of that produce which determines the rent of the land,
although the price of that produce is often highest in those
countries where the rent of land is lowest.”

<Rent has thus nothing to do with the absolute
productivity of agriculture.>

“This seems to be a paradox that
deserves to be explained. In every country there is a
variety of soils, differing considerably from one another in
point of fertility. These we shall at present suppose
arranged into different classes, which we shall denote by
the letters A B, C, D, E, F etc., the class A comprehending
the soils of the greatest fertility, and the other letters
expressing different classes of soils, gradually decreasing
in fertility as you recede from the first. Now, as the
expense of cultivating the least fertile soil is
as great or greater than that of the most
fertile field, it necessarily follows, that if an
equal quantity of corn, the produce of each
field, can be sold at the same price, the profit
on cultivating the most fertile soil must be much greater
than that of cultivating the others”

<namely the excess of price over the expenses or the
price of the capital advanced>

“and as this” <i.e., the
profit> “continues to decrease as the sterility
increases, it must at length happen that the
expense of cultivating some of the inferior classes
will equal the value of the whole produce.”
[James Anderson, An Enquiry into the Nature of the Corn
Laws, Edinburgh, 1777, pp. 45-48, quoted from
J. R. McCulloch, The Literature of Political Economy,
London, 1845, p. 69)

The last field pays no rent, (This is cited from
McCulloch, The Literature of Political Economy,
London, 1845. Does McCulloch quote here from An
Enquiry into the Nature of the Corn Lows or from
Recreations in Agriculture, Natural History, Arts
etc., London, 1799-1802? This to be looked up at
the Museum.)

What Anderson calls “value of the whole
produce” is evidently nothing other than his
conception of the market-price at which the product
is sold, whether it grows on better or on worse land.
With the more fertile types of land, this
“price” (value) leaves a greater or lesser
excess over the expenses. This does not apply to the
last product. Here the average
price—i.e., that formed by the costs of production
plus the average profit—coincides with the
market-price of the product. Hence it does not yield
an excess profit, which alone can constitute rent.
With Anderson, rent equals the excess of the
market-price of the product over its average
price. (The theory of value as yet does not worry
Anderson at all.) Thus if, as a result of the
particularly low fertility of the land, the average
price of the product of this land coincides with the
market-price of the product, then there is no excess
and therefore no fund for the formation of rent.
Anderson does not say the last cultivated land cannot
bear a rent. He only says that if it
“happens” that the expenses (the costs of
production plus the average profit) are so great that the
difference between the market-price of the product and its
average price disappears, then rent also disappears and that
this must be the case if one descends ever further down the
scale. Anderson says expressly that a definite
market-price equal for equal quantities of produce
that have been produced under more favourable or less
favourable conditions of production, is the prerequisite for
this formation of rent. He says that a surplus profit
or excess of profit from the better types of soil over that
from the worse, necessarily follows “if an equal
quantity of corn, the produce of each field, can
be sold at the same price”, i.e., if a general
market-price is presupposed.

| Anderson by no means
assumes, as might have appeared from the preceding passage,
that different degrees of fertility are merely the
product of nature. On the contrary the

“… infinite diversity of
soils” arises partly from the fact that these
“soils […] may be so much altered from their
original state by the modes of culture they have been
formerly subjected to, by the manures etc. (An
Inquiry into the Causes that have hitherto Retarded the
Advancement of Agriculture in Europe, Edinburgh, 1779,
p. 5).

On the one hand, the progress in the productivity of
labour in general makes it easier to bring land into
cultivation; on the other hand, cultivation increases the
diversity of soils, in that the original fertility of land A
which is cultivated and land B which is not, may have been
the same if we deduct from A’s fertility that part which,
though it is now inherent in it, had previously been added
artificially. Thus cultivation itself increases
the diversity of natural fertility between cultivated and
waste lands.

Anderson says expressly that that land for whose produce
average price and market-price coincide, can pay no
rent:

“Where there are two fields, the
produce of which is nearly as above stated”, namely
the one yielding 12 bushels covering the costs, the other
20, “without requiring any immediate outlay for
their improvement, the farmer would […] pay even
more rent than” 6 bushels for instance for the latter
while [he would pay] none for the former. If
“twelve bushels” are “just sufficient for
the expense of cultivating […] no rent whatever can
be afforded for cultivated land that yields only
twelve bushels” (James Anderson, Essays Relating to
Agriculture and Rural Affairs, Vol. III, Edinburgh,
1796, pp. 107-09).

Then he immediately goes on to say:

“Yet it cannot be expected that, if
the superior produce has been immediately occasioned
by his own outlay of capital and exertions of industry, he
can pay nearly the same proportion of it as
real: but after the land has been for some time in a
permanent state of fertility to that degree, though it
even originally derived that fertility from his own
industry, he will be content to pay such a proportion of
rent as is here stated…” (l.c., pp. 109-10).

Supposing therefore the produce of the best cultivated
land is 20 bushels per acre. Of this, according to the
assumption, 12 bushels pay the expenses (advances plus
average profit). Then it can pay 8 bushels as
rent. Assume that the bushel is 5s., then 8
bushels or 1 quarter are 40s, or £2 and 20 bushels are
£5 (2 1/2 quarters). Of
these £5, 12 bushels or 60s, which is £3, is
expenses. Then it pays a rent of £ 2 or 8
bushels. If the rate of profit is 10 per cent then of
the £ 3 expenses, the outlay is 54
6/11s. and the profit is 5
5/11s. (546/11 :
55/11 = 100 : 10). Now
supposing, the farmer had to carry out various improvements
on waste land, which is just as fertile as that yielding 20
bushels had been originally, in order to bring it
into such a state of cultivation that would correspond to
the general state of agriculture. Apart from the
outlay of 54 6/11s. or, if we reckon
the profit in with the expenses, apart from 60s., this may
involve a further outlay of 36 4/11;
then 10 per cent on this would be 3
7/11, and if the farmer always sold 20
bushels at 5s, he could pay a rent only after 10 years, only
after the reproduction of his capital. From then on
the artificially created fertility of the land would he
reckoned as original and would fall to the landlord.

Although the newly cultivated land is as fertile as the
best cultivated land was originally, the market-price and
the average price for its product do nevertheless coincide
now, because it contains an item of costs which is extinct
in the best land, whose artificially created fertility and
whose natural fertility coincide to a certain extent.
But with the newly cultivated land, that part of fertility
which is created artificially, by the application of
capital, is still entirely distinct from the natural
fertility of the land. The newly cultivated land can
therefore pay no rent although its original fertility
may be the same as that of the best cultivated land.
After ten years, however, it could pay not only rent, but as
much rent as the best type which was cultivated
earlier. Thus Anderson comprehends both phenomena:

1. That the differential rent of the landlords is
partly the result of the fertility which the farmer has
given the land artificially.

2. That after a certain lapse of time, this
artificial fertility appears as the original productivity of
the soil itself, in that the soil itself has been
transformed and the process by which this transformation has
been accomplished, has disappeared and is no longer
visible.

| If to-day I build a
cotton mill for £100,000, I get a more efficient mill
than my predecessor who set one up ten years ago. I do
not pay for the difference between productivity in
machine-building, building in general etc. of to-day and of
ten years ago; on the contrary. It enables me to pay
less for a mill of the same efficiency or only the
same for a mill d higher efficiency. In
agriculture it is different. The difference between
the original fertilities of the soils is magnified by that
part of the so-called natural fertility of the soil which,
in fact, has been once produced by men, but has now
become incorporated in the soil and is no longer to be
distinguished from its original fertility. Owing to
the development of the productive power of labour in
general, it costs less to raise uncultivated soil of the
same original fertility to the improved level of
fertility, than it cost to bring the original fertility of
the cultivated soil to the apparently original fertility it
now has, but some expenditure is still required to bring
that equalisation about. The average price of the new
product is consequently higher than that of the old, the
difference between market-price and average price is thus
smaller and may disappear completely. But supposing,
in the above case, the newly cultivated soil is so fertile,
that after the additional expense of 40s. (including
profit) it yields 28 bushels instead of 20. In this
case the farmer could pay a rent of 8bushels or
£2. And why? Because the newly cultivated
soil yields 8 bushels more than the old, so that despite the
higher average price, with the same market-price, it yields
just as much in excess of the price. If it had
involved no extra expense, its fertility would be double
that of the old land. With this expense it is the same
as that of the old land.

### [10. The Untenability of the Rodbertian Critique Rodbertus’s of Ricardo’s Theory of Rent. Lack of Understanding of the Peculiarities of Capitalist Agriculture]

Now back to Rodbertus, definitively and for the last time.

“It” (Rodbertus’s theory of
rent) “explains all phenomena of wages and rent
etc.…by a division of the labour product,
which necessarily occurs if two prerequisites, adequate
productivity of labour and property in land and capital, are
given. It explains that the adequate productivity of
labour alone constitutes the economic possibility of such
a division, in that this productivity gives to the value
of the product so much actual content that in addition other
people who do not work, can also live from it. And it
explains that landed property and capital property alone
constitute the legal reality of such a division, in
that it forces the workers to share their product
with the non-working proprietors of land and capital and,
what is more, in such a proportion that they, the workers,
only get so much of it as to enable them to
live.” (Rodbertus [Sociale Briefe on von
Kirchmann, Dritter Brief, Berlin, 1851],
pp. 156-57.)

Adam Smith sets forth this problem in two ways.
[The first concept:] Division of the product of
labour where this is regarded as given and he is in fact
concerned with the distribution of use-value.
This is also Herr Rodbertus’s conception. It is also
to he found with Ricardo who is all the more to be
reproached on this account because he does not merely
confine himself to general phrases but seriously tries to
determine the value by labour-time. This
conception is more or less, mutatis mutandis,
applicable to all modes of production where the workers and
the owners of the objective conditions of labour form
different classes.

Smith’s second conception, on the other hand, is
characteristic of the capitalist mode of production, Hence
it alone is a theoretically fruitful formula. For
Smith here conceives of profit and rent as springing from
the surplus labour which the worker adds to the
subject of labour, apart from that portion of labour by
which he only reproduces his own wage. This is the
only correct standpoint where production rests solely on
exchange-value. This concept comprises the process of
development, whereas the first concept presupposes that
labour-time is constant.

With Ricardo the one-sidedness arises also from the fact
that in general he wants to show that the various economic
categories or relationships do not contradict the theory
of value, instead of on the contrary, developing
them together with their apparent contradictions out of this
basis or presenting the development of this basis
itself.

“You[t] know,
that all economists, already from Adam Smith onwards,
split up the value of the product into wages, ground-rent
and capital gain and that therefore the idea of basing
the incomes of the different classes and particularly also
rent on a division of the product is nothing
new.” (Certainly not!) “Only the
economists immediately go astray. All of
them—not even excepting the Ricardian
School—first of all commit the error of not
regarding the whole product, the entire
wealth, the total national product as the unit in
which the workers, the landowners and the capitalists
participate. On the contrary they regard the
division of the raw product as a particular
division in which three participants share, and
the division of the manufactured product again as a
particular division in which only two participants
share. So these systems consider that the mere raw
product and the mere manufactured product, each in itself,
is a special kind of wealth which constitutes income”
(l.c., p. 162).

First of all, by breaking down the “whole
value of the product into wages, ground-rent and capital
gain” [p. 162] and thus forgetting about constant
capital which also forms a part of value, Adam Smith has in
fact led “astray” all the later
economists, including Ricardo and including Herr
Rodbertus. As my exposition has shown, the lack of
this differentiation made any scientific presentation quite
impossible. In this respect the Physiocrats were
further advanced. Their “avances primitives
et annuelles”[u] are defined as a part of the value
of the annual product or as a part of the annual product
itself, which is not resolved into wages, profit or rent,
either for the nation or for the individual. According
to the Physiocrats, the raw material of the agriculturists
replaces the advances of the sterile class (the
transformation of this raw material into machines of course
devolves on the sterile class), while, on the other hand,
the agriculturists replace a part of their own advances
(seeds, cattle for breeding and draught animals, fertiliser
etc.) from their product and get a part, machinery
etc. replaced by the sterile class in exchange for raw
material.

Secondly Herr Rodbertus errs in that he identifies
division of value with division of
product. The “wealth which constitutes
income” has nothing directly to do with this
division of the value of the product. That the
portions of value which accrue, for instance, to the
producers of yarn, and which are represented in certain
quantities of gold, exist as agricultural and
manufactured products of all kinds is equally well known to
the economists as to Rodbertus. This is taken for
granted because commodities are produced and not
products for the immediate consumption of the producers
themselves. Since the value which becomes available
for distribution, i.e., the part of value which forms
revenue, is created within each individual sphere of
production, independently of the others—although, on
account of the division of labour, it presupposes the
others—Rodbertus takes a step backward and creates
confusion, by not examining this creation of value on its
own, but confusing it right from the start by asking what
share of the available total product of the nation these
component parts secure for their owners. With
Rodbertus, division of the value of the product
immediately becomes division of use-values.
Because he foists this confusion upon the other economists,
there arises the need for his corrective, i.e., the
consideration of manufactured and raw products en
bloc—a mode of procedure which is irrelevant to
the creation of value, and hence wrong if it is to explain
the latter.

The only participants in the value of the
manufactured product. In 50 far as it comprises
revenue and in so far as the manufacturer does not pay a
rent, he it for land on which the buildings stand or for
waterfalls, etc., are the capitalist and the
wage-labourer. The value of the agricultural
produce is generally divided between three. This
Herr Rodbertus also admits. The manner in which he
explains this phenomenon does not in any way alter this
fact. It is entirely in accord with the standpoint of
capitalist production that the other economists, especially
Ricardo, start from a division into two, between
capitalist and wage-labourer, and only bring in the
landowner who draws rent at a later stage, as a special
excrescence. Capitalist production is based on the
antithesis of two factors | , materialised labour and
living labour. Capitalist and wage-labourer are the
sole functionaries and factors of production whose
relationship and confrontation arise from the nature of the
capitalist mode of production.

The circumstances under which the capitalist has in turn
to share a part of the surplus-labour or surplus-value which
he has captured, with a third, non-working person, are only
of secondary importance. It is also a fact of
production, that, after the part of the value which is equal
to constant capital is deducted, the entire surplus-value
passes straight from the hands of the worker to those of the
capitalist, with the exception of that part of the value
of the product which is paid out as wages. The
capitalist confronts the worker as the direct owner
of the entire surplus-value, in whatever manner he may later
he sharing it with the money-lending capitalist, landowner
etc. As James Mill observes, production could
therefore continue undisturbed if the landed proprietor
disappeared and the state took his place. He—the
private landowner—is not a necessary agent for
capitalist production, although it does require that the
land should belong to someone, so long as it is not the
worker, but for instance, the state. Far from being an
error on the part of Ricardo etc., this reduction of the
classes participating directly in production, hence also in
the value produced and then in the products in which this
value is embodied, to capitalists and wage-labourers,
and the exclusion of the landowners (who only enter
post festum, as a result of conditions of ownership
of natural forces that have not grown out of the
capitalist node of production but have been passed on
to it) is rooted in the nature of the capitalist mode of
production—as distinct from the feudal, ancient
etc. This reduction is an adequate theoretical
expression of the capitalist mode of production, and reveals
its differentia specifica. Herr Rodbertus is
still too much of an old Prussian “landed
proprietor”, to understand this. Furthermore, it
can only he grasped and become self-evident when the
capitalist has seized agriculture, and everywhere, as is
generally the case in England, has taken charge of
agriculture just as he has of industry, and has
excluded the landowner from any direct
participation in the production process. What
Rodbertus regards as a “deviation”, is,
therefore, the right path, which however he does not
understand because he is still engrossed in views that
originated from the pre-capitalist mode of production.

“He too” (Ricardo) “does
not divide the finished product among the parties
concerned, but, like the other economists, regards the
agricultural product as well as the manufactured
product—as a separate product, which has to be
divided” (l.c., p. 167).

Not the product, Herr Rodbertus, but the value of
the product, and this is quite correct. Your
“finished” product and its division have
absolutely nothing to do with this division of value.

“He” (Ricardo) “regards
capital property as given and that even earlier than
landed property… Thus he does not begin with
the reasons for but with the fact of the division of
the product, and his entire theory is limited to the causes
which determine and modify the proportions of the
shares… The division of the product purely into
wages and capital gain is for him the
original one and originally also the only one”
(l.c., p.167).

This you fail to understand again, Herr Rodbertus.
From the standpoint of capitalist production, capital
property does in fact appear as the
“original” because capitalist production is
based on this sort of property and it is a factor of and
fulfils a function in capitalist production; this
does not hold good of landed property. The latter
appears as derivative, because modern landed property
is in fact feudal property, but transformed by the
action of capital upon it; in its form as modern landed
property it is therefore derived from, and the result
of capitalist production. That Ricardo considers the
position as it is and appears in modern society to be also
the historically original situation (whereas you,
instead of keeping to the modern form, cannot rid yourself
of your memories of landownership) is a delusion from which
the bourgeois economists suffer in respect of all bourgeois
economic laws. They appear to them as “natural
laws” and hence also as historically
“primary”.

| But Herr Rodbertus
could already see from the very first sentence of his
preface, that Ricardo, where it is not a question of the
value of the product, but of the product
itself, permits the whole of the
‘finished” product to he shared out.

“The produce of the
earth—all that is derived from its surface by the
united application of labour, machinery, and capital, is
divided among three classes of the community; namely, the
proprietor of the land, the owner of the stack or capital
necessary for its cultivation, and the labourers by whose
industry it is cultivated.” (David Ricardo, The
Principles of Political Economy and Taxation, London,
1821, third edition, Preface, p. V.)

He continues forthwith:

“But in different stages of society,
the proportions of the whole produce of the earth
which will be allotted to each of these classes, under the
names of rent, profit, and wages, will be essentially
different” (l.c., p. V).

He is concerned here with the distribution of the
‘whole produce”, not the manufactured
product or the raw product. If this whole
produce” is taken as given, these shares in the
“whole produce” are solely determined within
each sphere of production by the share which each
shareholder has in the ‘value” of his own
product. This “value” is convertible into
and can he expressed in a certain proportional part of the
“whole produce”. Ricardo only errs
here, following Adam Smith, in that he forgets that
“the whole produce” is not divided into rent,
profit and wages, but that part of it “will be
allotted” in the shape of capital to one or some of
these three classes.

“You might want to assert, that, just
as originally the law of equal capital gains would
have had to depress raw product prices so far that
ground-rent would have to disappear only to be re-created as
a result of a rise in prices due to the difference between
the yield of more fertile and less fertile land—
so, to-day the advantages of drawing rent besides the
usual capital gain, would induce the capitalist to spend
capital on flew cultivation and improvements until, due to
the flooding of markets brought forth by this, prices would
fall sufficiently in order to make rents on the least
favourable capital investments disappear again. In
other words, this would be to assert that, so far as the raw
product is concerned, the law of the equalisation of capital
gains invalidates the other law, that the value of the
products is governed by labour costs, while it is just
Ricardo, who, in the first chapter of his work, uses
the former to prove the latter” (Rodbertus, l.c.,
p. 174).

Indeed, Herr Rodbertus! The law of the
equalisation of capital gains” does not
invalidate the law that the “value” of
the products is governed by “labour
costs”. But it does invalidate Ricardo’s
assumption that the average price of the products
equals their “value”. But there
again, it is not the “raw product” whose value
is reduced to the average price, but the other way
about. Due to landed property, the ‘raw
product” is distinguished by the privilege that its
value is not reduced to the average price. If,
indeed, its value did decrease, which would be
possible despite your “value of the material”,
to the level of the average price of the commodities, then
rent would disappear. The types of land which possibly
pay no rent to-day, pay none, because the
market-price of raw products is for them equal to
their own average price, and because the competition
of more fertile types of land deprives them of the
privilege of selling their product at its
‘value”.

“Could it be true that before
any cultivation takes place at all capitalists already exist
who receive a profit and invest their capital according to
the law of profit equalisation?’ (How very
silly!) “… I admit, that if to-day an
expedition from the civilised countries set out to a
| new, uncultivated land,
an expedition in which the wealthier participants were
equipped with supplies and tools—capital—from an
old established culture and the poorer ones came along with
a view to winning a high wage in the service of the former,
then the capitalists would regard as their gain that which
remains to them over and above the wages of the workers for
they bring with them from their mother country things and
ideas which have long been in existence there” (l.c.,
pp. 174-75).

Well, here you have it, Herr Rodbertus. Ricardo’s
whole conception is only appropriate to the presupposition
that the capitalist mode of production is the predominant
one. How he expresses this presupposition,
whether he commits a historical hysteron proteron is
irrelevant to the theory. The presupposition
must he made, and it is therefore impossible to introduce,
as yon are doing, the peasant, who does not understand
capitalist book-keeping and hence does not reckon seeds
etc., as part of the capital advanced! The
“absurdity” is introduced not by Ricardo but by
Rodbertus, who assumes that capitalists and workers exist
“before cultivation of the land” (l.c.,
p. 176).

“According to the Ricardian concept,
cultivation of the land is supposed to begin … only when
… capital has been created in a society and capital
gain is known and paid” (l.c., p. 178).

What utter nonsense! Only when a capitalist has
squeezed himself as farmer between the husbandman and the
landed proprietor—he it that the old tenant has
swindled his way into becoming a capitalist farmer, or that
an industrialist has invested his capital in agriculture
rather than in manufacture—only then he-gins, by no
means “the cultivation of the land”, but
‘capitalist” land cultivation which is very
different, both in form and content from the previous forms
of cultivation.

“In every country the greater part of
the land is already owned by someone long before it is
cultivated; and certainly, long before a rate of capital
profit has been established in industry” (l.c.,
p. 179).

To comprehend Ricardo’s conception Rodbertus would have
to be an Englishman instead of a Pomeranian landowner and
would have to understand the history of the enclosure of
commons and waste land. Rodbertus cites America.
There the state sells the land

“in lots, first to the cultivators at
a low price, it is true, but one which must at all
events already represent a rent” (l.c., pp.
179-80).

By no means. This price does not constitute a
ground-rent, any more than, say, a general trade tax
constitutes a trade rent or in fact any tax
constitutes a “rent”.

“With regard to the cause of the rise
under point b” (the increase in population or the
increase in the quantity of labour employed) “I
maintain, however, that rent has precedence over capital
gain. The latter can never rise because, as a
result of the increased value of the national
product—if productivity remains the same but
productive power increases (increased population)—more
capital gain accrues to the nation, for this greater
capital gain always accrues to a capital which is
greater in the same proportion, the rate of
profit therefore remains the same” (l.c.,
pp. 184-85).

This is wrong. The quantity of unpaid
surplus-labour rises, for instance, if 3, 4 5 hours surplus
labour-time are worked instead of 2 hours. The volume
of capital advanced does not grow [to the same extent] as
the volume of this unpaid surplus-labour, firstly,
because this further excess of surplus-labour is not
paid for and so does not occasion a capital outlay;
secondly, because the capital outlay for fixed capital does
not grow in the same proportion as its utilisation in this
instance. No more spindles etc. are
required. True, they are used tip more quickly but not
in the same proportion in which their use increases.
Thus, given the same productivity, profit grows here,
because not only the surplus-value grows, but also the
rate of surplus-value. In agriculture this is
impracticable because of the natural conditions. On
the other hand, productivity is easily altered with
the increased outlay of capital. Although an
absolutely large amount of capital is laid out, it is
relatively not so big, due to economies in the conditions of
production, quite apart from the division of labour and
machinery. Thus the rate of profit could grow
even if the surplus-value (not only its rate)
remained the same.

| Rodbertus is
positively wrong, and typically the Pomeranian landowner
when he says:

“It is possible that in the course of
these thirty years” (1800-1830) “more
properties came into being through the parcelling out of
land or even through the cultivation of new land and
the increased rent was thus also divided among more
landowners, but it was not distributed over more acres in
1830 than in 1800. Previously the older
properties comprised the whole of the acreage of those
newly separated or newly cultivated properties and the lower
rent of 1800 was also calculated on them, and this
influenced the level of English rent in general at that time
just as much as the higher rent in 1830” (l.c.,
p. 186).

Worthy Pomeranian! Why do you always transfer your
Prussian situation to England in a disparaging manner?
The English-man does not reckon that, if, as was the case
(this to be looked up), three to four million acres were
‘enclosed” between 1800 and 1830, the rent on
these four million acres was calculated before 1830 as well
and also in 1800. Rather they were waste land or
commons which bore no rent and did not belong to
anybody.

It has nothing to do with Ricardo if Rodbertus, like
Carey (but in a different way), seeks to prove to Ricardo
that for physical and other reasons, the ‘most
fertile” hand is usually not the first to he
cultivated. The “most fertile” land is
always the “most fertile” under the existing
conditions of production.

A very large number of the objections which Rodbertus
raises against Ricardo arise from the naive manner in which
he identifies the “Pomeranian” conditions of
production with the “English”. Ricardo
presupposes capitalist production to which, where it is in
fact carried out, as in England corresponds the separation
of the farming capitalist from the landlord. Rodbertus
introduces circumstances which are in themselves alien to
the capitalist node of production, which has merely been
built upon them. For instance, what Herr Rodbertus
says about the position of economic centres in economic
complexes applies perfectly to Pomerania but not to England,
where the capitalist node of production has become
increasingly pre-eminent since the last third of the 16th
century, where it has assimilated all the conditions and in
different periods has progressively sent historical
preconditions, villages, buildings and people, to the devil,
in order to secure the “most productive”
investment for capital.

What Rodbertus says about “capital
investment” is equally wrong.

“Ricardo limits ground-rent to that
which the landowner is paid for the use of he original,
natural and indestructible qualities of the land.
He thus wants to ensure that everything which would have to
be ascribed to capital in be land which is already being
cultivated is deducted from rent. But it is clear that
out of the yield from a piece of land he must never allot
more to capital than the full interest customary in a
country. For otherwise he would have to assume
that there are two different rates of gain in the economic
development of a country one agricultural, which is greater
than that prevailing in manufacture, and this latter.
This assumption would overthrow his very system, which is
based on the equality of the rate of gain” (l.c., pp.
215-16)

Again the notion of the Pomeranian landowner who gets
money on tick in order to improve his property and who for
theoretical and practical reasons, only wants to pay the
money-lender the “customary interest”. But
in England things are different. It is the farmer, the
farming-capitalist, who lays out capital in order to improve
the land. From this capital, just as from that which
he hays out directly in production, he does not demand the
customary interest but the customary profit. He
does not tend the landowner any capital on which the latter
is to pay the “customary” interest. He may
borrow capital himself, or else lie uses his own surplus
capital so that it yields him the “customary”
industrial profit, at least double the customary
interest.

Incidentally, Ricardo knows what Anderson already knew
and, into the bargain, expressly says that | the productivity of the land
thus engendered by capital, later coincides with its
“natural” productivity, hence swells the
rent. Rodbertus knows nothing of all this and
therefore babbles away at random.

I have already given a correct explanation of modern
landed property:

“Rent, in the Ricardian sense, is
property in land in its bourgeois state; that is, feudal
property which has become subject to the conditions of
bourgeois production.” (Misère de la
Philosophie, Paris, 1847 p. 156.)

Similarly I have already correctly observed:

“Ricardo, after postulating bourgeois
production as necessary for determining rent, applies the
conception of rent, nevertheless, to the landed properly of
all ages and all countries. This is an error common to
all the economists who represent the bourgeois relations of
production as eternal categories” (l.c., p. 160)

I also pointed out correctly that ‘land as
capital” could be increased like all other
capitals:

“Land as capital can be
increased just as much as all the other instruments
of production. Nothing is added to its matter, to use
M. Proudhon’s language, but the lands which serve
as instruments of production are multiplied.
The very fact of applying further outlays of capital to land
already transformed into means of production increases land
as capital without adding anything to land as matter, that
is, to the extent of he land” (l.c., p. 165)

The difference between manufacture and agriculture which
I pointed out at that time still remains correct:

“In the first place, one cannot, as
in manufacturing industry, multiply at will the
instruments of production possessing the same degree at
productivity, that is, plots of land with the same
degree of fertility. Them as population increases,
land of an inferior quality begins to be exploited, or mew
outlays of capital, proportionately less productive than
before, are made upon the same plot of land” (l.c.,
p. 157)

Rodbertus says:

“But I must draw attention to yet
another circumstance which, admittedly, much more gradually,
but also far more generally, turns worse agricultural
machines into better ones. This is the continued
management of a piece of land merely in accordance with
a rational system, without making any special capital
investment.” ([Sociale Briefe on von Kirchmann,
Dritter Brief], p. 222.)

Anderson already said cultivation improves the
land. [Rodbertus continues.]

“You would have to prove that the
working population engaged in agriculture had, in the course
of time, increased to a greater degree than the production
of food or even just compared with the rest of the
population of a country. Only this could irrefutably
show that increasing agricultural production also demands
that progressively more labour is expended upon it.
But it is just here that statistics contradict you”
(l.c., p. 274). “Indeed, you will find that,
[pretty well] as a rule, the denser the population of a
country, the smaller will be the proportion of people
engaged in agriculture… The same phenomenon can be
observed when the population of a country increases: that
section which is not engaged in agriculture will
almost everywhere increase to a greater degree” (l.c.,
p. 275).

But this is partly because more arable land is turned
over to cattle and sheep grazing, partly because with the
higher stage of production—large-scale
agriculture—labour becomes more productive.
But also, and this is a circumstance which Herr
Rodbertus overlooks entirely, because a greater part of the
non-agricultural population assist in agriculture,
supplying constant capital—which grows with the
advance in cultivation—such as mineral fertilisers,
seeds from other countries, machinery of every sort.

According in Herr Rodbertus (l.c., p. 78):

“At present the agriculturist”
(in Pomerania) “does not” (regard) the
feeding-stuffs for his draught animals as capital, if he has
grown these in his own establishment…”

| “Capital in
itself, or from an economic point of view, is a product
which continues to be used for production… But
in respect of a particular gain which it is to yield, or
from the point of view of to-day’s entrepreneurs, it
must appear as an ‘outlay’ in order to be
capital” (l.c., p. 77).

This concept of “outlay” however does not, as
Rodbertus thinks, require that it is bought as a
commodity. If instead of being sold as a
commodity, a part of the product re-enters production, it
does so as a commodity. It has previously been
estimated as “money”, this is easily done, since
simultaneously all these “outlays’, in
agriculture too, are available on the market as
“commodities”: cattle, feeding-stuffs,
fertilisers, corn for sowing, seeds of all kinds. But
it seems that in “Pomerania” this is not
reckoned as “outlay”.

“The value of the particular
results of these different sorts of work” (manufacture
and primary production) “is not the income itself
which accrues to their owner, but only the measure for its
conversion into money. This particular income itself
is a part of the social income, which is only produced by
the combined labour in agriculture and manufacture, and its
elements too are thus only produced by this combined
effort” (l.c., p. 36).

This is quite irrelevant. The realisation of this
value can only be its realisation in use-value.
But we are not concerned with that. Furthermore, the
necessary wage already implies how much value in the
shape of agricultural and industrial products is contained
in the means of subsistence the worker requires.

Done with.

* | For instance, when Ricardo’s
theory (see above) convinces him that a rise in wages above
their minimum does not raise the value of the commodities,
he says so in a straightforward manner. Malthus wants
to bold down wages so flint the bourgeois may profit.

[a] In the
manuscript: “encouragement of foreign
importation”, instead of “encouraging the
importation of corn from abroad”—Ed.

[b] In the
manuscript: “to place” instead of “for the
purpose of feeding.”—Ed.

[c] “The work
surpasses the material.” —Ed.

[d] In the
manuscript: “the—Ed.

[e] but not the
general average of rent” is a summary by Marx of the
contents of the subsequent passages—Ed.

[f] In the
manuscript: “could”—Ed

[g] In this
paragraph Marx reproduces in his own words the contents of a
longer passage from Hopkins’s book On Rent of Land,
p. 94.—Ed.

[h] In the
manuscript: “landlords”.—Ed

[i] This
passage has been condensed by Marx.—Ed.

[j] a “It is
somewhat extraordinary” is in the manuscript condensed
to: “strange”.—Ed.

[k] In the
manuscript: “simultaneously” instead of
“at the same time”.— Ed.

[l] In the
manuscript: “machinery”.—Ed.

[m] In the
manuscript: “landlord”.—Ed.

[n] Instead of
“in others 10 per cent”, in the manuscript:
‘“in others not 10”—Ed.

[o] In the
manuscript: “when”—Ed.

[p] Instead of
“added to the very important circumstance, of good
roads being already formed in the neighbourhood’, in
the manuscript: “‘in addition good roads in the
neighbourhood, etc”—Ed.

[q] In the
manuscript: “expendet”—Ed.

[r] In the
manuscript: “the 18th century” instead of
“this century”.—Ed.

[s] In the
manuscript: ” the productivity of the soil”
instead of “that productiveness”.
—Ed.

[t] Von
Kirchmann. —Ed.

[u] Original and
annual advances. —Ed.


## [CHAPTER X] Ricardo’s and Adam Smith’s Theory of Cost-price (Refutation)

### [A. Ricardo’s Theory of Cost-price]

### [1. Collapse of the Theory of the Physiocrats and the Further Development of the Theories of Rent]

With Anderson’s thesis (partly also contained in Adam
Smith’s work): It is not […] the rent of the land
that determines the price of its produce, but it is
the price of that produce which determines the rent
of the land…” the doctrine of the Physiocrats was
overthrown. The price of the agricultural
produce, and neither this produce itself nor the land, had
thus become the source of rent. This finished the
notion that rent was the offspring of the exceptional
productivity of agriculture which again was supposed to be
the offspring of the special fertility of the soil.
For, if the same quantity of labour was exerted in a
particularly productive element and hence was itself
exceptionally productive, then the result could only be that
this labour manifested itself in a relatively large
quantity of products and that the price of the
individual product was therefore relatively low; but it
could never have the opposite result, namely, that the
price of its product was higher than that of
other products containing the same quantity of labour and
that this price, as distinct from that of other
commodities, thus yielded a rent, in addition to
profit and wages. (In his treatment of rent Adam
Smith to some extent returns to the physiocratic view,
having previously refuted or at least rejected it by his
original conception of rent as part of surplus-labour.)

Buchanan sums up this discarding of the physiocratic view
in the following words:

“The notion of agriculture yielding a
produce, and a rent in consequence, because nature concurs
with human industry in the process of cultivation, is a mere
fancy. It is not from the produce, but from the price
at which the produce is sold, that the rent is derived; and
this price is got not because nature assists in the
production, but because it is the price which suits the
consumption to the supply.” [David Buchanan in Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations, Vol. II, Edinburgh, 1814, p. 55,
note; quoted from David Ricardo, On the Principles of Political Economy, and Taxation"indentb", third edition, London,
1821, p. 66, note.]

After the rejection of this notion of the
Physiocrats—which, however, was fully justified in its
deeper sense, because they regarded rent as the only
surplus, and capitalists and labourers together merely as
the paid employees of the landlord—only the following
viewpoints were possible.

| [Firstly:] The view
that rent arises from the monopoly price of
agricultural products, the monopoly price being due to the
landowners possessing the monopoly of the land.
According to this concept, the price of the
agricultural product is constantly above its
value. There is a surcharge of price and
the law of the value of commodities is breached by the
monopoly of landed property.

Rent arises out of the monopoly price of
agricultural products, because supply is constantly
below the level of demand or demand is constantly
above the level of supply. But why does supply
not rise to the level of demand? Why does not
an additional supply equalise this relationship and
thus, according to this theory, abolish all
rent? In order to explain this, Malthus on the one
hand takes refuge in the fiction that agricultural products
provide themselves with direct consumers (about which more
later, in connection with his row with Ricardo); on the
other hand, in the Andersonian theory, that agriculture
becomes less productive because the additional supply
costs more labour. Hence, in so far as this view is
not based on mere fiction, it coincides with the Ricardian
theory. Here too, price stands above
value, surcharge.

[Secondly:] The Ricardian Theory: Absolute rent does
not exist, only a differential rent. Here
too, the price of the agricultural products that bear
rent is above their individual value, and in so far
as rent exists at all, it does so through the excess of
the price of agricultural products over their
value. Only here this excess of price over
value does not contradict the general theory of value
(although the fact remains) because within each sphere of
production the value of the commodities belonging to
it is not determined by the individual value of the
commodity but by its value as modified by the
general conditions of production of that
sphere. Here, too, the price of the rent-bearing
products is a monopoly price, a monopoly however as
it occurs in all spheres of industry and only becomes
permanent in this one, hence assuming the form of rent as
distinct from excess profit. Here too, it is an excess
of demand over supply or, what amounts to the same
thing, that the additional demand cannot be satisfied by an
additional supply at prices corresponding to those of
the original supply, before its prices were forced up by the
excess of demand over supply. Here too, rent comes
into being (differential rent) because of excess
of price over value, [brought about by] the rise of
prices on the better land above the value of the
product, and this leads to the additional supply.

[Thirdly:] Rent is merely interest on the capital sunk
in the land. This view has the following in common
with the Ricardian, namely, that it denies the existence of
absolute rent. It must admit the existence of
differential rent, when pieces of land in which equal
amounts of capital have been invested, yield rents of
varying size. Hence in fact, it amounts to the
Ricardian view, that certain land yields no rent and
that where actual rent is yielded, this is
differential rent. But it is absolutely incapable of
explaining the rent of land in which no capital has
been invested, of waterfalls, mines etc. It was, in
fact, nothing but an attempt from a capitalist point of
view, to save rent despite Ricardo— under the name
of interest.

Finally [fourthly]: Ricardo assumes that on the
land which does not bear a rent, the price of the product
equals its value because it equals the average price,
i.e., capital outlay plus average profit. He thus
wrongly assumes that the value of the commodity equals the
average price of the commodity. If this wrong
assumption is dropped, then absolute rent becomes possible
because the value of agricultural products, like that
of a whole large category of other commodities, stands
above their average price, but owing to landed
property, the value of the agricultural products, unlike
that of these other commodities, is not levelled out at the
average price. Hence this view assumes, like the
monopoly theory, that property in land, as such, has
something to do with rent; it assumes differential rent
along with Ricardo, and finally it assumes that absolute
rent by no means infringes the law of value.

### [2. The Determination of Value by Labour-Time—the Basis of Ricardo’s Theory. Despite Certain Deficiencies the Ricardian Mode of Investigation Is a Necessary Stage in the Development of Political Economy]

Ricardo starts out from the determination of the relative
values (or exchangeable values) of commodities by “the
quantity of labour”. (We can examine
later the various senses in which Ricardo uses the term
value. This is the basis of Bailey’s criticism and, at
the same time, of Ricardo’s shortcomings.) The
character of this “labour” is not further
examined. If two commodities are equivalents—or bear a
definite proportion to each other or, which is the
same thing, if their magnitude differs according to
the | quantity of
“labour” which they contain—then it is
obvious that regarded as exchange-values, their
substance must be the same. Their substance is
labour. That is why they are
“values”. Their magnitude varies,
according to whether they contain more or less of this
substance. But Ricardo does not examine the
form—the peculiar characteristic of labour that
creates exchange-value or manifests itself in
exchange-values—the nature of this
labour. Hence he does not grasp the connection of
this labour with money or that it must assume
the form of money. Hence he completely fails to
grasp the connection between the determination of the
exchange-value of the commodity by labour-time and the fact
that the development of commodities necessarily leads to the
formation of money. Hence his erroneous theory of
money. Right from the start he is only concerned with
the magnitude of value, i.e., the fact that the
magnitudes of the va1ues of the commodities are
proportionate to the quantities of labour which are required
for their production. Ricardo proceeds from here and
he expressly names Adam Smith as his starting-point (Chapter
I, Section I).

Ricardo’s method is as follows: He begins with the
determination of the magnitude of the value of the commodity
by labour-time and then examines whether the other
economic relations and categories contradict this
determination of value or to what extent they modify
it. The historical justification of this method of
procedure, its scientific necessity in the history of
economics, are evident at first sight, but so is, at the
same time, its scientific inadequacy. This inadequacy
not only shows itself in the method of presentation (in a
formal sense) but leads to erroneous results because it
omits some essential links and directly seeks to
prove the congruity of the economic categories with one
another.

Historically, this method of investigation was justified
and necessary. Political economy had achieved a
certain comprehensiveness with Adam Smith; to a certain
extent he had covered the whole of its territory, so that
Say was able to summarise it all in one textbook,
superficially but quite systematically. The only
investigations that were made in the period between Smith
and Ricardo were ones of detail, on productive and
unproductive labour, finance, theory of population, landed
property and taxes. Smith himself moves with great
naïveté in a perpetual contradiction. On
the one hand he traces the intrinsic connection existing
between economic categories or the obscure structure of the
bourgeois economic system. On the other, he
simultaneously sets forth the connection as it appears in
the phenomena of competition and thus as it presents itself
to the unscientific observer just as to him who is actually
involved and interested in the process of bourgeois
production. One of these conceptions fathoms the inner
connection, the physiology, so to speak, of the bourgeois
system, whereas the other takes the external phenomena of
life, as they seem and appear and merely describes,
catalogues, recounts and arranges them under formal
definitions. With Smith both these methods of approach
not only merrily run alongside one another, but also
intermingle and constantly contradict one another.
With him this is justifiable (with the exception of a few
special investigations, [such as] that into money) since his
task was indeed a twofold one. On the one hand he
attempted to penetrate the inner physiology of bourgeois
society but on the other, he partly tried to describe its
externally apparent forms of life for the first time, to
show its relations as they appear outwardly and partly he
had even to find a nomenclature and corresponding mental
concepts for these phenomena, i.e., to reproduce them for
the first time in the language and [in the] thought
process. The one task interests him as much as the
other and since both proceed independently of one another,
this results in completely contradictory ways of
presentation: the one expresses the intrinsic connections
more or less correctly, the other, with the same
justification—and without any connection to the first
method of approach—expresses the apparent
connections without any internal relation. Adam
Smith’s successors, in so far as they do not represent the
reaction against him of older and obsolete methods of
approach, can pursue their particular investigations and
observations undisturbedly and can always regard Adam Smith
as their base, whether they follow the esoteric or the
exoteric part of his work or whether, as is almost always
the case, they jumble up the two. But at last Ricardo
steps in and calls to science: Halt! The basis, the
starting-point for the physiology of the bourgeois
system—for the understanding of its internal organic
coherence and life process—is the determination of
value by labour-time. Ricardo starts with this
and forces science to get out of the rut, to render an
account of the extent to which the other
categories—the relations of production and
commerce—evolved and described by it, correspond to or
contradict this basis, this starting-point; to elucidate how
far a science which in fact only reflects and reproduces the
manifest forms of the process, and therefore also how far
these manifestations themselves, correspond to the basis on
which the inner coherence, the actual physiology of
bourgeois society rests or the basis which forms its
starting-point; and in general, to examine how matters stand
with the contradiction between the apparent and the actual
movement of the system. This then is Ricardo’s | great historical significance
for science. This is why the inane Say, Ricardo having
cut the ground from right under his feet, gave vent to his
anger in the phrase that “under the pretext of
expanding it” (science) “it had been pushed into
a vacuum”. Closely bound up with this scientific
merit is the fact that Ricardo exposes and describes the
economic contradiction between the classes—as shown by
the intrinsic relations—and that consequently
political economy perceives, discovers the root of the
historical struggle and development. Carey (the
passage to be looked up later) therefore denounces him as
the father of communism.

“Mr. Ricardo’s system is one of
discords …its whole tends to the production of
hostility among classes and nations… His
hook is the true manual of the demagogue, who seeks power by
means of agrarianism, war, and plunder.” (H. C. Carey,
The Past, the Present, and the Future, Philadelphia,
1848, pp. 74-75.)

Thus it follows on the one hand that the Ricardian method
of investigation is scientifically justified and has great
historical value, on the other hand the scientific
deficiencies of his procedure are clearly visible and will
become more evident in what follows later.

Hence also the very peculiar and necessarily faulty
architectonics of his work. The whole work consists of
32 chapters (in the third edition). Of this, 14
chapters deal with taxes, thus dealing only with the
application of the theoretical principles. The
twentieth chapter, “Value and Riches, Their
Distinctive Properties” is nothing but an examination
of the difference between use-value and exchange-value,
i.e., a supplement to the first chapter, “On
Value”. The twenty-fourth chapter
“Doctrine of Adam Smith Concerning the Rent of
Land”, like the twenty-eighth chapter “On the
Comparative Value of Gold, Corn and Labour…”
and the thirty-second chapter “Mr. Malthus’s Opinions
on Rent” are mere supplements to, and in part a
vindication of, Ricardo’s rent theory, thus forming mere
appendices to chapters II and III which deal with
rent. The thirtieth chapter “On the Influence of
Demand and Supply on Prices” is simply an appendix to
the fourth chapter “On Natural and
Market-Price.” The nineteenth chapter, “On
Sudden Changes in the Channels of Trade”, forms a
second appendix to this chapter. The thirty-first
chapter, “On Machinery”, is purely an appendix
to the fifth and sixth chapters “On Wages” and
“On Profits”. The seventh chapter,
“On Foreign Trade”, and the twenty-fifth,
“On Colonial Trade”—like the chapters on
taxes—are mere applications of previously established
principles. The twenty-first chapter “Effects of
Accumulation on Profits and Interest” is an appendix
to the chapters on rent, profits and wages. The
twenty-sixth chapter “On Gross and Net Revenue”
is an appendix to the chapters on wages, profits and
rent. Finally, the twenty-seventh chapter “On
Currency and Banks” stands quite apart from the
rest of the work and merely consists of further explanations
and in part modifications of views put forward in his
earlier writings on money.

The Ricardian theory is therefore contained exclusively
in the first six chapters of the work. It is in
respect of this part of the work that I use the term faulty
architectonics. The other part (with the exception of
the section on money) consists of applications, elucidations
and addenda which, by their very nature, are jumbled
together and make no claim to being systematically
arranged. But the faulty architectonics of the
theoretical part (the first six chapters) is not accidental,
rather it is the result of Ricardo’s method of investigation
itself and of the definite task which he set himself in his
work. It expresses the scientific deficiencies of this
method of investigation itself.

Chapter I is “On Value”. It is
subdivided into seven sections. The first section
actually examines whether wages contradict the
determination of the values of commodities by the
labour-time they contain. In the third section Ricardo
demonstrates that the entry of what I call constant capital
into the value of the commodity does not contradict
the determination of value and that the values of
commodities are equally unaffected by the rise or fall in
wages. The fourth section examines to what extent the
determination of exchangeable values by labour-time is
altered by the application of machinery and other fixed and
durable capital, in so far as it enters into the total
capital in varying proportions in different spheres of
production. The fifth section examines how far a rise
or fall in wages modifies the determination of values by
labour-time, if capitals of unequal durability and varying
periods of turnover are employed in different spheres of
production. Thus one can see that in this first
chapter not only are commodities assumed to
exist—and when considering value as such, nothing
further is required—but also wages, capital, profit,
the general rate of profit and even, as we shall see, the
various forms of capital as they arise from the process of
circulation, and also the difference between “natural
and market-price”. This latter, moreover, plays
a decisive role in the following chapters, Ch. II and
Ch. III: “On Rent” and “On the Rent of
Mines”. In accordance with his method of
investigation, the second chapter, “On
Rent” |
—the third “On the Rent of Mines” is only
a supplement to this—again opens with the question:
Does landed property, and rent, contradict the
determination of the value of commodities by
labour-time?

This is how he opens the second chapter “On
Rent”:

“It remains however to be considered,
whether the appropriation of land, and the consequent
creation of rent, will occasion any variation in the
relative value of commodities, independently of the quantity
of labour necessary to production” (Principles of
Political Economy, third edition, London, 1821,
p. 53).

In order to carry out this investigation, he introduces
not only, en passant, the relationship of
“market-price” and “real price” (
monetary expression of value) but postulates the whole of
capitalist production and his entire conception of the
relationship between wages and profit. The fourth
chapter “On Natural and Market-Price” and the
fifth “On Wages” and the sixth “On
Profits” are thus not only taken for granted, but
fully developed in the first two chapters “On
Value” and “On Rent” and in Chapter III as
an appendix to II. The later three chapters, in so far
as they bring any new theoretical points, fill in
gaps here and there, and provide closer definitions, which
for the most part should by rights have found their place in
[chapters] I or II.

Thus the entire Ricardian contribution is contained in
the first two chapters of his work. In these chapters,
the developed relations of bourgeois production, and
therefore also the developed categories of political
economy, are confronted with their principle—the
determination of value—and examined in order to
determine the degree to which they directly correspond to
this principle and the position regarding the apparent
discrepancies which they introduce into the value relations
of commodities. They contain the whole of his critique
of hitherto existing political economy, the determined break
with the contradiction that pervades Adam Smith’s work with
its esoteric and exoteric method of approach, and, at the
same time, because of this critique, they produce some quite
new and startling results. Hence the great theoretical
satisfaction afforded by these first two chapters; for they
provide with concise brevity a critique of the old, diffuse
and meandering political economy, present the whole
bourgeois system of economy as subject to one fundamental
law, and extract the quintessence out of the divergency and
diversity of the various phenomena. But this
theoretical satisfaction afforded by these first two
chapters because of their originality, unity of fundamental
approach, simplicity, concentration, depth, novelty and
comprehensiveness, is of necessity lost as the work
proceeds. Here too, we are at times captivated by the
originality of certain arguments. But as a whole, it
gives rise to weariness and boredom. As the work
proceeds, there is no further development. Where it
does not consist of monotonous formal application of the
same principles to various extraneous matters, or of
polemical vindication of these principles, there is only
repetition or amplification; at most one can occasionally
find a striking chain of reasoning in the final
sections.

In the critique of Ricardo, we have to separate what he
himself failed to separate. [Firstly] his theory of
surplus-value, which of course exists in his work,
although he does not define surplus-value as distinct
from its particular forms, profit, rent, interest.
Secondly, his theory of profit. We shall begin
with the latter, although it does not belong into this
section, but into the historical appendix to Section
III.

### [3. Ricardo’s Confusion about the Question of “Absolute” and “Relative” Value. His Lack of Understanding of the Forms of Value]

Before we go on, just a few comments on how Ricardo
confuses the definitions of “value”.
Bailey’s polemic against him is based on this; it is however
also important for us.

First of all Ricardo speaks of “value in
exchange” (l.c., p. 1) and, like Adam Smith,
defines it as “the power of purchasing other
goods” (l.c., p. 1). This is exchange-value
as it appears at first. Then, however, he
proceeds to the real determination of value:

“It is the comparative quantity of
commodities which labour will produce, that determines their
present or past relative value” (l.c., p.
9).

“Relative value” here means
nothing other than the exchangeable value as determined by
labour-time. But relative value can also have
another meaning, namely, if I express the exchange-value of
a commodity in terms of the use-value of another, for
instance the ‘exchange-value of sugar in terms of the
use-value of coffee.

“Two commodities vary in relative
value, and we wish to know in which the variation
has […] taken place” (l.c., p. 9).

Which variation? Ricardo later also calls this
“relative value” “comparative
value” (p. 448 et seq.). We want to know in
which commodity “the variation” has taken
place. This means the variation of the
“value” which was called “relative
value” above. For instance, 1 pound of sugar
equals 2 pounds of coffee. Later 1 pound of sugar
equals 4 pounds of coffee. The “variation”
which we want to know about is: whether the
“necessary labour-time” has altered for
sugar or for coffee, whether sugar costs twice as much
labour-time as before or whether coffee costs half as much
labour-time as before and which of these
“variations” in the labour-time required for
their respective production has called forth this variation
in their exchange relation. This
“relative or comparative value” of sugar and
coffee—the ratio in which they exchange—is thus
different from relative value in the first sense. In
the first sense, the relative value of sugar is determined
by the quantity of sugar which can be produced by a certain
amount of labour-time |. In the second case, the
relative value of sugar [and coffee] expresses the ratio in
which they are exchanged for one another and changes in this
ratio can be the result of a change in the “relative
value” in the first sense, in coffee or in
sugar. The proportion in which they exchange for one
another can remain the same, although their
“relative values” in the first sense have
altered, 1 lb. sugar can equal 2 lbs. coffee, as before,
even though the labour-time for the production of sugar and
of coffee has risen to double or has fallen to a half.
Variations in their comparative value, that
is, if the exchange-value of sugar is expressed in coffee,
and vice versa, will only appear when the variations in
their relative value in the first sense, i.e., the
values determined by the quantity of labour, have altered
to a different extent, when therefore comparative
changes have occurred. Absolute changes, when they do
not alter the original ratio, but are of equal magnitude and
move in the same direction, will not call forth any
variation in the comparative values—nor in the
money prices of these commodities, since, if the
value of money should change, it would do so equally for
both [commodities]. Hence, whether the values of two
commodities are expressed in their own reciprocal use-values
or in their money price—representing both commodities
in the form of the use-value of a third
commodity—these relative or comparative
values or prices are the same, and the changes in them must
be distinguished from changes in their relative
values in the first sense of the term, i.e., in so far
as they only express the change in the labour-time required
for their own production, and thus realised in
themselves. The latter relative value thus
appears as “absolute value” compared with
relative values in the second sense, i.e., in the sense of
actually representing the exchange-value of one commodity in
terms of the use-value of the other or in money. That
is why the term “absolute value” occurs
in Ricardo’s work, to denote “relative value” in
the first sense.

If, in the above example, 1 lb. sugar costs the same
amount of labour-time as before, then its “relative
value” in the first sense has not altered. If,
however, the labour cost of coffee has halved, then the
value of sugar expressed in terms of coffee has altered,
because the “relative value” of coffee, in the
first sense, has altered. The relative values of sugar
and coffee thus appear to be different from their
“absolute values” and this difference becomes
evident because the comparative value of sugar, for
instance, has not altered in comparison with commodities
whose absolute values have remained unchanged.

“The inquiry to which I wish to draw
the reader’s attention, relates to the effect of the variations in the relative value of commodities, and
not in their absolute value” (l.c., p. 15).

At times Ricardo also calls this “absolute”’
value “real value”’ or simply value (for
instance on p. 16).

See the whole of Bailey’s polemic against Ricardo in:

A Critical Dissertation on the Nature, Measures and
Causes of Value; chiefly in reference to the Writings of
Mr. Ricardo and his Followers. By the Author of Essays
on the Formation and Publication of Opinions, London,
1825. (See also his A Letter to a Political
Economist; occasioned by an article in the Westminster
Review etc., London, 1826.) [Bailey’s polemic]
partially revolves around these different instances of
definitions of value, which are not explained by Ricardo but
only occur de facto and are confused with one another, and
Bailey sees in this only “contradictions”.
Secondly, [Bailey’s polemic is directed] against
“absolute value” or “real value”
as distinct from comparative value (or relative value
in the second sense).

In the first of the above-mentioned works, Bailey
says:

“Instead of regarding value as a
relation between two objects, they”( Ricardo and his
followers) “consider it as a positive result produced
by a definite quantity of labour.” (Samuel Bailey,
A Critical Dissertation on the Nature, Measures and
Causes of Value, London, 1825, p. 30.)

They regard “value as something intrinsic and
absolute” (l.c., p. 8).

The latter reproach arises from Ricardo’s inadequate
presentation, because he does not even examine the form of
value—the particular form which labour assumes as the
substance of value. He only examines the magnitudes of
value, the quantities of this abstract, general and, in this
form social, labour which engender differences in the
magnitudes of value of commodities. Otherwise
Bailey would have recognised that the relativity of the
concept of value is by no means negated by the fact that all
commodities, in so far as they are exchange-values, are only
relative expressions of social labour-time and their
relativity consists by no means solely of the ratio in which
they exchange for one another, but of the ratio of all of
them to this social labour which is their substance.

On the contrary, as we shall see, Ricardo is rather to be
reproached for very often losing sight of this
“real” or “absolute value” and
only retaining “relative” and “comparative
values”.

| Thus:

### [4.] Ricardo’s Description of Profit, Rate of Profit, Average Prices etc.

### [a) Ricardo’s Confusion of Constant Capital with Fixed Capital and of Variable Capital with Circulating Capital. Erroneous Formulation of the Question of Variations in “Relative Values” and Their Causative Factors]

In Section III of the First Chapter Ricardo explains that
the statement: the value of the commodity is determined by
labour-time includes not only the labour directly employed
on the commodity in the final labour process but also the
labour-time contained in the raw material and the
instruments of labour that are required for the production
of the commodity. Thus it applies not only to the
labour-time contained in the newly-added labour which has
been bought, paid for by wages, but also to the labour-time
contained in that part of the commodity which I call
constant capital. Even the very heading of this
Section III of Chapter I shows the deficiency of his
exposition. It runs like that:

“Not only the labour applied
immediately to commodities affect their value, but the
labour also which is bestowed on the implements, tools, and
buildings, with which such labour is assisted.” (David
Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, p. 16.)

Raw material has been omitted here, yet the labour
bestowed on raw material is surely just as different from
“labour applied immediately to commodities” as
the labour bestowed on “implements, tools and
buildings”. But Ricardo is already thinking of
the next section. In Section III he assumes that
equal component parts of value comprised in the
instruments of labour employed enter into the production of
the various commodities. In the next section he
examines the modifications arising from the varying
proportions in which fixed capital enters [into the
commodities]. Hence Ricardo does not arrive at the
concept of constant capital, one part of which
consists of fixed capital and the other of circulating
capital—raw material and auxiliary material—just
as circulating capital not only includes variable
capital but also raw material etc., and all means of
subsistence which enter into consumption in general,
not only into the consumption of the workers.

The proportion in which constant capital enters into a
commodity does not affect the values of the
commodities, the relative quantities of labour contained in
the commodities, but it does directly affect the different
quantities of surplus-value or surplus-labour
contained in commodities embodying equal amounts of
labour-time. Hence this varying proportion gives rise
to average prices that differ from values.

With regard to sections IV and V of Chapter I we have to
note, first of all, that Ricardo does not examine a highly
important matter which directly affects the
production of surplus-value, namely, that in different
spheres of production the same volume of capital contains
different proportions of constant and variable
capital. Instead, Ricardo concerns himself exclusively
with the different forms of capital and the varying
proportions in which the same capital assumes these various
forms, in other words, [with] different forms arising out
of the process of the circulation of capital, that is,
fixed and circulating capital, capital which is fixed to a
greater or lesser degree (i.e., fixed capital of varying
durability) and unequal velocity of circulation or rates of
turnover of capital. And the manner in which Ricardo
carries out this investigation is the following: He
presupposes a general rate of profit or an average
profit of equal magnitude for different capital
investments of equal magnitude, or for different spheres of
production in which capitals of equal size are
employed—or, which is the same thing, profit in
proportion to the size of the capital employed in the
various spheres of production. Instead of
postulating this general rate of profit,
Ricardo should rather have examined in how far its
existence is in fact consistent with the
determination of value by labour-time, and he would have
found that instead of being consistent with it,
prima facie, it contradicts it, and that its
existence would therefore have to be explained through a
number of intermediary stages, a procedure which is very
different from merely including it under the law of
value. He would then have gained an altogether
different insight into the nature of profit and would not
have identified it directly with surplus-value.

Having made this presupposition Ricardo then asks
himself how will the rise or fall of wages affect the
“relative values”, when fixed and
circulating capital are employed in different
proportions? Or rather, he imagines that this
is how he handles the question. In fact he deals with
it quite differently, namely, as follows: He asks himself
what effect the rise or fall of wages will have on the
respective profits on capitals with different periods
of turnover and containing different proportions of the
various forms of capital. And here of course he finds
that depending on the amount of fixed capital etc., a rise
or fall of wages must have a very different effect on
capitals, according to whether they contain a greater or
lesser proportion of variable capital, i.e., capital which
is laid out directly in wages. Thus in order to
equalise again the profits in the different spheres of
production, | in other
words, to re-establish the general rate of profit,
the prices of the commodities—as distinct from their
values—must be regulated in a different
way. Therefore, he further concludes, these
differences affect the “relative values” when
wages rise or fall. He should have said on the
contrary: Although these differences have nothing to do with
the values as such, they do, through their varying effects
on profits in the different spheres, give rise to average
prices or, as we shall call them cost-prices which
are different from the values themselves and are not
directly determined by the values of the commodities but by
the capital advanced for their production plus the average
profit. Hence he should have said: These average
cost-prices are different from the values of
the commodities. Instead,’ he concludes that they are
identical and with this erroneous premise he
goes on to the consideration of rent.

Ricardo is also mistaken when he thinks that it is only
[through] the three cases he examines that he discovers the
“variations” in the “relative
values” that occur independently of the labour-time
contained in the commodities, that is in fact the difference
between the cost-prices and the values of the
commodities. He has already assumed this
difference, in postulating a general rate of
profit, thus presupposing that despite the varying
ratios of the organic component parts of capitals, these
yield a profit proportional to their size, whereas
the surplus-value they yield is determined absolutely by the
quantity of unpaid labour-time they absorb, and with a given
wage this is entirely dependent on the volume of that part
of capital which is laid out in wages, and not on the
absolute size of the capital.

What he does in fact examine is this: supposing that
cost-prices differ from the values of
commodities—and the assumption of a general rate of
profit presupposes this difference—how in turn are
these cost-prices (which are now, for a change, called
“relative values”) themselves reciprocally
modified, proportionately modified by the rise or fall of
wages, taking also into account the varying proportions of
the organic component parts of capital? If Ricardo had
gone into this more deeply, he would have found
that—owing to the diversity in the organic composition
of capital which first manifests itself in the immediate
production process as the difference between variable and
constant capital and is later enlarged by differences
arising from the circulation process—the mere
existence of a general rate of profit necessitates
cost-prices that differ from values. He
would have found that, even if wages are assumed to
remain constant, the difference exists and therefore
is quite independent of the rise or fall in wages,
thus he would have arrived at a new definition. He
would also have seen how incomparably more important and
decisive the understanding of this difference is for the
whole theory, than his observations on the variation in
cost-prices of commodities brought about by the rise
or fall of wages. The result with which he contents
himself—and that he is content accords with the whole
manner in which he carries out his investigation—is as
follows: Once the variations in the cost-prices (or,
as he says, “relative values”) of the
commodities—in so far as they are due to changes,
rises or falls, in wages when capital of different organic
composition is invested in different spheres— are
admitted and taken into consideration the law remains valid;
that “the relative values” of the commodities
are determined by labour-time does not contradict the
law; for all other changes— changes that are not
merely transitory—in the cost-prices of the
commodities can only be explained by a change in the
necessary labour-time required for their respective
production.

On the other hand, it must be regarded as a great merit
that Ricardo associates the differences in fixed and
circulating capital with the varying periods of turnover of
capital and that he deduces all these differences from the
varying periods of circulation, i.e., in fact from
the circulation or reproduction period of
capital.

First of all, let us consider these differences
themselves, as he presents them in Section IV (Chapter I)
and then examine his views on how they act or bring about
variations in the “relative values”.

1. “In every state of society, the tools,
implements, buildings, and machinery employed in different
trades may be of various degrees of durability, and
may require different portions of labour to produce
them” (l.c., p. 25).

So far as the “different portions of labour to
produce them” are concerned, this can imply—and
here it seems to be Ricardo’s sole point—that the less
durable ones require more labour (recurring, directly
applied labour), partly for their repair and partly for
their reproduction; or it can also mean that machinery
etc. of the same degree of durability may be more or
less expensive, the product of more or less labour.
This latter aspect, important for the proportion of variable
to constant capital, is not relevant to Ricardo’s
consideration and therefore he does not take it up anywhere
as a separate point.

2. “The proportions, too, in which the capital
that is to support labour” (the variable capital),
“and the capital that is invested in tools, machinery,
and buildings” (fixed capital), “may be
variously combined”. Thus we have a
“difference in the degree of durability of fixed
capital, and this variety in the proportions in which
the two sorts of capital may be combined”
(l.c., p. 25).

It is at once evident why he is not interested in that
part of constant capital which exists as raw material.
The latter is itself part of circulating capital. A
rise in wages does not cause increased expenditure on
that part of capital which consists of machinery and does
not need to be replaced but remains available; the
rise, however, causes an increased outlay for that part
which consists of raw material, since this has to be
constantly replenished, hence also constantly
reproduced.

“The food and clothing consumed by
the labourer, the buildings in which he works, the
implements with which his labour is assisted, are all of a
perishable nature. There is however a vast
difference in the time for which these different capitals
will endure…According as capital is rapidly
perishable, and requires to be frequently reproduced,
or is of slow consumption, it is classed under the heads of
circulating, or of fixed capital” (l.c., p. 26).

Thus the difference between fixed and circulating capital
is here reduced to the difference in the time of
reproduction (which coincides with the period of
circulation).

3. “It is also to be observed that the
circulating capital may circulate, or be
returned to its employer, in very unequal
times. The wheat bought by a farmer to
sow* is
comparatively a fixed capital to the wheat purchased by a
baker to make into loaves. One leaves it in the
ground, and can obtain no return for a year; the other can
get it ground into flour, sell it as bread to his customers
and have his capital free to renew the same, or commence any
other employment in a week” (l.c., pp. 26-27).

On what does this difference in the circulation
periods of different circulating capitals depend? [On
the fact] that in one case, the same capital remains for a
longer time in the actual sphere of production,
though the labour-process does not continue.
This applies, for instance, to wine which lies in the cellar
to attain maturity, or to certain chemical processes in
tanning, dyeing etc.

“Two trades then may employ the
same amount of capital; but it may be very differently
divided with respect to the portion which is fixed, and that
which is circulating.” (l.c., p. 27.)

4. “Again two manufacturers may employ the
same amount of fixed, and the same amount of circulating
capital; but the durability of their fixed
capitals” (therefore also their period of
reproduction) “may he very unequal. One may have
steam-engines of the value of £10,000 the other, ships
of the same value” (l.c., pp. 27-28).

“Different degrees of durability of
…capitals, or, which is the same thing …of
the time which must elapse before one set of commodities
can be brought to market” (l.c., p. 30).

5.“It is hardly necessary to say, that commodities
which have the same quantity of labour bestowed on[a] their production,
will differ in exchangeable value, if they cannot be brought
to market in the same time” (l.c., p. 34).

[Thus we have:] 1. A difference in the proportion
of fixed to circulating capital. 2. A difference
in the period of turnover of circulating capital as a
result of a break in the labour-process while the production
process continues. 3. A difference in the
durability of fixed capital. 4. A
difference in the relative period during which a commodity
is altogether subjected to the labour-process (without any
break in the labour-process or without any difference
between production period and labour period) before it can
enter the actual circulation process. The last case is
described by Ricardo as follows:

“Suppose I employ twenty men at an
expense of £1,000 for a year in the production of a
commodity, and at the end of the year I employ twenty men
again for another year, at a further expense of £1,000
in finishing or perfecting the same commodity, and that I
bring it to market at the end of two years, if profits be
10 per cent, my commodity must sell for £2,310;
for I have employed £1,000 capital for one year, and
£2,100 capital for one year more. Another man
employs precisely the same quantity of labour, but he
employs it all in the first year; be employs forty men at an
expense of £2,000, and at the end of the first year he
sells it with 10 per cent profit, or for £2,200.
Here then are two commodities having precisely the some
quantity of labour bestowed on them, one of which sells
for £2,310—the other for £2,200”
(l.c., p. 34).

| But how is a change
in the relative values of these commodities brought
about by this difference—whether in the degree of
durability of fixed capital, or in the period of turnover of
circulating capital, or in the proportions in which the two
sorts of capital may be combined or, finally, in the time
required by different commodities upon which the same
quantity of labour is bestowed [to come on to the
market]. Ricardo says in the first place, that

“This difference …and
[…] variety in the proportions”
etc. “introduce another cause, besides the
greater or less quantity of labour necessary to produce
commodities, for the variations in their relative
value—this cause is the rise or fall in the value
of labour” (l.c., pp. 25-26).

And how is this proved?

“A rise in the wages of labour cannot
fail to affect unequally, commodities produced under
such different circumstances” (l.c., p. 27).

Namely when capitals of equal size are employed in
different industries, and one capital consists
chiefly of fixed capital and contains only a small amount of
capital “employed in the support of labour”
(l.c., p. 27), whereas in the other capital the proportions
are exactly the reverse. To begin with, it is nonsense
to say that the “commodities” are
affected. He means their values. But how
far are the values affected by these circumstances?
Not at all. In both cases it is the profit which is
affected. The man who, for instance, lays out only
1/5 of his capital in variable
capital—provided wages and the rate of surplus-labour
are constant—can only produce [a surplus-value of] 4
on 100, if the rate of surplus-value is 20 per cent.
On the other hand, another man, who lays out
4/5 in variable capital would produce
a surplus-value of 16 [on 100]. For in the first
example the capital laid out in wages is
100/5 = 20 and
1/5 of 20 or 20 per cent is 4.
And in the second example, the capital laid out in wages
equals 4/5 × 100 = 80. And
1/5 of 80 or 20 per cent = 16.
In the first example the profit would be 4, in the second
16. The average profit for both would be
(16+4)/2 or 20/2
= 10 per cent. This is actually the case to which
Ricardo refers. Thus if they both sold at
cost-prices—and this Ricardo assumes—then
they would each sell their commodity at 110. Supposing
wages rose, for example, by 20 per cent. Where
previously a worker cost £ 1, he now costs £ 1
4s, or 24s. As before, the first [man] still has to
lay out £80 in constant capital (since Ricardo leaves
raw materials out of account here, we can do the same) and
for the 20 workers whom he employs, he has to lay out
80s. that is £ 4 in addition to the £ 20. His
capital therefore now amounts to £ 104 and, since the
workers are producing a smaller surplus-value instead of a
larger one, he is only left with £ 6 profit out of his
£ 110. £ 6 on £104 is 5
10/13 per cent. The other man,
however, who employs 80 workers, would have to pay out an
additional 320s., i.e., £16. Thus he would have to lay
out £116. If he were to sell at £110, he would
consequently make a loss of £6 instead of a
gain. This, however, is only the case because the average
profit has already modified the relation between the labour
he has laid out and the surplus-value which he himself
produces.

Instead therefore of investigating the important problem:
what changes have to take place in order that the one who
lays out £80 of his capital of 100 in wages does not
make four times as much profit as the other who only lays
out 20 of his £100 in wages, Ricardo examines the
subsidiary question of how it is that after this great
difference has been levelled out, i.e., with a given rate of
profit, any alteration of the rate of profit, due to rising
wages for instance, would affect the man who employs many
workers with his £100 far more than the man who
employs few workers with his £100, and
hence—provided the rate of profit is the
same—the commodity prices of the one must rise and of
the other must fall, if the rate of profit—or the
cost-prices—is to remain the same.

Ricardo’s first illustration has absolutely nothing to do
with “ a rise in the value of
labour” although he originally stated that the
whole of the variation in “the relative values”
were to arise from this cause. This is the
example:

“Suppose two men employ one hundred
men each for a year in the construction of two machines, and
another man employs the same number of men in cultivating
corn, each of the machines at the end of the year will be of
the same value as the corn, for they will each be produced
by the same quantity of labour. Suppose one of the
owners of one of the machines to employ it, with the
assistance of one hundred men, the following year in making
cloth, and the owner of the other machine to employ his
also, with the assistance likewise of one hundred men, in
making cotton goods, while the farmer continues to employ
one hundred men as before in the cultivation of corn.
During the second year they will all have employed the same
quantity of labour”

<in other words they will have laid out the same
capital in wages, but they will by no means have employed
the same quantity of labour>

“but the goods and machine together
| of the clothier, and
also of the cotton manufacturer, will be the result of the
labour of two hundred men, employed for a year; or, rather,
of the labour of one hundred men for two years; whereas the
corn will be produced by the labour of one hundred men for
one year, consequently if the corn he of the value of
£ 500 the machine and cloth of the clothier together,
ought to he of the value of £1,000 and the machine and
cotton goods of the cotton manufacturer, ought to be also
of twice the value of the corn. But they will
be of more than twice the value of the corn, for the
profit of the clothier’s and cotton manufacturer’s capital
for the first year has been added to their capitals,
while that of the farmer has been expended and
enjoyed. On account then of the different degrees
of durability of their capitals, or, which is the same
thing, on account of the time which must elapse
before one set of commodities can be brought to market, they
will be valuable, not exactly in proportion to the
quantity of labour bestowed on them,—they will not
he as two to one, but something more, to compensate for
the greater length of time which must elapse before the most
valuable can be brought to market. Suppose that
for the labour of each workman £50 per annum were
paid, or that £5,000 capital were employed and
profits were 10 per cent, the value of each of the
machines as well as of the corn, at the end of the first
year, would be £ 5,500. The second year the
manufacturers and farmers wilt again employ £5,000
each in support of labour, and will therefore again sell
their goods for £5,500; but the men using the
machines, to be on a par with the farmer, must not
only obtain £5,500, for the equal capitals of
£5,000 employed on labour, but they must obtain a
further sum of £550; for the profit on
£5,500, which they have invested in machinery,
and consequently” (because actually, an
equal annual rate of profit of 10 per cent is assumed as
a necessity and a law) “their goods must sell for
£6,050”[l.c., pp. 29-30].

<That is, average prices or cost-prices
different from the values of the commodities come into
being as a result of the average profit—the general
rate of profit presupposed by Ricardo.>

“Here then are capitalists employing
precisely the same quantity of labour annually on the
production of their commodities, and yet the goods they
produce differ in value on account of the different
quantities of fixed capital, or accumulated labour,
employed by each respectively” (l.c., pp. 30-31).

<Not on account of that, but on account of both those
ragamuffins having the fixed idea that both of them must
draw the same spoils from “the support they have given
to labour”; or that, whatever the respective
values of their commodities, those commodities must
be sold at average prices, giving each of them the
same rate of profit.>[b]

“The cloth and cotton goods are of
the same value, because they are the produce of equal
quantities of labour, and equal quantities of fixed capital;
but corn is not of the same value” <should
read cost-price> “as these commodities, because
it is produced, as far as regards fixed capital, under
different circumstances” (l.c., p. 31).

This exceedingly clumsy illustration of an exceedingly
simple matter is so complicated in order to avoid saying
simply: Since capitals of equal size, whatever the ratio of
their organic components or their period of circulation,
yield profits of equal size—which would be
impossible if the commodities were sold at their
values etc.—there exist cost-prices which
differ from the values of commodities. And this is
indeed implied in the concept of a general rate of
profit.

Let us examine this complicated example and reduce it to
its genuine dimensions, which are hardly
“complicated”. And for this purpose let us
begin from the end and note at the outset, in order to reach
a clearer understanding, that Ricardo
“presupposes” that the farmer and the cotton
manufacturer spend nothing on raw material, that,
furthermore, the farmer does not lay out any capital for
instruments of labour and, finally, that no part of the
fixed capital laid out by the cotton-manufacturer enters
into his product as wear and tear. Though all these
assumptions are absurd, they do not in themselves affect the
illustration.

Having made these assumptions, and starting Ricardo’s
example from the end, it runs as follows: The farmer lays
out £5,000 in wages; the cotton fellow lays out
£5,000 in wages and £5,500 in machinery.
The first therefore spends £5,000 and the second
£10,500; the second | thus spends as much again as
the first. If therefore both are to make a profit of
10 per cent, the farmer must sell his commodity at £
5,500 and the cotton fellow his at £6,050 (since it
has been assumed that no part of the £5,500 expended
in machinery forms part of the value of the product as wear
and tear). One absolutely cannot conceive what Ricardo
intended to elucidate in this example, apart from the fact
that the cost-prices of commodities—in so far as they
are determined by the value of the outlay embodied in the
commodities plus the same annual rate of
profit—differ from the values of the
commodities and that this difference arises because the
commodities are sold at prices that will yield the same
rate of profit on the capital advanced; in short, that
this difference between cost-prices and values
is identical with a general rate of profit.
Even the difference between fixed capital and circulating
capital which he introduces here is, in this example, sheer
humbug. Since if, for instance, the additional
£5,500 which the cotton spinner employs, consisted of
raw materials, while the farmer did not require any seeds
etc., the result would be exactly the same. Neither
does the example show, as Ricardo asserts, that

“the goods they” (the
cotton-manufacturer and the farmer) “produce differ in
value on account of the different quantities of fixed
capital, or accumulated labour, employed by each
respectively” (l.c., p. 31).

For according to his assumption, the cotton-manufacturer
employs a fixed capital of £5,500 and the farmer nil;
the one employs fixed capital, the other does not. By
no means do they, therefore, employ it “in different
quantities”, any more than one could say that, if one
person eats meat and the other eats no meat, they consume
meat “in different quantities”. On the
other hand it is correct (though very wrong to introduce the
term surreptitiously with an “or”) that they
employ “accumulated labour”, i.e., materialised
labour, “in different quantities”, namely, one
to the amount of £10,500 and the other only
£5,000. However, the fact that they employ
“different quantities of accumulated labour”
only means that they lay out “different quantities of
capital” in their respective trades, that the amount
of profit is proportionate to this difference in the size of
the capitals they employ, because the same rate of
profit is assumed, and that, finally, this difference in
the amount of profit, proportionate to the size of the
capitals, is expressed, represented, in the respective
cost-prices of the commodities. But whence the
clumsiness in Ricardo’s illustration?

“Here then are capitalists employing
precisely the same quantity of labour annually on the
production of their commodities, and yet the goods they
produce differ in value” (l.c., pp. 30-31).

This means that they do not employ the same quantity of
labour—immediate and accumulated labour taken
together—but they do employ the same quantity of
variable capital, capital laid out in wages, the same
quantity of living labour. And since money exchanges
for accumulated labour, i.e., existing commodities, in the
form of machines etc., only according to the law of
commodities, since surplus-value comes into being
only as the result of the appropriation without payment of a
part of the living labour employed—it is clear (since,
according to the assumption, no part of the machinery enters
into the commodity as wear and tear) that both can only make
the same profit if profit and surplus-value are
identical. The cotton-manufacturer would have to sell
his commodity for £5,500, like the farmer, although he
lays out more than twice as much capital. And even if
the whole of his machinery passed into the commodity, he
could only sell his commodity for £11,000; he would
make a profit of less than 5 per cent, while the farmer
makes 10. But with these unequal profits, the
farmer and the manufacturer would have sold the commodities
at their values, provided that the 10 per cent made
by the farmer represented actual unpaid labour embodied in
his commodity. If therefore, they sell their
commodities at an equal profit, then this must be due to one
of two things: either the manufacturer arbitrarily adds 5
per cent on to his commodities and then the commodities of
the manufacturer and the farmer, taken together, are sold
above their value; or the actual surplus-value which
the farmer makes is, for instance, 15 per cent and both add
the average of 10 per cent on to their commodity. In
this case, although the cost price of the respective
commodity is either above or below its value, both
commodities taken together are sold at their
value and the equalisation of the profits is itself
determined by the total surplus values they contain.
Here, in Ricardo’s above proposition, when correctly
modified, lies the truth, [namely] that capitals of equal
size, containing [different] proportions of variable to
constant capital, must result in commodities of unequal
values and thus yield different profit; the levelling out of
these profits must therefore result in cost-prices
which differ from the values of the commodities.

“Here then are capitalists employing
precisely the same quantity of” (immediate, living)
“labour annually on the production of the commodities,
and yet the goods they produce differ in value” (i.e.,
have cost-prices different from their values) “on
account of the different quantities of …accumulated
labour employed by each respectively” [l.c., pp.
30-31.]

But the idea foreshadowed in this passage is never
clearly stated by Ricardo, It only explains the meanderings
and obvious fallaciousness of the illustration, which up to
this point had nothing to do with the “different
quantities of fixed capital employed”.

Let us now go further back in the analysis. In the
first year, the manufacturer builds a machine with a hundred
men; the farmer, meanwhile, produces corn, also with a
hundred men. In the second year the manufacturer uses
the machine to manufacture cotton, for which he again
employs a hundred men. The farmer, on the other hand,
again employs a hundred men for the cultivation of
corn. Suppose, says Ricardo, the value of corn is
£500 per annum. Let us assume that the unpaid
labour contained therein equals 25 per cent [of the labour
paid for], i.e., [of] 400 = 100. Then at the end of
the first year, the machine would also be worth £500,
of which £400 would be paid labour and £100 the
value of the unpaid labour. Let us | assume that by the end of the
second year, the whole of the machine has been used up, has
passed into the value of the cotton. In fact Ricardo
assumes this, in that, at the end of the second year, he
compares not only the value of the cotton goods, but
“the value of the cotton goods and the machine”
with “the value of the corn ”[l.c., p. 29].

Well then. At the end of the second year, the value
of the cottons must be equal to £1,000, namely,
£500 the value of the machine, and £500 the
value of the newly-added labour. The value of the
corn, on the other hand, is £500, namely, £400
the value of the wages and £100 unpaid labour.
So far, there is nothing in this case which contradicts
the law of value. The cotton-manufacturer makes a
profit of 25 per cent just as the corn-manufacturer
does. But the commodities of the former equal
£1,000 and those of the latter equal £500,
because the former commodity embodies the labour of 200 men
and the latter the labour of only 100 in each year.
Furthermore, the £100 profit (surplus-value) , which
the cotton-manufacturer has made on the machine in the first
year—by absorbing 1/5 of the
labour of the workers who constructed it, without paying for
it—are only realised for him in the second year, since
it is only then that he realises in the value of the cotton,
simultaneously the value of the machine. But now we
come to the point. The cotton-manufacturer sells for
more than £1,000, i.e., at a higher value than his
commodity has, while the farmer sells his corn at
£500, thus, according to our assumption, at its
value. If, therefore, there were only these two people
to exchange with one another, the manufacturer obtaining
corn from the farmer and the farmer cotton from the
manufacturer, then it would amount to the same as if the
farmer sold his commodity below its value, making
less than 25 per cent [profit] and the manufacturer sold his
cotton above its value. Let us do without the
two capitalists (the cloth-man and the cotton-man) whom
Ricardo introduces here quite superfluously, and let us
modify his example by only referring to the
cotton-manufacturer. Ricardo’s double calculation is
of no value at all to the illustration at this point.
Thus:

“But they” (the cottons)
“will be of more than twice the value of the
corn, for the profit on the …
cotton-manufacturer’s capital for the first year has
been added to their capitals, while that of the farmer has
been expended and enjoyed” [l.c., p. 30].

(This latter bourgeois extenuating phrase is here quite
meaningless from a theoretical standpoint. Moral
considerations have nothing to do with the matter.)

“On account then of the different
degrees of durability of their capitals, or, which is
the same thing, on account of the time which must elapse
before one set of commodities can be brought to market,
they will he valuable, not exactly in proportion to the
quantity of labour bestowed on them,—they will not be
as two to one, but something more, to compensate for the
greater length of time which must elapse before the most
valuable can be brought to market” (l.c.,
p. 30).

If the manufacturer sold the commodity at its value, then
he would sell it at £1,000, twice the price of corn,
because it embodies twice as much labour, £500 of
accumulated labour in the machinery (£100 of which he
has not paid for) and £500 labour employed in the
production of cotton, 100 of which again he has not paid
for. But he calculates like this: the first year I
laid out £400 and by exploiting the workers, I
produced a machine with this, which is worth
£500. I thus made a profit of 25 per cent.
The second year I laid out £900, namely, £500 in
the said machine and again £400 in labour. If I
am again to make 25 per cent, I must sell the cotton at
£1,125, i.e., £125 above its value.
For this £125 does not represent any labour contained
in the cotton, neither labour accumulated in the first year
nor labour added in the second. The aggregate amount
of labour contained in the cotton only amounts to
£1,000. On the other hand, suppose the two
exchange with one another, or that half the capitalists find
themselves in the position of the cotton-manufacturer and
the other half in the position of the farmer. How are
the first half to be paid £ 125? From what
fund? Obviously only from the second
half. But then it is clear that this second half
does not make a profit of 25 per cent, Thus the first half
would cheat the second under the pretext of a general
rate of profit, while, in fact, the rate of profit would
be 25 per cent for the manufacturer and below 25 per cent
for the farmer. It must, therefore, come about in a
different way.

In order to make the illustration clearer and more
accurate, let us suppose the farmer uses £900 in the
second year. Then, with a profit of 25 per cent, he
has made £100 on the £400 laid out in the
first year, and £225 in the second, altogether
£325. As against this, the manufacturer makes 25
per cent on the £400 in the first year, but in the
second only £100 on £900, i.e., only 11
1/9 per cent (since only the
£400 laid out in labour yield surplus-value, whereas
the £500 in machinery yield none). Or let us
suppose the farmer lays out £400 again, then he has
made 25 per cent in the first year as well as in the second;
which taken together is 25 per cent or £200 on an
outlay of £800 in two years. As against this,
the manufacturer will have made 25 per cent in the first
year and 11 1/9 in the second; i.e.,
£200 on an outlay of £ 1,300 in two years which
amounts to 15 5/13 per cent. If
this were levelled out, the manufacturer would receive 20
5/26 per cent and so would the
farmer. In other words, this would be the average
profit. This would result in [a price of] less than
£500 for the farmer’s commodity and more than
£1,000 for the manufacturer’s commodity.

| At all events, the
manufacturer here lays out £400 in the first year and
£900 in the second, while the farmer lays out only
£400 on each occasion. If the manufacturer
instead of producing cotton had built a house (if he were a
builder) then at the end of the first year, the unfinished
house would embody £500 and he would have to spend a
further £400 on labour in order to complete it.
The farmer, however, whose capital turned over within the
year, can recapitalise a part, say 50, of his £100
profit and spend it again on labour, which the manufacturer,
in the supposed case, cannot do. If the rate of profit
is to be the same in both cases, then the commodity
of one must be sold above its value and that of the
other below its value. Since competition
strives to level out values into cost-prices, this is what
happens.

But it is incorrect to say, as Ricardo does, that here a
variation in the relative values takes place “on
account of the different degrees of durability of
capitals” (p. 30) or “on account of the time
which must elapse before one set of commodities can be
brought to market” (p. 30). It is, rather, the
adoption of a general rate of profit, which despite
the different values brought about by the circulation
process, gives rise to equal cost-prices which are
different from values, for values are determined only
by labour-time.

Ricardo’s illustration consists of two examples.
The durability of capital, or the character of
capital as fixed capital, does not enter into the second
example at all. It only deals with capitals of
different size, but of which the same amount is laid out in
wages, as variable capital, and where profits are to be
equal, although the surplus-values and values must be
different.

Neither does durability enter into the first
example. It is concerned with the longer
labour-process—the longer period during which the
commodity has to remain within the sphere of production,
before it becomes a finished commodity and can enter
into circulation. In this example of Ricardo the
manufacturer also employs more capital in the second year
than the farmer although he employs the same amount of
variable capital in both years. The farmer, however,
could employ a greater variable capital in the second year,
because his commodity remains within the labour-process for
a shorter period and is converted more quickly into
money. Besides, that part of profit which is consumed
as revenue, is already available to the farmer at the end of
the first year, but to the manufacturer only at the end of
the second. The latter must therefore spend an
additional amount of capital for his keep which he
advances to himself. Incidentally, whether in
the second case a compensation can take place and profits
can be equalised depends here entirely on the degree
to which the profits of the capitals which are turned over
in one year are recapitalised, in other words, on the actual
amount of profits produced. Where there is nothing,
there is nothing to equalise. Here the capitals again
produce values, hence surplus-values, hence profits not in
proportion to the size of the capital; If profits are to be
proportionate to their size, then there must be
cost-prices different from the values.

Ricardo gives a third illustration, which, however, is
again exactly the same as the first example of the
first illustration and contains nothing new at all.

“Suppose I employ twenty men at an
expense of £1,000 for a year in the production of a
commodity, and at the end of the year I employ twenty men
again for another year, at a further expense of £1,000
in finishing or perfecting the same commodity, and that I
bring it to market at the end of two years, if profits be 10
per cent, my commodity must sell for £2,310;
for I have employed £1,000 capital for one
year, and £2,100 capital for one year more.
Another man employs precisely the same quantity of labour,
but he employs it all in the first year; he employs forty
men at an expense of £2,000, and at the end of the
first year he sells it with 10 per cent profit, or
for £2,200. Here then are two commodities having
precisely the same quantity of labour bestowed on them, one
of which sells for £2,310—the other for
£2,200. This case appears to differ from
the last, but is, in fact, the same” (l.c.,
pp. 34-35).

It is not only the same “in fact”, but
“in appearance” too, except that in the one case
the commodity is called “machine” and here
simply “commodity”. In the first example,
the manufacturer laid out £400 in the first year and
£900 in the second. This time he lays out
£1,000 in the first and £2,100 in the
second. The farmer laid out £400 in the first
and £400 in the second. This time, the second
man lays out £2,000 in the first year and nothing in
the second. That is the whole difference. In
both cases, however, the fable turns on the fact that one of
the men lays out in the second year the whole of the product
of the first (including surplus-value) plus an additional
sum.

The clumsiness of these examples shows that Ricardo is
wrestling with a difficulty which he does not understand and
succeeds even less in overcoming. The clumsiness
consists in this: The first example of the first
illustration is meant to bring in the durability of
capital; it does nothing of the sort; Ricardo himself has
made this impossible because he does not let any part
of fixed capital enter into the commodity as wear and tear,
thus excluding the very factor through which the peculiar
mode of circulation of fixed capital becomes
evident. He merely demonstrates that as a consequence
of the longer duration of the labour-process, a
greater capital is employed than where the
labour-process takes a shorter time. The third example
is supposed to illustrate something different, but in
reality illustrates the same thing. The second
example of the first |
illustration, however, is intended to show what differences
arise as a result of different ratios of fixed
capital. Instead it only shows the difference brought
about by two capitals of unequal size, although the
same amount of capital is laid out in wages. And,
furthermore, the manufacturer operates without cotton and
yarn and the farmer without seeds or implements! The
complete inconsistency, even absurdity, of this illustration
necessarily arises from this underlying lack of clarity.

### [b) Ricardo’s Confusion of Cost-Prices with Value and the Contradictions in His Theory of Value Arising Therefrom. His Lack of Understanding of the Process of Equalisation of the Rate of Profit and of the Transformation of Values into Cost-Prices]

Finally he states the practical conclusions to be drawn
from all these illustrations:

“The difference in value arises in
both cases from the profits being accumulated as
capital, and is only a just compensation” (as
though it were a question of justice here) “for the
time that the profits were withheld” (l.c.,
p. 35).

What does this mean, other than that in a definite
period of circulation, for instance a year, a capital
must yield 10 per cent whatever its specific period of
circulation may be and quite independently of the various
surplus-values which according to the proportion of
their organic component parts capitals of equal size
must produce in different branches of production,
irrespective of the circulation process.

Ricardo should have drawn the following conclusions:

[Firstly:] Capitals of equal size produce
commodities of unequal values and therefore yield
unequal surplus-values or profits, because
value is determined by labour-time, and the amount of
labour-time realised by a capital does not depend on its
absolute size but on the size of the variable capital, the
capital laid out in wages. Secondly: Even
assuming that capitals of equal size produce equal
values (although the inequality in the sphere of
production usually coincides with that in the sphere of
circulation), the period within which they
appropriate equal quantities of unpaid labour and
convert these into money, still varies in
accordance with their turnover period. Thus
arises a second difference in the values, surplus-values and
profits which capitals of equal size must yield in
different branches of production in a given period of
time.

Hence, if profits as a percentage of capital are
to be equal over a period, say of a year, so that capitals
of equal size yield equal profits in the same period of
time, then the prices of the commodities must be
different from their values. The sum total of
these cost-prices of all the commodities taken together will
be equal to their value. Similarly the total
profit will be equal to the total surplus-value which all
these capitals yield, for instance, during one year.
If one did not take the definition of value as the basis,
the average profit, and therefore also the
cost-prices, would be purely imaginary and untenable.
The equalisation of the surplus-values in different spheres
of production does not affect the absolute size of this
total surplus-value; but merely alters its
distribution among the different spheres of
production. The determination of this
surplus-value itself, however, only arises out of the
determination of value by labour-time. Without this,
the average profit is the average of nothing, pure
fancy. And it could then equally well be 1,000 per
cent or 10 per cent.

All Ricardo’s illustrations only serve him as a means to
smuggle in the presupposition of a general rate of
profit. And this happens in the first chapter
“On Value”, while wages are supposed to be dealt
with only in the fifth chapter and profits in the
sixth. How from the mere determination of the
“value” of the commodities their
surplus-value, the profit and even a general rate of
profit are derived remains obscure with
Ricardo. In fact the only thing which he proves in the
above illustrations is that the prices of the
commodities, in so far as they are determined by the general
rate of profit, are entirely different from their
values. And he arrives at this difference by
postulating the rate of profit to be law. One
can see that though Ricardo is accused of being too
abstract, one would be justified in accusing him of the
opposite: lack of the power of abstraction, inability, when
dealing with the values of commodities, to forget profits, a
factor which confronts him as a result of competition.

Because Ricardo, instead of deriving the difference
between cost-prices and values from the determination of
value itself, admits that “values” themselves
(here it would have been appropriate to define the concept
of “absolute” or “real value” or
“value” as such) are determined by influences
that are independent of labour-time and that the law of
value is sporadically invalidated by these influences, this
was used by his opponents, such as Malthus, in order to
attack his whole | theory
of value. Malthus correctly remarks that the
differences between the organic component parts of capital
and the turnover periods of capitals in different branches
of production develop simultaneously with the progress of
production, so that one would arrive at Adam Smith’s
standpoint, that the determination of value by labour-time
was no longer applicable to “civilised”
times. (See also Torrens.) On the other
hand his disciples have resorted to the most pitiful
scholastic inventions, to make these phenomena consistent
with the fundamental principle (see [James] Mill and
the miserable McCulloch).

Ricardo does not dwell on the conclusion which
follows from his own illustrations, namely,
that—quite apart from the rise or fall of
wages—on the assumption of constant wages, the
cost-prices of commodities must differ from their values, if
cost-prices are determined by the same percentage of
profit. But he passes on, in this section, to the
influence which the rise or fall of wages exerts on
cost-prices to which the values have already been
levelled out.

The matter is in itself extraordinarily simple.

The farmer lays out £5,000 at 10 per cent; his
commodity equals £5,500. If the profit falls by
1 per cent from 10 to 9, because wages have risen and the
rise in wages has brought about this reduction, then he
continues to sell at £5,500 (since it is assumed that
he lays out the whole of his capital in wages). But of
these £5,500 only £454
14/109 belong to him and not
£500. The capital of the manufacturer consists
of £5,500 for machinery and £5,000 for
labour. As before, the latter £5,000 results in
a product of £5,500, except that now the manufacturer
does not lay out £5,000 but £5,045
95/109 and on this he makes a profit
of only £454 14/109, like the
farmer. On the other hand he can no longer reckon 10
per cent or £550 on his fixed capital of £5,500
but only 9 per cent or £ 495. He will therefore
sell his commodity at £5,995 instead of at
£6,050. Thus, as a result of the rise in wages,
the money price of the farmer’s commodity has remained the
same, while that of the manufacturer has fallen, the value
of the farmer’s commodity compared with that of the
manufacturer has therefore risen. The whole point of
the matter is that if the manufacturer sold his commodity at
the same value as before, he would make a higher profit than
the average, because only the part of his capital that has
been laid out in wages is directly affected by the rise in
wages. This illustration in itself already
assumes cost-prices regulated by an average profit of
10 per cent and differing from the values of
the commodities. The question is, how are these
cost-prices affected by the rise or fall in profit, when the
capitals employed contain different proportion of fixed and
circulating capital. This illustration (Ricardo, l.c.,
pp. 31-32) has nothing to do with the essential question of
the transformation of values into cost-prices.
But it is a nice point because Ricardo in fact demonstrates
here that, if the composition of the capitals were the same,
a rise in wages—contrary to the vulgar
view—would only bring about a lowering of profits
without affecting the values of the commodities; if the
composition of the capitals is unequal, then it will only
bring about a fall in the price of some commodities
instead of—as vulgar opinion maintains—a rise in
the price of all commodities. Here the fall in
the prices of commodities results from a fall in the rate of
profit or, which amounts to the same thing, a rise in
wages. In the case of the manufacturer a large part of
the cost-price of the commodity is determined by the
average profit which he reckons on his fixed capital.
If therefore this rate of profit falls or rises as a result
of the rise or fall in wages, then the price of these
commodities will fall or rise correspondingly—that is
in accordance with that part of the price which results from
the profit calculated upon the fixed capital. The same
applies to “circulating capitals returnable at
distant periods, and vice versa.
(J.R. McCulloch [The Principles of Political Economy,
Edinburgh, 1825, p. 300].) If the capitalists who
employ less variable capital were to continue to chalk up
their fixed capital at the same rate of profit, and add it
to the price of the commodity then their rate of profit
would rise and it would rise in the proportion in which they
employ more fixed capital than those whose capital consists
to a greater extent of variable capital. This would be
levelled out by competition.

“Ricardo,” says Mac.,
“was the first who endeavoured to analyse and discover
the effects of fluctuations in the rate of wages on the
value of commodities, when the capitals employed in their
production were not of the same degree of durability.”
“Ricardo has not only shown that it is impossible for
any rise of wages to raise the price of all
commodities; but…that in many cases a rise of
wages necessarily leads to a fall of prices, and
a fall of wages to a rise of prices”
(l.c., pp. 298-99).

Ricardo proves his point by firstly postulating
cost-prices regulated by a general rate of
profit.

Secondly: “There can be no rise in the value of
labour without a fall of profits”. (David
Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, p. 31.)

Thus already in Chapter I “On Value”,
those laws are presupposed, which in chapters V and VI
“On Wages” and “On Profits” should
be deduced from the Chapter “On
Value”. Incidentally, | Ricardo concludes quite
wrongly, that because “there can be no rise in the
value of labour without a fall of profits”, there can
be no rise of profits without a fall in the value of
labour. The first law refers to surplus-value.
But since profit equals the proportion of surplus-value to
the total capital advanced, profit can rise though the value
of labour remains the same, if the value of constant capital
falls. Altogether Ricardo mixes up surplus-value and
profit. Hence he arrives at erroneous laws on profit
and the rate of profit.

The general conclusion of the last illustration is as
follows:

“The degree of alteration in the
relative value of goods, on account of a rise or fall of
labour” (or, which amounts to the same thing, rise or
fall in the rate of profit), “would depend on the
proportion which the fixed capital bore to the whole capital
employed. All commodities which are produced by very
valuable machinery, or in very valuable buildings, or which
require a great length of time before they can be brought to
market, would fall in relative value, while all those which
were chiefly produced by labour, or which would be speedily
brought to market would rise in relative value” (l.c.,
p. 32).

Again Ricardo comes to the one point with which he is
really concerned in his investigation. These
variations in the cost-prices of commodities resulting from
a rise or fall in wages are insignificant compared with
those variations in the same cost-prices which are brought
about by changes in the values of commodities, that is
changes in the quantity of labour employed in their
production (Ricardo is far from expressing this truth in
these adequate terms). One can therefore, by and
large, “abstract” from this and, accordingly,
the law of value remains virtually correct. (He should
have added that the cost-prices remain unintelligible
without values determined by labour-time.) This is the
true course of his investigation. In fact it is clear
that despite the transformation of the values of commodities
into cost-prices, the latter having been assumed, a
change in cost-prices—in so far as it does not
arise from a permanent fall or rise, a permanent alteration,
in the rate of profit which can only establish itself in the
course of many years—can only and solely be caused by
a change in the values of commodities, in the
labour-time necessary for their production. {And these
cost-prices must not be confused with market-prices:
they are the average market-prices of the commodities in the
different branches of production. Market-price
itself already includes an average in so far as commodities
of the same sphere are determined by the prices of
those commodities which are produced under the mean,
average conditions of production of this sphere.
By no means under the worst conditions, as Ricardo
assumes with rent, because the average demand is related to
a certain price, even with corn. A certain amount of
the supply is therefore not sold above this
price. Otherwise the demand would fall. Those
whose conditions of production are not average but
below average, must therefore often sell their
commodity not only below its value but below its cost
price.}

“The reader, however, should remark,
that this cause of the variation of commodities” (this
should read variations of cost-prices or, as he calls
them, relative values of commodities) “is
comparatively slight in its effects Not so
with the other great cause of the variation in the value of
commodities, namely, the increase or diminution in the
quantity of labour necessary to produce them…An
alteration in the permanent rate of profits, to any great
amount, is the effect of causes which do not operate but in
the course of years; whereas alterations in the quantity of
labour necessary to produce commodities, are of daily
occurrence. Every improvement in machinery, in tools,
in buildings, in raising the raw material, saves labour, and
enables us to produce the commodity to which the improvement
is applied with more facility, and consequently its
value alters. In estimating, then, the causes
of the variations in the value of commodities, although it
would be wrong wholly to omit the consideration of the
effect produced by a rise or fall of labour, it would be
equally incorrect to attach much importance to
it…“ (l.c., pp. 32-33).

He therefore takes no further account of this.

The whole of this Section IV of Chapter I “On
Value” is so extraordinarily confused, that,
although Ricardo announces at the start that he intends to
consider the variations in the values of
commodities brought about by the rise or fall in
wages in conjunction with different composition of
capital, he actually does this only occasionally. In
fact, he fills the major part of Section IV with
illustrations which prove that, quite independently
of the rise or fall of wages—he himself assumes
that wages remain constant—the postulation
| of a general rate of
profit must result in cost-prices which differ from the
values of the commodities and, moreover, that this does not
even depend on the difference [in the proportion] of fixed
and circulating capital. He forgets this again at the
end of the section.

He announces the subject of his inquiry in Section IV
with the words:

“This difference in the degree of
durability of fixed capital, and this variety in
the proportion in which the two sorts of capital may be
combined, introduce another cause, besides the
greater or less quantity of labour necessary to produce
commodities, for the variations in their relative
value—this cause is the rise or fall in the value
of labour” (l.c., pp. 25-26).

In fact, he shows by his illustrations, in the first
place, that it is only the general rate of profit
which enables the different combinations of types of capital
(namely, variable and constant etc.) to differentiate the
prices of commodities from their values, that therefore the
cause of those variations is the general rate of
profit and not the value of labour, which is assumed to be
constant. Then—only in the second place—he
assumes cost-prices already differentiated from values as a
result of the general rate of profit and he examines how
variations in the value of labour affect these. Number
1, the main point, he does not investigate; he loses sight
of it altogether and he closes the section as he began
it:

“…it being shown in this
section that without any variation in the quantity of
labour, the rise of its value merely will occasion a
fall in the exchangeable value of those goods, in the
production of which fixed capital is employed; the
larger the amount of fixed capital, the greater will be the
fall” (l.c., p. 35).

And in the following Section V (Chapter I) he continues
on the same lines, in other words, he only investigates how
the cost-prices of commodities can be altered by a
variation in the value of labour, or wages,
not when the proportion of fixed and circulating capitals is
different in two capitals of equal size employed in two
different spheres of production, but when there is
“unequal durability of the capital”[c] or “unequal
rapidity with which it is returned to its
employer”[d] [l.c., p. 36]. The correct
surmise implied in Section IV, regarding the difference
between cost-prices and values brought about by the
general rate of profit is here no longer noticeable.
Only a secondary question is examined here, namely, the
variation in the cost-prices themselves. This
section, therefore, is in fact of hardly any theoretical
interest, apart from the occasional mention of differences
in the form of capital arising from the circulation
process.

“In proportion as fixed capital is
less durable, it approaches to the nature of circulating
capital. It will be consumed and its value
reproduced in a shorter time, in order to preserve the
capital of the manufacturer” (l.c., p. 36).

Thus the lesser durability and the difference between
fixed and circulating capital in general, are reduced to the
difference in the period of reproduction. This
is certainly a factor of decisive importance. But by
no means the only one. Fixed capital enters wholly
into the labour-process and only in successive stages and by
instalments into the process of creating value. This
is another major distinction in their form of
circulation. Furthermore: fixed capital
enters—necessarily enters—only as
exchange-value into the process of circulation, while
its use-value is consumed in the labour-process and
never goes outside it. This is another important
distinction in the form of circulation. Both
distinctions in the form of circulation also concern the
period of circulation; but they are not identical with the
degrees [of durability of fixed capital] and the differences
[in the period of circulation].

Less durable capital constantly requires a greater
quantity of labour,

“to keep it in its original state of
efficiency; but the labour so bestowed may be considered as
really expended on the commodity manufactured, which must
bear a value in proportion to such labour”.
(l.c., pp. 36-37.)”…if the wear and tear of the
machine were great, if the quantity of labour requisite to
keep it in an efficient state were that of fifty men
annually, I should require an additional price for my goods,
equal to that which would be obtained by any other
manufacturer who employed fifty men in the production of
other goods, and who used no machinery at all. But a
rise in the wages of labour would not equally affect
commodities produced with machinery quickly consumed, and
commodities produced with machinery slowly consumed, In the
production of the one, a great deal of labour would be
continually transferred to the commodity
produced…” [l.c., p. 37].

<but he is so occupied with his general rate of
profit, that he does not see that thereby a relatively great
deal of surplus-labour would be continually transferred to
the commodity>

“in the other very little would be so
transferred” [l.c., p. 37].

<Hence very little surplus-labour, hence much less
[surplus]-value, if the commodities exchanged according to
their values.>

“Every rise of wages, therefore, or,
which is the same thing, |
every fall of profits, would lower the relative value of
those commodities which were produced with a capital of a
durable nature, and would proportionally elevate those which
were produced with capital more perishable. A fall of
wages would have precisely the contrary effect” (l.c.,
pp. 37-38).

In other words: The manufacturer who employs fixed
capital of less durability employs relatively less fixed
capital and more capital expended in wages, than the one who
employs capital of greater durability. This case is
therefore identical with the previous one, illustrating how
a variation in wages affects capitals, one of which consists
of relatively, proportionately, more fixed capital than the
other, There is nothing new [here].

What Ricardo further says about machinery on
pp. 38-40 should be held over until we come to Chapter XXXI
“On Machinery”.

It is curious how Ricardo, at the end, almost expresses
the correct idea in a passing phrase only to let it
go again and after touching upon it in the passages we are
about to quote, returns again to his dominating idea of the
effect of a change in the value of labour on cost-prices and
finally concludes the investigation with this secondary
consideration.

The passage containing the allusion is the following:

“It will be seen, then, that in the
early stages of society, before much machinery or durable
capital is used, the commodities produced by equal
capitals will be nearly of equal value, and will
rise or fall only relatively to each other on account of
more or less labour being required for their
production” [l.c., p. 40].

<The final clause is badly worded; it refers moreover
not to value but to commodities, and is meaningless,
unless it refers to their prices; for to say that
values fall in proportion to labour-time means that
values fall or rise as they fall or rise.>

“but after the introduction of these
expensive and durable instruments, the commodities
produced by the employment of equal capitals will be of very
unequal value; and although they will still be liable to
rise or fall relatively to each other, as more or less
labour becomes necessary to their production, they will be
subject to another, though a minor variation, also, from the
rise or fall of wages and profits. Since goods which
sell for £5,000 may be the produce of a capital equal
in amount to that from which are produced other goods which
sell for £10,000, the profits on their manufacture
will be the same; but those profits would be
unequal, if the prices of the goods did not vary
with a rise or fall in the rate of profits”
(l.c., pp. 40-41).

In fact Ricardo says:

Capitals of equal size produce commodities of
equal values, if the ratio of their organic component
parts is the same; if equally large portions of them
are expended on wages and on means of production. The
same quantities of labour, therefore equal values (apart
from the difference which might arise through the
circulation process) are then embodied in their
commodities. On the other hand, capitals of equal
size produce commodities of very unequal value,
when their organic composition is different, namely, when
the proportion between the part existing as fixed capital
and the part laid out in wages differs considerably.

Firstly, only a part of the fixed capital enters into the
commodity as a component part of value, consequently the
magnitude of their values will greatly vary
according to whether much or little fixed capital is
employed in the production of the commodity. Secondly,
the part laid out in wages—calculated as a percentage
on capital of equal size—is much smaller, therefore
also the total [newly added] labour embodied in the
commodity, and consequently the surplus-labour (given a
working-day of equal length) which constitutes the
surplus-value. If, therefore, these capitals of equal
size—whose commodities are of unequal values
and these unequal values contain unequal
surplus-values, and therefore unequal
profits—if these capitals because of their equal
size are to yield equal profits, then the prices of
commodities (as determined by the general rate of profit
on a given outlay) must be very different from the values
of the commodities. Hence it follows, not that the
values have altered their nature, but that the prices
are different from the values. It is all the
more surprising that Ricardo did not arrive at this
conclusion, for he sees that even if one presupposes
cost-prices determined by the general rate of profit, a
change in the rate of profit (or rate of wages) must change
these cost-prices, so that the rate of profit | in the different spheres of
production may remain the same. How much more
therefore must the establishment of a general rate of profit
change unequal values since this general rate of
profit is in fact nothing other than the levelling out
of the different rates of surplus-value in different
commodities produced by equal capitals.

Having thus, if not set forth and comprehended, at any
rate virtually demonstrated, the difference between cost and
value, cost-prices and values of commodities, Ricardo ends
with the following sentence:

“Mr. Malthus appears to think that it
is a part of my doctrine, that the cost and
value of a thing should be the same;—it
is, it he means by cost, ‘cost of
production’ including profits” (l.c., p. 46,
note). (That is, outlay plus profit as determined by
the general rate of profit.)

With this erroneous confusion of cost-prices and values,
which he has himself refuted, he then proceeds to consider
rent.

With regard to the influence of the variations in the
value of labour upon the cost-price of gold, Ricardo says
the following in Section VI, Chapter I:

“May not gold be considered as a
commodity produced with such proportions of the two kinds of
capital as approach nearest to the average quantity employed
in the production of most commodities? May not these
proportions be so nearly equally distant from the two
extremes, the one where little fixed capital is used, the
other where little labour is employed, as to form a just
mean between them?” (l.c., p. 44).

This is far more applicable to those commodities into
whose composition the various organic constituents enter in
the average proportion, and whose period of circulation and
reproduction is also of average length. For these,
cost-price and value coincide, because for them, and only
for them, average profit coincides with their actual
surplus-value.

As inadequate as sections IV and V of Chapter I appear in
their consideration of the influence of the variations in
the value of labour on “relative values”,
theoretically a secondary matter compared with the
transformation of values into cost-prices through the
average rate of profits, so important is the conclusion
which Ricardo draws from this, thereby demolishing one of
the major errors that had persisted since Adam Smith,
namely, that the raising of wages, instead of reducing
profits, raises the prices of commodities. This is
indeed already implied in the very concept of values
and is in no way altered by the transformation of values
into cost-prices, since this, in any case, only affects the
distribution of the surplus-value made by the total
capital among the various branches of production or
different capitals in different spheres of production.
But it was important that Ricardo stressed this point and
even proved the opposite to be the case. He is
therefore justified in saying in Section VI, Chapter I:

“Before I quit this subject, it may
be proper to observe, that Adam Smith, and all the writers
who have followed him, have, without one exception that I
know of, maintained that a rise in the price of labour would
be uniformly followed by a rise in the price of all
commodities” [l.c., p. 45].

<This corresponds to Adam Smith’s second explanation
of value, according to which it is equal to the quantity of
labour a commodity can purchase.>

“I hope I have succeeded in showing
that there are no grounds for such an opinion and that only
those commodities would rise which had less fixed capital
employed upon them than the medium in which price was
estimated,” (here relative value is equivalent to
the expression of the value in money), “and that all
those which had more, would positively fall in price when
wages rose. On the contrary, if wages fell, those
commodities only would fall, which had a less proportion of
fixed capital employed on them, than the medium in which
price was estimated; all those which had more, would
positively rise in price” (l.c., p. 45).

With regard to money prices this seems
wrong. When gold rises or falls in value, from
whatever causes, then it does so to the same extent for all
commodities which are reckoned in gold. Since it thus
represents a relatively unchangeable medium despite its
changeability, it is not at all clear how any relative
combination of fixed capital and circulating capital in
gold, compared with commodities, can bring about a
difference. But this is due to Ricardo’s false
assumption that money, in so far as it serves as a
medium of circulation, exchanges as a commodity for
commodities. Commodities are assessed in gold before
it circulates them. Supposing wheat were the medium
instead of gold. If, for example, consequent upon a
rise in wages, wheat as a commodity into which enters more
than the average variable instead of constant capital, were
to rise relatively in its price of production, then all
commodities would be assessed in wheat of higher
“relative value”. The commodities into
which more fixed capital entered, would be expressed in less
wheat than before, not because their specific price had
fallen compared with wheat but because their price had
fallen in general. A commodity which contained just as
much [living] labour—as against accumulated
labour—as wheat, would show its rise [in price] by
being expressed in more wheat | than a commodity whose price
had fallen as compared with wheat. If the same causes
which raised the price of wheat, raised, for example, the
price of clothes, then although the clothes would not be
expressed in more wheat than previously, those
[commodities], whose price had fallen compared with wheat,
for instance cotton, would be expressed in less. Wheat
would be the medium in which the difference in the price of
cotton and clothes would be expressed.

But what Ricardo means is something different. He
means that: because of a rise in wages, wheat has risen as
against cotton but not as against clothes. Thus
clothes would exchange for wheat at the old price, whereas
cottons would exchange against wheat at the higher
price. In itself, the assumption that variations in
the price of wages in England, for instance, would alter the
cost-price of gold in California where wages have not risen,
is utterly absurd. The levelling out of values
by labour-time and even less the levelling out of
cost-prices by a general rate of profit does not take
place in this direct form between different countries.
But take even wheat, a home product. Say that the
quarter of wheat has risen from 40s. to 50s., i.e., by 25
per cent. If the dress has also risen by 25 per cent,
then it is worth 1 quarter of wheat as before. If the
cotton has fallen by 25 per cent, then the same amount of
cotton which was previously worth 1 quarter is now only
worth 6 bushels of wheat. And this expression in wheat
represents exactly the ratio of the prices of cotton and
clothes, because they are being measured in the same
medium, in 1 quarter wheat.

Moreover, this notion is absurd in another way too.
The price of the commodity which serves as a measure
of value and hence as money, does not exist at all, because
otherwise, apart from the commodity which serves as money I
would need a second commodity to serve as money—a
double measure of values. The relative value of money
is expressed in the innumerable prices of all commodities;
for in each of these prices in which the exchange-value of
the commodity is expressed in money, the exchange-value of
money is expressed in the use-value of the commodity.
There can therefore be no talk of a rise or fall in
the price of money. I can say: the price of
money in terms of wheat or of clothes has remained the same;
its price in terms of cotton has risen, or, which is the
same, that the money price of cotton has fallen. But I
cannot say that the price of money has risen or
fallen. But Ricardo actually maintains that, for
instance, the price of money in terms of cotton has risen or
the price of cotton in terms of money has fallen, because
the relative value of money has risen as against that of
cotton while it has retained the same value as against
clothes or wheat, Thus the two are measured with an
unequal measure.

This Section VI “On an Invariable Measure of
Value” [l.c., p. 41] deals with the
“measure of value” but contains nothing
important. The connection between value, its immanent
measure—i.e., labour-time—and the necessity for
an external measure of the values of commodities is
not understood or even raised as a problem.

The very opening of this section shows the superficial
manner in which it is handled.

“When commodities varied in relative
value, it would be desirable to have the means of
ascertaining which of them fell and which rose in real
value, and this could be effected only by comparing them one
after another with some invariable standard measure
[…], which should itself be subject to none of the
fluctuations to which other commodities are exposed.”
(l.c., pp. 41-42). But “…there is no
commodity which is not itself exposed to the same variations
…that is, there is none which is not subject to
require more or less labour for its production” (l.c.,
p. 42).

Even if there were such a commodity, the influence of the
rise or fall in wages, the different combinations of fixed
and circulating capital, the different degrees of durability
of the fixed capital employed and the [different] length of
time before the commodity can be brought to market, etc.,
would prevent it from being:

“…a perfect measure of value,
by which we could accurately ascertain the variations in all
other things… “It would be a perfect
measure of value for all things produced under the same
circumstances precisely as itself, but for no others”
(l.c., p. 43).

That is to say, if the [prices of this latter group of]
“things” varied, we could say (provided the
value of money did not rise or fall) that the variations
were caused by the rise or fall “in their
values”, in the labour-time necessary for their
production. With regard to the other things, we could
not know whether the “variations” in their money
prices were due to other reasons, etc. Later we
shall have to come back to this matter which is quite
unsatisfactory. (During a subsequent revision of the
theory of money.)

Chapter I, Section VII. Apart from the
important doctrine on “relative” wages,
profits and rents, to which we shall return later, this
section contains nothing but the theory that a fall or rise
in the value of money accompanied by a corresponding rise or
fall in wages etc. does not alter the relations but only
their monetary expression. If the same commodity is
expressed in double the number of pounds sterling, so also
is that part of it which resolves into profit, wages or
rent. But the ratio of these three to one another and
the real values they represent, remain the same. The
same applies when the profit is expressed by double the
number of pounds, £ 100 is then however represented by
£ 200 so that the relation between profit and capital,
the rate of profit, remains unaltered. The changes in
the monetary expression affect profit and capital
simultaneously, ditto profit, wages and rent. This
applies to rent as well in so far as it is not calculated on
the acre but on the capital advanced in agriculture
etc. In short, in this case the variation is not in
the commodities etc.

“A rise of wages from this cause
will, indeed, be invariably accompanied by a rise in the
price of commodities; but in such cases, it will be found
that labour and all commodities have not varied in regard to
each other, and that the variation has been confined to
money” (l.c., p. 47).

## [5.] Average or Cost-Prices and Market-Prices

### [a) Introductory Remarks: Individual Value and Market-Value; Market-Value and Market-Price]

| In developing his
theory of differential rent, in Chapter II, “On
Rent”, Ricardo puts forward the following
thesis:

“The exchangeable value of all
commodities, whether they be manufactured, or the
produce of the mines, or the produce of land, is always
regulated, not by the less quantity of labour that will
suffice for their production under circumstances highly
favourable, and exclusively enjoyed by those who have
peculiar facilities of production; but by the greater
quantity of labour necessarily bestowed on their production
by those who have no such facilities; by those who
continue to produce them under the most unfavourable
circumstances; meaning—by the most unfavourable
circumstances, the most unfavourable under which the
quantity of produce required, renders it necessary to
carry on the production” (l.c., pp. 60-61).

The last sentence is not entirely correct. The
“quantity of produce required” [is] not a fixed
magnitude. [It would be correct to say:] A certain
quantity of produce required within certain limits of
price. If the latter rises above these limits then the
“quantity required” falls with the demand.

The thesis set out above can be expressed in general
terms as follows: The value of the commodity—which is
the product of a particular sphere of production—is
determined by the labour which is required in order to
produce the whole amount, the total sum of the
commodities appertaining to this sphere of production and
not by the particular labour-time that each individual
capitalist or employer within this sphere of production
requires. The general conditions of production and the
general productivity of labour in this particular sphere of
production, for example in cotton manufacture, are the
average conditions of production and the average
productivity in this sphere, in cotton-manufacture, The
quantity of labour by which, for example, [the value of] a
yard of cotton is determined is therefore not the quantity
of labour it contains, the quantity the manufacturer
expended upon it, but the average quantity with which all
the cotton-manufacturers produce one yard of cotton for the
market. Now the particular conditions under which the
individual capitalists produce, for example, in cotton
manufacture, necessarily fall into three categories.
Some produce under medium conditions, i.e., the
individual conditions of production under which they produce
coincide with the general conditions of production in
the sphere. The average conditions are their actual
conditions. The productivity of their labour is at
the average level. The individual value of
their commodities coincides with the general value of
these commodities. If, for example, they sell the yard
of cotton at 2s.—the average value—then they
sell it at the value which the yards they produce
represent in natura. Another category produces
under better than average conditions. The
individual value of their commodities is below
their general value. If they sell their commodities at
the general value, they sell them above their
individual value. Finally, a third category produces
under conditions of production that are below the
average.

Now the “quantity of produce required” from
this particular sphere of production is not a fixed
magnitude. If the rise of the value of the commodities
above the average value exceeds certain limits, the
“quantity of produce required” falls, that is,
this quantity is only required at a given price—or at
least within certain limits of price. Hence it is just
as possible that the last-mentioned category has to
sell below the individual value of its commodities as
the better placed category always sells its products
above their individual value, Which of the categories
has a decisive effect on the average value, will in
particular depend on the numerical ratio or the proportional
size of the categories. If numerically the middle
category greatly outweighs the others it will determine [the
average value]. If this group is numerically weak and
that which works below the average conditions is
numerically strong and predominant, then the latter
determines the general value of the produce of this sphere,
although this by no means implies and it is even very
unlikely, that the individual capitalist who is the most
unfavourably placed in the last group, is the
determining factor. (See Corbet.)

But let us leave this aside. The general result is
that: the general value of the products of this group
is the same for all, whatever may be its relation to
the particular value of each individual commodity.
This common value is the market-value of these
commodities, the value at which they appear on the
market. Expressed in money, this market-value is the
market-price, just as in general, value expressed in
money is price. The actual market-price is now above,
now below this market-value and coincides with it only by
chance. Over a certain period, however, the
fluctuations equal each other out and it can be said that
the average of the actual market-prices is the
market-price which represents the
market-value. Whether, at a given moment, the
actual market-price corresponds to this market-value in
magnitude, i.e., quantitatively or not, at any rate
it shares the qualitative characteristic with it,
that all commodities of the same sphere of production
available on the market have the same price (assuming
of course that they are of the same quality), that is, in
practice , they represent the general value of the
commodities of this sphere.

| The above thesis put
forward by Ricardo for the purpose of his theory of rent has
therefore been interpreted by his disciples to mean that
two different market-prices cannot exist
simultaneously on the same market or: products of the
same kind found on the market
simultaneously, have the same price or—since we
can leave out of account here the accidental features of
this price—the same market-value.

Thus competition, partly among the capitalists
themselves, partly between them and the buyers of the
commodity and partly among the latter themselves, brings it
about here that the value of each individual commodity in a
particular sphere of production is determined by the
total mass of social labour-time required by the
total mass of the commodities of this particular
sphere of social production and not by the individual
values of the separate commodities or the labour-time
the individual commodity has cost its particular
producer and seller.

It obviously follows from this, however, that, whatever
the circumstances, the capitalists belonging to the first
group—whose conditions of production are more
favourable than the average—make an excess profit, in
other words their profit is above the general rate of
profit of this sphere. Competition, therefore , does
bring about the market-value or market-price
by the equalisation of profits within a particular
sphere of production. (For the purpose of this
investigation, the distinction [between market-value and
market-price] is irrelevant since the differences in the
conditions of production—hence the different rates of
profit for the individual capitalist—in the same
sphere, remain, whatever may be the relationship of
market-price to market-value.) On the contrary,
competition here equalises the different individual
values to the same, equal, undifferentiated market-value,
by permitting differences between individual
profits, profits of individual capitalists, and their
deviations from the average rate of profit in the
sphere. It even creates differences by establishing
the same market-value for commodities produced under
unequal conditions of production, therefore with unequal
productivity of labour, the commodities thus represent
individual unequal quantities of labour-time.
The commodity produced under more favourable conditions,
contains less labour-time than that produced under less
favourable conditions, but it sells at the same price, and
has the same value, as if it contained the same labour-time
though this is not the case.

### [b) Ricardo Confuses the Process of the Formation of Market-Value and the Formation of Cost-Prices]

For the establishment of his theory of rent, Ricardo
needs two propositions which express not only
different but contradictory effects of
competition. According to the first, the products of
the same sphere sell at one and the same
market-value, competition therefore enforces different
rates of profit, i.e., deviations from the general
rate of profit. According to the second, the rate
of profit must be the same for each capital
investment, that is competition brings about a general
rate of profit. The first law applies to
the various independent capitals invested in the same
sphere of production. The second applies to
capitals in so far as they are invested in different
spheres of production. By the first action,
competition creates the market-value, that is, the
same value for commodities of the same sphere of
production, although this identical value must result
in different profits, it thus creates the same
value despite of, or rather by means of, different rates
of profit. The second action (which, incidentally,
is brought about in a different way; namely, the competition
between capitalists of different spheres throws the
capital from one sphere into another, while the other
competition, in so far as it is not competition between
buyers, occurs between capitals of the same sphere)
enables competition to create the cost-price, in
other words the same rate of profit in the various
spheres of production, although this identical rate of
profit is contrary to the inequality of values, and can
hence only be enforced by prices which are different
from values.

Since Ricardo needs both these propositions—equal
value or price with unequal rate of profit,
and equal rate of profit with unequal
values,—for his theory of rent, it is most
remarkable that he does not sense this twofold determination
and that even in the Section where he deals ex
professo with market-price, in Chapter IV
“On Natural Price and Market-Price”, he does
not deal with market-price or market-value at
all, although in the above-quoted passage he uses it as a
basis to explain differential rent, the excess profit
crystallised in the form of rent. | But he deals here merely with
the reduction of the prices in the different
spheres of production to cost-prices or
average prices, i.e., with the relationship between
the market-values of the different spheres of production and
not with the establishment of the market-value in each
particular sphere, and unless this is established
market-values do not exist at all.

The market-values of each particular sphere,
therefore the market-prices of each particular sphere
(if the market-price corresponds to the “natural
price”, in other words if it merely represents the
value in the form of money) would yield very different rates
of profit, for of equal size in different
“spheres—quite apart from the differences
arising from their different processes of
circulation—employ very unequal proportions of
constant and variable capita and therefore yield very
unequal surplus—values, hence very unequal
profits. The levelling out of the various
market-values, so that the same rate of profit is
produced in the different spheres of production, and
capitals of equal size yield equal average profits, is
therefore only possible by the transformation of
market-values into cost-prices which are
different from the actual values.*

What competition within the same sphere of
production brings about, is the determination of the
value of the commodity in a given sphere by the
average labour-time required in it, i.e., the creation of
the market-value. What competition between the
different spheres of production brings about is the
creation of the same general rate of profit in the
different spheres through the levelling out of the
different market-values into market prices, which are
cost-prices that are different from the actual
market-values. Competition in this second instance by
no means tends to assimilate the prices of the commodities
to their values, but on the contrary, to reduce their values
to cost-prices that differ from these values, to abolish the
differences between their values and cost-prices.

It is only this latter process which Ricardo considers in
Chapter IV and, oddly enough, he regards it as the reduction
of the prices of commodities—through
competition—to their values, the reduction of the
market-price (a price which is different from value) to the
natural price (the value expressed in terms of money).
This blunder, however, arises from the error he committed
already in Chapter I “On Value”, where he
identified cost-price and value, this in turn was due to the
fact that at a point where as yet he was only concerned with
explaining “value”, where he, therefore, as yet,
only had to deal with “commodity”, he
plunged in with the general rate of profit and all
the conditions arising from the more developed capitalist
relations of production.

Ricardo’s whole procedure in Chapter IV is therefore
quite superficial. He starts out from the
“…accidental and temporary variations of [the]
price” (l.c., p. 80) of commodities resulting from
the fluctuating relations between demand and supply.

“With the rise or fall of price,
profits are elevated above, or depressed below
their general level, and capital is either encouraged
to enter into, or is warned to depart from the particular
employment in which the variation has taken place”
(l.c., p. 80).

Here the general level of profit prevailing
between the particular spheres of production, between
“the particular employments” is already
presupposed. But he should have considered first, how
the general level of price in the same employment and
the general level of profit between different
employments is brought about. Ricardo would then have
seen that the latter operation already presupposes movements
of capital in all directions—or a distribution,
determined by competition, of the whole social capital
between its different spheres of employment. Once
it is assumed that the market-values or average
market-prices in the different spheres are reduced to
cost-prices yielding the same average rate of profit
(this is however only the case in spheres where landed
property does not interfere; where it interferes,
competition—within the same sphere—can convert
the price to the value and the value to the market-price,
but it cannot reduce the market-price to the cost-price),
persistent deviations of the market-price from the
cost-price, when it rises above or falls below it in
particular spheres, will bring about new migrations and a
new distribution of social capital. The first
migration occurs in order to establish cost-prices
which differ from values. The second migration
occurs in order to equalise the actual market-prices
with the cost-prices—as soon as they rise above or
fall below the latter. The first is a transformation
of the values into cost-prices. The second is a
rotation of the actual |
market-prices of the moment in the various spheres, around
the cost-price, which now appears as the natural
price, although it is different from the value and only
the result of social action.

It is this latter, more superficial movement which
Ricardo examines and at times unconsciously confuses with
the other. Both are of course brought about by
“the same principle”, namely, the principle that
while

“every man” [is] “free to
employ his capital where he pleases,” [he] “will
naturally seek for it that employment which is most
advantageous; he will naturally be dissatisfied with a
profit of 10 per cent, if by removing his capital he can
obtain a profit of 15 per cent. This restless
desire on the part of all the employers of stock, to
quit a less profitable for a more advantageous business, has
a strong tendency to equalise the rate of profits of
all, or to fix them in such proportions, as may,
in the estimation of the parties, compensate for any
advantage which one may have, or may appear to have over the
other” (l.c., p. 81).

This tendency has the effect of distributing the total
mass of social labour-time among the various spheres of
production according to the social need. In this
way, the values in the different spheres of production are
transformed into cost-prices, and on the other hand, the
variations of the actual prices in particular spheres from
the cost-prices are levelled out.

All this is contained in Adam Smith’s work. Ricardo
himself says:

“No writer has more satisfactorily
and ably shewn than Dr. Smith, the tendency of capital to
move from employments in which the goods produced do not
repay by their price the whole expenses, including the
ordinary profits,” (that is to say, the
cost-price) “of producing and bringing them to
market” (l.c., p. 342, note).

The achievement of Ricardo, whose blunder is on the whole
caused by his lack of criticism of Adam Smith in this
respect, consists in his more precise exposition of this
migration of capital from one sphere to the other, or rather
of the manner in which this occurs. He was, however,
only able to do this because the credit system was more
highly developed in his time than in the time of Adam Smith,
Ricardo says:

“It is perhaps very difficult to
trace the steps by which this change is
effected: it is probably effected, by a manufacturer
not absolutely changing his employment, but only
lessening the quantity of capital he has in that
employment. In all rich countries, there is a
number of men forming what is called the monied
class*; these men
are engaged in no trade, but live on the interest of
their money, which is employed in discounting bills, or in
loans to the more industrious part of the
community. The bankers too employ a large capital on
the same objects. The capital so employed forms a
circulating capital of a large amount, and is employed, in
larger or smaller proportions, by all the different trades
of a country. There is perhaps no manufacturer,
however rich, who limits his business to the extent that his
own funds alone will allow: he has always some portion of
this floating capital, increasing or diminishing according
to the activity of the demand for his commodities.
When the demand for silks increases, and that for cloth
diminishes, the clothier does not remove with his capital to
the silk trade, but he dismisses some of his workmen, he
discontinues his demand for the loan from bankers and monied
men; while the case of the silk manufacturer is the reverse:
[…] he borrows more, and thus capital is
transferred from one employment to another, without the
necessity of a manufacturer discontinuing his usual
occupation. When we look to the markets of a large
town, and observe how regularly they are supplied both with
home and foreign commodities, in the quantity in which they
are required, under all the circumstances of varying demand,
arising from the caprice of taste, or a change in the amount
of population, without often producing either the effects of
a glut from a too abundant supply, or an enormously high
price from the supply being unequal to the demand, we must
confess that the principle which apportions capital to
each trade in the precise amount that it is required, is
more active than is generally supposed” (l.c.,
pp. 81-82).

Credit therefore is the means by which the capital
of the whole capitalist class is placed at the disposal of
each sphere of production, not in proportion to the capital
belonging to the capitalists in a given sphere but in
proportion to their production requirements—whereas in
competition the individual capitals appear to be independent
of each other. Credit is both the result and the
condition of capitalist production and this provides us with
a convenient transition from the competition between
capitals to capital as credit.

### [c) Ricardo’s Two Different Definitions of “Natural Price”. Changes in Cost-Price Caused by Changes in the Productivity of Labour]

At the beginning of Chapter IV, Ricardo says that by
natural price he understands the value of the
commodities, that is, the price as determined by
their relative labour-time, and that by market-price
he understands the accidental and temporary deviations from
this natural price or value |. Throughout the further
course of the chapter—and he is quite explicit in
this— he understands something quite different by
natural price, namely, cost-price which is
different from value. Thus, instead of showing how
competition transforms values into cost-prices, i.e.,
creates permanent deviations from values, he shows,
following Adam Smith, how competition reduces the
market-prices in different trades to cost-prices.

Thus Chapter IV opens like this:

“In making labour the
foundation of the value of commodities, and the
comparative quantity of labour which is necessary to
their production, the rule which determines the respective
quantities of goods which shall be given in exchange for
each other, we must not be supposed to deny the
accidental and temporary deviations of the actual or
market price of commodities from this, their
primary and natural price” (l.c., p. 80).

Here therefore natural price equals value
and market-price is nothing but the deviation of actual
price from value.

As against this:

“Let us suppose that all commodities
are at their natural price, and consequently
that the profits of capital in all employments
are exactly at the same rate, or differ only so much
as, in the estimation of the parties, is equivalent to any
real or fancied advantage which they possess or
forego” (l.c., p. 83).

Here therefore, natural price equals
cost-price, that is, the price at which the relation
between the profit and the advances embodied in the
commodity is the same, although equal values of
commodities produced by capitals in different spheres of
production, contain very unequal surplus-values, and
thus unequal profits. If the price is to yield
the same profit, it must therefore be different from the
value of the commodity. On the other hand, capitals of
equal size produce commodities of very unequal value,
according to whether a larger or a smaller portion of the
fixed capital enters into the commodity. But more
about this when dealing with the circulation of
capitals.

By equalisation through competition, Ricardo therefore
understands only the rotation of the actual prices or actual
market-prices around the cost-prices or the
natural price as distinct from the value, the
levelling out of the market-price in different branches of
production to general cost-prices, i.e., precisely to prices
which are different from the real values in different
trades.:

“It is then the desire, which every
capitalist has, of diverting his funds from a less to a more
profitable employment, that prevents the market-price
of commodities from continuing for any length of time either
much above, or much below their natural price, It is
this competition which so adjusts the changeable value
of commodities,” <and also the different
real values> “that after paying the wages for
the labour necessary to their production, and all other
expenses required to put the capital employed in its
original state of efficiency, the remaining value or
overplus will in each trade be in proportion to
the value of the capital employed”
(l.c., p. 84).

This is exactly the case. Competition adjusts the
prices in the different trades so that “the
remaining value or overplus”, the profit,
corresponds to the value of the capital employed, but
not to the real value of the commodity, not to the real
overplus which it contains after the deduction of
expenses. To bring this adjustment about the price of
one commodity must be raised above, and that of the other
must be depressed below their respective real values, It is
not the value of the commodities but their cost-price, i.e.,
the expenses they contain plus the general rate of profit,
around which competition forces the market-prices in the
different trades to rotate.

Ricardo continues:

“In the 7th Chap. of the Wealth of
Nations, all that concerns this question is most ably
treated” (l.c., p. 84).

In fact it is his uncritical belief in the Smithian
tradition, which here leads Ricardo astray.

As usual, Ricardo closes the chapter by saying that in
the following investigations, he wants to
“…leave […] entirely out of […]
consideration” (l.c., p. 85) the accidental deviations
of market-prices from the cost-price; but he overlooks the
fact that he has paid no regard at all to the
constant deviations of market-prices, in so far as
they correspond to cost-prices, from the real values of the
commodities and that he has substituted cost-price for
value.

Chapter XXX “On the Influence of Demand and
Supply on Prices”. Here Ricardo defends the
proposition that the permanent price is determined by the
cost-price, and not by supply or demand: that,
therefore, the permanent price is determined by the
value of the commodities only in so far as this value
determines the cost-price. Provided that the prices of
the commodities are so adjusted that they all yield a profit
of 10 per cent, then every lasting change in these prices
will be determined by a change in their values, in the
labour-time required for their production. As this
value continues to determine the general rate of profit, so
the changes in it continue to determine the variations in
cost-prices, although of course the difference between
cost-prices and values is thereby not superseded.
What is superseded is only that the difference between value
and actual price should not | be greater than the
difference between cost-prices and values, a difference that
is brought about by the general rate of profit.
With the changes in the values of commodities, their
cost-prices also change. A “new natural
price” (p. 460) is formed. If, for example,
the worker can now produce twenty hats in the same period of
time which it previously took him to produce ten hats, and
if wages accounted for half the cost of the hat, then the
expenses, the costs of production, of the twenty hats, in so
far as they consist of wages, have fallen by half. For
the same wages are now paid for the production of twenty
hats as previously for ten. Thus each hat now contains
only half the expenditure for wages. If the hat
manufacturer were to sell the hats at the same price he
would sell them above the cost-price. If the profit
had previously been 10 per cent then it would now be 46
2/3 per cent, assuming the outlay for
the manufacture of a certain quantity of hats was originally
50 for raw material, etc. and 50 for labour. [The
outlay] would now be 50 for raw material etc. and 25 for
wages. If the commodity is sold at the old price then
the profit is 35/75 or 46
2/3 per cent. As a result of the
fall in value, the new natural price will therefore fall to
such an extent that the price only yields 10 per cent
profit. The fall in the value or in the labour-time
necessary for the production of the commodity reveals itself
in the fact that less labour-time is used for the same
amount of commodity, hence also less paid
labour-time, less wages and, consequently, the
costs, the wages paid (i.e., the amount of wages;
this does not presuppose a fall in the rate of
wages) proportionately decline for the production of
each individual commodity.

This is the case if the change in value has taken place
in the hat making itself. Had it occurred in the
production of the raw material or of the tools, then this
would have been similarly expressed as a diminution of
outlay in wages for the production of a certain given
quantity of product in these spheres; but to the hat
manufacturer it would denote that his constant capital had
cost him less. The cost-prices or
“natural prices” (which have nothing to
do with “nature”) can fall in two ways as a
result of a change—here a fall—in the
value of the commodities:

[Firstly] because the wages laid out in the
production of a given quantity of commodities fall, owing to
a fall in the aggregate absolute amount of labour, paid
labour and unpaid labour, expended on this quantity of
commodities.

Secondly: If, as a result of the increased or
diminished productivity of labour (both can occur, the one
when the proportion of variable capital to constant capital
falls, the other when wages rise owing to the means of
subsistence becoming dearer), the ratio of surplus-value to
the value of the commodity or to the value of the labour
contained in it, changes, then the rate of profit rises or
falls, and the amount of labour is differently divided
up.

In the latter case, the prices of production or
cost-prices could change only in so far as they are affected
by variations in the value of labour. In the first
case, the value of labour remains the same. In the
second case, however, it is not the values of the
commodities which alter, but only the division between
[necessary] labour and surplus-labour. A change in the
productivity and therefore in the value of the
individual commodity would nevertheless take place in
this case. The same capital will produce more
commodities than previously in the one case and less in the
other. The aggregate volume of the commodities in
which it is materialised would have the same value,
but the individual commodity would have a different
value. Although the value of the wage does not
determine the value of the commodities, the value of the
commodities (which enter into the consumption of the worker)
determines the value of the wage.

Once the cost-prices of the commodities in the various
branches of production are established, they rise or fall
relatively to each other with any change in the values of
the commodities. If the productivity of labour rises,
the labour-time required for the production of a
particular commodity decreases and therefore its
value falls; whether this change in productivity
occurs in the labour used in the final process or in the
constant capital, the cost-price of this commodity must also
fall correspondingly. The absolute amount of labour
employed on it has been reduced, hence also the amount
of paid labour it contains and the amount of wages expended
on it, even though the rate of wages has remained the
same. If the commodity were sold at its former
cost-price, then it would yield a higher profit than the
general rate of profit, since formerly, this profit was
equal to 10 per cent on the higher outlay. It would
therefore be now more than 10 per cent on the diminished
outlay. If on the contrary the productivity of labour
decreases, the real values of the commodities rise.
When the rate of profit is given—or, which is the same
thing, the cost-prices are given—the relative rise or
fall of the cost-prices is dependent on the rise or fall,
the variation, in the real values of the commodities, As a
result of this variation, new cost-prices or, as Ricardo
says, following Smith, “new natural prices” take
the place of the old.

In Chapter XXX, from which we have just been quoting,
Ricardo expressly identifies natural price, that is,
cost-price, with natural value, i.e., value as determined by
labour-time.

“Their price” (of monopolised
commodities) “has no necessary connexion with their
natural value: but the prices of commodities,
which are subject to competition, …will ultimately
depend …on [the] …cost of their
production” (l.c., p. 465).

Here therefore are cost-prices or natural prices directly
| identified with
“natural value”, that is, with
“value”.

This confusion explains how later a whole lot of fellows
post Ricardum, like Say himself, could accept “the
cost of production” as the ultimate regulator of
prices, without having the slightest inkling of the
determination of value by labour-time, indeed they directly
deny the latter while maintaining the former.

This whole blunder of Ricardo’s and the consequent
erroneous exposition of rent etc., as well as the erroneous
laws about the rate of profit etc. spring from his
failure to distinguish between surplus-value and
profit; and in general his treatment of
definitions is crude and uncomprehending, just as that
of the other economists. The following will show how
he allowed himself to be ensnared by Smith. |

||XII-636| Just to add a
further comment to what has already been said: Ricardo knows
no other difference between value and natural
price than that the latter is the monetary expression of
value, and that it can therefore change because of a change
in value of the precious metals, without value itself
changing. This change, however, only affects the
evaluation or the expression of value in money. Thus,
he says, for instance:

“It” (foreign trade) “can
only he regulated by altering the natural price, not
the natural value, at which commodities can he
produced in those countries, and that is effected by
altering the distribution of the precious metals”
(l.c., p. 409). |XII-636|| .

## [B. Adam Smith’s Theory of Cost-price]

### [1. Smith’s False Assumptions in the Theory of Cost-Prices. Ricardo’s Inconsistency Owing to His Retention of the Smithian Identification of Value and Cost-Price]

||XI-549| It must first be
noted that according to Adam Smith as well,

“there are always a few commodities
of which the price resolves itself into two parts
only, the wages of labour, and the profits of
stock”. ([The Wealth of Nations, Oxford
University Press, London, 1928, Vol. I, p. 56; Garnier,] t.
1, l. 1, ch. VI, p. 103.[e])

This difference between Ricardo’s and Smith’s
views can therefore be ignored here.

Adam Smith first explains that exchange-value resolves
itself into a certain quantity of labour and that after
deducting raw materials etc., the value contained in
exchange-value is resolved into that part of labour for
which the labourer is paid and that part for which he is not
paid, the latter part consists of profit and rent (the
profit in turn may be resolved into profit and
interest). Having shown this, he suddenly turns about
and instead of resolving exchange-value into wages, profit
and rent, he declares these to be the elements forming
exchange-value, he makes them into independent
exchange-values that form the exchange-value of the product;
he constructs the exchange-value of the commodity from the
values of wages, profit and rent, which are determined
independently and separately. Instead of having their
source in value, they become the source of value.

“Wages, profit, and
rent, are the three original sources of all
revenue as well as of all exchangeable value”
([O.U.P., Vol. I, p. 57; Garnier,] t, 1, l. 1, ch. VI,
p. 105).

Having revealed the intrinsic connection, he is suddenly
obsessed again with the aspect of the phenomenon, with the
connection, as it appears in competition, and in
competition everything always appears in inverted[f] form, always standing
on its head.

Now it is from this latter inverted starting-point that
Smith develops the distinction between the “natural
price of the commodities” and their
“market-price”. Ricardo accepts
this from him, but forgets that Adam Smith’s “natural
price” is, according to Smith’s premises, nothing
other than the cost-price resulting from competition
and that for Smith himself, this cost-price is only
identical with the “value” of the
commodity, in so far as he forgets his more profound
conception and sticks to the false concept derived from the
external appearance, namely that the exchange-value
of commodities is formed by putting together the
independently determined values of wages, profit and
rent. While Ricardo contests this concept throughout,
he accepts Smith’s confusion or identification of
exchange-value with cost-price or natural
price, which is based on that very concept.
In the case of Adam Smith this confusion is legitimate,
because his whole examination of natural price starts
out from his second, false conception of
value. But in Ricardo’s case, it is wholly
unjustifiable, because he nowhere accepts this wrong
conception of Adam Smith’s, but contests it ex
professo as an inconsistency. Adam Smith, however,
succeeded in ensnaring him again with his natural
price .

Having compounded the value of the commodity from
the separate and independently determined values of
wages, profit and rent, Adam Smith now asks
himself how these primary values are determined. And
here he starts out from the phenomena as they appear in
competition.

[In] Chapter VII, Book I “Of the Natural and
Market Price of Commodities” [he says:]

“There is in every society or
neighbourhood an ordinary or average rate of
… wages and profit … and rent…
These ordinary or average rates may be called the natural
rates of wages, profit, and rent, at the time and place
in which they commonly prevail” ([OUP., Vol. I, p.
60; Garnier,] l.c., t. I, pp. 110-11). “When the
price of any commodity is neither more nor less than
what is sufficient to pay the rent […] the wages
[…] and the profits […] according to their
natural rates, the commodity is then sold for
[…] its natural price” ([O.U.P., Vol. I,
p. 61; Garnier,] l.c., p. 111).

This natural price is then the cost-price of the
commodity and the cost-price coincides with the value
of the commodity, since it is presupposed that the value of
the commodity is compounded of the values of wages, profit
and rent.

“The commodity is then | sold precisely for what it
is worth” (the commodity is sold at its
value) “or for what it really
costs the person who brings it to market” (at
its v a l u e or at the c o s t-p r i c e for
the person who brings it to market) “for though, in
common language, what is called the prime cost of any
commodity does not comprehend the profit of the
person who is to sell it again, yet, if he sells it at a
price which does not allow him the ordinary
rate of profit in his neighbourhood, he is evidently a
loser by the trade; since by employing his stock in some
other way, he might have made that profit”
([O.U.P., Vol. I, p. 61; Garnier,] l.c., p. 111).

Here we have the whole genesis of natural price and,
besides, set out in quite appropriate language and logic,
since the value of the commodity is composed of the prices
of wages, profit and rent, while the true value of the
latter is, in turn, constituted by their natural
rates; thus it is clear that the value of the
commodity is identical with its cost-price and
the latter with the natural price of the
commodity. The rate of profit, as of wages, is
presupposed. They are indeed given for the
formation of the cost-price. They are
antecedent to the cost-price. To the individual
capitalist therefore they also appear as given. The
hows, whys and wherefores do not concern him. Adam
Smith here adopts the standpoint of the individual
capitalist, the agent of capitalist production, who fixes
the cost-price of his commodity. So much for wages
etc., so much for the general rate of profit.
Ergo: This is how this capitalist sees the
operation by which the cost-price of the commodity is
fixed or, as it further seems to him, the value of
the commodity, for he also knows that the market-price is
now above, now below, this cost-price, which therefore
appears to him as the ideal price of the commodity, its
absolute price as distinct from its price fluctuations, in
short as its value, in so far as he has any time at
all to reflect on matters of this sort. And since
Smith transports himself right into the midst of
competition, he immediately reasons and argues with the
peculiar logic of the capitalist caught up in this
sphere. He interjects: In common language,
costs do not include the profit made by the
seller (which necessarily forms a surplus above his
expenses). Why then do you include profit in the
cost-price? Adam Smith answers like the profound
capitalist to whom this question is put:

Profit in general must enter into cost-price,
because I would be cheated if only a profit of 9
instead of 10 per cent were to enter into cost-price.

The naïve way in which Adam Smith on the one hand
expresses the thoughts of the agent of capitalist production
and presents things boldly and comprehensively, as they
appear to and are thought of by the latter, as they
influence him in practice, and as, indeed, they appear on
the surface, while, on the other hand, he sporadically
reveals their more profound relationships, gives his book
its great charm.

One can see here too why Adam Smith—despite his
considerable scruples on this point—resolves the
entire value of the commodity into rent, profit and wages
and omits constant capital, although of course he admits its
existence for each “individual”
capitalist. For otherwise he would have to say: The
value of a commodity consists of wages, profit, rent and
that part of the value of the commodity which does not
consist of wages, profit, rent. It would therefore be
necessary to determine value independently of wages, profit
and rent.

If, besides the outlay on average wages etc., the price
of the commodity also covers the average profit and—if
rent enters into the commodity—the average rent, then
the commodity is sold at its natural or
cost-price, and this cost-price is equal to its
value, for its value is nothing but the sum of the
natural values of wages, profit and rent.

| Having taken his
stand in competition and assumed the rate of profit
etc. as given, Adam Smith for the rest interprets
correctly natural price or cost-price,
namely, the cost-price as distinct from the
market-price.

“… the natural price of
the commodity, o r the whole value of the rent,
labour, and profit, which must be paid in order to bring
it” to market ([O.U.P., Vol. I, pp. 61-62; Garnier,]
l.c., p. 112).

This cost-price of the commodity is different from the
actual price or market-price of the
commodity. ([O.U.P., Vol. I, p. 62; Garnier,] l.c.,
p. 112.) The latter is dependent on demand and
supply.

The [sum of the] costs of production or the
cost-price of the commodity is precisely “the
whole value of the rent, labour, and profit, which
must be paid in order to bring it” to market
([O.U.P., Vol. I, p. 62; Garnier,] p. 113). If demand
corresponds to supply, then the market-price is equal to the
natural price.

“When the quantity brought to market
is just sufficient to supply the effectual demand, and no
more, the market-price naturally comes to be exactly
… the same with the natural price”
([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 114).
“The natural price, therefore, is, as it were,
the central price, to which the prices of all commodities
are continually gravitating. Different accidents may
sometimes keep them suspended a good deal above it, and
sometimes force them down even somewhat below it”
([O.U.P., Vol. I, p. 64; Garnier,] l.c., p. 116).

Hence Adam Smith concludes that in general, the

“whole quantity of industry annually
employed in order to bring any commodity to market”
will correspond to the needs of society or the
“effectual demand” ([O.U.P., Vol. I, p. 64;
Garnier,] l.c., p. 117).

What Ricardo conceives as the distribution of total
capital among the various branches of production appears
here in the as yet more naive form of the [quantity of]
industry needed in order to produce “a
particular commodity”. The levelling out
of prices among the sellers of the same commodity to
the market-price and the levelling out of the
market-prices of the various commodities to the
cost-price are here as yet jumbled up in complete
confusion.

At this point Smith, only quite incidentally, touches
upon the influence of the variation in the real values of
commodities on the natural prices or cost-prices.

Namely in agriculture

“the same quantity of industry will,
in different years, produce very different quantities of
commodities; while, in others, it will produce always the
same, or very nearly the same. The same number of
labourers in husbandry will, in different years, produce
very different quantities of corn, wine, oil, hops,
etc. But the same number of spinners and weavers will
every year produce the same, or very nearly the same,
quantity of linen and woollen cloth… In the
other” (the non-agricultural) “species of
industry, the produce of equal quantities of labour being
always the same, or very nearly the same”, (i.e.,
so long as the conditions of production remain the
same) “it can be more exactly suited to the
effectual demand” ([O.U.P., Vol. I, pp. 64-65;
Garnier,] l.c., pp. 117-18).

Adam Smith sees here that a mere change in the
productivity of “equal quantities of labour”,
therefore, in the actual values of commodities, alters
cost-prices. But he makes this again more shallow by
reducing it to the relation between supply and demand.
According to his own arguments, the proposition as he
presents it, is wrong. For, while in agriculture, as a
result of varying seasons etc., “equal quantities of
labour” yield different quantities of products, he
himself has demonstrated that as a result of machinery,
division of labour etc. “equal quantities of
labour” yield very different amounts of product in
manufacture etc. It is therefore not this
difference which distinguishes agriculture from the other
branches of industry; but the fact that in industry the
degree of productive power applied is determined beforehand,
while in the former, it depends on accidents of
nature. But the result remains the same: the value
of the commodities or the quantity of labour which,
depending on its productivity, has to be expended on a given
commodity, affects cost-prices.

In the following passage Adam Smith has also [shown] how
the migration of capitals from one sphere of production to
another establishes cost-prices in the various branches of
production. But he is not so clear on this as Ricardo,
For if the | price of the
commodity falls below its natural price then,
according to his argument, this is due to one of the
elements of this price falling below the natural
rate. Thus it is not due to the withdrawal of
capitals alone or to the migration of capitals, but
to the migration of labour, capital or land from one branch
to another, In this respect his view is more consistent than
Ricardo’s, but it is wrong.

“Whatever part of it” (the
natural price) “was paid below the natural
rate, the persons whose interest it affected would
immediately feel the loss, and would immediately withdraw
either so much land, or so much labour, or so much stock,
from being employed about it, that the quantity brought
to market would soon be no more than sufficient to supply
the effectual demand. Its market-price,
therefore, would soon rise to the natural
price. This at least would be the case where there
was perfect liberty” ( [O.U.P., Vol. I, p. 69;
Garnier,] l.c., p. 125).

This represents an essential difference between Smith’s
and Ricardo’s conceptions of the levelling out to the
natural price. Smith’s [conception] is based on
his false assumption, that the three elements independently
determine the value of the commodity, while Ricardo’s is
based on the correct assumption that it is the average
rate of profit (at a given level of wages), which alone
determines the cost-prices.

### [2. Adam Smith’s Theory of the “Natural Rate” of Wages, Profit and Rent]

“The natural price itself
varies with the natural rate of each of its component
parts, of wages, profit, and rent” ([O.U.P., Vol. I,
p. 70; Garnier,] l.c., p. 127).

In chapters VIII, IX, X and XI of Book I, Adam Smith then
seeks to determine the natural rate of these
“component parts”, wages, rent and profit, and
the fluctuations in these rates.

Chapter VIII: “Of the Wages of
Labour”

At the start of the chapter on wages,
Smith—forsaking the illusory standpoint of
competition—in the first place shows the true nature
of surplus-value and [regards] profit and rent as mere forms
of surplus-value.

The basis from which he determines the natural rate of
wages is the value of labour-power itself, the necessary
wage.

“A man must always live by his work,
and his wages must at least be sufficient to maintain him,
They must even upon most occasions be somewhat more,
otherwise it would he impossible for him to bring up a
family, and the race of such workmen could not last beyond
the first generation” ([O.U.P., Vol. I, p. 75;
Garnier,] l.c., p. 136).

This, however, becomes meaningless again because he never
asks himself how the value of the necessary means of
subsistence, i.e., of the commodity in general is
determined. And here, since he has moved away from his
main conception, Adam Smith would have to say: The price of
wages is determined by the price of the means of subsistence
and the price of the means of subsistence is determined by
the price of wages. Having once assumed that the
value of wages is fixed, he gives an exact
description of its fluctuations, as they appear in
competition, and the circumstances that cause these
fluctuations. This belongs to the exoteric part [of
his work] and does not concern us here.

<In particular [he deals with] the accumulation
of capital, but he does not tell us what determines it,
since this accumulation can only be rapid either if the rate
of wages is relatively low and the productivity of labour
high (in this case a rise in wages is always the result of a
permanently low level of wages during the preceding period)
or if the rate of accumulation is low but the productivity
of labour is high. From his standpoint, he would have
to deduce the rate of wages in the first case from the rate
of profit (i.e., from the rate of wages), and in the second
case from the gross amount of profit, but this would in turn
necessitate his investigating the value of the
commodity.)

He tries to derive the value of the commodity from the
value of labour which is one of its constituent parts.
And on the other hand he explains the level of wages by
saying that

“the wages of labour do not…,
fluctuate with the price of provisions” ([O.U.P.,
Vol. 1, p. 82; Garnier,] l.c., p. 149) and that “the
wages of labour vary more from place to place than the price
of provisions” ([O.U.P., Vol. I, p. 82; Garnier,]
l.c., p. 150).

In fact the chapter contains nothing relevant to the
question except the definition of the minimum wage,
alias the value of labour-power. Here Adam Smith
instinctively resumes the thread of his more profound
argument, only to lose it again, so that even the
above-cited definition [signifies] nothing. For how
[does he propose to] determine the value of the
necessary means of subsistence—and therefore of
commodities in general? Partly by the natural price of
labour. And how is this to be determined? By the
value of necessaries, or commodities in general. A
vicious circle. As to the rest, the chapter contains
not a word on the issue, the natural price of labour,
| but only investigations
into the rise of wages above the level of the natural rate,
demonstrating that the rise of wages is proportionate to the
rapidity with which capital accumulates, that is, to the
progressive accumulation of capital. Then he examines
the various conditions of society in which this takes place,
and finally he gives a slap in the face to the determination
of the value of the commodity by wages and of wages by the
value of the necessary means of subsistence, by showing that
this does not appear to be the case in England. In
between comes a piece of Malthusian population
theory—because wages are determined by the means of
subsistence necessary, not only to maintain the life of the
worker, but [should be sufficient] for the reproduction of
the population.

Namely after attempting to prove that wages rose
during the eighteenth century, especially in England, Adam
Smith raises the question whether this is to be regarded
“as an advantage, or as an inconveniency, to the
society” ([O.U.P., Vol. I, p. 87; Garnier,] l.c.,
p. 159). In this connection he returns temporarily to his
more profound approach, according to which profit and rent
are merely parts of the product of the worker.
The workmen, he says:

“make up the far greater part of
every great political society. But what improves the
circumstances of the greater part, can never be regarded as
any inconveniency to the whole. No society can surely
be flourishing and happy, of which the far greater part of
the members are poor and miserable. It is but equity,
besides, that they who feed, clothe, and lodge the whole
body of the people, should have such a share of the
produce of their own labour as to be themselves
tolerably well fed, clothed, and lodged” ([O.U.P.,
Vol. I, p. 87; Garnier,] l.c., pp. 159-60).

In this connection he touches upon the theory of
population:

“Poverty, though it no doubt
discourages, does not always prevent marriage. It
seems even to be favourable to generation, …
Barrenness, so frequent among women of fashion, is very rare
among those of inferior station… But poverty,
though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender
plant is produced; but in so cold a soil, and so severe a
climate, soon withers and dies… Every species
of animals naturally multiplies in proportion to the means
of their subsistence, and no species can ever multiply
beyond it. But in civilised society, it is only among
the inferior ranks of people that the scantiness of
subsistence can set limits to the further multiplication of
the human species… The demand for men,
like that for any other commodity, necessarily regulates
the production of men, quickens it when it goes on too
slowly, and stops it when it advances too fast”
([O.U.P., Vol. I, pp. 87-89; Garnier,] l.c., pp. 160-63
passim).

The connection between the wages minimum and the varying
conditions of society is as follows:

“The wages paid to journeymen and
servants of every kind must be such as may enable them, one
with another, to continue the race of journeymen and
servants, according as the increasing, diminishing, or
stationary demand of the society, may happen to
require” ([O.U.P., Vol. I, pp. 89-90; Garnier,] l.c.,
p. 164). (Of the society! That is to
say—of capital.)

He then shows that the slave is “dearer” than
the free labourer, because the latter himself looks after
his “wear and tear” whereas that of the
former is [controlled] “by a negligent master or
careless overseer” ([O.U.P., Vol. I, p. 90; Garnier,]
l.c., p. 164). The “fund” for replacing
the “wear and tear” is frugally used by the free
labourer whereas for the slave it is wastefully and
disorderly administered.

“The fund destined for replacing or
repairing, if I may say so, the wear and tear of the
slave, is commonly managed by a negligent master or careless
overseer. That destined for performing the same office
with regard to the freeman is managed by the freeman
himself. The disorders which generally prevail in the
economy of the rich, naturally introduce themselves into the
management of the former; the strict frugality and
parsimonious attention of the poor as naturally establish
themselves in that of the latter” ([O.U.P., Vol. I,
p. 90; Garnier,] l.c., p. 164).

It is characteristic in the determination of the minimum
wage or the natural price of labour, that it is lower for
the free wage-labourer than for the slave. This occurs
also to Adam Smith:

“The work done by freemen comes
cheaper in the end than that performed by
slaves… The liberal reward of labour,
therefore, as it is the effect of increasing wealth, so it
is the cause of increasing population. To complain of
it, is | to lament over
the necessary cause and effect of the greatest public
prosperity” ([O.U.P., Vol. I, p. 90; Garnier,] l.c.,
p. 165).

Adam Smith continues to plead for a high wage.

It not only “encourages the propagation”, but
also “increases the industry of the common
people. The wages of labour are the encouragement of
industry, which, like every other human quality, improves in
proportion to the encouragement it receives. A
plentiful subsistence increases the bodily strength of the
labourer, and the comfortable hope of bettering his
condition… animates him to exert that strength to the
utmost. Where wages are high, accordingly, we shall
always find the workmen more active, diligent, and
expeditious than where they are low” ([O.U.P., Vol. I,
pp. 90-91; Garnier,] l.c., p. 166).

But high wages spur the workmen on to over-exertion and
to premature destruction of their labour-power.

“Workmen… when they are
liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a
few years” ([O.U.P., Vol. I, p. 91; Garnier,] l.c.,
pp. 166-67). “If masters would always listen to
the dictates of reason and humanity, they have frequently
occasion rather to moderate, than to animate the application
of many of their workmen” ([O.U.P., Vol. I, p. 92;
Garnier,] l.c., p. 168).

He goes on to argue against the view that “a little
more plenty than ordinary may render some workmen
idle” ( [O.U.P., Vol. I, p. 92; Garnier,] l.c.,
p. 169).

Then he examines whether it is true that the workmen are
more idle in years of plenty than in years of scarcity and
what is the general relation between wages and the price of
the means of subsistence. Here again comes the
inconsistency.

“The money price of labour is
necessarily regulated by two circumstances, the demand for
labour, and the price of the necessaries and
conveniencies of life… The money price of
labour is determined by what is requisite for purchasing
this quantity” (of the necessaries and conveniencies
of life) ([O.U.P., Vol. I, pp. 95-96; Garnier,] l.c.,
p. 175).

[He then examines] why—because of the demand for
labour— wages can rise in years of plenty and fall in
years of scarcity. ([O.U.P., Vol. I, p. 96 et seq.;
Garnier,] l.c., p. 176 et seq.)

The causes [of the rise and fall] in good and had years
counterbalance one another.

“The scarcity of a dear year, by
diminishing the demand for labour, tends to lower its price,
as the high price of provisions tends to raise it. The
plenty of a cheap year, on the contrary, by increasing the
demand, tends to raise the price of labour, as the cheapness
of provisions tends to lower it. In the ordinary
variations of the prices of provisions, those two opposite
causes seem to counterbalance one another, which is
probably, in part, the reason why the wages of labour are
everywhere so much more steady and permanent than the price
of provisions” ([O.U.P., Vol. I, p. 96; Garnier,]
l.c., p. 177).

As against the concept of wages as the source of the
value of commodities, he finally, after all this zigzagging,
again advances his original, more profound view, that the
value of commodities is determined by the quantity of
labour; and if in good years, or with the growth of
capital, the worker receives more commodities, then
he also produces far more commodities, that is to say the
individual commodity contains a smaller quantity of
labour. He can therefore receive a greater quantity of
commodities of less value and thus—this is the implied
conclusion— profit can grow, despite rising absolute
wages.

“The increase in the wages of labour
necessarily increases the price of many commodities, by
increasing that part of it which resolves itself into
wages, and so far tends to diminish their consumption,
both at home and abroad. The same cause, however,
which raises the wages of labour, the increase of stock,
tends to increase its productive powers, and to make a
smaller quantity of labour produce a greater quantity of
work.” [This is due to] the division of labour, the
use of machinery, inventions, etc….There are many
commodities, therefore, which, in consequence of these
improvements, come to be produced by so much less labour
than before, that the increase of its price is
more than compensated by the diminution of its
quantity” ([O.U.P., Vol. I, p. 97; Garnier,] l.c.,
pp. 177-78).

The labour is better paid, but less labour is contained
in the individual commodity, hence a smaller amount has to
be paid out. He thus allows his false theory,
according to which the value of the commodity is determined
by the wage as a constituent element of the value, to be
annulled, or rather paralysed, counterbalanced by his
correct theory, according to which the value [of the
commodity] is determined by the quantity of labour it
contains.

## Chapter IX: “Of the Profits of Stock”.

Here accordingly the natural rate of the second element
that determines and constitutes the natural price or
value of the commodities is to be ascertained. What
Adam Smith says about the cause of the fall in the rate
of profit ([Garnier,] l.c., pp. 179, 189, 190, 193, 196,
197, etc.) shall be considered at a later stage.

Adam Smith is confronted here by considerable
difficulties. He says that even the determination of
average wages amounts merely to ascertaining “the most
usual wages” ([O.U.P., Vol. I, p.98; Garnier], l.c.,
p. 179), the actual given rate of wages.

“But even this can seldom be done
with regard to the profits of stock” ([O.U.P.,
Vol. I, p. 98; Garnier,] l.c., p. 179). Apart from the
good or bad fortune of the entrepreneur, this profit
“is affected by every variation of price in the
commodities” ([O.U.P., Vol. I, p. 98; Garnier,] l.c.,
p. 180)

although it is precisely through the natural rate of
profit, as one of the component elements of
“value”, that we are supposed to determine the
natural price of these commodities. This [the
determination of the natural rate of profit] is already
difficult for a single capitalist in a single trade.

“To ascertain what is the average
profit of all the different trades carried on in a great
kingdom, must be much more difficult” ([O.U.P.,
Vol. I, p. 98; Garnier,] l.c., p. 180).

But one may form some notion of the “average
profits of stock” “from the interest of
money”.

“It may be laid down as a maxim, that
wherever a great deal can be made by the use of money, a
great deal will commonly be given for the use of it; and
that, wherever little can be made by it, less will commonly
be given for it” ([O.U.P., Vol. I, p. 98; Garnier]
l.c., pp. 180-81).

Adam Smith does not say the rate of interest determines
profits. He expressly states the reverse. But
there are records of the rate of interest for different
epochs etc.; such records do not exist for the rate of
profit. The rates of interest are therefore indices
from which the approximate level of the rate of profit can
be judged. But the task set was not to compare the
levels of actual rates of profit, but to determine the
natural level of the rate of profit.
Adam Smith seeks refuge in a subsidiary investigation into
the level of the rate of interest in different periods,
which in no way touches upon the problem he has set himself,
He makes a cursory examination of various periods in England
and then compares these with Scotland, France and Holland
and finds that—with the exception of the American
colonies—

“high wages of labour and high
profits of stock … are things, perhaps,[g] which scarce
ever go together, except in the peculiar circumstances of
new colonies” ([O.U.P., Vol. I, p. 102; Garnier,]
l.c., p. 187).

Here Adam Smith tries, like Ricardo—but to a
certain extent with more success—to give some
approximate explanation of high profits:

“A new colony must always, for some
time, be more under-stocked in proportion to the extent of
its territory, and more under-peopled in proportion to the
extent of its stock, than the greater part of other
countries. They have more land than they have stock to
cultivate. What they have, therefore, is applied to
the cultivation only of what is most fertile and most
favourably situated, the land near the sea shore and
along the hanks of navigable rivers. Such land, too,
is frequently purchased at a price below the value even of
its natural produce.” (In fact, therefore, it costs
nothing.) “Stock employed in the purchase
and improvement of such lands must yield a very large
profit, and, consequently, afford to pay a very large
interest. Its rapid accumulation in so profitable an
employment enables the planter to increase the number of his
hands faster than he can find them in a new
settlement. Those whom he can find, therefore, are
very liberally rewarded. As the colony increases,
the profits of stock gradually diminish. When the most
fertile and best situated lands have been all occupied, less
profit can be made by the cultivation of what is inferior
both in soil and situation, and less interest can be
afforded for the stock which is so employed, In the greater
part of our colonies, accordingly, the … rate of
interest has been considerably reduced during the course of
the present century” ([O.U.P., Vol. I, pp. 102-03;
Garnier,] l.c., pp. 187-89).

This is one of the foundations of the Ricardian
explanation of why profits fall, although it is presented in
a different way. On the whole, Smith explains
everything here by the competition between capitals; as
capitals grow, profit falls and as they diminish, profit
grows, and accordingly wages rise or fall conversely.

| “The diminution
of the capital stock of the society, or of the funds
destined for the maintenance of industry, however, as it
lowers the wages of labour, so it raises the profits of
stock, and consequently the interest of money. By the
wages of labour being lowered, the owners of what stock
remains in the society can bring their goods at less expense
to market than before, and less stock being employed in
supplying the market than before, they can sell them
dearer” ([O.U.P., Vol. I, p. 104; Garnier,] l.c., pp.
191-92).

Then he talks about the highest possible and the lowest
possible rates [of profit].

The “highest rate” is that which, “in
the price of the greater part of commodities, eats up the
whole of what should go to the rent of the land, and leaves
only what is sufficient to pay the labour of preparing and
bringing them to market, according to the lowest rate at
which labour can anywhere be paid, the bare subsistence of
the labourer” ([O.U.P., Vol. I, p. 108; Garnier,]
l.c., pp. 197-98).

“The lowest ordinary rate of profit
must always be something more than what is sufficient to
compensate the occasional losses to which every employment
of stock is exposed. It is this surplus only which is
neat or clear profit” ([O.U.P., Vol. I, p. 107;
Garnier,] l.c., p. 196).

Adam Smith himself in fact characterises what he says
about the “natural rate of profit”:

“Double interest is in Great Britain
reckoned what the merchants call a good, moderate,
reasonable profit; terms which, I apprehend, mean no
more than a common and usual profit” ([O.U.P.,
Vol. I, p. 108; Garnier,] l.c., p. 198).

And indeed, Smith calls this “common and usual
profit” neither moderate nor good, but his term for it
is “the natural rate of profit”.
However, he does not tell us at all what it is or how it is
determined although we are supposed to determine the
“natural price” of the commodity by means of
this “natural rate of profit”.

“In countries which are fast
advancing to riches, the low rate of profit may, in the
price of many commodities, compensate the high wages of
labour, and enable those countries to sell as cheap as their
less thriving neighbours, among whom the wages of labour may
be lower” ([O.U.P., Vol. I, p. 109; Garnier,] l.c.,
p. 199).

Low profits and high wages are not reciprocally opposed
here, but the same cause—the quick growth or
accumulation of capital—produces both. Both
enter into the price; they constitute it. If
therefore one is high while the other is low, the price
remains the same, and so on.

Adam Smith here regards profit purely as a surcharge, for
at the end of the chapter he says:

“In reality, high profits tend much
more to raise the price of work than high
wages” ([O.U.P., Vol. I, p. 109; Garnier,] l.c.,
p. 199). If, for example, the wages of all the working
people in linen manufacture were to rise by twopence a day,
this would only raise the price of the “piece of
linen” by the number of twopences equal to the number
of people employed, “multiplied by the number of days
during which they had been so employed, That part of the
price of the commodity which resolved itself into wages
would, through all the different stages of the manufacture,
rise only in arithmetical proportion to this rise of
wages. But if the profits of all the different
employers of those working people should be raised five per
cent, that part of the price of the commodity which resolved
itself into profit would, through all the different stages
of manufacture, rise in geometrical proportion to
this rise of profit… In raising the price of
commodities the rise of wages operates in the same manner as
simple interest does in the accumulation of debt, The rise
of profit operates like compound interest” ([O.U.P.,
Vol. I, pp. 109-10; Garnier,] l.c., pp. 200-01).

At the end of this chapter Adam Smith also tells us
the source of the whole notion, that the price of the
commodity, or its value, is made up out of the values of
wages and profits—namely, the amis du
commerce,[h] the
faithful practitioners of competition:

“Our merchants and
master-manufacturers complain much of the had effects of
high wages in raising the price, and thereby lessening the
sale of their goods, both at home and abroad. They say
nothing concerning the bad effects of high profits.
They are silent | with
regard to the pernicious effects of their own gains.
They complain only of those of other people” ([O.U.P.,
Vol. 1, p. 110; Garnier,] l.c., p. 201).

Chapter X [is entitled] “Of Wages and Profit in
the Different Employments of Labour and Stock.”
This is only concerned with detail and therefore belongs
into the chapter on competition. In its way, it is
very good. It is completely exoteric.

{Productive and unproductive labour:

“The lottery of the law … is
very far from being a perfectly fair lottery; and that, as
well as many other liberal and honourable professions, is,
in point of pecuniary gain, evidently
under-recompensed” ([O.U.P., Vol. I, p. 118; Garnier,]
Book I, Chapter X, pp. 216-17).

Similarly he says of soldiers:

“Their pay is less than that of
common labourers, and, in actual service, their fatigues are
much greater” ([O.U.P., Vol. I, pp. 121-22; Garnier,]
l.c., p. 223).

And of sailors in the navy:

“Though their skill and dexterity are
much superior to that of almost any artificers; and though
their whole life is one continual scene of hardship and
danger … their wages are not greater than those of
common labourers at the port which regulates the rate of
seamen’s wages” ([O.U.P., Vol. I, p. 122; Garnier,]
l.c., p. 224).

Ironically:

“It would be indecent, no doubt, to
compare either a curate or a chaplain with a journeyman in
any common trade, The pay of a curate or chaplain, however,
may very properly be considered as of the same nature with
the wages of a journeyman” ([O.U.P., Vol. I, p. 148;
Garnier,] l.c., p. 271).

He expressly says of “men of letters”
that they are underpaid because of their too great numbers
and he recalls that before the invention of printing,
“a scholar and a beggar” ([O.U.P.,
Vol. I, p. 151; Garnier,] l.c., pp. 276-77) were synonymous
and seems to apply this, in a certain sense, to men of
letters.}

The chapter is full of acute observations and important
comments .

“In the same society or
neighbourhood, the average and ordinary rates of profit in
the different employments of stock should be more nearly
upon a level than the pecuniary wages of different sorts of
labour” ([O.U.P., Vol. I, p. 124; Garnier,] l.c.,
p. 228).

“The extent of the market, by
giving employment to greater stocks, diminishes
apparent profit; but by requiring supplies from a
greater distance, it increases prime cost. This
diminution of the one and increase of the other seem, in
most cases, nearly to counterbalance one another” (in
the case of such articles as bread, meat, etc.)
([O.U.P., Vol. I, p. 126; Garnier,] l.c., p. 232).

“In small towns and country villages,
on account of the narrowness of the market, trade
cannot always be extended as stock extends. In such
places, therefore, though the rate of a particular person’s
profits may be very high, the sum or amount of them can
never be very great, nor consequently that of his annual
accumulation. In great towns, on the contrary, trade
can be extended as stock increases, and the credit of a
frugal and thriving man increases much faster than his
stock. His trade is extended in proportion to the
amount of both” ([O.U.P., Vol. I, p. 127; Garnier,]
l.c., p. 233).

Regarding the false statistical presentation of
wages, for instance in the sixteenth and seventeenth
etc. centuries, Adam Smith quite rightly observes that the
wages here were only, for example, the wages of cotters,
who, when not occupied around their cottages or working for
their masters (who gave them a house, “a small garden
for pot-herbs, as much grass as will feed a cow, and,
perhaps, an acre or two of bad arable land”, and, when
he employed them, a very poor wage)

“are said to have been willing to
give their spare time for a very small recompense to
anybody, and to have wrought for less wages than other
labourers… This daily or weekly
recompense, however, seems to have been considered as
the whole of it, by many writers who have collected
the prices of labour and provisions in ancient times, and
who have taken pleasure in representing both as wonderfully
low” ([O.U.P., Vol. I, pp. 131-32; Garnier,] l.c.,
p. 242).

He makes the altogether true observation that:

“this equality in the whole of the
advantages and disadvantages of the different employments of
labour and stock, can take place only in such as are the
sole or principal employments of those who occupy
them” ([O.U.P., Vol. I, p. 131; Garnier,] l.c.,
p. 240).

This point, incidentally, has already been quite well set
forth by Steuart, particularly in relation to agricultural
wages—as soon as time becomes precious.

| With regard to
the accumulation of capital in the towns during the Middle
Ages, Adam Smith very correctly notes in this chapter, that
it was principally due to the exploitation of the country
(by trade as well as by manufacture). (There were in
addition the usurers and even haute finance; in short, the
money merchants.)

“In consequence of such
regulations” [i.e., regulations made by the guilds],
“indeed, each class” (within the town corporate)
“was obliged to buy the goods they had occasion for
from every other within the town, somewhat dearer than they
otherwise might have done. But, in recompense, they
were enabled to sell their own just as much dearer; so that,
so far it was as broad as long, as they say; and in the
dealings of the different classes within the town with one
another, none of them were losers by these
regulations. But in their dealings with the country
they were all great gainers; and in these latter dealings
consists the whole trade which supports and enriches every
town.

“Every town draws its whole
subsistence, and all the materials of its industry, from the
country. It pays for these chiefly in two ways.
First, by sending back to the country a part of those
materials wrought up and manufactured; in which case, the
price is augmented by the wages of the workmen, and the
profits of their masters or immediate employers; secondly,
by sending to it a part both of the rude and manufactured
produce, either of other countries, or of distant parts of
the same country, imported into the town; in which case,
too, the original price of those goods is augmented by the
wages of the carriers or sailors, and by the profits of the
merchants who employ them. In what is gained upon the
first of those branches of commerce consists the advantage
which the town makes by its manufactures; in what is gained
upon the second, the advantage of its inland and foreign
trade. The wages of the workmen, and the profits of
their different employers, make up the whole of what is
gained upon both. Whatever regulations, therefore,
tend to increase those wages and profits beyond what they
otherwise would be, tend to enable the town to purchase,
with a smaller quantity of its labour, the produce of a
greater quantity of the labour of the country”
([O.U.P., Vol. I, pp. 140-41; Garnier] l.c.,
pp. 258-59).

{Here, therefore,—l.c., t, 1, l. 1, ch. X,
p.259—Adam Smith returns to the correct determination
of value, the determination of value by the quantity of
labour. This should be quoted as an example when
dealing with his theory of surplus-value. If the
prices of the commodities which are exchanged between town
and country are such that they represent equal quantities of
labour, then they are equal to their values. Profit
and wages on both sides of the exchange cannot, therefore,
determine these values, but the division of these values
determines profit and wages. That is why Adam Smith
finds that the town, which exchanges a smaller quantity of
labour against a greater quantity of labour from the
countryside, draws excess profit and excess wages compared
with the country. This would not be the case if it did
not sell its commodities to the country for more than
their value. In that case “wages and
profits” would not increase “beyond what they
otherwise would be”. If, therefore, wages
and profits are at their natural level, then they do not
determine the value of the commodity, but are determined by
it. Profit and wages can then only arise from the
division of the given value, which is their
precondition, this value however cannot be the result of
preconceived profits and wages.}

“They give the traders and artificers
in the town an advantage over the landlords, farmers, and
labourers in the country, and break down that natural
equality which would otherwise take place in the commerce
which is carried on between them. The whole annual
produce of the labour of the society is annually
divided between those two different sets of
people. By means of those” (town)
“regulations, a greater share of it is given to
the inhabitants of the town than would otherwise fall to
them; and a less to those of the country.

“The price which the town
really pays for the provisions and materials annually
imported into it, is the quantity of manufactures and other
goods annually exported from it. The dearer the
latter are sold, the cheaper the former are
bought. The industry of the town becomes more, and
that of the country less advantageous” ([O.U.P.,
Vol. I, pp. 141-42; Gamier,] l.c., pp. 259-60).

Thus, according to Smith’s presentation of the matter, if
the commodities of the town and those of the country were
sold in proportion to the quantity of labour which
they each contain, then they would be sold at their
values, and consequently the profit and wages on both
sides of the exchange could not determine these
values, but would be determined by them. The
levelling out of profits—which vary because of the
varying organic composition of capitals—does not
concern us here, since it does not lead to differences
between profits; but equalises them.

| “The
inhabitants of a town, being collected into one
place, can, easily combine together. The most
insignificant trades carried on in towns have, accordingly,
in some place or other, been incorporated” ([O.U.P.,
Vol. I, p. 142; Garnier] l.c., p. 261). “The
inhabitants of the country, dispersed in distant places,
cannot easily combine together. They have not only
never been incorporated, but the incorporation spirit never
has prevailed among them. No apprenticeship has ever
been thought necessary to qualify for husbandry, the great
trade of the country” ([O.U.P., Vol. I, p. 143;
Garnier,] l.c., p. 262).

In this connection Smith comes to speak of the
disadvantages of the “division of labour”.
The farmer practises a trade requiring more intelligence
than the manufacturing worker, who is subject to the
division of Labour.

“The direction of operations,
besides, which must be varied with every change of the
weather, as well as with many other accidents, requires much
more judgement and discretion, than that of those which are
always the same, or very nearly the same” ([O.U.P.,
Vol. I, p. 143; Garnier,] l.c., p. 263).

The division of labour develops the social
productive power of labour or the productive power of
social labour, but at the expense of the general
productive ability of the worker. This increase in
social productive power confronts the worker
therefore as an increased productive power, not of
his labour, but of capital, the force that
dominates his labour. If the town labourer is more
developed than the country labourer, this is only due to the
circumstance that his mode of work causes him to live in
society, whereas that of the agricultural labourer
makes him live directly with nature.

“The superiority which the industry
of the towns has everywhere in Europe over that of the
country, is not altogether owing to corporations and
corporation laws, It is supported by many other
regulations. The high duties upon foreign
manufactures, and upon all goods imported by alien
merchants, all tend to the same purpose” ([O.U.P.,
Vol. I, p. 144; Garnier,] l.c., p. 265). These
“regulations secure them” (the towns) against
the competition of foreigners.

This is an act, no longer of the town bourgeoisie, but of
the bourgeoisie already legislating on a national scale as
the corps de nation or as the Third Estate of the
State Assembly or the Lower House. The specific acts
of the town bourgeoisie—directed against the
country—are the excise and duties levied at the gates,
and, in general, the indirect taxes, which have their origin
in the towns (see Hüllmann), while the direct taxes are
of country origin. It might appear that the excise,
for example, is a tax which the town imposed indirectly upon
itself. The countryman must advance it, but reimburses
himself in the price of the product. But this was not
the case in the Middle Ages. The demand for his
products—in so far as he converted these into
commodities and money at all—[was, in so far as it
came] from the town, mostly compulsorily restricted to the
area under the jurisdiction of the town, so that he did not
have the power to raise the price of his product by the full
amount of the town tax.

“In Great Britain, the superiority of
the industry of the towns over that of the country seems to
have been greater formerly than in the present times.
The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in
agriculture to those of trading and manufacturing stock,
than they are said to have done in the last century”
(the seventeenth) “or in the beginning of the
present” (the eighteenth). “This change
may be regarded as the necessary, though very late
consequence of the extraordinary encouragement given to the
industry of the towns. The stocks accumulated in them
come in time to he so great, that it can no longer be
employed with the ancient profit in that species of industry
which is peculiar to them. That industry has its
limits like every other; and the increase of stock,
by increasing the competition, necessarily reduces
the profit. The lowering of profit in the town
forces out stock to the country, where, by creating a
new demand for country labour, it necessarily raises its
wages. It then spreads itself, if I may say so,
over the face of the land, and, by being employed in
agriculture, is in part restored to the country, at the
expense of which, in a great measure, it had originally been
accumulated in the town” ([O.U.P., Vol. I, p. 145;
Garnier,] l.c., pp. 266-67).

In Chapter XI of Book I, Smith then seeks to
determine the natural rate of rent, the third element
which constitutes the value of the commodity. We shall
postpone consideration of this and first return again to
Ricardo.

This much is clear from the foregoing: When Adam Smith
identifies the natural price or cost-price of the
commodity with its value, he does so after first
abandoning his correct conception of value, and
substituting for it the view which is evoked by and arises
from the phenomena of competition. In competition, the
cost-price and not the value appears as the
regulator of the market-price—so to speak, as
the immanent price, the value of the commodity.
But in competition this cost-price appears to be represented
by the given average rate of wages, profit and rent.
Hence Adam Smith tries to establish these separately and
independently of the value of the commodity—
rather as elements of the natural price, Ricardo, whose main
concern has been the refutation of this Smithian | aberration, accepts the result
that necessarily follows from it—namely the
identity of values and cost-prices—although with
Ricardo this result is logically impossible.

* Here Herr
Rodbertus can see that in England seeds are
“bought”.

[a] In the
manuscript: “upon”.—Ed.

[b] Marx wrote this
paragraph in English.—Ed.

[c] In the
manuscript: “of fixed capital”.—Ed.

[d] In the
manuscript: “unequal rapidity in the return of the
capitals to their owners”.—Ed.

* it is possible
that the rate of surplus-value is not equalised in
the different spheres of production (for instance because of
unequal length of working time). This is not
necessary because the surplus-values themselves are
equalised.

* Here Roscher could
have seen once again what the Englishman understands by the
term “monied class”. The “monied
class” is here diametrically opposed to the
“industrious part of the community”.

[e] Marx
quotes here from Recherches sur la nature et les causes
de la richesse des nations. Paris, 1802, Garnier’s
translation of Adam Smith’s work. All passages taken
by Marx from the French translation are marked
“Garnier” in this edition and are printed in
English according to A. Smith, An Inquiry into the Nature
and Causes of the Wealth of Nations, Oxford University
Press, London, 1928 (referred to hereafter as O.U.P.).
The French text, as that of all other quotations taken by
Marx from French and German sources, can be found in the
Appendices.—Ed.

[f] In the German
original: “verkehrt” which may mean:
upside down, reversed, or: wrong.—Ed.

[g] In Garnier’s

[h] Friends of
commerce (an expression used by Fourier).—Ed.


## [Chapter XI] Ricardo’s Theory of Rent.

### [1. Historical Conditions for the Development of the Theory of Rent by Anderson and Ricardo]

The main points were dealt with when discussing
Rodbertus. Just a few more gleanings here.

Firstly, some comments on the historical aspect:

Ricardo was first of all concerned with the period
1770-1815, which came approximately within his own
experience, and during which wheat prices were constantly
rising. Anderson [on the other hand] was concerned
with the eighteenth century, at the close of which he was
writing. During the first half of that century wheat
prices were falling and during the second half they were
rising. Hence for Anderson, the law he discovered was
in no way connected with a diminishing productivity of
agriculture or a normal <for Anderson an unnatural>
rise in the price of the product. For Ricardo however
such a connection existed. Anderson believed that the
abolition of the corn laws (at that time export premiums)
caused the rise in prices during the second half of the
eighteenth century. Ricardo knew that the introduction
of corn laws (1815) was intended to prevent the fall in
prices, and to a certain degree was bound to do so.
With regard to the latter [it was] therefore necessary to
point out that, if left to itself, the law of
rent—within a definite territory—was
bound to result in recourse to less fertile land, thus
leading to dearer agricultural products and increased rent
at the cost of industry and the mass of the
population. And here Ricardo was right, both
historically and in practice. Anderson on the other
hand [maintained] that corn laws (and he also favours a duty
on imports) must further the even development of agriculture
within a definite territory and that for this even
development agriculture needs security. Consequently
he [maintained] that this progressive development in
itself—through the law of rent he
discovered—would lead to increased productivity in
agriculture and thereby to a fall in the average prices of
agricultural produce.

Both of them, however, start out from the viewpoint
which, on the continent, seems so strange: 1.
That there is no Landed property to shackle any desired
investment of capital in land. 2. That expansion
takes place from better land to worse (this process is
absolute for Ricardo, provided one leaves out of account the
interruptions caused by the response of science and
industry; for Anderson the worse land is in turn transformed
into better land and so it is relative). 3. That
a sufficient amount of capital is always available for
investment in agriculture.

Now so far as 1. and 2. are concerned, it must seem very
odd to the continentals, that in the country in which,
according to their conception, feudal landed property has
maintained itself most stubbornly, the economists, Anderson
as well as Ricardo, start out from the conception that no
landed property exists. The explanation for this
is:

firstly: the peculiarity of the English “law
of enclosures”, which is in no way analogous with the
continental portioning out of common land;

secondly: nowhere in the world has capitalist
production, since Henry VII, dealt so ruthlessly with the
traditional relations of agriculture, adapting and
subordinating the conditions to its own requirements.
In this respect England is the most revolutionary country in
the world. Wherever the conditions handed down from
history were at variance with, or did not correspond to, the
requirements of capitalist production on the land, they were
ruthlessly swept away; this applies not only to the position
of the village communities but to the village communities
themselves, not only to the habitats of the agricultural
population but to the agricultural population itself, not
only to the original centres of cultivation, but to
cultivation itself. The German, for example, meets
with economic relations that are determined by traditional
circumstances such as land boundaries, the position of the
economic centres, given conglomerations of the
population. The Englishman meets with historical
conditions of agriculture which have been progressively
created by capital since the end of the 15th century.
“Clearing of estates”, a technical term
[well-known] in the United Kingdom, will not be found in any
continental country. But what is the meaning of this
“clearing of estates”? It means
that without any consideration for the local inhabitants,
who are driven away, for existing village communities, which
are obliterated, for agricultural buildings, which are torn
down, for the type of agriculture, which is transformed in
one fell swoop, for instance arable land converted into
grazing pasture—[in short] none of the conditions of
production are accepted as they have traditionally existed
but are historically transformed in such a way that
under the circumstances, they will provide the most
profitable investment for capital. To that extent,
therefore, no landed property exists; it gives
capital—i.e., the farmer—full scope, since it is
only concerned with monetary income. A Pomeranian
landowner, therefore, with his head full of ancestral land
boundaries, centres of economy and lectures on agriculture
etc., may well be amazed by Ricardo’s
“unhistorical” view of the | development of conditions in
agriculture. This shows merely that he naïvely
confuses Pomeranian conditions with those prevailing in
England. But it cannot be said that Ricardo, who in
this case starts from the conditions in England, is just as
narrow-minded as the Pomeranian landowner, who can think
only in terms of Pomeranian conditions. English
conditions are the only ones in which modern
landownership, i.e., landownership which has been
modified by capitalist production, has been
adequately developed. For the modern—the
capitalist—mode of production, the English view is
here the classical view. The Pomeranian, on the other
hand, judges the developed relations from a historically
lower and as yet inadequate form.

Indeed, most of Ricardo’s continental critics even take
as their starting-point conditions in which the capitalist
mode of production, adequate or inadequate, does not as yet
exist at all. It is as if a guild-master wanted, lock,
stock and barrel, to apply Adam Smith’s laws—which
presuppose free competition—to his guild economy.

The presupposition of the movement from better to worse
land—relatively to the particular stage in the
development of the productive power of labour as with
Anderson, and not absolutely as with Ricardo—could
only arise in a country such as England, where within a
relatively very small territory capital has farmed so
ruthlessly and has for centuries mercilessly sought to adapt
to its own needs all traditional relationships of
agriculture. Thus it [the presupposition] could only
arise where, unlike the continent, capitalist production in
agriculture does not date from yesterday and does not have
to fight against old traditions.

A second factor influencing the English was the knowledge
they gained through their colonies. We have
seen that Adam Smith’s work—with direct reference to
the colonies—already contains the basis for the entire
Ricardian viewpoint. In these colonies, and especially
in those which produced only merchandise such as tobacco,
cotton, sugar etc. and not the usual foodstuffs, where,
right from the start, the colonists did not seek subsistence
but set up a business, fertility was of course decisive,
given the situation [of the land], and given the
fertility, the situation of the land was
decisive. They did not act like the Germans, who
settled in Germany in order to make their home there, but
like people who, driven by motives of bourgeois
production, wanted to produce commodities, and
their point of view was, from the outset, determined not by
the product but by the sale of the product. That
Ricardo and other English writers transferred this
point of view—which emanated from people who were
themselves already the product of the capitalist mode of
production—from the colonies to the course of world
history and that they took the capitalist mode of
production as a premise for agriculture in general, as
it was for their colonists, is due to the fact that
they saw in these colonies, only in more obvious form,
without the fight against traditional relations, and
therefore untarnished, the same domination of
capitalist production in agriculture as hits the eye
everywhere in their own country. Hence, if a German
professor or landowner—belonging to a country which
differs from all others in its complete lack of
colonies—considers such a view to be
“false”, then this is quite understandable.

Finally the presupposition of a continuous flow of
capital from one sphere of production into another, this
basic assumption of Ricardo’s amounts to nothing more
than the assumption that developed capitalist production
predominates. Where this domination is not yet
established, this presupposition does not exist. For
instance, a Pomeranian landowner will find it strange that
neither Ricardo nor indeed any English writer ever suspects
that agriculture might lack capital. The
Englishman does, indeed, complain of lack of land in
proportion to capital, but never of a lack of capital
in proportion to the land. Wakefield, Chalmers,
etc. try to explain the fall in the rate of profit from the
former circumstance. The latter does not exist for any
English writer; Corbet notes as a self-explanatory fact,
that capital is always redundant in all branches of
production. On the other hand, bearing in mind the
situation in Germany, the landowner’s difficulties in
borrowing money—because mostly it is the landowner
himself who cultivates the land and not a capitalist class
which is quite independent of him—it is understandable
that Herr Rodbertus, for example, is surprised at “the
Ricardian fiction, that the supply of capital is
regulated by the desire to invest it”.
([Sociale Briefe an v. Kirchmann. Dritter Brief,
Berlin, 1851] p. 211.) What the Englishman lacks is a
“field of action”, opportunity for investment of
the available stock of capital. But a “desire
for capital” to “invest”, on the part of
the only class which has capital to invest—the
capitalist class—this does not exist in England.

| This “desire
for capital” is Pomeranian.

The objection made by English writers against Ricardo was
not that capital was not available in any desired quantity
for particular investments, but that the return flow of
capital from agriculture encountered specific technical
etc. obstacles.

This kind of critical-continental censoriousness of
Ricardo, therefore, only shows the lower stage in the
conditions of production from which these
“sages” start out.

### [2. The Connection Between Ricardo’s Theory of Rent and His Explanation of Cost-Prices]

Now to the matter in hand.

In the first place, in order to isolate the problem, we
must leave aside entirely differential rent, which
alone exists for Ricardo. By differential
rent I understand the difference in the magnitude
of rent—the greater or smaller rent which is due to
the different fertility of the various types of
land. (Given equal fertility, differential rent
can only arise from differences in the amounts of capital
invested. This case does not exist for our problem and
does not affect it.) This differential rent merely
corresponds to the excess profits which, given the
market-price or, more correctly, the
market-value, will be made in every branch of
industry, for example cotton spinning, by that
capitalist whose conditions of production are better
than the average conditions of this particular trade.
For the value of the commodity of a particular sphere
of production is determined, not by the quantity of
labour which the individual commodity costs, but by the
quantity which the commodity costs that is produced
under the average conditions of the sphere.
Manufacture and agriculture only differ from one another
here in that in the one, the excess profits fall into the
pocket of the capitalist himself, whereas in the other they
are pocketed by the landowner, and furthermore, that in the
former they are f l u i d, they are not lasting, are
made by this capitalist or that, and always disappear again,
while in the latter they become fixed because of
their enduring (at least for a long period) natural basis in
the variations in the land.

This differential rent must therefore be left out of
account, but it should be noted that it may exist not only
when a movement from better to inferior land takes place but
also from inferior to better land. In both cases the
only requirement is that the newly cultivated land is
necessary but at the same time only just sufficient to
satisfy the additional demand. If the newly
cultivated, better land were more than sufficient to
satisfy the additional demand then, according to the volume
of the additional demand, part or all of the inferior land
would be thrown out of cultivation or, at any rate,
out of cultivation of that product which forms the
basis of the agricultural rent, i.e., in England of wheat
and in India of rice. Thus differential rent does not
presuppose a progressive deterioration of
agriculture, but can equally well spring from a
progressive improvement in it. Even where it is
based on the descent to worse types of land, firstly this
descent may be due to an improvement in the
productive forces of agriculture, in that the cultivation of
the worse land, at the price which is set by demand,
is only made possible by greater productive
power. Secondly, the worse land can be
improved; the differences will nevertheless remain, although
they will become smaller, so that as a result there is only
a relative, comparative decrease in
productivity— whereas absolute productivity
increases. This was in fact the presupposition
made by Anderson, the original author of the Ricardian
law.

Then, in the second instance, only the agricultural
rent in the strict sense should be considered here, in
other words the rent of the land which supplies the chief
vegetable foods. Smith has already explained that the
rents of land which supplies the other products, such as
stock-raising etc., are determined by that rent; that
they are themselves derived, determined by the law of
rent and not determining it. In themselves therefore
these rents do not furnish any useful material for the
understanding of the law of rent in its original, pure
condition: There is nothing primary about them.

This settled, the question is reduced to the following:
Does an absolute rent exist? That is, a rent
which arises from the fact that capital is invested in
agriculture rather than manufacture; a rent which is quite
independent of differential rent or excess
profits which are yielded by capital invested in better
land?

It is clear that Ricardo correctly answers this question
in the negative, since he starts from the
false assumption that values and average
prices of commodities are identical, If this were the
case, it would be a tautology to say that the price of
agricultural products is above their
cost-price—when | the constant price of
agricultural products yields, beyond the average profits,
also an extra rent, a constant surplus over and above
the average profit—for this cost-price equals the
advances plus the average profit and nothing else.
Were the prices of agricultural products to stand
above their cost-prices, and always to yield an
excess profit, they would consequently stand above
their value. There would be no alternative but to
assume that agricultural products are perpetually sold
above their value, which, however, equally
presupposes that all other products are sold below
their value, or that value in general is something quite
different from that which the theory requires it to
be. Taking into account all compensations which take
place between the different capitals owing to differences
arising from the process of circulation, the same
quantity of labour (immediate and accumulated) would
produce a higher value in agriculture than in
manufacture. The value of the commodity would
therefore not be determined by the quantity of labour
contained in it. The whole foundation of political
economy would thus be thrown overboard. Ergo, Ricardo
rightly concludes: no absolute rents. Only
differential rent is possible; in other words the value of
the agricultural product grown on the worst land equals the
cost-price of the product, as [with] every other
commodity, [this is equal to its] value. The capital
invested in the worst land differs from capital invested in
manufacture only by the type of investment, by its
being a particular species of investment. Here
therefore the universal validity of the law of value becomes
apparent. Differential rent—and this is
the sole rent on better land—is nothing but the excess
profit yielded by capitals employed in above-average
conditions owing to the [establishment of] one identical
market-value in every sphere of production.
This excess profit consolidates itself only in agriculture
because of its natural basis and, furthermore, the
excess profit flows not into the pocket of the capitalist
but into that of the landowner since it is the
landowner who represents this natural basis.

The entire argument collapses together with Ricardo’s
assumption, that cost-price equals
value. The theoretical interest which
forces him into a denial of absolute rent disappears.
If the value of the commodities differs from their
cost-price, then they necessarily fall into three
categories. In the first category, cost-price is equal
to the value of the commodity, in the second, the value is
below its cost-price and in the third it is
above its cost-price. The fact, therefore, that
the price of the agricultural product yields a rent,
only shows that the agricultural product belongs to that
group of commodities whose value is above their
cost-price. The only remaining problem requiring
solution would be: why, in contrast to other commodities
whose value is also above their cost-price,
competition between capitals does not reduce the value of
agricultural products to their cost-price. The
question already contains the answer. Because,
according to the presupposition, this can only happen in so
far as the competition between capitals is able to effect
such an equalisation, and this in turn can only occur to the
extent that all the conditions of production are either
directly created by capital or are
equally—elementally—at its disposal as if it had
created them. With land this is not the case, because
landed property exists and capitalist production
starts its career on the presupposition of landed
property, which is not its own creation, but which was
already there before it. The mere existence of
landed property thus answers the question. All that
capital can do is to subject agriculture to the conditions
of capitalist production. But it cannot deprive
landed property of its hold on that part of the
agricultural product which capital could
appropriate—not through its own action—but
only on the assumption of the non-existence of
landed property. Since landed property exists,
capital must however leave the excess of value over
cost-price to the landowner. But this difference
[between value and cost-price] itself only arises from a
difference in the composition of the organic
component parts of capital. All commodities whose
value, in accordance with this organic composition, is
above the cost-price, thereby show that the labour
expended on them is relatively less productive than
that expended on the commodities whose value is equal to the
cost-price and even less productive than that expended on
the commodities whose value is below the cost-price;
for they require a greater quantity of immediate
labour in proportion to the past labour contained in
the constant capital; they require more labour in order to
set in motion a definite capital. This is a
historical difference and can therefore
disappear. The same chain of reasoning which
demonstrates the possibility of the existence of absolute
rent, shows its reality, its existence, as a purely
historical fact, which belongs to a certain stage of
development of agriculture and which may disappear at a
higher stage.

Ricardo explained differential rent from an absolute
decrease in productivity in agriculture.
Differential rent does not presuppose this, nor does
Anderson make this assumption. On the other hand
Ricardo denies the existence of absolute rent because he
| assumes the organic composition of
capital to be the same in industry and agriculture and
so denies the purely historical fact of the lower
development of the productive power of labour in
agriculture as compared with manufacture. Hence lie
falls into a twofold historical error: On the one hand, he
assumes that the productivity of labour in agriculture is
absolutely the same as in industry, thus denying a
purely historical difference in their actual stage of
development. On the other hand, he assumes an
absolute decrease in the productivity of agriculture
and regards this as its law of development. He does
the one in order to make cost-price on the worst land
equal value and he does the other in order to explain
the differences between the cost-prices [of the
products] of the better kinds of land and their
values. The whole blunder originates in the
confusion of cost-price with value.

Thus the Ricardian theory is disposed of. The rest
was dealt with earlier, in the chapter on Rodbertus.

### [3. The Inadequacy of the Ricardian Definition of Rent]

I have already indicated that Ricardo opens the chapter
by stating that it is necessary to examine “whether
the appropriation of land, and the consequent
creation of rent” ([David Ricardo, On the
Principles of Political Economy, and Taxation, third
edition, London, 1821], p. 53) do not interfere with the
determination of value by labour-time. And he says
later:

“Adam Smith… cannot be correct
in supposing that the original rule which regulated the
exchangeable value of commodities, namely, the
comparative quantity of labour by which they were produced,
can be at all altered by the appropriation of land and
the payment of rent” (l.c., p. 67).

This direct and conscious connection which Ricardo’s
theory of rent has with the determination of value is
its theoretical merit. Apart from that this Chapter
II “On Rent” is rather inferior to West’s
exposition. It contains much that is queer, petitio
principii and unfair dealing with the problem.

Actual agricultural rent, which Ricardo
justifiably here treats as rent proper, is that which is
paid for the permission to invest capital, to produce
capitalistically, in the element land. Here
land is the element of production. This does
not apply, for example, to rent for buildings, waterfalls
etc. The powers of nature which are paid for in these
cases enter into production as a condition, be it as
productive power or as sine qua non, but they are not
the element in which this particular branch of
production is carried on. Again, in rents for mines,
coal-mines etc., the earth is the reservoir, from whose
bowels the use-values are to be torn. In this case
payment is made for the land, not because it is the
element in which production is to take place, as in
agriculture, not because it enters into production as
one of the conditions of production, as in the case of the
waterfall or the building site, but because it is a
reservoir containing the use-values, which are to be
got hold of through industry.

Ricardo’s explanation that:

“Rent is that portion of the
produce of the earth, which is paid to the landlord for
the use of the original and indestructible
powers of the soil” (l.c., p. 53)

is poor. Firstly, the soil has no
“indestructible powers”. (A note on this
is to follow at the end of this chapter.) Secondly, it
has no “original” powers either, since the land
is in no way “original”, but rather the product
of an historical and natural process. But let that
pass. By “original” powers of the land we
understand here those, which it possesses independently of
the action of human industry, although, on the other hand,
the powers given to it by human industry, become just as
much its original powers as those given to it by the process
of nature. Apart from this, it is correct to say that
rent is a payment for the “use” of
natural things, irrespective of whether it is for the use of
the “original powers” of the soil or of the
power of the waterfall or of land for building or of the
treasures to be found in the water or in the bowels of the
earth.

As distinct from the agricultural rent proper,
Adam Smith (says Ricardo) speaks of the rent paid for wood
from virgin forests, rent of coal-mines and
stone-quarries. The way in which Ricardo disposes of
this is rather strange.

He begins by saying that the rent of land must not be
confused with the interest and profit of capital (l.c.,
p. 53), that is:

“capital […] employed in
ameliorating the quality of the land, and in erecting such
buildings as were necessary to secure and preserve the
produce” (l.c., p. 54).

From this he immediately [passes on] to the
above-mentioned examples from Adam Smith. With regard
to virgin forests:

“Is it not, however, evident, that
the person who paid what he” (Adam Smith) “calls
rent, paid it in consideration of the valuable
commodity which was then standing on the land, and that
he actually repaid himself with a profit, by the sale of
the timber?” (l.c., p. 54).

Similarly with the stone-quarries and coal-mines.

“… the compensation | […] for the mine or
quarry, is paid for the value of the coal or stone
which can be removed from them, and has no connection with
the original and indestructible powers of the land.
This is a distinction of great importance, in an enquiry
concerning rent and profits; for it is found, that the laws
which regulate the progress of rent, are widely different
from those which regulate the progress of profits, and
seldom operate in the same direction” (l.c.,
pp. 54-55).

This is very strange logic. One must distinguish
rent paid to the owner of the land for the use
of the “original and indestructible powers of the
soil” from the interest and profit which is
paid to him for the capital he has invested in
ameliorating the land, etc. The
“compensation” which is paid to the owner
of naturally-grown forests for the right to
“remove” wood, or to the owner of stone-quarries
and coal-mines for the right to remove stones and coal, is
not rent, because it is not a payment for the
“use of the original and indestructible powers of the
soil”. Very well. But Ricardo argues as
though this “compensation” were the same as the
profit and interest which are paid for capital invested in
ameliorations of the land. But this is wrong.
Has the owner of a “virgin forest” invested
“capital” in it so that it may bear
“wood” or has the owner of stone-quarries and
coal-mines invested “capital” in these, so that
they may contain “stones” and
“coal”? Whence, therefore, his
“compensation”? It is by no means—as
Ricardo tries to make out—profit or interest of
capital. Therefore it is “rent” and
nothing else, even if it is not rent as defined by
Ricardo. But this only shows that his definition of
rent excludes those forms of it where the
“compensation” is paid for mere natural
things, in which no human labour is embodied, and where
it is paid to the owner of these natural things only
because he is the “owner”, the owner of
land, whether this consists of soil, forest, fish pond,
waterfall, building land or anything else. But, says
Ricardo, the man who paid for the right to fell trees
in the forest, paid “in consideration of the
valuable commodity which was then standing on the
land and […] actually repaid himself
with a profit, by the sale of the timber”
[p. 54]. Stop! When Ricardo here calls the wood,
i.e., the trees “standing on the land” in
the virgin forest a “valuable commodity”,
then this means only that it is potentially a
use-value. And this use-value is expressed here
in the word “valuable”. But it is not a
“commodity”. Because for this it
would, at the same time, have to be exchange-value, in other
words, to contain a certain quantity of labour expended upon
it. It only becomes a commodity by being separated
from the virgin forest, by being felled, removed and
transported—by being transformed from wood into
timber. Or does it only become a commodity by the fact
it is sold? Then arable land too becomes a commodity
by the mere act of selling?

Then we would have to say: Rent is the price paid to
the owner of natural forces or mere products of nature
for the right of using those forces or appropriating (by
labour) those products. This is in fact the form in
which all rent appears originally. But then the
question remains to be solved, how things which have no
value can have a price and how this is
compatible with the general theory of value.
The question: for what purpose does the man pay
“a compensation” for the right to remove timber
from the land upon which it stands, has nothing to do with
the real question. The question is: from what
fund does he pay? Well, says Ricardo,
“by the sale of the timber”. That
is, out of the price of the timber. And
furthermore, this price was such that, as Ricardo says, the
man “actually repaid himself with a
profit”. Now we know where we are. The
price of the timber must at any rate equal the sum of money
representing the quantity of labour necessary to fell the
timber, to remove it, to transport it, to bring it to
market. Now is the profit with which the man
“repays” himself, an addition over and above
this value, this exchange-value just imparted to the
wood through the labour expended upon it? If Ricardo
said this then he would fall into the crudest conception,
far beneath his own doctrine. No. Given that the
man was a capitalist, the profit is part of the labour he
employed in the production of the “timber”, the
part for which he did not pay; and the man would have
made the same profit, if he had set in motion the same
amount of labour, shall we say, in cotton spinning.
(If the man is not a capitalist, then the profit is equal to
that quantity of his labour which he exerts beyond that
which is necessary to cover his wages, and which would have
constituted the profit of the capitalist, had a capitalist
employed him, but which now constitutes his own profit
because he is his own wage-labourer and his own capitalist
in one and the same person.) But here we come
to the ugly word that this timber man “actually
repaid himself with a profit”. This gives
the whole transaction a very ordinary look and corresponds
to the crude manner of thinking which this capitalist, who
removes timber, may himself have of the source of his
profit. First he pays the owner of the virgin forest
for the use-value wood, which, however, has no
“value” (value in exchange) and which, so long
as it “stands upon the land” has not even a
use-value. He may pay him £ 5 per ton. And
then he sells the same wood to the public (setting aside his
other costs) at £ 6 and so actually pays back to himself
the £5 with a profit of 20 per cent. [He]
“actually repaid himself with a profit”.
If the owner of the forest had only demanded
“compensation” of £ 2 (40 s.), then the
timber man would have sold the ton at £2 8s. instead of
at [£] 6. | Since
he always adds the same rate of profit, the price of timber
would be high or low here because the rent is high or
low. The latter would enter into the price as a
constituent part but would in no way be the result of the
price. Whether the
“rent”—compensation—is paid to the
owner of the land for the use of the “power” of
the land or for the “use” of the “natural
products” of the land, in no way alters the economic
relations, in no way alters the fact that money is paid for
“a natural thing” (power or produce of the
earth) upon which no previous human labour has been
spent. And thus on the second page of his chapter
“On Rent” Ricardo would have overthrown
his whole theory in order to avoid a difficulty. It
would appear that Adam Smith was a great deal more
far-sighted here.

The same case with the stone-quarries and coal-mines.

“The compensation given for
the mine or quarry, is paid for the value of the coal
or stone which can be removed from them, and has no
connection with the original and indestructible
powers of the land”[a] (l.c., pp. 54-55).

No! But there is a very significant connection with
the “original and destructible
productions of the soil”. The word
“value” is just as ugly here as the
phrase “repaid himself with a profit” was
above.

Ricardo never uses the word value for utility or
usefulness or “value in use”. Does he
therefore mean to say that the “compensation” is
paid to the owner of the quarries and coal-mines for the
“value” the coal and stone have before
they are removed from the quarry and the mine—in their
original state? Then he invalidates his entire
doctrine of value. Or does value mean here, as
it must do, the possible use-value and hence also the
prospective exchange-value of coal and stone?
Then it means nothing but that their owner is paid
rent for the permission to use the “original
composition of the soil” for the production of coal
and stones. And it is absolutely incomprehensible why
this should not be called “rent”, in the same
way as if the permission were given to use the
“powers” of the land for the production of
wheat. Or we end up again with the annulment of the
whole theory of rent, as explained in connection with
wood. According to the correct theory, there are no
difficulties involved here at all. The labour, or
capital, employed in the “production” <not
reproduction> of wood, coal or stone (this labour, it is
true, does not create these natural products, but separates
them from their elementary connection with the earth and so
“produces” them as usable wood, coal or stone)
evidently belongs to those spheres of production in which
the part of capital laid out in wages is greater than that
laid out in constant capital, [where consequently the amount
of] direct labour is greater than that of “past”
labour the result of which serves as a means of
production. If, therefore, the commodity is sold at
its value here, then this value will be above its
cost-price, i.e., the wear and tear of the
instruments of labour, the wages, and the average
profit. The excess can thus be paid as rent to
the owner of forest, quarry or coal-mine.

But why these clumsy manoeuvres of Ricardo’s, such as the
wrong use of value etc.? Why this clinging to the
explanation of rent as a payment for the use of the
“original and indestructible powers of the
land”? Perhaps the answer will emerge
later. In any case, he wants to distinguish, to
mention specifically, the agricultural rent in the strict
sense and at the same time to open the way for differential
rent, by saying that payment for this elementary power can
only be made in so far as it develops different degrees of
power.

[a] In the
manuscript: “soil”.—Ed.


## [Chapter XII] Tables of Differential Rent and Comment

### [1. Changes in the Amount and Rate of Rent]

A further comment on the above: Supposing more
productive or better situated coal-mines and
stone-quarries were discovered, so that, with the same
quantity of labour, they yield-ed a larger product than the
older ones, and indeed so large a product that
it covered the entire demand. Then the value and
therefore the price of coal, stones, timber, would fall and
as a result the old coal-mines and stone-quarries would have
to be closed. They would yield neither profit, nor
wages, nor rent. Nevertheless, the new ones
would yield rent just as the old ones did previously
although less (at a lower rate). For every
increase in the productivity of labour reduces the amount of
capital laid out [in] wages, in proportion to the constant
capital which is in this case laid out in tools.
Is this correct? Does this also apply here, where the
change in the productivity of labour does not arise from a
change in the method of production itself, but
from the natural fertility of the coal-mine or the
stone-quarry, or from their situations? One can only
say here that in this case the same quantity of
capital yields more tons of coal or stone and that therefore
each individual ton contains less labour; the total tonnage,
however, contains as much as, or even more [labour], if the
new mines or quarries satisfy not only the old demand
which was previously supplied by the old mines and quarries,
but also an additional demand, and, moreover, an additional
demand which is greater than the difference between the
productivity of the old and that of the new mines and
quarries. But this would not alter the organic
composition of the capital employed. It
would be true to say that the price of a ton, an individual
ton, contained less rent, but only because altogether it
contained less labour, hence also less wages and less
profit. The proportion of the rate of
rent to profit would, however, not be affected by
this. Hence we can |
only say the following:

If demand remains the same, if, therefore, the
same quantity of coal and stone is to be produced as
before, then less capital is employed now in the new
richer mines and quarries than before, in the old ones, in
order to produce the same mass of commodities.
The total value of the latter thus falls, hence also the
total amount of rent, profit, wages and constant capital
employed. But the proportions of rent and profit
change no more than those of profit and wages or of profit
and the capital laid out, because there has been no
organic change in the capital employed. Only
the size and not the composition of the
capital employed has changed, hence neither has the method
of production.

If there is an additional demand to be satisfied,
an additional demand moreover that equals the difference in
fertility between the new and the old mines and quarries,
then the same amount of capital will be used now as
previously. The value of the individual ton
falls. But the total tonnage has the same value as
before. As regards the individual ton, the size of the
portions of value which resolve into profit and rent
decreased together with the value it contained. But
since the amount of capital has remained the same and
with it the total value of its product and no organic
change has taken place in its composition, the absolute
amount of rent and profit has remained the same.

If the additional demand is so great that with the
same capital investment it is not covered by the difference
in fertility between the new and the old mines and quarries,
then additional capital will have to be employed in the new
mines. In this case—provided the growth of the
total capital invested is not accompanied by a change in the
distribution of labour, the application of machinery, in
other words provided there is no change in the
organic composition of the capital—the amount
of rent and profit grows because the value of the total
product grows, the value of the total tonnage, although the
value of each individual ton falls and therefore also that
part of its value which resolves into rent and profit.

In all these instances, there is no change in the
rate of rent, because there is no change in the
organic composition of the capital employed (however
much its magnitude may alter). If, on
the other hand, the change arose out of such a
change—i.e., from a decrease in the amount of capital
laid out in wages as compared with that laid out in
machinery, etc., so that the method of production itself is
altered—then the rate of rent would fall,
because the difference between the value of the commodity
and the cost-price would have decreased. In the three
cases considered above, this does not decrease. For
though the value falls, the cost-price of the individual
commodity falls likewise, in that less labour is expended
upon it, less paid and unpaid labour.

Accordingly, therefore, when the greater productivity of
labour, or the lower value of a certain measure of
commodities produced, arises only from a change in the
productivity of the natural elements, from the difference
between the natural degree of fertility of soils; mines,
quarries etc., then the amount of rent may fall because,
under the altered conditions, a lesser quantity of capital
is employed; it may remain constant if there is an
additional demand; it may grow, if the additional
demand is greater than the difference in productivity
between the previously employed and the newly employed
natural agencies. The rate of rent, however, could
only grow with a change in the organic composition of the
capital employed.

Thus the amount of rent does not necessarily fall
if the worse soil, quarry, coal-mine etc. is
abandoned. The rate of rent, moreover, can
never fall if this abandoning is purely the result of
lesser natural fertility.

Ricardo distorts the correct idea, that in this case,
depending on the state of demand, the amount of rent
may fall, in other words depending upon whether the
amount of capital employed decreases, remains
the same or grows; he confuses it with the fundamentally
wrong idea, that the rate of rent must fall,
which is an impossibility on the assumption made,
since it has been assumed that no change in the
organic composition of capital has taken place,
therefore no change affecting the relationship between
value and cost-price, the only relationship that
determines the rate of rent.

### [2. Various Combinations of Differential and Absolute Rent. Tables A, B, C, D, E]

But what happens to differential rents in this
case?

Supposing that three groups of coal-mines were being
worked: I, II and III. Of these, I bore the absolute
rent, II a rent which was twice that of I, and III a rent
which was twice that of II or four times that of I. In
this example, I bears the absolute rent R, II 2R and III
4R. Now if No. IV is opened up, and if
this is more productive than I, II and III, and if it is so
extensive that the capital invested in it can be as great as
that in I, [then] in this case—the former state of
demand remaining constant—the same amount of
capital as was previously invested in I would now be
invested in IV. I would thereupon be closed and a part
of the capital invested in II would have to be
withdrawn. IV would suffice to replace I and a part of
II, but III and IV would not suffice to supply the whole
demand, without part of II continuing to be worked.
Let us assume, for the sake of the illustration, that
IV—using the same amount of capital as was previously
invested in I—is capable of providing the whole of the
supply from I and half the supply from II. If,
therefore, half the previous capital were invested in II,
the old capital in III and the new in IV, then the whole
market would be supplied.

| What changes had
taken place, or how would the changes accomplished affect
the general rental, the rents of I, II, III and IV?

The[a] absolute
rent, derived from IV, would, in amount and rate, be
absolutely the same as that formerly derived from I; in fact
the absolute rent, in amount and rate, would also
before have been the same on I, II and III, always supposing
that the same amount of capital was employed in those
different classes. The value of the produce of IV
would be exactly identical to that formerly employed on I,
because it is the produce of a capital of the same
magnitude and of a capital of the same organic
composition. Hence the difference between [the]
value [of the product] and its cost-price must be the same;
hence [also] the rate of rent. Besides, the amount [of
rent] must be the same, because—at a given rate
of rent—capitals of the same magnitude would have been
employed. But, since the [market] -value of the coal
is not determined by the [individual] value of the coal
derived from IV, it would bear an excess rent, or an
overplus over its absolute rent; a rent derived, not
from any difference between value and cost-price, but from
the difference between the market-value and the
individual value of the produce No. IV.

When we say that the absolute rent or the difference
between value and cost-price on I, II, III, IV, is the
same, provided the magnitude of the capital
invested in them, and therefore the amount of rent with a
given rate of rent is the same, then this is to be
understood in the following way: The (individual) value of
the coal from I is higher than that from II and that from II
is higher than that from III, because one ton from I
contains more labour than one ton from II and one ton from
II more than one ton from III. But since the
organic composition of the capital is in all three
cases the same, this difference does not affect the
individual absolute rent yielded by I, II, III, For
if the value of a ton from I is greater, so is its
cost-price; it is only greater in the proportion that
more capital of the same organic composition is
employed for the production of one ton in I than in
II and of one ton in II than in III. This difference
in their values is, therefore, exactly equal to the
difference in their cost-prices, in other words to
[the difference in] the relative amount of capital expended
to produce one ton of coal in I, II and III. The
variation in the magnitudes of value in the three groups
does not, therefore, affect the difference between value
and cost-price in the various classes. If the
value is greater, then the cost-price is greater in the
same proportion, for the value is only greater in
proportion as more capital or labour is expended;
hence the relation between value and cost-price remains the
same, and hence absolute rent is the same.

But now let us go on to see what is the situation
regarding differential rent.

Firstly, less capital is now being employed in the
entire production of coal in II, III and IV. For the
capital in IV is as great as the capital in I had
been. Furthermore, half the capital employed in II is
now withdrawn. The amount of rent on II therefore will
at all events drop by a half. Only one change has
taken place in capital investment, namely in II, because in
IV the same amount of capital is invested as was previously
invested in I. We have, moreover, assumed that
capitals of the same size were invested in I, II and III,
for example £ 100 in each, altogether £ 300; now
therefore only £ 250 are invested in II, III and IV,
or one-sixth of the capital has been withdrawn from the
production of coal.

Moreover, the market-value of coal has
fallen. We saw that I yielded R, II 2R and III
4R. Let us assume that the product of £ 100 on I
was £ 120, of which R equalled £10 and £10
equalled the profit, then the market-value of II was £
130 (£ 10 profit and £ 20 rent), and of III
£ 150 (£ 10 profit and £ 40 rent).
If the product of I was 60 tons (£ 2 per ton), then
that of II was 65 tons and that of III was 75 tons and the
total production was 60+65+75 tons=200 tons. Now 100
will produce as much in IV as the total product of I and
half the product of II, namely, 60+32
1/2 tons=92 1/2
tons, which, according to the old market-value, would have
cost £ 185 and since the profit was 10 would thus have
yielded a rent of £ 75, amounting to 7
1/2 R, for the absolute rent equalled
£ 10.

II, III and IV continue to yield the same number of tons,
200, since 32 1/2+75+92
1/2=200 tons.

But what is the position now, with regard to market-value
and differential rents?

In order to answer this we must see what is the amount of
the absolute individual rent of II, We assume that
the absolute difference between value and cost-price
in this sphere of production equals £ 10, i.e. equals
the rent yielded by the worst mine, although this is not
necessary unless the market-value was absolutely
determined by the value of I. | If this was, indeed, the case,
then the rent on I (if the coal from I were sold at its
value) in fact represented the excess of value over its own
cost-price and the general cost-price of commodities in this
sphere of production. II would therefore be
selling its products at their value, if it sold its tonnage
(the 65 tons) at £ 120, i.e., the individual ton at
£ 1 11/13. That instead it
sold them at £ 2 was only due to the excess of the
market-value, as determined by I, over its individual value;
it was due to the excess, not of its value, but of
its market-value over its cost-price.

Moreover, on the assumption made, II now sells instead of
65, only 32 1/2 tons, because a
capital of only £ 50 instead of a capital of £
100, is now invested in the mine.

II therefore now sells 32 1/2 tons
at £ 60. £ 10 on £ 50 [the capital
advanced] is 20 per cent. Of the £ 60, 5 are
profit and 5 rent.

Thus we have for II: Value of the product, £
1 11/13 per ton; number of tons is 32
1/2; total value of the product is
£ 60; rent is £ 5. The rent
has fallen from £ 20 to £ 5. If the
same amount of capital were still employed, then it
would only have fallen to £ 10. The rate has
therefore only fallen by half. That is, it has fallen
by the total difference that existed between the
market-value as determined by I and its own value,
the difference therefore that existed over and above the
difference between its own value and cost-price. Its
differential rent was £ 10; its rent is now £
10, equal to its absolute rent. In II, therefore, with
the reduction of the market-value to the value (of
coal from II) differential rent has disappeared and
consequently also the increased rate of rent which was
doubled by this differential rent. Thus it has been
reduced from £ 20 to £ 10; with this given
rate of rent, however, the rent has been further reduced
from £ 10 to £ 5, because the capital invested
in II has fallen by half.

Since the market-value is now determined by the
value of II, i.e., by £ 1 11/13
per ton, the market-value of the 75 tons produced by
III is now £ 138 6/13, of which
£ 28 6/13 are rent.
Previously the rent was £ 40. It has, therefore,
fallen by £ 11 7/13. The
difference between this rent and the absolute rent used to
be [£] 30; now it only amounts to [£] 18
6/13 (for 18
6/13+10=28
6/13), Previously it was 4R, now it is
only 2R+£ 8 6/13. As the
amount of capital invested in III has remained the same,
this fall is entirely due to the fall in the rate of
differential rent, i.e., the fall in the excess of the
market-value of III over its individual value.
Previously, the whole amount of the rent in III was equal to
the excess of the higher market-value over the price
of production, now it is only equal to the excess of the
lower market-value over the cost-price; the
difference is thus coming closer to the absolute rent of
III. With a capital of £ 100. III produces
75 tons, whose [individual] value is £ 120; one ton is
therefore equal to £ 1
3/5. But III sold the ton at
£ 2, the previous market-price, therefore, at £
2/5 more [than its individual
value]. On 75 tons, this amounted to [£]
2/5×75=£ 30, and this was in
fact the differential rent of rent III, for the rent was
[£] 40 ([£] 10 absolute and [£] 30
differential rent). Now, according to the new
market-value, the ton is sold at only £ 1
11/13. How much above its
[individual] value is this? [£] 1
3/5 =£ 1
39/65 and [£] 1
11/13=1 55/65 [1
55/65-1
39/65=16/65].
Thus the price at which the ton is sold is [£]
16/65 above its [individual]
value. On 75 tons this amounts to [£] 18
6/13, and this is exactly the
differential rent, which is thus always equal to the number
of tons multiplied by the excess of the market-value of the
ton over the [individual] value of the ton. It now
remains to work out the fall in rent by £ 11
7/13. The excess of the
market-value over the value of III has fallen from
2/5 of a £ per ton (when it was
sold at £ 2) to 16/65 per ton
(at £ 1 11/13), i.e., from
2/5=26/65 to
16/65, [which is by]
10/65. On 75 tons this amounts
to 750/65=
=150/13=11 7/13,
and this is exactly the amount by which the rent in III has
fallen.

| The 92
1/2 tons from IV, at £ 1
11/13 [per ton], cost £ 170
10/13. The rent here is £
60 10/13 and the differential rent is
£ 50 10/13.

If the 92 1/2 tons were sold at
their value (£ 120), then 1 ton would cost £ 1
11/37, Instead it is being sold at
£ 1 11/13. But £ 1
11/13=£ 1
407/481 and £ 1
11/37=£ 1
143/481. This makes the excess
of the market-value of IV over its value equal to
264/481. On 92
1/2 tons this amounts to exactly
£ 50 10/13, which is the
differential rent of IV.

Now let us put these two cases together, under A and
B.

A

Class

Capital

Absolute rent

Number of tons

Market-value per ton

Individual value per ton

Total value

Differential rent

£

£

£

£

£

£

I

100

10

60

2

2

120

0

II

100

10

65

2

111/13

130

13

III

100

10

70

2

13/5

150

30

Total

300

30

200

400

40

The total number of tons = 200. Total absolute rent
= £30.

Total differential rent = £40.
Total rent = £70.

B

Class

capital

Absolute rent

Number of tons

Market- value per ton

Individual value per ton

Total value

Differential rent

£

£

£

£

£

£

I

50

5

32 1/2

1 11/13

1 11/13

60

0

II

100

10

75

111/13

13/5

138 6/13

18 6/13

III

100

10

921/2

111/13

111/37

17010/13

5010/13

Total

250

25

200

369 3/13

69 3/13

Total capital = £250. Absolute rent =
£25. Differential rent = £69
3/13. Total rent =
£94 3/13. The total value
of the 200 tons has fallen from £400 to £369
3/13.

These two tables give rise to some very important
considerations.

First of all we see that the amount of absolute
rent rises or falls proportionately to the capital
invested in agriculture, that is, to the total amount of
capital invested in I, II, III. The rate of this
absolute rent is quite independent of the size of the
capitals invested for it does not depend on the difference
in the various types of land but is derived from the
difference between value and cost-price; this latter
difference however is itself determined by the organic
composition of the agricultural capital, by the method
of production and not by the land. In II B, the
amount of the absolute rent falls from £ 10 to
£ 5, because the capital has fallen from £ 100
to £ 50; half | the
capital has been withdrawn [from the land].

Before making any further observations on the two tables,
let us construct some other tables. We saw that in B
the market-value fell to £ 1
11/13 per ton. But [let us
assume that] at this value, there is no necessity
either for I A to disappear completely from the market, or
for II B to employ only half the previous capital.
Since in I, the rent is £ 10 out of the total value of
the commodity of £ 120, or 1/12
of the total value, [this applies] equally to the value of
the individual ton which is worth £ 2.
£2/12, however, is
£1/6 or 3
1/3s. (3
1/3s.X60=£10). The
cost-price of a ton from I is thus [£ 2-3
1/3s.=] £ 1 16
2/3s. The [new] market-value is
£ 1 11/13, or £ 1 16
12/13s. £ 1 16
2/3s., however, is £ 1
16s. 8d. or £ 1 1626/39s.
Against this, £ 1 1612/13s. are
£1 16 36/39s. or
10/39s. more. This would be the
rent per ton, at the new market-value and would amount to a
total rent of 15 5/13s. for 60
tons. Therefore I put less than 1 per cent rent on the
capital of £ 100. For I A to yield no rent at
all, the market-value would have to fall to its
cost-price, namely, to £ 1
162/3s, or to £ 1
5/6 (or to £
110/12). In this case the rent
on I A would have disappeared. It could, however,
continue to be exploited with a profit of 10 per cent.
This would only cease if the market-value were to fall
further, below [the cost-price of] £ 1
5/6.

So far as II B is concerned, it has been assumed in Table
B that half of the capital is withdrawn. But
since the market-value of £
111/13 still yields a rent of 10 per
cent, it will do so just as well on £ 100 as on
£ 50. If, therefore, it is assumed that half the
capital has been withdrawn, then only because under these
circumstances, II B still yields an absolute rent of 10 per
cent. For if II B had continued to produce 65 tons
instead of 32 1/2, then the market
would be over-supplied and the market-value of IV, which
dominates the market, would fall to such an extent, that the
capital investment in II B would have to be reduced in order
to yield the absolute rent. It is however clear that,
if the whole capital [of] £ 100 yields rent at 9 per
cent, the sum total is greater than that yielded by [a
capital of] £ 50 at 10 per cent. Thus if,
according to the state of the market, a capital of only
£50 were required in II to satisfy the demand, the
rent would have to be forced down to £ 5. It
would, in fact, fall even lower, if it is assumed that the
321/2 tons cannot always be disposed
of, i.e., if they were thrown out of the market. The
market-value would fall so low, that not only the rent on II
B would disappear, but the profit would also be
affected. Then capital would be withdrawn in order to
diminish supply, until the correct point of £ 50 had
been reached and then the market-value would have been
re-established at £ 1 11/13, at
which II B would again yield the absolute rent, but only on
half the capital previously invested in it. In this
instance too, the whole process would emanate from IV and
III, who dominate the market.

But it does not by any means follow that if the market
only absorbs 200 tons at £ 1
11/13 per ton, it will not absorb an
additional 32 1/2 tons if the
market-value falls, i.e., if the market-value of 232
1/2 tons is forced down through the
pressure of 32 1/2 surplus tons on the
market. The cost-price in II B is £ 1
9/13 or £ 1 13
11/13s. But the market-value is
£ 1 11/13 or £ 1 16
12/13s. If the market-value fell
to such an extent that I A no longer yielded a rent, i.e.,
[if the market-value fell] to the cost-price of I A, to
£ 1 16 2/3s. or £ 1
5/6 or £ 1
10/12, then for II B to use his whole
capital, demand would have to grow considerably; since I A
could continue to be exploited, as it yields the normal
profit. The market would have to absorb not 32
1/2 but 92 1/2
additional tons, 292 1/2 tons instead
of 200, i.e. [almost] half as much again. This is a
very significant increase. If a moderate increase is
to take place, the market-value would have to fall to such
an extent that I A is driven out of the market. That
is, the market-price would have to fall below the cost-price
of I A, i.e., below £ 1 10/12,
say, to £ 1 9/12 or £ 1
15s. It would then still be well above the cost-price
of II B.

We shall therefore add a further three tables to the
tables A and B, namely, C and D and
E. And we shall assume in C that the demand
grows, that all classes of A and B can continue to produce,
but at the market-value of B, at which I A still yields a
rent. In D we assume that [the demand] is sufficient
for I A to continue to yield the normal profit but no longer
a rent. And we shall assume in E that the price falls
sufficiently to eliminate I A from the market | but that the fall of the price
simultaneously leads to the absorption of the 32
1/2 surplus tons from II B.

The case assumed in A and B is possible. It is
possible that if the rent is reduced from £ 10 to
barely 16s., I A would withdraw his land from this
particular form of exploitation and let it out to another
sphere of exploitation, in which it can yield a higher
rent. But in this case, II B would be forced through
the process described above, to withdraw half his capital,
if the market did not expand upon the appearance of the new
market-value.

C

Class

capital

Absolute rent

Number of tons

Market- value per ton

Individual value per ton

Total value

Rent

Differential rent

£

£

£

£

£

£

£

I

100

10/13

60

1 11/13

2

110 10/13

10/13

-93/13

II

100

10

65

111/13

111/13

120

0

III

100

10

75

111/13

13/5

1386/13

+186/13

IV

100

10

921/2

111/13

111/37

17010/13

+5010/13

Total

400

30 10/13

292 1/2

540

69 3/13

D

Class

capital

Absolute rent

Market- value per ton

Cost-price

Number of tons

Total value

Differential rent

£

£

£

£

£

£

I

100

0

15/6

1 5/6

60

110

0(-)

II

100

91/6

15/6

[19/13]

65

119 1/6

-(latent)

III

100

10

15/6

[17/15]

75

1371/2

+171/2

IV

100

10

15/6

[17/37]

921/2

1691/2

+497/12

Total

400

29 1/6

292 1/2

536 1/4

67 1/12

E

Class

Capital

Absolute rent

Market-value per ton

Cost-price

Number of tons

Total value

Differential rent

£

£

£

£

£

£

II

100

3 3/4

1 3/4

1 9/13

65

113 3/4

-(none)

III

100

10

13/4

[17/15]

75

1311/4

+11 1/4

IV

100

10

13/4

[17/37]

92 1/2

1617/8

+417/8

Total

300

23 3/4

232 1/2

406 7/8

53 1/8

| Now let us compile
the tables A, B, C, D and E, but in the manner which should
have been adopted from the outset. Capital, Total
value, Total product, Market-value per ton, Individual value
[per ton], Differential Value [per ton], Cost-Price [per
ton], Absolute rent, Absolute rent in tons, Differential
rent, Differential rent in tons, Total rent, And then the
totals of all classes in each table.

| Comment on the
Table (p. 574)

It is assumed that a capital of 100 (constant and
variable capital) is laid out and that the labour it employs
provides surplus-labour (unpaid labour) amounting to
one-fifth of the capital advanced, or a surplus-value of
100/5. If, therefore, the
capital advanced equals £ 100, the value of the total
product must be £ 120. Supposing furthermore
that the average profit is 10 per cent, then £ 110 is
the cost-price of total product, in the above example, of
coal. With the given rate of surplus-value or
surplus-labour, the £ 100 capital transforms itself
into a value of £ 120, whether poor or rich mines are
being exploited; in a word: The varying productivity of
labour—whether this variation be due to varying
natural conditions of labour or varying social conditions of
labour or varying technological conditions—does not
alter the fact that the value of the commodities equals the
quantity of labour materialised in them.

Thus to say the value of the product created by the
capital of £ 100 equals £ 120, simply means that
the product contains the labour-time materialised in the
£ 100 capital, plus one-sixth of labour-time which is
unpaid but appropriated by the capitalist. The total
value of the product equals £ 120, whether the capital
of £ 100 produces 60 tons in one class of mines or 65,
75 or 92 1/2 in another. But
clearly, the value of the individual part, be it measured by
the quarter or yard etc., varies greatly according to the
productivity. But to stick to our table (the same
applies to every other mass of commodities brought about by
capitalist production) the value of l ton equals £ 2,
if the total product of the capital is 60 tons, i.e., 60
tons are worth £ 120 or represent labour-time equal to
that which is materialised in £ 120. If the
total product amounts to 65 tons, then the value of the
individual ton is £ 11 1/13 or
£ 1 16 12/13s., if it amounts to
75 tons, then the value of the individual ton is £ l
9/15 or £ 1 12s.; finally, if it
comes to 92 1/2 tons, then the value
per ton is £ 1 11/37 or £
1 5 35/37s. Because the total
mass of commodities or tons produced by the capital of
£ 100 always has the same value, equal to £ 120,
since it always represents the same total quantity of labour
contained in £ 120, the value of the individual ton
varies, according to whether the same value is represented
in 60, 65, 75 or 92 1/2 tons, in other
words, it varies with the different productivity of
labour. It is this difference in the productivity of
labour which causes the same quantity of labour to be
represented sometimes in a smaller and sometimes in a larger
total quantity of commodities, so that the individual part
of this total contains now more, now less, of the absolute
amount of labour expended, and, therefore, accordingly has
sometimes a larger and sometimes a smaller value. This
value of the individual ton, which varies according to
whether the capital of £ 100 is invested in more
fertile or less fertile mines, and therefore according to
the different productivity of labour, figures in the table
as the individual value of the individual ton.

Hence nothing could be further from the truth than the
notion that when the value of the individual commodity falls
with the rising productivity of labour, the total value of a
product produced by a particular capital—for instance,
£ 100— rises because of the increased mass of
commodities in which it is [now] represented. For the
value of the individual commodity only falls because the
total value—the total quantity of labour
expended—is represented by a larger quantity of
use-values, of products. Hence a relatively smaller
part of the total value or of the labour expended falls to
the individual product and this only to the extent to which
a smaller quantity of labour is absorbed in it or a smaller
amount of the total value falls to its share.

Originally, we regarded the individual commodity
as the result and direct product of a particular quantity of
labour.

Now, that the commodity appears as the product of
capitalist production, there is a formal change in this
respect: The mass of use-values which has been produced
represents a quantity of labour-time, which is equal to the
quantity of labour-time contained in the capital (constant
and variable) consumed in its production, plus the unpaid
labour-time appropriated by the capitalist. If the
labour-time contained in the capital, as expressed in terms
of money, amounts to £ 100 and this capital of £
100 comprises £40 laid out in wages, and if the
surplus labour-time amounts to 50 per cent on the variable
capital, in other words, the rate of surplus-value is 50 per
cent, then the value of the total mass of commodities
produced by the capital of £ 100 equals £
120. As we have seen in the first part of this work,
if the commodities are to circulate, their exchange-value
must first be converted into a price, i.e., expressed in
terms of money. Thus | before the capitalist throws
the commodities on to the market, he must first work out the
price of the individual commodity, unless the total product
is a single indivisible object, such as, for example, a
house, in which the total capital is represented, a single
commodity, whose price according to the assumption would
then be £ 120, equal to the total value as expressed
in terms of money. Price here equals monetary
expression of value.

According to the varying productivity of labour the total
value of £ 120 will be distributed over more or fewer
products. Thus the value of the individual product
will, accordingly, be proportionally equal to a larger or a
smaller part of £ 120. The whole operation is
quite simple. For example, if the total product equals
60 tons of coal, 60 tons are equal to £ 120 and 1 ton
equals £ 120/60, i.e., £2;
if the product is 65 tons, the value of the individual ton
equals £ 120/65, i.e., £ 1
11/13 or £ 1 16
12/13s. (£ 1 16s. 1
11/13d). If the product equals
75 tons, the value of the individual ton is
120/75, i.e., £ 1 12 s.; if it
equals 92 1/2 tons, then it is
£1 11/37, which is £ 1 5
35/37s. The value (price) of the
individual commodity is thus equal to the total value of the
product divided by the total number of products, which are
measured according to the standard of measurement—such
as tons, quarters, yards etc. appropriate to them as
use-values.

C

T

TV

MV

IV

DV

CP

AR

DR

AR in T

DR in T

TR

TR in T

[Class]

Capital

Number of tons

Total value

Market value per ton

Individual-value per ton

Differential value per ton

Cost-price per ton

Absolute rent

Differential rent

Absolute value in tons

Differential rent in tons

Rental

Rental in tons

£

£

£

£

£

A

I

100

60

120

£2[=40s.]

$2[=40s.]

0

£1 5/6 = £1 162/3s.

10

0

5

0

10

5

II

100

65

130

£2[=40s.]

£1 11/13= £1 1612/13s.

£ 2/13 = 31/13s.

£19/13 = 1 1311/13s.

10

10

5

5

20

10

III

100

75

150

£2[=40s.]

£1 3/5 = £ 1 12s.

£2/5=8s.

£17/15 = 91/3s.

10

30

5

15

40

20

Total

300

200

400

30

40

15

20

70

35

B

II

500

32 1/2

60

£1 11/13=£1 16 12/13s.

£1 11/13 = £1 16 12/13s.

0

£1 9/13 = £1 13 11/13s.

5

0

2 17/24

0

5

2 17/24

III

100

75

138 6/13

£111/13=£1 16 12/13s.

£1 3/5 = £ 1 12s.

£ 16/15 = 4 12/13s.

£1 7/15 = £1 9 1/3s.

10

18 6/13

5 5/12

10

28 6/13

15 5/12

IV

100

92 1/2

170 10/13

£1 11/13=£1 1612/13s.

£ 111/37 = £ 1 5 35/37s.

£264/481 = 10 470/481s.

£1 7/37 = £1 3 29/37s.

10

50 10/13

5 5/12

27 1/2

60 10/13

32 11/12

Total

250

200

369 3/13

25

69 3/13

13 13/24

37 1/2

94 3/13

51 1/24

C

I

100

60

110 10/13

£1 11/13=£1 16 12/13s.

£2 = 40s.

-£2/13 = -3 1/13s.

£1 5/6 = £1 16 2/3s.

£10/15 = 15 5/13s.

0

5/12

0

£10/13 = 15 5/13s.

5/12

II

100

65

120

£1 11/13=£1 16 12/13s.

£1 11/13 = £1 16 12/13s

0

£1 9/3 = £1 13 11/13s.

10

0

5 5/12

0

10

5 5/12

III

100

75

138 6/13

£1 11/13=£1 16 12/13s.

£1 3/5 = £1 12s.

+£16/65 = +4 12/13s.

£1 7/15 = £1 9 1/3s.

10

18 6/13

5 5/12

10

28 6/13

15 5/12

IV

100

92 1/2

170 10/13

£1 11/13=£1 16 12/13s.

£1 11/37= £1 5 35/37s.

+£ 264/481= +10 470/481s.

£1 7/15 = £1 3 29/37s.

10

50 10/13

5 5/12

27 1/2

60 10/13

32 11/12

Total

400

292 1/2

540

30 10/13

69 3/13

16 2/3

37 1/2

100

54 1/6

D

I

100

60

110

£1 5/6 = £1 16 2/3s.

£2 = 40s.

-£1/6 = -3 1/3s.

£1 5/6 = £1 16 2/3s.

0

0

0

0

0

0

II

100

65

119 1/6

£1 5/6 = £1 16 2/3s.

£1 11/13=£1 16 12/13s

-£ 1/78 = -10/39s.

£1 9/3 = £1 13 11/13s.

9 1/6

0

5

0

9 1/6

5

III

100

75

137 1/2

£1 5/6 = £1 16 2/3s.

£1 3/5 = £1 12s.

+£7/32 = +4 2/3s.

£1 7/15 = £1 9 1/3s.

10

17 1/2

5 5/11

9 6/11

27 1/2

15

IV

100

92 1/2

169 7/12

£1 5/6 = £1 16 2/3s.

£1 11/37 = £1 5 35/37s.

+£ 119/220= +10 80/111s.

£1 7/37 = £1 3 29/37s.

10

49 7/12

5 5/11

27 1/22

59 7/12

32 1/2

Total

400

292 1/2

536 1/4

29 1/6

67 1/12

15 10/11

36 13/22

96 1/4

52 1/2

E

II

100

65

113 3/4

£1 3/4 = £1 15s.

£ 1 11/13 = £1 16 12/13s.

[-£5/52] = -1 1213s.

£1 9/3 = £1 13 11/13s.

3 3/4

0

2 1/7

0

3 3/4

2 1/7

III

100

75

131 1/4

£1 3/4 = £1 15s.

£1 3/5= £1 12s.

[+£ 3/20]= +3s.

£1 7/15 = £1 9 1/3s.

10

11 1/4

5 5/7

6 3/7

21 1/4

12 1/7

IV

100

92 1/2

161 7/8

£1 3/4 = £1 15s.

£1 11/37 = £1 5 35/37s.

[+£73/138] = +9 2/37s.

£1 7/37 = £1 3 29/37s.

10

41 7/8

5 5/7

23 13/14

51 7/8

29 9/14

Total

300

232 1/2

406 7/8

23 3/4

53 1/8

15 10/11

30 5/14

76 7/8

43 13/14

If, therefore, the price of the individual commodity
equals the total value of the mass of commodities produced
by a capital of £100, divided by the total number of
commodities, then the total value equals the price of the
individual commodity multiplied by the total number of
individual commodities or it equals the price of a definite
quantity of individual commodities multiplied by the total
amount of commodities, measured by this standard of
measurement. Furthermore: The total value consists of
the value of the capital advanced to production plus the
surplus-value; that is of the labour-time contained in the
capital advanced plus the surplus labour-time or unpaid
labour-time appropriated by the capital. Thus the
surplus-value contained in each individual part of the
commodity is proportional to its value. In the same
way as the £ 120 is distributed among 60, 65, 75 or 92
1/2 tons, so the £ 20
surplus-value is distributed among them. When the
number of tons is 60, and therefore the value of the
individual ton equals 120/60, which is
£ 2 or 40s., then one-sixth of this 40s. or £ 2,
that is, 6 2/3s., is the share of the
surplus-value which falls to the individual ton; the
proportion of surplus-value in the ton which costs £ 2
is the same as in the 60 which cost £ 120. The
[ratio of] surplus-value to value remains the same in the
price of the individual commodity as in the total value of
the mass of commodities. In the above example, the
total surplus-value in each individual ton is
20/60=2/6=1/3
of [20], which is equal to 1/6 of 40
as above. Hence the surplus-value of the single ton
multiplied by 60 is equal to the total surplus-value which
the capital has produced. If the portion of value
which falls to the individual product—the
corresponding part of the total value—is smaller
because of the larger number of products, i.e., because of
the greater productivity of labour, then the portion of
surplus-value which falls to it, the corresponding part of
the total surplus-value which adheres to it, is also
smaller. But this does not affect the ratio of the
surplus-value, of the newly-created value, to the value
advanced and merely reproduced. Although, as we have
seen, the productivity of labour does not affect the total
value of the product, it may however increase the
surplus-value, if the product enters into the consumption of
the worker; then the falling price of the individual
commodities or, which is the same, of a given quantity of
commodities, may reduce the normal wage or, amounts
to the same, the value of the labour-power. In
so far as the greater productivity of labour creates
relative surplus-value, it increases not the total value of
the product, but that part of this total value which
represents surplus-value, i.e., unpaid labour.
Although, therefore, with greater productivity of labour, a
smaller portion of value falls to the individual
product—because the total mass of commodities which
represents this value has grown—and thus the price of
the individual product falls, that part of this price which
represents surplus-value, nevertheless, rises under
the above-mentioned circumstances, and, therefore, the
proportion of surplus-value to reproduced value grows
(actually here one should still refer to variable capital,
for profit has not yet been mentioned). But this is
only the case because, as a result of the increased
productivity of labour, the surplus-value has grown within
the total value. The same factor—the
increased productivity of labour—which enables a
larger mass of products to contain the same quantity of
labour thus lowering the value of a given part of this mass
or the price of the individual commodity, reduces the
value of the labour-power, therefore increases the surplus
or unpaid labour contained in the value of the total
product and hence in the price of the individual
commodity. Although thus the price of the
individual commodity falls, although the total
quantity of labour contained in it, and therefore its
value, falls, the proportion of surplus-value, which is a
component part of this value, increases. In other
words, the smaller total quantity | of labour contained in the
individual commodity comprises a greater quantity of
unpaid labour than previously, when labour was less
productive, when the price of the individual commodity was
therefore higher, and the total quantity of labour contained
in the individual commodity greater. Although in the
present case one ton contains less labour and is therefore
cheaper, it contains more surplus-labour and therefore
yields more surplus-value.

Since in competition everything appears in a false form,
upside down, the individual capitalist imagines 1. that he
[has] reduced his profit on the individual commodity by
reducing its price, but that he makes a greater profit
because of the increased mass [of commodities] (here
a further confusion is caused by the greater amount of
profit which is derived from the increase in capital
employed, even with a lower rate of profit); 2. that he
fixes the price of the individual commodity and by
multiplication determines the total value of the product
whereas the original procedure is division and
multiplication is only correct as a derivative method based
on that division. The vulgar economist in fact does
nothing but translate the queer notions of the capitalists
who are caught up in competition into seemingly more
theoretical language and seeks to build up a justification
of these notions.

Now to return to our table.

The total value of the product or of the quantity
of commodities created by a capital of £100, equals
£ 120, however great or small—according to the
varying degree of the productivity of labour—the
quantity of commodities may be. The cost-price
of this total product, whatever its size, equals £ 110
if, as has been assumed, the average profit is 10 per
cent. The excess in value of the total product,
whatever its size, equals £ 10, which is one-twelfth
of the total value or one-tenth of the capital
advanced. This £ 10, the excess of value
over the cost-price of the total product, constitutes
the rent. It is evidently quite independent of
the varying productivity of labour resulting from the
different degrees of natural fertility of the mines, types
of soil, in short, of the natural element in which the
capital of £ 100 has been employed, for those
different degrees in the productivity of the labour
employed, arising from the different degrees of fertility of
the natural agent, do not prevent the total product from
having a value of £ 120, a cost-price of £ 110,
and therefore an excess of value over cost-price of £
10. All that the competition between capitals
can bring about, is that the cost-price of the
commodities which a capitalist can produce with £ 100
in coal-mining, this particular sphere of production, is
equal to £ 110. But competition cannot compel
the capitalist to sell the product at £ 110 which is
worth £ 120—although such compulsion exists in
other industries. Because the landlord steps in and
lays his hands on the £ 10. Hence I call this
rent the absolute rent. Accordingly it always
remains the same in the table, however the fertility
of the coal-mines and hence the productivity of labour may
change. But, because of the different degrees of
fertility of the mines and thus of the productivity of
labour, it is not always expressed in the same number of
tons. For, according to the varying productivity
of labour, the quantity of labour contained in £ 10
represents more or less use-values, more or less tons.
Whether with the variation in degrees of fertility, this
absolute rent is always paid in full or only in part,
will be seen in the further analysis of the table.

There is furthermore on the market coal produced in mines
of different productivity. Starting with the lowest
degree of productivity, I have called these, I, II, III,
IV. Thus, for instance, the first class produces 60
tons with a capital of £ 100, the second class
produces 65 tons etc. Capital of the same size—
£ 100, of the same organic composition, within the
same sphere of production—does not have the same
productivity here, because the degree of productivity of
labour varies according to the degree of productivity of the
mine, type of soil, in short of the natural agent. But
competition establishes one market-value for these
products, which have varying individual values.
This market-value itself can never be greater
than the individual value of the product of the least
fertile class. If it were higher, then this would
only show that the market-price stood above the
market-value. But the market-value must
represent real value. As regards products of
separate classes, it is quite possible, that their
[individual] value is above or below the
market-value. If it is above the market-value,
the difference between the market-value and their cost-price
is smaller than the difference between their
individual value and their cost-price. But as the
absolute rent equals the difference between their individual
| value and their
cost-price, the market-value cannot, in this case, yield the
entire absolute rent for these products. If the
market-value sank down to their cost-price, it would
yield no rent for them at all. They
could pay no rent, since rent is only the difference between
value and cost-price, and for them, individually, this
difference would have disappeared, because of the [fall in
the] market-value. In this case, the difference
between the market-value and their individual value is
negative, that is, the market-value differs from
their individual value by a negative amount.
The difference between market-value and individual value in
general I call differential value. Commodities
belonging to the category described here have a minus sign
in front of their differential value.

If, on the other hand, the individual value of the
products of a class of mines (class of land) is below
the market-value, then the market-value is a b o v
e their individual value. The value or
market-value prevailing in their sphere of production thus
yields an excess above their individual value.
If, for example, the market-value of a ton is £ 2, and
the individual value of a ton is £ 1 12s., then its
differential value is 8s. And since in the class in
which the individual value of a ton is £ 1 12s. the
capital of £ 100 produces 75 tons, the total
differential value of these 75 tons is 8 s.´75=£
30. This excess of the market-value for the total
product of this class over the individual value of
its product, which is due to the relatively greater
fertility of the soil or the mine, forms the differential
rent, since the cost-price for the capital remains the
same as before. This differential rent is greater or
smaller, according to the greater or smaller excess of the
market-value over the individual value.
This excess in turn is greater or smaller, according to the
relatively greater or smaller fertility of the class
of mine or land to which this product belongs, compared with
the less fertile class whose product determines the
market-value.

Finally, the individual cost-price of the products
is different in the different classes. For instance,
for the class in which a capital of £ 100 yields 75
tons the cost-price of the individual commodity would be
£ 1 9 1/3 s., since the total
value is £ 120 and the cost-price £ 110,
and if the market-value were equal to the individual value
in this class, i.e., £ 1 12 s., then the 75 tons sold
at £ 120 would yield a rent of £ 10, while
£ 110 would represent their cost-price.

But of course, the individual cost-price of a
single ton varies according to the number of tons in which
the capital of £ 100 is represented, or according to
the individual value of the individual products of
the various classes. If, for example, the capital of
£ 100 produces 60 tons, then the value per ton is
£ 2 and its cost-price £ 1 16
2/3 s.; 55 tons would be equal to
£ 110 or to the cost-price of the total product.
If, however, the £ 100 capital produces 75 tons, then
the value per ton is £ 1 12s., its cost-price £
1 9 1/3s., and 68
3/4 tons of the total product would
cost £ 110 or would replace the cost-price. The
individual cost-price, i.e., the cost-price of the
individual ton, varies in the different classes in the
same proportion as the individual value.

It now becomes evident from all the five tables, that
absolute rent always equals the excess of the value
of the commodity over its own cost-price. The
differential rent, on the other hand, is equal to the
excess of the market-value over its individual value.
The total rent, if there is a differential rent (apart from
the absolute rent), is equal to the excess of the
market-value over the individual value plus the excess of
the individual value over the cost-price, or the excess of
the market-value over the individual cost-price.

Because here the purpose is only to set forth the general
law of rent as an illustration of my theory of value and
cost-prices—since I do not intend to give a detailed
exposition of rent | till
dealing with landed property ex professo—I have
removed all those factors which complicate the matter:
namely the influence of the location of the mines or
types of land; different degree of productivity of different
amounts of capital applied to the same mine or the
same type of land; the interrelationship of rents
yielded by different lines of production within the same
sphere of production, for example, by different branches of
agriculture; the interrelationship of rents yielded by
different branches of production which are, however,
interchangeable, such as, for instance, when land is
withdrawn from agriculture in order to be used for building
houses, etc. All this does not belong here.

### [3. Analysis of the Tables]

Now for a consideration of the tables. They show
how the general law explains a great multiplicity of
combinations, while Ricardo, because he had a false
conception of the general law of rent, perceived only one
side of differential rent and therefore wanted to reduce the
great multiplicity of phenomena to one single case by means
of forcible abstraction. The tables are not intended
to show all the combinations but only those which are most
important, particularly for our specific purpose.

### [a)] Table A [The Relation Between Market-Value and Individual Value in the Various Classes]

In Table A, the market-value of a ton of coal is
determined by the individual value of a ton in class I,
where the mine is least fertile, hence the productivity of
labour is the lowest, hence the mass of products yielded by
the capital investment of £ 100 is the smallest and,
therefore, the price of the individual product (the price as
determined by its value) is the highest.

It is assumed that the market absorbs 200 tons, neither
more nor less.

The market-value cannot be above the
[individual] value of a ton in I, i.e., of that commodity
which is produced under the 1east favourable conditions of
production, II and III sell the ton above its individual
value because their conditions of production are more
favourable than those of other commodities produced within
the same sphere, this does not, therefore, offend
against the law of value. On the other hand, the
market-value could only be above the value of a ton in I, if
the product of I were sold above its value,
quite regardless of market-value. A difference
between market-value and [individual] value arises in
general not because products are sold absolutely
above their value, but only because the value of the
individual product may be different from the value of the
product of a whole sphere; in other words because the
labour-time necessary to supply the total
product—in this case 200 tons—may differ from
the labour-time which produces some of the tons—in
this case those from II and III—in short, because the
total product supplied has been produced by labour of
varying degrees of productivity. The difference
between the market-value and the individual value of a
product can therefore only be due to the fact that the
definite quantities of labour with which different parts of
the total product are manufactured have different degrees
of productivity. It can never be due to the value
being determined irrespective of the quantity of
labour altogether employed in this sphere. The
market-value could be above £ 2 per ton, only if I, on
the whole, quite apart from its relation to II and III, were
to sell its product above its value. In this
case the market-price would be above the
market-value because of the state of the market,
because of demand and supply. But the market-value
which concerns us here—and which here is assumed to be
equal to the market-price—cannot rise above
itself.

The market-value here equals the value of I,
which, more-over, supplies three-tenths of the entire
product on the market. since II and III only supply
sufficient amounts to meet the total demand, i.e., to
satisfy the additional demand over and above that which is
supplied by I, II and III have no cause, therefore, to sell
below £ 2 since the entire product can be sold at
£2. They cannot | sell above £ 2
because I sells at £ 2 per ton. This law, that
the market-value cannot be above the
individual value of that product which is produced
under the worst conditions of production but provides
a part of the necessary supply, Ricardo distorts into the
assertion that the market-value cannot fall below the
value of that product and must therefore always be
determined by it. We shall see later how wrong this
is.

Because the market-value of a ton coincides with the
individual value of a ton in I, the rent it yields
represents the absolute excess of the value over its
cost-price, the absolute rent, which is £
10. II yields a differential rent of £ 10 and
III of £ 30, because the market-value, which is
determined by I, yields an excess of £ 10 for II and
of £ 30 for III, over their individual value
and therefore over the absolute rent of £ 10, which
represents the excess of the individual value over the
cost-price. Hence II yields a total rent of £ 20
and III of £ 40, because the market-value yields an
excess over their cost-price of £ 20 and £40
respectively.

We shall assume that the transition is from I, the least
fertile mine, to the more fertile II, and from this to the
yet more fertile mine III, It is true that II and III are
more fertile than I, but they satisfy only seven-tenths of
the total demand and, as we have just explained, can
therefore sell their product at £ 2, although its
value is only £ 1 16 12/13s.
and £ 1 12s. respectively. It is clear that when
the particular quantity required to satisfy demand is
supplied, and gradation takes place in the productivity of
labour which satisfies the various portions of this demand,
whether the transition is in one direction or the other, in
both cases the market-value of the more fertile classes will
rise above their individual value; in one case
because they find that the market-value is
determined by the unfertile class and the additional
supply provided by them is not great enough to occasion any
change in the market-value as determined by class I; in the
other case, because the market-value originally determined
by them—determined by class III or II—is now
determined by class I, which provides the additional supply
required by the market and can only meet this at a higher
value, which now determines the market-value.

### [b) The Connection Between Ricardo’s Theory of Rent and the Conception of Falling Productivity in Agriculture. Changes in the Rate of Absolute Rent and Their Relation to the Changes in the Rate of Profit]

In the case under consideration, for example, Ricardo
would say: We start out from class III. The additional
supply will, in the first place, come from II.
Finally, the last additional supply—demanded by the
market—comes from I, and since I can provide the
additional supply of 60 tons only at £ 120, that is at
£ 2 per ton, and since this supply is needed, the
market-value of a ton which was originally £ 1 12
s. and later £ 1 16 12/13 s.,
now rises to £ 2. But, on the other hand, it is
equally true, that if we start out from I, which satisfied
the demand for 60 tons at £2, then, however, the
additional supply is provided by II, the product of II is
sold at the market-value of £ 2 although the
individual value of it is only £ 1 16
12/13 s., for it is still only
possible to supply the 125 tons required if I provides 60
tons at a value of £ 2 per ton. The same
applies, if a new additional supply of 75 tons is required,
but III provides only 75 tons, only supplies the
additional demand, and therefore, as before, 60 tons have to
be supplied by I at £ 2. Had I supplied the
whole demand of 200 tons, they would have been sold at
£ 400. And this is what they are [sold] at now,
because II and III do not sell at the price at which they
can satisfy the additional demand for 140 tons, ||XII-581| but at the price at which
I, which only supplies three-tenths of the product, could
satisfy it. The entire product required, 200 tons, is
in this case sold at £ 2 per ton, because three-tenths
of it can only be supplied at a value of £ 2 per ton,
irrespective of whether the additional portions of the
demand were met by proceeding from III via II to I or from I
via II to III.

Ricardo says: If III and II are the starting-points,
their market-value must rise to the value (cost-price with
him) of I, because the three—tenths supplied by I are
required to meet the demand and the decisive point here is
therefore the required volume of the product and not
the individual value of particular portions of it. But
it is equally true that the three-tenths from I are just as
essential as before when I is the starting-point and II and
III only provide the additional supply. If,
therefore, I determined the market-value in the descending
line, it determines it in the ascending line for the same
reasons. Table A thus shows us the
incorrectness of the Ricardian concept that differential
rent depends on the diminishing productivity of
labour, on the movement from the more productive mine or
land to the less productive. It is just as compatible
with the reverse process and hence with the growing
productivity of labour. Whether the one or the other
takes place has nothing to do with the nature and existence
of differential rent but is a historical
question. In reality, the ascending and descending
lines will cut across one another, the additional demand
will sometimes be supplied by going over to more, sometimes
to less fertile types of land, mine or natural agent.
[In this it is] always supposed that the supply provided by
the natural agent of a new, different class—be it more
fertile or less fertile—only equals the additional
demand and does not, therefore, bring about a change in the
relation between demand and supply. Hence it
can only bring about a change in the market-value
itself, if the supply, can only be made available at higher
cost not however if it can be made available at lower
cost.

Table A thus reveals to us from the outset the
falseness of this fundamental assumption of Ricardo’s,
which, as Anderson shows, was not required, even on the
basis of a wrong conception of absolute rent.

If production proceeds in a descending line, from III to
Il and from II to I with recourse to natural agents of a
gradually decreasing fertility—then III, in which a
capital of 100 has been invested, will at first sell its
commodities at their value, at £ 120. This,
since it produces 75 tons, will amount to £ 1 12s. per
ton. If an additional supply of 65 is then required,
II, which invests a capital of 100, will similarly sell its
product at a value of £ 120. This amounts
to £ 1 1612/13s. per ton.
And if, finally, an additional supply of 60 tons were
required, which can only be provided by I, then it too will
sell its product at its value of £ 120, which
amounts to £ 2 per ton. In this process III
would yield a differential rent of £ 18
6/13 as soon as II came on the market,
whereas previously it only yielded the absolute rent of
£ 10. II would yield a differential rent of
£ 10 as soon as I came into the picture and
differential rent of III would then rise to £30.

Descending from III to I, Ricardo discovers that I does
not yield a rent, because in considering III he started out
from the assumption that no absolute rent exists.

There is indeed a difference between the ascending and
descending line. If the passage is from I to III, so
that II and III only provide the additional supply, then the
market-value remains equal to the individual value of I
which is £ 2. And if, as the supposition is
here, the average profit is 10 per cent, then it can be
assumed that the price of coal ([or] price of wheat—a
quarter of wheat etc. can always be substituted for a ton of
coal) will have entered into its calculation, since coal
enters into the consumption of the worker as a means of
subsistence as well as figuring as an auxiliary material of
considerable importance in constant capital. It can
therefore also be assumed that the rate of surplus-value
would have been higher and therefore the surplus-value
itself greater, hence also the rate of profit higher
than 10 per cent, if I [were] more productive or the value
of the ton had been below £ 2. This,
however, would be the case if III was the
starting-point. The [market]-value of the ton of coal
was then only £ 1 12 s.; when | II entered, it rose to
£1 16 12/13s. and finally when I
appeared, it rose to £ 2. It can thus be assumed
that when only III was being worked—all other
circumstances, length of surplus labour-time and other
conditions of production etc. being taken as constant and
unchanged—the rate of profit was higher (the rate
of surplus-value was higher because one element of the
wage was cheaper; because of the higher rate of
surplus-value, the mass of surplus-value, and therefore also
the rate of profit, was higher; in addition
however—with the surplus-value thus modified—the
rate of profit was higher because an element of cost in the
constant capital was lower). The rate of profit became
lower with the appearance of II and finally sank to 10 per
cent, as the lowest level, when I appeared. In this
case therefore one would have to assume that (regardless of
the data) for instance the rate of profit was 12 per cent
when only III was being worked; that it sank to 11 per cent
when II came into play and finally to 10 per cent when I
entered into it. In this case the absolute rent would
have been £8 with III because the cost-price would
have been £ 112; it would have become £ 9 as
soon as II came into play because now the cost-price would
have been £ 111 and it would finally have been raised
to £ 10 because the cost-price would have fallen to
£ 110. Here then a change in the rate of
absolute rent itself would have taken place and this
in inverse ratio to the change in the rate of
profit. The rate of rent would have progressively
grown because the rate of profit had progressively
fallen. The latter would, however, have fallen because
of the decreasing productivity of labour in the mines, in
agriculture, etc. and the corresponding increase in the
price of the means of subsistence and auxiliary
materials.

### [c)] Observations on the Influence of the Change in the Value of the Means of Subsistence and of Raw Material (Hence also the Value of Machinery) on the Organic Composition of Capital

In this case the rate of rent rose because
the rate of profit fell. Now did it fall
because there was a change in the organic composition of the
capital? If the average composition of the capital was
£ 80c+£20v, did this composition
remain the same? It is assumed that the normal
working-day remains the same. Otherwise the influence
of the increased price of the means of subsistence could be
neutralised. We must differentiate between two factors
here. Firstly, an increase may occur in the price of
the means of subsistence, hence reduction in surplus-labour
and surplus-value. Secondly, constant capital may
become more expensive because, as in the case of coal, the
auxiliary material, or in the case of wheat, another element
of constant capital, namely seeds, rises in value or also,
[because] due to the increased price of wheat, the
cost-price of other raw produce (raw material) may
rise. Finally, if the product was iron, copper etc.,
the raw material of certain branches of industry and the raw
material of machinery (including containers) of all branches
of industry would rise.

On the one hand it is assumed that no change has taken
place in the organic composition of capital; in other words
that no change has taken place in the manner of production
decreasing or increasing the amount of living labour
employed in proportion to the amount of constant capital
employed. The same number of workers as before
is required (the limits of the normal working-day remaining
the same) in order to work up the same volume of raw
material with the same amount of machinery etc., or, where
there is no raw material, to set into motion the same amount
of machinery, tools, etc. Besides this first aspect of
the organic composition of capital, however, a second aspect
has to be considered, namely, the change in the value
of the elements of capital although as use-values they
may be employed in the same portions. Here again we
must distinguish:

The[b] change in
value affects both elements—variable and
constant—equally. This may never occur in
practice. A rise in the price of certain agricultural
products such as wheat etc., raises the (necessary) wage and
the raw material (for instance seeds). A rise in coal
prices raises the necessary wage and the auxiliary material
of most industries. While in the first case the rise
in wages occurs in all branches of industry, that in raw
materials occurs only in some. With coal, the
proportion in which it enters into wages is lower than that
in which it enters into production. As regards
total capital, the change in the value of coal and
wheat is thus hardly likely to affect both elements of
capital equally. But let us suppose this to be
the case.

Let the value of the product of a capital £ 80c+£ 20v be £ 120.
Considering capital as a whole, the value of
the product and its cost-price coincide, for the
difference is equalised out for the aggregate capital [of
the country]. The rise in value of an article such as
coal which, according to the assumption, enters into both
component parts of capital in equal proportions,
brings about a rise in cost by one-tenth for both
elements. Thus £ 80c would now only buy as many
commodities as could previously be bought with
[approximately] £70c and with £20v only as many
workers could be paid as previously with [approximately]
£18v. Or, in order to continue production on the
old scale, [approximately] £ 90c and £ 22v would
now have to be laid out. The value of the product, as
previously, is now £ 120, of which, however, the
outlay amounts to £ 112 (£90 constant and
£22 variable). Thus the profit is £8 and
on £ 112 this works out at 1/14,
which is 7 1/7 per cent. Hence
the value of the product from £ 100 capital advanced
is now equal to £ 107 1/7.

What is the ratio in which c and v now
enter into this new capital? Previously the ratio
v:c was as 20:80, as 1:4; now it is as 22:90 [or] as
11:45.
1/4=45/180;
11/45=44/180.
That means that variable capital has decreased by
1/180 | as against constant
capital. In keeping with the assumption that the
increase in price of coal etc. has proportionally the
same effect on both parts of the capital, we must put it
as £ 88c+£ 22v. For the value of the
product is £ 120; from this has to be deducted an
outlay of £ 88+£ 22=£ 110. This
leaves a profit of £ 10. 22:88=20:80. The
ratio of c to v would have remained
the same as in the old capital. As before, the
ratio would be v:c as 1:4. But £ 10
profit on £ 110 is 1/11, which
is 9 1/11 per cent. If
production is to be continued on the same scale, £ 110
capital will have to be invested instead of £ 100, and
the value of the product [would continue to be] £
120. The composition of a capital of £ 100
however would be £ 80c+£ 20v, the value of the
product being £ 109 1/11.

If, in the above case, the value £ 80c had remained
constant and only v had varied, i.e., £ 22v
instead of £ 20v, then the previous ratio having been
20:80 or 10:40, it would now be 22:80 or 11:40. Now if
this change had taken place, then [the capital would amount
to] £ 80c+£ 22v [and the] value of the product
would be £ 120; therefore the outlay [would be]
£ 102 and the profit £ 18 i.e., 17
33/51 per cent. [But] 22:18 is
as 21 29/51:17
33/51. If £ 22v capital
need to be laid out in wages, in order to set in motion a
constant capital of £ 80 in value, then £ 21
29/51 are required in order to move a
constant capital of £ 78 22/51
in value. According to this ratio, only £ 78
22/51 would be laid out in machinery
and raw material from a capital of £ 100; £ 21
29/51 would have to go to wages,
whereas previously £ 80 was spent on raw material
etc. and only £ 20 on wages. The value of the
product is now £ 117
33/51. And the composition of
the capital: £ 7822/51c+£
21 29/51v. But £ 21
29/51+£ 17
33/51=£ 39
11/51. Under the previous
composition [of capital], the total labour put in was equal
to 40; now it is 39 11/51 or less by
40/51, not because the constant
capital has altered in value, but because there is
less constant capital to be worked on, hence a capital of
£ 100 can set in motion a little less labour than
before, although more dearly paid for.

If, therefore, a change in an element of cost, here a
rise in price—a rise in value—only alters (the
necessary) wage, then the following takes place: Firstly,
the rate of surplus-value falls; secondly, with a given
capital, less constant capital, less raw material and
machinery, can be employed. The absolute amount of
this part of the capital decreases in proportion to the
variable capital, and provided other conditions remain
the same, this must always bring about a rise in the
rate of profit (if the value of constant capital remains the
same). The [physical] volume of the constant
capital decreases although its value remains the
same. But the rate of surplus-value
decreases and also the [amount of] surplus-value
itself, because the falling rate is not accompanied by an
increase in the number of workers employed. The rate
of surplus-value—of surplus-labour—falls more
than the ratio of variable to constant capital. For
the same number of workers as before, that is the
same absolute quantity of labour, needs to be employed in
order to set in motion the same amount of constant
capital. Of this absolute quantity of labour more,
however, is necessary labour and less of it is
surplus-labour. Thus the same quantity of
labour must be paid for more dearly. Of the
same capital—£ 100 for instance—less
can thus be laid out in constant capital, since more has to
be laid out in variable capital to set in motion a smaller
constant capital. The fall in the rate of
surplus-value in this case is not connected with an increase
in the absolute quantity of labour which a particular
capital employs, or with the increase in the number of
workers employed by it. The [amount of] surplus-value
itself cannot therefore rise here, although the rate of
surplus-value falls.

Provided, therefore, that the organic composition of the
capital remains the same, in so far as its physical
component parts regarded as use-values are concerned; that
is, if change in the composition of the capital is not due
to a change in the method of production within the
sphere in which the capital is invested, but only to a rise
in the value of the labour-power and hence to a rise
in the necessary wage, which is equal to a decrease in
surplus-labour or the rate of surplus-value, which in this
case can be neither partly nor wholly neutralised by an
increase in the number of workers employed by a capital of
given size—for instance £ 100—then the
fall in the rate of profit is simply due to the fall in
surplus-value itself. If the method of production and
the ratio between the amounts of immediate and accumulated
labour used remain constant, this same cause then gives rise
to the change in the organic composition of capital—a
change which is only due to the fact that the value (the
proportional value) of the amounts employed has
changed. The same capital employs | less immediate labour
proportionately as it employs less constant capital, but it
pays more for this smaller amount of labour. It can
therefore only employ less constant capital because the
smaller amount of labour which sets in motion this smaller
amount of constant capital, absorbs a greater part of the
total capital. In order, for example, to set in motion
£ 78 of constant capital, it must lay out £ 22
in variable capital, while previously £ 20v sufficed
to set in motion £80c.

This therefore happens when an increase in the price of a
product subjected to landed property, only affects
wages. The converse would result from the product
becoming cheaper.

But now let us take the case assumed above. The
increased price of the agricultural product is supposed to
affect constant and variable capital proportionately to
the same degree. According to the assumption,
therefore, there is no change in the organic composition
of the capital. Firstly, no change in the
method of production. The same absolute amount of
immediate labour sets in motion the same amount of
accumulated labour as before. The ratio of the
amounts remains the same. Secondly, no change in
the proportion of value as between accumulated and
immediate labour. If the value of one rises or falls,
so does that of the other in the same proportion to
its relative size, which thus remains unchanged. But
previously [we had] : £ 80c+£ 20v; value of
the product £ 120. Now £ 88c+£
22v, value of the product [likewise] £ 120. This
yields £ 10 on £ 110 or 9
1/11 per cent [profit; for a capital
of] £ 80c+£ 20v therefore the value of [the
product is] £ 109 1/11,

Previously we had:

Constant Capital

Variable capital

Surplus-value

Rate of profit

Rate of surplus-value

£80

£20

£20

20 per cent

100 per cent

Now we have:

Constant Capital

Variable capital

Surplus-value

Rate of profit

Rate of surplus-value

£80

£20

£9 1/11

9 1/11 per cent

45 5/11 per cent

£ 80c represents less raw material etc. here and
£ 20v less absolute labour in the same proportion. The
raw material etc. has become dearer and [a capital of]
£ 80 therefore buys a smaller quantity of raw material
etc.; thus, because the method of production has
remained the same, it requires less immediate
labour. But the smaller quantity of immediate labour costs
as much as the larger quantity of immediate labour did
before, and it has become dearer exactly to the same extent
as the raw material etc, and has therefore decreased in the
same proportion. If, therefore, the surplus-value had
remained the same, then the rate of profit would have sunk
in the same proportion in which the raw material etc. had
become dearer and in which the ratio of the value of the
variable to the constant capital had changed. The rate of
surplus-value however has not remained the same, but has
changed in the same proportion as the value of the variable
capital has grown. Let us take [another] example.

The value of a pound of cotton has gone up from 1s. to
2s. Previously, £ 80 (we take machinery
etc. here as equal to nil) could buy 1,600 lbs. Now
£80 will only buy 800 lbs. Previously, in order
to spin 1,600 lbs., £ 20 [were] required to pay the
wages of, say, 20 workers. In order to spin the 800
lbs, only 10 [workers are needed], since the method of
production has remained the same. The 10 had
previously cost £ 10, now they cost £ 20, just
as the 800 lbs. would previously have cost £ 40, and
now cost £ 80. Assume now that the profit was
previously 20 per cent. This would involve:

Constant capital

Variable capital

Surplus-value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

I

£80=1,600 lbs. cotton

£20=20 workers

£20

100per cent

20 per cent

1600 lbs. yarn

1s. 6d.

II

£80=800 lbs. cotton

£20=10 workers

£10

50 per cent

10 per cent

800 lbs. yarn

2s. 9d

For if the surplus-value created by 20 workers is 20,
then that created by 10 is 10; in order to produce it,
however, £ 20 needs to be paid out, as before, whereas
according to the earlier relationship, only 10 was
paid. The value of the product, of the | lb. of yarn, must in this case
rise at any rate, because it contains more labour,
accumulated labour (in the cotton which enters into it) and
immediate labour.

If only cotton had risen and wages had remained the same,
then the 800 lbs. of cotton would also have been spun by 10
workers. But these 10 workers would only have cost
£ 10. That is, the surplus-value of 10 [would]
as before have amounted to 100 per cent. In order to
spin 800 lbs. of cotton, 10 workers [would be] needed with a
capital outlay of 10. Thus total capital outlay would
have been £ 90. Now according to the assumption
there would always be 1 worker per 80 lbs. of cotton.
Hence on 800 lbs. 10 workers and on 1,600 lbs. 20. How
many pounds therefore could the total capital of £ 100
spin now? £ 88 8/9 could
be used to buy cotton and £ 11
1/9 could be laid out in wages.

The relative proportions would be:

Constant capital

Variable capital

Surplus-value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

III

£88 8/9= 88 8/9 lbs.

£11 1/9 = 11 1/9 workers

£11 1/9

100per cent

11 1/9 per cent

888 8/9 lbs. yarn

2s. 6d.

In this case, where no change in the value
of variable capital takes place, and the rate of
surplus-value therefore remains the same, [we have the
following]:

In I, variable capital is to constant capital as
20:80=1:4. In III, it is as 11
1/9:88 8/9=1:8;
it has thus fallen proportionally by one half, because the
value of constant capital has doubled. The same
number of workers spin up the same amount of cotton, but
£ 100 now only employ 11 1/9
workers, while the remaining £ 88
8/9 only buy 888
8/9 lbs. of cotton instead of 1,600
lbs. [as in] I. The rate of surplus-value has
remained the same. But owing to the change in the
value of the constant capital, the same number of workers
can no longer be employed by a capital of £ 100; the
ratio between variable and constant capital has
changed. Consequently the amount of surplus-value
falls and with it the profit, since this surplus-value is
calculated on the same amount of capital outlay as
before. In the first case, the variable capital
(i.e. 20) was 1/4 of the constant
capital (20:80) and 1/5 of the total
capital. Now it is only 1/8 of
the constant capital (11 1/9:88
8/9) and 1/9 of
100, the total capital. But 100 per cent on
100/5 or 20 is 20 and 100 per cent on
100/9 or 11 1/9
is only 11 1/9. If the wage
remains the same here, or the value of the variable capital
remains the same, its absolute amount falls, because the
value of the constant capital has risen.
Therefore the percentage of the variable capital falls and
with it surplus-value itself, its absolute amount, and hence
the rate of profit.

If the value of the variable capital remains
the same and the method of production remains the
same, and therefore the ratio between the amounts of
labour, raw material and machinery employed remains the
same, a change in the value of the constant capital
brings about the same variation in the composition of
capital as if the value of constant capital had
remained the same, but a greater amount of capital of
unchanged value (thus also a greater capital
value) had been employed, in proportion to the capital
laid out in labour. The consequence is necessarily a
fall in profit. (The opposite takes place if the value
of constant capital falls.)

Conversely, a change in the value of the variable
capital—in this case a rise—increases the
proportion of variable to constant capital and
therefore also the percentage of variable capital, or its
proportional share in the total capital. Nevertheless,
the rate of profit falls here, instead of rising, for
the method of production has remained the
same. The same amount of living labour as before
is employed now, in order to convert the same amount of raw
materials, machinery etc. into products. Here, as in
the above case, only a smaller total amount of immediate and
accumulated labour can be set in motion with the same
capital of £ 100 |;
but the smaller amount of labour costs more. The
necessary wage has risen. A larger share of this
smaller amount of labour represents necessary labour and
therefore a smaller amount forms surplus-labour. The
rate of surplus-value has fallen, while at the same time the
number of workers or the total quantity of labour under the
command of the same capital has diminished. The
variable capital has increased in proportion to constant
capital and hence also in proportion to total capital,
although the amount of labour employed in proportion
to the amount of constant capital has decreased. The
surplus-value consequently falls and with it the rate of
profit. Previously, the rate of surplus-value
remained the same, while the rate of profit fell,
because the variable capital fell in proportion to
the constant capital and hence in proportion to the total
capital, or the surplus-value fell because the number of
workers decreased, its multiplier decreased, while the
rate remained the same. This time the rate of
profit falls because the variable capital rises in
proportion to the constant capital, hence also to the total
capital; this rise in variable capital is, however,
accompanied by a fall in the amount of labour employed (of
labour employed by the same capital), in other words,
the surplus-value falls, because its decreasing rate
is bound up with the decreasing amount of labour
employed. The paid labour has increased in
proportion to the constant capital, but the total quantity
of labour employed has decreased.

These variations in the value therefore always affect the
surplus-value itself, whose absolute amount decreases in
both cases because either one or both of its two factors
fall. In one case it decreases because the number of
workers decreases while the rate of surplus-value remains
the same, in the other, because both the rate decreases and
the number of workers employed by a capital of £ 100
decreases.

Finally we come to case II, where the change in the value
of an agricultural product affects both parts of capital in
the same proportion and where this change of
value is therefore not accompanied by a change in the
organic composition of capital.

In this case (see p. 584) the pound of yarn rises from
1s, 6d. to 2s. 9d., since it is the product of more
labour-time than before. It contains just as much
immediate (although more paid and less unpaid) labour as
before, but more accumulated labour. Due to the change
in the value of cotton from is, to 2s., 2s. instead of
1s. is incorporated in the value of the lb. of yarn.

Example II on page 584 however is incorrect. We
had:

Constant capital

Variable capital

Surplus-value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

I

£80=1,600 lbs. cotton

£20=20 workers

£20

100 per cent

20 per cent

1,600 lbs. yarn

1s. 6d.

The labour of 20 workers is represented by £
40. Of this, half is unpaid labour here, hence
[£]20 surplus-value. According to this ratio, 10
workers will produce (a value of) £ 20 and of this
[£] 10 [are] wages and [£] 10 surplus-value.

If, therefore, the value of the labour-power rose in the
same proportion as that of the raw material, i.e., if it
doubled, then it would be £ 20 for 10 workers as
compared with £ 20 for 20 workers before. In
this case, there would be no surplus-labour left. For
the value, in terms of money, which the 10 workers produce
is equal to £ 20, if that which the 20 produce is
equal to £ 40. This is impossible. If this
were the case, the basis of capitalist production would have
disappeared.

Since, however, the changes in value of constant and
variable capital are supposed to be the same
(proportionally), we must put this case differently.
Therefore say the value of cotton rose by one-third;
£80 now buy 1,200 lbs. cotton, whereas previously they
bought 1,600. Previously £ 1=20 lbs. [cotton] or
1 lb. [cotton]=£ 1/20=1s. Now
£ 1=15 lbs, or 1 lb.=£
1/15= =1
1/3s. or 1s. 4d. Previously 1
worker cost £ 1, now £ 1
l/3= £ 1 6 2/3s. or
£ 1 6s. 8d. and for 15 men [that] amounts to £
20 (£15+£l5/3).
| Since 20 men produce a
value of £40, 15 men produce a value of £
30. Of this value, £ 20 [are] now their wages
and £ 10 surplus-value or unpaid labour,

Thus we have the following:

Constant capital

Variable capital

Surplus-value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

IV

£80=1,200 lbs. cotton

£20= 15 men

£10

50 per cent

10 per cent

1,200 lbs. yarn

1s. 10d.

This 1s. 10d. [contains] cotton worth 1s. 4d. and labour
worth 6d.

The product becomes dearer because the cotton has become
dearer by a third. But the product is not dearer by a
third. Previously, in I, it was equal to 18d.; if,
therefore, it had become dearer by one-third, it would now
be 18d.+6d.=24d., but it is only equal to 22d.
Previously 1,600 lbs. yarn contained £40 labour, i.e.,
1 lb., £ 1/40 or
20/40s. or
1/2s.=6d. labour. Now 1,200
lbs. [yarn] contain £30 labour, 1 lb. therefore
contains £
1/40=1/2s. or
6d. labour. Although the labour has become dearer in
the same ratio as the raw material, the quantity of
immediate labour contained in 1 lb. of yarn has remained
the same, though more of this quantity is now paid
and less unpaid labour. This change in the value of
wages does not, therefore, in any way affected the value of
the lb. of yarn, of the product. Now as before, labour
only accounts for 6d., while cotton now accounts for
1s. 4d., instead of is., as previously. Thus, if the
commodity is sold at its value, the change in the
value of wages cannot after all bring about a change in the
price of the product. Previously, however, 3d. of the
6d. were wages and 3d. surplus-value; now 4d. are wages and
2d. surplus-value. In fact 3d. on wages per lb. of
yarn comes to 3×1,600d.=£ 20 for 1,600
lbs. yarn. And 4d. per pound amounts to 4×1,200=
£20 for 1,200 lbs. And 3d. on 15d. (1s. cotton
plus. 3d. wages) in the first example comes to
1/5 profit=20 per cent. On the
other hand, 2d. on 20d. (16d. cotton and 4d. wages) comes to
1/10 or 10 per cent.

If, in the above example, the price of cotton had
remained the same [then we would have the following]: 1 man
spins 80 lbs., since the method of production has remained
the same in all the examples, and the pound is again
equal to 1s.

Now the capital is made up as follows:

Constant capital

Variable capital

Surplus- value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

£73 1/3= 1,466
2/3 lbs. cotton

£26 2/3 (20 men)

£ 13 1/3

50 per cent

13 1/3 per cent

1,466 2/3 lbs.

1 6/11s.

This calculation is wrong; for if a man spins 80 lbs., 20
[men] spin 1,600 and not l,466 2/3,
since it is assumed that the method of
production has remained the same. This
fact can in no way be altered by the difference in the
remuneration of the man. The example must therefore be
constructed differently.

Constant capital

Variable capital

Surplus- value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

II

£75= 1,500 lbs. cotton

£25 (18 3/4 men)

£12 1/2

50 per cent

12 1/2 per cent

1,500 lbs. yarn

1s. 6d.

Of this 6d., 4d. wages and 2d, profit. 2 on
16=1/8=12 1/2
per cent.

Finally, if the value of the variable capital remained
the same as before, [i.e.], 1 man received £ 1,
whereas the value of the constant capital altered, so that l
lb. cotton cost 1s. 4d. or 16d., instead of 1s. then:

Constant capital

Variable capital

Surplus- value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

III

£84 4/19 = 1,263
3/19 lbs. cotton

£15 15/19 = (15
15/19 men)

£15 15/l9

100 per cent

1515/19 percent

1,263 3/19 lbs. [yarn]

1s. l0d.

| The profit [would be]
3d. On 19d. this comes to exactly 15
15/19 per cent.

Now let us put all these examples together, beginning
with I, where no change of value has as yet taken place.

Constant capital

Variable capital

Surplus -value

Rate of surplus-value

Rate of profit

Product

Price per lb. of yarn

Profit

I

£80=1,600 lbs. cotton

£20=20 workers

£20

100 per cent

20 per cent

1,600 lbs. yarn

1s. 6d.

3d.

II

£75= 1,500 lbs. cotton

£25= 18 3/4
workers

£12 1/2

50 per cent

12 1/2 per cent

1,500 lbs. yarn

1s. 6d.

2d.

III

£84 4/19 = 1,263
3/19 lbs. [cotton]

£15 15/19 =15
15/19 workers

£15 15/19

100 per cent

15 15/19 per cent

1,263 3/19 lbs. yarn

1s. 10d.

3d.

IV

280= 1,200 lbs. [cotton]

£20= 15 workers

£10

50 per cent

10 per cent

1,200 lbs. yarn

1s. l0d.

2d.

The price of the product has changed in III and IV,
because the value of constant capital has changed. On
the other hand, a change in the value of variable capital
does not bring about a change in price because the absolute
quantity of immediate labour remains the same and is only
differently apportioned between necessary labour and
surplus-labour.

Now what happens in example IV, where the change in value
affects constant and variable capital in equal
proportions, where both rise by one-third?

If only wages had risen (II), then the profit would have
fallen from 20 per cent to 12 1/2,
i.e., by 7 1/2 per cent. If
constant capital alone had risen (III), profit would have
fallen from 20 per cent to 15 15/19
per cent, i.e., by 4 4/19 per
cent. Since both rise to the same extent, profit falls
from 20 per cent to 10 per cent, i.e., by 10 per cent.
But why not by 7 1/2+4
4/19 per cent or by 11
27/38, which is the sum of the
differences of II and III? This 1
27/38 must be accounted for; in
accordance with that, the profit should have fallen (IV) to
8 11/38, instead of to 10. The
amount of profit is determined by the amount of
surplus-value and this is determined by the number of
workers, when the rate of surplus-labour is given. In
I there are 20 workers and half their labour-time is
unpaid. In II, only a third of the total labour is
unpaid, thus the rate of surplus-value falls; moreover, 1
1/4 less workers are employed and
therefore the number [of workers] or the total labour
decreases. In III the rate of surplus-value is again
the same as in I, one-half of the working-day is unpaid, but
as a result of the rise in value of the constant capital,
the number of workers falls from 20 to 15
15/19 or by 4
4/19. In IV (the rate of
surplus-value having fallen again to the level of that in
II, namely, one-third of the working-day), the number of
workers decreases by 5, namely, from 20 to 15.
Compared with I, the number of workers in IV decreases by 5,
compared with II by 3 3/4 and compared
with III by 15/19; but compared with I
it does not decrease by 11/4+4
4/19, i.e., by 5
35/76. Otherwise the number of
workers employed in IV would be 14
41/76.

Hence it follows that variations in the value of
commodities which enter into constant or variable
capital—when the method of production, or the
physical composition of capital, remains the same, in
other words, when the ratio of immediate and accumulated
labour remains constant—do not bring about a
change in the organic composition of the capital if they
affect variable and constant capital in the same
proportion, as in IV (where for instance cotton becomes
dearer to the same degree as the wheat which is consumed by
the workers). The rate of profit falls here (while the
value of constant and variable capital increases), firstly
because the rate of surplus-value falls due to the rise in
wages, and secondly, because the number of workers
decreases.

The change in value—if it affects only constant
capital or only variable capital—acts like a change in
the organic composition of capital and changes the
relative value of the component parts of capital,
although the method of production remains the same.
When only the variable capital is affected, it rises in
relation to the constant capital | and to the total capital; and
not only the rate of surplus-value decreases, but also the
number of workers employed. Consequently the amount of
constant capital (whose value [remains] unchanged) employed
is also smaller (II).

If the change in value only affects the constant capital,
then the variable capital falls in proportion to the
constant capital and to the total capital. Although
the rate of surplus-value remains the same, its amount
decreases because the number of workers employed
falls (III).

Finally, it would be possible for the change in value to
affect both constant and variable capital, but in
uneven proportions. This case only requires to
be fitted into the above categories. Suppose, for
instance, that constant and variable capital were affected
in such a way that the value of the former rose by 10 per
cent and the latter by 5. Then in so far as they both
rose by 5 per cent, one by 5+5 and the other by 5, we would
have case IV. But in so far as the constant capital
changed by a further 5 per cent, we would have case III.

In the above, we have only assumed a rise in value.
With a fall we have the opposite effect. For example,
going from IV to I can be considered as a fall in value
which affected both component parts in equal
proportions. To assess the effect of a fall in
only [one component part], II and III would have to be
modified. |

| I would make the
following further observation on the influence of the
variation of value upon the organic com-position of capital:
With capitals in different branches of
production—with an otherwise equal physical
composition—it is possible that the higher
value of the machinery or of the material used, may
bring about a difference. For instance, if the cotton,
silk, linen and wool [industries] had exactly the same
physical composition, the mere difference in the cost of the
material used would create such a variation. |

### [d) Changes in the Total Rent, Dependent on Changes in the Market-Value]

| Returning to Table A
it thus follows, that the assumption, that the profit of 10
per cent has come about through a decrease (in that the rate
of profit, starting from III was higher, in II it was lower
than in III, but still higher than in I, where it was 10 per
cent) may be correct, namely, if the development actually
proceeded along the descending line; but this assumption by
no means necessarily follows from the gradation of rents,
the mere existence of differential rents; on the contrary
with the ascending line, this [gradation of rents]
presupposes that the rate of profit remains the same over a
long period.

Table B. As has already been explained
above, in this example the competition from III and IV,
forces [the cultivator of] II to withdraw half his
capital. With a descending line, it would on the
contrary appear that an additional supply of only 32
1/2 tons is required, hence only a
capital of £ 50 has to be invested in II.

But the most interesting aspect of the table is this:
Previously a capital of £ 300 was invested, now only
£ 250, i.e., one-sixth less. The amount of
product has however remained the same— 200 tons.
The productivity of labour has thus risen and the value of
the individual commodity fallen. The total
value of the commodities has likewise fallen, from
£ 400 to £ 369
3/13. As compared with A,
the market-value per ton has fallen from £ 2 to
£ 1 16 12/13s., since the new
market-value is determined by the individual value of
II instead of, as previously, by the higher one of I.
Despite all these circumstances—decrease in the
capital invested, decrease in the total value of the product
with the same volume of production, fall in the
market-value, exploitation of more fertile classes=the rent
in B, as compared with A, has risen
absolutely, by £ 24 3/13
(£ 94 3/13 as against £
70). If we examine how far the individual classes
participate in the increase in total rent, we find that in
class II the absolute rent, in so far as its rate is
concerned, has remained the same for £ 5 on £ 50
equals 10 per cent; but its amount has fallen by
half, from £ 10 to £ 5, because the capital
investment in II B has fallen by half, from £ 100 to
£ 50. Class II B, instead of effecting an
increase in the rental, effects a decrease by £
5. Furthermore, the differential rent for II B has
completely disappeared, because the market-value is now
equal to the individual value of II; this results in a
second loss of £ 10. Altogether then the
reduction in rent for class II amounts to £ 15.

In III the amount of absolute rent is the same; but as a
result of the fall in market-value, its differential value
has also fallen; hence also the differential rent. It
amounted to £ 30, now it amounts only to [£] 18
6/13. This is a reduction by
[£] 11 7/13. The rent for
II and III taken together has therefore fallen by [£]
26 7/13. It remains to account
for a rise, not of 24 3/13, as at
first sight it would seem, but of £ 50
10/13. Furthermore, however, for
B as compared with A, the absolute rent of I A has
disappeared as class I itself has disappeared. This
represents a further reduction by £ 10. Thus,
all in all, £ 60 10/13 must be accounted
for. But this is the rental of the new class IV
B. The rise in the rental of B is therefore only to be
explained by the rent from IV B. The absolute rent for
IV B, like that of all other classes, is £ 10.
The differential rent of £ 50
10/13, however, is due to | the fact that the differential
value of IV is 10 470/481s. per ton,
and this has to be multiplied by 92
1/2 for that is the number of
tons. The fertility of II and III has remained the
same. The least fertile class has been removed
entirely and yet the rental rises because, due to its
relatively great fertility, the differential rent of IV
alone is greater than the total differential rent of A had
been previously. Differential rent does not depend on
the absolute fertility of the classes that are cultivated
for 1/2 II, III, IV [B are] more
fertile than I, II, III [A], and yet the differential rent
for 1/2 II, III, IV [B] is greater
than it was for I, II, III [A] because the greatest portion
of the product—92 1/2
tons—is supplied by a class whose differential value
is greater than that occurring in I, II, III A. When
the differential value for a class is given, the
absolute amount of its differential rent naturally depends
on the amount of its product. But this amount
itself is already taken into account in the calculation and
formation of the differential value. Because with
£ 100, IV produced 92 1/2 tons,
no more and no less, its differential value in B where the
market-value is £ 1 16
12/13s. per ton, amounts to 10
470/481s. per ton.

The whole rental in A amounts to £ 70 on £
300 capital, which is 23 1/3 per
cent. On the other hand in B, leaving out of account
the 3/13, it is £ 94 on £
250, which is 37 3/5 per cent.

Table C. Here it is assumed that class IV
having come into the picture and class II determining the
market-value, demand does not remain the same, as in Table
B, but it increases with the falling price, so that the
whole of the 92 1/2 tons which have
been newly added by IV is absorbed by the market. At
£ 2 per ton only 200 tons would be absorbed; at
£ 1 11/13, the demand grows to
292 1/2. It is wrong to assume
that the limits of the market are necessarily the same at
£ 1 11/13 per ton as at £
2 per ton. On the contrary, the market expands to a
certain extent with the falling price—even in the case
of a general means of subsistence, such as wheat.

This, for the time being, is the only point to
which we want to draw attention in Table C. Table
D. Here it is assumed that the 292
1/2 tons are absorbed by the market
only if the market-value falls to £ 1
5/6, which is the cost-price
per ton for class I, which therefore bears no rent but only
yields the normal profit of 10 per cent. This is the
case which Ricardo assumes to be the normal case and on
which we should therefore dwell at somewhat greater
length.

As in the preceding tables, the ascending line is here
presupposed at the outset; later we shall look at the same
process in the descending line.

If II, III and IV only provided an additional supply of
140, that is, an additional supply which the market absorbs
at £ 2 per ton, then I would continue to determine the
market-value.

But this is not the case. There is an overplus of
92 1/2 tons on the market, produced by
class IV. If this were, in fact, surplus production,
which exceeded the absolute requirements of the market, then
I would be completely thrown out of the market and II would
have to withdraw half its capital as in B. II would
then determine the market-value as in B. But it is
assumed that if the market-value decreases, the market can
absorb the 92 1/2 tons. How does
this occur? IV, III and 1/2II
dominate the market absolutely. In other words if the
market could only absorb 200 tons, they would throw out
I.

But to begin with let us take the actual position.
There are now 292 1/2 tons on the
market whereas previously there were only 200. II
would sell at its individual value, at £ 1
11/13, in order to make room for
itself and to drive I, whose individual value is £ 2,
out of the market. But since, even at this
market-value, there is no room for the 292
1/2 tons, IV and III exert pressure on
II, until the market-price falls to £ 1
5/6, at which price the classes IV,
III, II and I find room for their product on the market,
which at this |
market-price absorbs the whole product. Through
this fall in price, supply and demand are balanced. As
soon as the additional supply surpasses the capacity of the
market, as determined by the old market-value, each class
naturally seeks to force the whole of its product on
to the market to the exclusion of the product of the
other classes. This can only be brought about through
a fall in price, and moreover a fall to the level where the
market can absorb all products. If this
reduction in price is so great that the classes I, II
etc. have to sell below their costs of production,
they naturally have to withdraw [their capital from
production]. If, however, the situation is such that
the reduction does not have to be so great in order to bring
the output into line with the state of the market, then the
total capital can continue to work in this sphere of
production at this new market-value.

But it is further clear that in these circumstances it is
not the worst land, I and II, but the best, III and IV,
which determines the market-value, and so also the rent on
the best sorts of land determines those on the worse,
as Storch correctly grasped in relation to this
case.

IV sells at the price at which it can force its entire
product on to the market overcoming all resistance from the
other classes. This price is £ 1
5/6. If the price were higher,
the market would contract and the process of mutual
exclusion would begin anew.

That I determines the market-value [is correct] only on
the assumption that the additional supply from II etc. is
only the additional supply which the market can absorb at
the market-value of I. If it is greater, then I is
quite passive and by the room it takes up, only compels II,
III, IV to react until the price has contracted sufficiently
for the market to be large enough for the whole
product. Now it happens that at this market-value,
which is in fact determined by IV, IV itself pays a
differential rent of £ 49 7/12
in addition to the absolute rent, III pays a differential
rent of £ 17 1/2 in addition to
the absolute rent, II, on the other hand, pays no
differential rent and moreover, only pays a part of the
absolute rent, £ 9 1/6, instead
of £ 10, i.e., not the full amount of the absolute
rent. Why? Although the new market-value of
£ 1 5/6 is above its cost-price,
it is below its individual value. If
market-value were equal to its individual value, it
would pay the absolute rent of £ 10, which is equal to
the difference between individual value and
cost-price. But since it is below that, it only pays a
part of its absolute rent, £ 9
1/6 instead of £ 10; the actual
rent it pays is equal to the difference between market-value
and cost-price, but this difference is smaller than that
between its individual value and its cost-price.

<The actual rent is equal to the difference
between market-value and cost-price.>

The absolute rent is equal to the difference
between individual value and cost-price.

The differential rent is equal to the difference
between market-value and individual value.

The actual or total rent is equal to the absolute
rent plus the differential rent, in other words, it is equal
to the excess of the market-value over the individual value
plus the excess of the individual value over the cost-price
or [it is] equal to the difference between market-value and
cost-price.

If, therefore, the market-value is equal to the
individual value, the differential rent is nil and the total
rent is equal to the difference between individual value and
cost-price.

If the market-value is greater than the individual value,
the differential rent is equal to the excess of the
market-value over the individual value, the total rent,
however, is equal to this differential rent plus the
absolute rent.

If the market-value is smaller than the individual value,
but greater than the cost-price, the differential rent is a
negative quantity, hence the total rent is equal to the
absolute rent plus this negative differential rent, i.e.,
the excess of the individual value over the
market-value.

If the market-value is equal to the cost-price, then on
the whole rent is nil.

In order to put this down in the form of equations, we
shall call the absolute rent AR, the differential rent DR,
the total rent TR, the market-value MV, the individual value
IV and the cost-price CP. We then have the following
equations:

| 1. AR=IV-GP=+y

2. DR=MV-IV=x

3. TR=AR+DR=MV-IV+IV-CP= y+x=MV-CP

If MV>IV then MV-IV=+x. Hence: DR
positive and TR= y+x.

And MV-CP=y+x. Or MV-y-x=CP or
MV=y+x+CP. If MV<IV then
MV-IV=-x. Hence: DR negative and
TR=y-x.

And MV-CP=y-x. Or MV+x=IV. Or
MV+x-y=CP. Or MV=y-x+CP.

If MV=IV, then DR=0, x=0, because MV-IV=0.

Hence TR=AR+DR=AR+0=MV-IV+IV-CP=0+IV-CP=IV-CP=MV-CP=+y.

If MV=CP [then] TR or MV-CP=0

In the circumstances assumed, I pays no rent. Why
not? Because the absolute rent is equal to the
difference between the individual value and the
cost-price. The differential rent, however, is equal
to the difference between the market-value and the
individual value. But the market-value here is equal
to the cost-price of I. The individual value of I is
£ 2 per ton, the market-value £ 1
5/6. The differential rent of I
is therefore £ 1 5/6-£ 2,
which is -£ 1/6. The
absolute rent of I, however, is £ 2=£ 1
5/6, in other words, it is equal to
the difference between its individual value and its
cost-price, which is +£
1/6. Since, therefore, the
actual rent of I is equal to the absolute rent
(+£1/6) and the differential
rent (-£1/6), it is equal to
+£1/6-£1/6=0.
Thus category I pays neither differential rent nor absolute
rent, but only the cost-price, The value of its product is
£2; [it is] sold at £ 1
5/6, that means
1/12 below its value which is 8
1/3 per cent below its
value. Category I cannot sell at a higher price,
because the market is determined not by I but by IV, III, II
in opposition to I. Category I can merely provide an
additional supply at the price of £ 1
5/6.

That I pays no rent, is due to the fact that the
market-value is equal to its cost-price.

This fact, however, is the result:

Firstly of the relatively low productivity of
I. What it has to supply, is 60 additional tons at
£ 1 5/6. Suppose instead
of supplying only 60 tons for [£] 100, I supplied 64
tons for [£] 100, i.e., 1 ton less than class
II. Then only £ 93 3/4
capital would have to be invested in I in order to supply 60
tons. The individual value of one ton in I would then
be £ 1 7/8 or £ 1 17
1/2s.; its cost-price: £ 1 14
3/8s. And since the market-value
is £ 1 5/6= =£ 1 16
2/3s., the difference between
cost-price and market value is 2
7/24s. And on 60 tons this would
amount to | a rent of
£ 6 17 1/2s.

If therefore all the circumstances remained the same and
I were more productive than it is by
1/15 (since
60/15=4), it would still pay a part of
the absolute rent because there would be a difference
between the market-value and its cost-price, although a
smaller difference than between its individual value and its
cost-price. Here the worst land would therefore still
bear a rent if it were more fertile than it is. If I
were absolutely more fertile than it is, II, III IV would be
relatively less fertile compared with it. The
difference between its [value] and their individual values
would be smaller. The fact that I bears no rent
is therefore just as much due to the circumstance that it is
not absolutely more fertile as to the fact that II, III, IV
are not relatively less fertile.

Secondly, however: Given the productivity of I as
60 tons for £ 100. If II, III, IV, and
especially IV, which enters the market as a new competitor,
were less fertile, not only relatively as against I, but
absolutely, then category I could yield a rent, even
though this would only consist of a fraction of the absolute
rent. For since the market absorbs 292
1/2 tons at £ 1
5/6, it would absorb a smaller number
of tons, for instance 280 tons at a market-value higher than
£ 1 5/6. Every
market-value, however, which is higher than £ 1
5/6, i.e., higher than the production
costs of I, yields a rent for I, equal to the market-value
minus the cost-price of I.

It can thus equally well be said that I yields no rent
because of the absolute productivity of IV, for as long as
II and III were the only competitors on the market, it
yielded a rent and would continue to do so even despite the
advent of IV, despite the additional supply—although
it would be a lower rent—if for a capital outlay of
£ 100 IV produced 80 tons instead of 92
1/2 tons.

Thirdly: We have assumed that the absolute rent
for a capital outlay of £ 100 is £ 10, that is,
10 per cent on the capital or 1/11 on
the cost-price, and that therefore the value [of the product
yielded by] a capital of £ 100 in agriculture is
£ 120 of which £ 10 are profit.

It would be wrong to assume that if we [say]: £ 100
capital is laid out in agriculture and if one working-day
equals £ 1, then 100 working-days are laid out.
In general, if a capital of £ 100 equals 100
working-days then, in whatever branch of production this
capital may be laid out, [the newly-created value] is never
[equal to 100 working-days]. Supposing that one gold
sovereign equals one working-day of 12 hours, and that this
is the normal working-day, then the first question is, what
is the rate of exploitation of labour? That is, how
many of these 12 hours does the worker work for himself, for
the reproduction (of the equivalent) of his wage, and how
many does he work for the capitalist gratis? [How
great], therefore is the labour-time which the capitalist
sells without having paid for it and which is
therefore the source of the surplus-value and serves to
augment the capital? If the rate of exploitation is 50
per cent, then the worker works 8 hours for himself and 4
gratis for the capitalist. The product equals 12
hours, which is £ 1 (since according to the
assumption, 12 hours labour-time are contained in one gold
sovereign). Of these 12 hours, equal to £ 1, 8
recoup the capitalist for the wage and 4 form his
surplus-value. Thus on a wage of 13
1/3s., surplus-value equals 6
2/3s.; or on a capital outlay of
£ 1, it is 10s, and on £ 100, £ 50.
Then the value of the commodity produced with the £
100 capital would be £ 150. The profit of the
capitalist in fact consists in the sale of the unpaid labour
contained in the product. The normal profit is derived
from this sale of that which has not been paid for.

| But the second
question is this: What is the organic composition of
the capital? That part of the value of the capital
which consists of machinery etc. and raw material is
simply reproduced in the product, it reappears
remaining unaltered. This part of the capital the
capitalist must pay for at its value. It thus
enters into the product as a given predetermined
value. Only the labour used by the capitalist is
merely partly paid for by him, although it enters
wholly into the value of the product [and] is wholly
bought by him. Assuming the above to be the rate of
exploitation of labour, the amount of surplus-value for
capital of the same size will, therefore, depend on
its organic composition. If the capital A
consists of £ 80c+£ 20v, then the value of the
product is £ 110 and the profit is £ 10
(although it contains 50 per cent unpaid labour). If
the capital B consists of £ 40c+£ 60v,
then the value of the product is £ 130, and the profit
is £ 30 although it too contains only 50 per cent
unpaid labour. If the capital C consists of £
60c+ +£ 40v, then the value of the product is £
120 and the profit is £ 20 although, in this case too,
it comprises 50 per cent unpaid labour. Thus the three
capitals, equal to £ 300, yield a total profit of
£ 10+£ 30+£ 20=£ 60, and this makes
an average of 20 per cent for £ 100. This
average profit is made by each of the capitals if it sells
the commodity it produces at £ 120. The capital
A: £ 80c+£ 20v, sells at £ 10
above its value; capital B: £
40c+£ 60v, sells at £ 10 below its value;
capital C:£ 60c+£ 40v sells at its
value. All the commodities taken together, are sold at
their value: £ 120+£ 120+ £ 120=£
360. In fact the value of A+B+C equals £
110+£ 130+£ 120=£ 360. But the
prices of the individual categories are partly above,
partly below and partly at their value so that
each yields a profit of 20 per cent. The values of the
commodities, thus modified, are their cost-prices, which
competition constantly sets as centres of gravitation for
market-prices.

Now assume that the £ 100 laid out in agriculture
is composed of £ 60c+£ 40v (which, incidentally,
is perhaps still too low for v), then the value [of the
product] is £ 120. But this would be equal to
the cost-price in the industry. Suppose
therefore in the above case that the average price [of the
product produced] by a capital of [£]100 is
£110. We now say that if the agricultural
product is sold at its value, its value is £ 10
above its cost-price. It then yields a rent of
10 per cent and this we assume to be the normal thing
in capitalist production, that in contrast to other
products, the agricultural product is not sold at its
cost-price, but at its value, as a result of
landed property. The composition of the
aggregate capital is £ 80c+£ 20v, if the average
profit is 10 per cent. We assume that that of the
agricultural capital is £ 60c+£ 40v, that is, in
its composition wages— immediate labour—have a
larger share than in the total capital invested in the other
branches of industry. This indicates a relatively
lower productivity of labour in this branch. It is
true, that in some types of agriculture, for instance in
stock-raising, the composition may be £ 90c+£
l0v, i.e., the ratio of v:c may be smaller than in the total
industrial capital. Rent is, however, not determined
by this branch, but by agriculture proper, and, furthermore,
by that part of it which produces the principal means of
subsistence, such as wheat, etc. The rent in the
other branches is not determined by the composition of | the capital invested in these
branches themselves, but by the composition of the capital
which is used in the production of the principal means of
subsistence. The mere existence of capitalist
production presupposes that vegetable food, not animal food,
is the largest element in the means of subsistence.
The interrelationship of the rents in the various branches
is a secondary question that does not interest us here and
is [therefore] left out of consideration.

In order, therefore, to make the absolute rent equal to
10 per cent, it is assumed that the general average
composition of the non-agricultural capital is £
80c+£ 20v and that of agricultural capital is £
60c+£ 40v.

The question now is whether it would make any difference
to case D, where class I pays no rent, if the agricultural
capital were differently constituted, for example £
50c+£ 50v or £ 70c+£ 30v? In the
first case, the value of the product would be £ 125,
in the second, £ 115. In the first case, the
difference arising from the different composition of the
non-agricultural capital would be £ 15, in the second
it would be 5. That is, the difference between the
value of the agricultural product and cost-price would in
the first case be so per cent higher than has been assumed
above, and in the second 50 per cent lower.

If the former were the case, if the value [of the
product] of £ 100 were £ 125, then the value per
ton for I [would be] equal to £ 2
1/12 in Table A. And this would
be the market-value for A, for class I determines the
market-value here. The cost-price for I A, on the
other hand, would be £ 1 5/6, as
before. Since, according to the assumption, the 292
1/2 tons are only saleable at £
1 5/6, this would therefore make no
difference, just as it would make no difference if the
agricultural capital [were] composed of £ 70c+£
30v or the difference between the value of the agricultural
produce and its cost-price [were] only £ 5, i.e., half
the amount [previously] assumed. If the
cost-price, and therefore the average organic
composition of the non-agricultural capital, were assumed to
be constant at £ 80c+£ 20v, then it would make
no difference to this case <I D> whether it [the
organic composition of the agricultural capital] were higher
or lower, although it would make a considerable difference
to Table A and it would make a difference of 50 per cent in
the absolute rent.

But let us now assume the opposite, that the composition
of the agricultural capital remains £ 60c+£ 40v,
as before and that of the non-agricultural capital
varies. Instead of being £ 80c+£ 20v, let
it be either £ 70c+£ 30v or £ 90c+£
l0v. In the first case the average profit [would be]
[£] 15 or 50 per cent higher than in the supposed
case; in the other, £ 5 or 50 per cent lower. In
the first case the absolute rent [would be] £ 5.
This would again make no difference to I D. In the
second case the absolute rent [would be] £ 15.
This too would make no difference to the case I D. All
this would therefore be of no consequence to I D, however
important it may continue to be for tables A, B, C, and E,
i.e., for the absolute determination of the absolute and
differential rent, whenever the new class— be it in
the ascending or the descending line—only supplies the
necessary additional demand at the old market-value.

Now the following question arises:

Can this case D occur in practice? And even
before this, we must ask: is it, as Ricardo assumes, the
normal case? It can only be the normal
case:

Either: if the agricultural capital is equal to £
80c+£ 20v, that is, to the average composition of the
non-agricultural capital, so that the value of the
agricultural produce would be equal to the cost-price
of the non-agricultural produce. For the time
being this is statistically wrong. The assumption of
this relatively lower productivity of agriculture is
at any rate more appropriate than Ricardo’s assumption of a
progressive absolute decrease in its
productivity.

| In Chapter I
“On Value” Ricardo assumes that the
average composition of capital prevails in gold and silver
mines (although he only speaks of fixed and circulating
capital here; but we shall “correct”
this). According to this assumption, these mines could
only yield a differential rent, never an absolute
rent. The assumption itself, however, in turn rests on
the other assumption, that the additional supply provided by
the richer mines is always greater than the additional
supply required at the old market-value. But it is
absolutely incomprehensible why the opposite cannot equally
well take place. The mere existence of differential
rent already proves that an additional supply is possible,
without altering the given market-value. For IV
or III or II would yield no differential rents if they did
not sell at the market-value of I, however this may have
been determined, that is, if they did not sell at a
market-value which is determined independently of the
absolute amount of their supply.

Or: case D would always have to be the normal one,
if the [conditions] presupposed in it are always the normal
ones; in other words, if I is always forced by the
competition from IV, III and II, especially from IV, to sell
its product below its value by the whole amount of
the absolute rent, that is, at the cost-price.
The mere existence of differential rent in IV, III, II
proves that they sell at a market-value which is
above their individual value. If Ricardo
assumes that this cannot be the case with I, then it is only
because he presupposes the impossibility of absolute
rent, and the latter, because he presupposes the identity
of value and cost-price.

Let us take case C where the 292
1/2 tons find a sale at a market-value
of £ 1 16 12/13 s. And,
like Ricardo, let us start out from IV, So long as only 92
1/2 tons are required, IV will sell at
£1 5 35/37s. per ton, i.e., it
will sell commodities that have been produced with a capital
of £ 100 at their value of £ 120, which yields
the absolute rent of £ 10. Why should IV sell
its commodity below its value, at its
cost-price? So long as it alone is there, III, II, I
cannot compete with it. The mere cost-price of
III is above the value which yields IV a rent of
£ 10, and even more so the cost-price of II and
I. Therefore III etc. could not compete, even if they
sold these tons at the bare cost-price.

Let us assume that there is only one class—the best
or the worst type of land, IV or I or III or II, this makes
no difference whatsoever to the theory—let us assume
that its supply is unlimited, that is,
relatively unlimited compared to the amount of the
given capital and labour which is in general available and
can be absorbed in this branch of production, so that land
forms no barriers and provides a relatively unlimited field
of action for the available amount of labour and
capital. Let us assume, therefore, that there is no
differential rent because there is no cultivation of land of
varying natural fertility, hence there is no
differential rent (or else only to a negligible
extent). Furthermore, let us assume that there is
no landed property; then clearly there is no absolute
rent and, therefore (as, according to our assumption, there
is no differential rent), there is no rent at
all. This is a tautology. For the existence of
absolute rent not only presupposes landed property,
but it is the posited landed property, i.e., landed
property contingent on and modified by the action of
capitalist production. This tautology in no way
helps to settle the question, since we explain that absolute
rent is formed as the result of the resistance
offered by landed property in agriculture to the capitalist
levelling out of the values of commodities to average
prices. If we remove this action on the part of landed
property—this resistance, the specific resistance
which the competition between capitals comes up against in
this field of action—we naturally abolish the
precondition on which the existence of rent is based.
Incidentally (as Mr. Wakefield sees very well in his
colonial theory), there is a contradiction in the assumption
itself: on the one hand, developed capitalist production, on
the other hand, the non-existence of landed property.
Where are the wage-labourers to come from in this case?

A somewhat analogous development takes place in
the colonies, even where, legally, landed property
exists, in so far as the government gives [land] gratis as
happened originally in the colonisation from England; and
even where the |
government actually institutes landed property by selling
the land, though at a negligible price, as in the United
States, at 1 dollar or something of the sort per acre.

Two different aspects must be distinguished here.

Firstly: There are the colonies proper, such as in
the United States, Australia, etc. Here the mass of
the farming colonists, although they bring with them a
larger or smaller amount of capital from the motherland, are
not capitalists, nor do they carry on
capitalist production. They are more or less
peasants who work themselves and whose main object, in the
first place, is to produce their own livelihood,
their means of subsistence. Their main product
therefore does not become a commodity and is not
intended for trade. They sell or exchange the excess
of their products over their own consumption for imported
manufactured commodities etc. The other, smaller
section of the colonists who settle near the sea, navigable
rivers etc., form trading towns. There is no question
of capitalist production here either. Even if
capitalist production gradually conies into being, so that
the sale of his products and the profit he makes from this
sale become decisive for the farmer who himself works and
owns his land; so long as, compared with capital and labour,
land still exists in elemental abundance providing a
practically unlimited field of action, the first type of
colonisation will continue as well and production will
therefore never be regulated according to the needs
of the market—at a given market-value.
Everything the colonists of the first type produce over
and above their immediate consumption, they will throw
on the market and sell at any price that will bring in more
than their wages. They are, and continue for a long
time to be, competitors of the farmers who are already
producing more or less capitalistically, and thus keep the
market-price of the agricultural product constantly
below its value. The farmer who therefore
cultivates land of the worst kind, will be quite satisfied
if he makes the average profit on the sale of his farm,
i.e., if he gets back the capital invested, this is not the
case in very many instances. Here therefore we have
two essentially different conditions competing with one
another: capitalist production is not as yet dominant in
agriculture; secondly, although landed property exists
legally, in practice it only exists as yet sporadically, and
strictly speaking there is only possession of land. Or
although landed property exists in a legal sense, it
is—in view of the elemental abundance of land
relative to labour and capital—as yet unable to offer
resistance to capital, to transform agriculture into a field
of action which, in contrast to non-agricultural industry,
offers specific resistance to the investment of
capital.

In the second type of
colonies—plantations—where commercial
speculations figure from the start and production is
intended for the world market, the capitalist mode of
production exists, although only in a formal sense, since
the slavery of Negroes precludes free wage-labour, which is
the basis of capitalist production. But the business
in which slaves are used is conducted by
capitalists. The method of production which
they introduce has not arisen out of slavery but is grafted
on to it. In this case the same person is capitalist
and landowner. And the elemental [profusion]
existence of the land confronting capital and labour does
not offer any resistance to capital investment, hence none
to the competition between capitals. Neither does a
class of farmers as distinct from landlords develop
here. So long as these conditions endure, nothing will
stand in the way of cost-price regulating market-value.

All these preconditions have nothing to do with the
preconditions in which an absolute rent exists: that
is, on the one hand, developed capitalist production, and on
the other, landed property, not only existing in the legal
sense but actually offering resistance and defending the
field of action against capital, only making way for it
under certain conditions.

In these circumstances an absolute rent will exist, even
if only IV or III or II or I are cultivated. Capital
can only win new ground in that solely existing class [of
land] by paying rent, that is, by selling the agricultural
product at its value. It is, moreover, only in
these circumstances that there can first be talk of a
comparison and a difference between the capital invested in
agriculture (i.e., in a natural element as such, in primary
production) and that invested in non-agricultural
industry.

But the next question is this:

If one starts out from I, then clearly II, III, IV, if
they only provide the additional supply admissible at the
old market-value, will sell at the market-value determined
by I, and therefore, apart from the absolute rent, they will
yield a differential rent in proportion to their relative
fertility. On the other hand, if IV is the
starting-point, then it appears that certain objections
| could be made.

For we saw that II [in tables B and C] draws the absolute
rent if the product is sold at its value of £ 1
11/13 or at £ 1 16
12/13s.

In Table D the cost-price of III, the next
class (in the descending line) is higher than the
value of IV, which yields a rent of £ 10.
Thus there cannot be any question of competition or
underselling here—even if III sold at
cost-price. If IV, however, no longer satisfies the
demand, if more than 92 1/2 tons are
required, then its price will rise. In the above case,
it would have to rise by 3
43/111s. per ton, before III could
enter the field as a competitor, even at its
cost-price. The question is, will it enter into
it in these circumstances? Let us put this case in
another way. For the price of IV to rise to £ 1
12s., the individual value of III, the demand would not have
to rise by 75 tons. This applies especially to the
dominant agricultural product, where an insufficiency
in supply will bring about a much greater rise in
price than corresponds to the arithmetical
deficiency in supply. But if IV had risen to £1
12s., then at this market-value, which is equal to III’s
individual value, the latter would pay the absolute rent and
IV a differential rent. If there is any additional
demand at all, III can sell at its individual value, since
it would then dominate the market-value and there would be
no reason at all for the landowner to forgo the
rent.

But say the market-price of IV only rose to £ 1 9
1/3s., the cost-price of
III. Or in order to make the example even more
striking: suppose the cost-price of III is only £ 1
5s., i.e., only 1 8/37s. higher than
the cost-price of IV. It must be higher because
its fertility is lower than that of IV, Can III be taken in
hand now and thus compete with IV, which sells above III’s
cost-price, namely, at £1 5
35/37 s.? Either there is an
additional demand or not. In the first case the
market-price of IV has risen above its value, above £
1 5 35/37s. And then, whatever
the circumstances, III would sell above its
cost-price, even if not to the full amount of its absolute
rent.

Or there is no additional demand. Here in
turn we have two possibilities. Competition from III
could only enter into it if the farmer of III were at the
same time its owner, if to him as a capitalist landed
property would not be an obstacle, would offer no
resistance, because he has control of it, not as capitalist
but as landowner. His competition would force IV to
sell below its hitherto prevailing price of £ 1 5
35/37 s, and even below the price of
£ 1 5s. And in this way III would be driven out
of the field. And IV would be capable of driving III
out every time. It would only have no reduce the price
to the level of its own costs of production, which are lower
than those of III. But if the market expanded as a
result of the reduction in price engendered by III,
what then? Either the market expands to such an extent
that IV can dispose of its 92 1/2 tons
as before, despite the newly-added 75, or it does not expand
to this degree, so that a part of the product of IV and III
would be surplus. In this case IV, since it dominates
the market, would continue to lower [the price] until the
capital in III is reduced to the appropriate size, that is
until only that amount of capital is invested in it as is
just sufficient for the entire product of IV to be
absorbed. But at £ 1 5s. the whole product would
be saleable and since III sold a part of the product at this
price, IV could not sell above that. This however
would be the only possible case: temporary over-production
not engendered by an additional demand, but leading to an
expansion of the market. And this can only be the case
if capitalist and landowner are identical in III—i.e.,
if it is assumed once again that landed property does not
exist as a power confronting capital, because the capitalist
himself is landowner and sacrifices the landowner to the
capitalist. But if landed property as such confronts
capital in III, then there is no reason at all why the
landowner should hand over his acres for cultivation without
drawing a rent from them, why he should hand over his land
before the price of IV has risen to a level which is at
least above the cost-price of III. If this rise
is only | small, then, in
any country under capitalist production, III will continue
to be withheld from capital as a field of action, unless
there is no other form in which it can yield a rent.
But it will never be put under cultivation before it yields
a rent, before the price of IV is above the
cost-price of III, i.e., before IV yields a differential
rent in addition to its old rent. With the further
growth of demand, the price of III would rise to its value,
since the cost-price of II is above the
individual value of III. II would be cultivated as
soon as the price of III had risen above £ 1,13
11/13s., and so yielded some rent for
II.

But it has been assumed in D that I yields no
rent. But this only because I has been assumed to be
already cultivated land which is being forced to sell
below its value, at its cost-price because of
the change in market-value brought about by the entry of
IV. It will only continue to be thus exploited, if the
owner is himself the farmer, and therefore in this
individual case landed property does not
confront capital, or if the farmer is a small capitalist
prepared to accept less than 10 per cent or a worker who
only wants to make his wage or a little more and hands over
his surplus-labour, which is equal to [£] 10 or
£ 9 or less, to the landowner instead of the
capitalist. Although in the two latter cases
fermage is paid, yet economically speaking, no rent,
and we are concerned with the latter. In the one case
the farmer is a mere labourer, in the other something
between labourer and capitalist.

Nothing could be more, absurd than the assertion that the
landowner cannot withdraw his acres from the market
just as easily as the capitalist can withdraw his capital
from a branch of production. The best proof of this is
the large amount of fertile land that is uncultivated in the
most developed countries of Europe, such as England, the
land which is taken out of agriculture and put to the
building of railways or houses or is reserved for this
purpose, or is transformed by the landlord into rifle-ranges
or hunting-grounds as in the highlands of Scotland
etc. The best proof of this is the vain struggle of
the English workers to lay their hands on the waste
land.

Nota bene: In all cases where the absolute rent, as in II
D, falls below its normal amount, because, as here, the
market-value is below the individual value of the class or,
as in II B, owing to competition from the better land, a
part of the capital must be withdrawn from the worse land or
where, as in I D, rent is completely absent, it is
presupposed:

1. that where rent is entirely absent, the
landowner and capitalist [are] one and the same
person; here therefore the resistance of landed property
against capital and the limitation of the field of action of
capital by landed property disappear but only in individual
cases and as an exception. The presupposition of
landed property is abolished as in the colonies, but only in
separate cases;

2. that the competition of the better
lands—or possibly the competition from the worse lands
(in the descending line)— leads to over-production and
forcibly expands the market, creates an additional demand by
forcing prices down. This however is the very case
which Ricardo does not foresee because he always argues on
the assumption that the supply is only sufficient to satisfy
the additional demand;

3. that II and I in B, C, D either do not pay the
full amount of the absolute rent or pay no absolute rent at
all, because they are forced by the competition from the
better lands to sell their product below its value,
Ricardo on the other hand presupposes that they sell their
product at its value and that the worst land
always determines the market-value, whereas in case I D,
which he regards as the normal case, just the opposite takes
place. Furthermore his argument is always based on the
assumption of a descending line of production.

If the average composition of the non-agricultural
capital is £80c+£ 20v, and the rate of
surplus-value is 50 per cent, and if the composition of the
agricultural capital is £ 90c+£ l0v, i.e.,
higher than that of industrial capital—which | is historically incorrect for
capitalist production— [then there is] no absolute
rent; if it is £ 80c+£ 20v, which has not so
far been the case, [there is] no absolute rent; if it
is lower, for instance £ 60c+£ 40v,
[there is an] absolute rent.

On the basis of the theory, the following possibilities
can arise, according to the relationship of the different
categories to the market—i.e., depending on the extent
to which one or another category dominates the market:

A. The last class pays absolute rent.
It determines the market-value because all classes only
provide the necessary supply at this market-value.

B. The last class determines the
market-value; it pays absolute rent, the full rate of rent,
but not the full previous amount because competition from
III and IV has forced it to withdraw part of the capital
from production.

C. The excess supply which classes I,
II, III, IV provide at the old market-value, forces
the latter to fall; this however, being regulated by the
higher classes, leads to the expansion of the market.
I pays only a part of the absolute rent, II pays only the
absolute rent.

D. The same domination of
market-value by the better classes or of the inferior
classes by oversupply destroys rent in I altogether and
reduces it to below its absolute amount in II; finally
in

E. The better classes oust I from the market
by bringing down the market-value below the cost-price [of
I]. II now regulates the market-value because at
this new market-value only the necessary supply [is]
forthcoming from all three classes. |

| Now back to
Ricardo.

It goes without saying that when dealing with the
composition of the agricultural capital the value or price
of the land does not enter into this. The latter is
nothing but the capitalist rent.

[a] This paragraph
is in English in the manuscript.—Ed.

[b] In the
manuscript:”First. The”.—Ed.

## [Chapter XIII] Ricardo’s Theory of Rent (Conclusion)

### [1. Ricardo’s Assumption of the Non-Existence of Landed Property. Transition to New Land Is Contingent on Its Situation and Fertility]

Back to Ricardo, Chapter II “On
Rent”:

He begins by presenting the “colonial
theory”, already known from Smith, and here it is
sufficient to state briefly the logical sequence of
ideas.

“On the first settling of a country, in
which there is an abundance of rich and fertile land,
a very small proportion of which is required to be
cultivated for the support of the actual population, or
indeed can be cultivated with the capital which the
population can command, there will be no rent; for no
one would pay for the use of land, when
there was an abundant quantity not yet appropriated,
and, therefore,” (because not
appropriated, which Ricardo entirely forgets later on),
“at the disposal of whosoever might choose to
cultivate it.” ([David Ricardo, On the Principles
of Political Economy, and Taxation, third edition,
London, 1821], p. 55.)

<Here the assumption therefore is: no landed
property. Although this description of the process is
approximately correct for the settlings of modern
peoples, it is, firstly, inapplicable to developed
capitalist production; and [secondly] equally false
if put forward as the historical course of
events in the old Europe.>

“On the common principles of supply
and demand, no rent could be paid for such land, for
the reason stated why nothing is given for the use of air
and water, or for any other of the gifts of nature
which exist in boundless quantity … no charge
is made for the use of these | natural aids, because they are
inexhaustible, and at every man’s disposal… If
all land had the same properties, if it were
unlimited in quantity, and uniform in quality,
no charge could be made for its use” (because it could
not be converted into private property at
all), “unless where it possessed peculiar
advantages of situation” (and, he should add, were
at the disposal of a proprietor). “It is only,
then, because land is not unlimited in
quantity and uniform in quality, and because in the
progress of population, land of an inferior quality,
or less advantageously situated, is called into
cultivation, that rent is ever paid for the use of
it. When in the progress of society, land of the
second degree of fertility is taken into cultivation,
rent immediately commences on that of the first
quality, and the amount of that rent will depend on
the difference in the quality of these two portions of
land” (l.c., pp. 56-57).

We shall examine this point more closely. The
logical sequence is this:

If land, rich and fertile land exists in elemental
abundance in practically unlimited quantity compared to the
actual population and capital—and Ricardo
assumes this on the “first settling of a
country” (Smith’s colonial theory)—and
if, furthermore, an “abundant quantity” of this
land is “not yet appropriated” and
therefore, because it is “not yet
appropriated”, is “at the disposal of
whosoever might choose to cultivate it” , in this
case, naturally, nothing is paid for the use of land, [there
is] no rent. If land were [available] “in
unlimited quantity”—not only relatively to
capital and population, but if it were in fact an
unlimited element (unlimited like air and water) —then
indeed its appropriation by one person could not exclude its
appropriation by another. No private (also no
“public” or state) property in land could
exist. In this case—if all land is of the
same quality—no rent could be paid for it at
all. At most, [rent would be paid] to the possessor of
land which “possessed peculiar advantages of
situation.

Thus, under the circumstances assumed by
Ricardo—namely, that land is “not
appropriated” and uncultivated land is
“therefore at the disposal of whosoever might
choose to cultivate it”— if rent is paid, then
this is only possible because “land is not unlimited
in quantity and uniform in quality”, in other words,
because different types of land exist and land of the same
type is “limited”. We say that, on
Ricardo’s assumption, only a differential rent can be
paid. But instead of confining it to this, he jumps at
once to the conclusion that—quite apart from his
assumption of the non-existence of landed
property—absolute rent is never paid for the use of
land, only differential rent.

The whole point therefore is: If land confronts capital
in elemental abundance, then capital operates in
agriculture in the same way as in every other branch
of industry. There is then no landed property,
no rent. At most, where one piece of land is more
fertile than another, there can be excess profits as in
industry. In this case these will consolidate
themselves as differential rent, because of their natural
basis in the different degrees of fertility of the soil.

If, on the other hand, land is 1. limited,
2. appropriated, and capital finds landed property as
a precondition—and this is the case where capitalist
production develops: where capital does not find this
precondition, as it does in the old Europe, it creates it
itself, as in the United States—thus land is from the
outset not an elementary field of action for capital.
Hence [there is absolute] rent, in addition to differential
rent. But in this case also the transitions from one
type of land to another—be it ascending: I, II, III,
IV or descending IV, III, II, I—work out differently
than they did under Ricardo’s assumption. For
the employment of capital meets with the resistance of
landed property both in category I and in II, III, IV; and
similarly, in the reverse process, when the transition is
from IV to III etc. In the transition from IV to III
etc., it is not sufficient for the price of IV to rise high
enough to enable the capital to be employed in III with an
average profit. The price must rise to such an extent
that rent can be paid on III. If the transition is
made from I to II etc., then it is self-evident that the
price which paid a rent for I, must not only pay this rent
for II, but a differential rent besides. By
postulating the non-existence of landed property,
Ricardo has not, of course, eliminated the law that arises
with the existence and from the existence
of landed property.

Having just shown how, on his assumption, a
differential rent can come into being, Ricardo
continues;

“When land of the third quality is
taken into cultivation, rent immediately commences on the
second, and it is regulated, as before, by the difference in
their productive powers. At the same time, the rent of
the first quality will rise, for that must always be above
the rent of the second, by the difference between the
produce which they yield with a given quantity of capital
and labour. With every step in the progress of
population, which shall oblige a country to have recourse to
land of a worse quality” (l.c., p. 57)

(which, however, by no means implies that every step
in the progress of population will oblige a country to have
recourse to land of worse quality),

“to enable it to raise its supply
| of food, rent, on all
the more fertile land, will rise” (l.c., p. 57).

This is all right.

Ricardo now passes on to [an] example. But, quite
apart from other points to be noted later, this example
presupposes the descending line. This, however,
is mere presupposition. In order to smuggle it
in, he says:

“On the first settling of a country,
in which there is an abundance of rich and fertile
land[a] …
not yet appropriated” (l.c., p. 55).

But the case would [be] the same, if, relatively to the
colonists, there was “an abundance of poor and sterile
land—not yet appropriated”. The
non-payment of rents does not depend on the richness
or fertility of the land, but on the fact that it is
unlimited, unappropriated and of uniform quality, whatever
might be that quality as regards the degree of its
fertility. Hence Ricardo himself goes on to formulate
his assumption thus :

“If all land had the
same properties, if it were unlimited in
quantity, and uniform in quality, no charge could
be made for its use” (l.c., p. 56).

He does not say and cannot say, if it “were rich
and fertile”, because this condition would have
absolutely nothing to do with the law. If,
instead of being rich and fertile, the land were poor and
sterile, then each colonist would have to cultivate a
greater proportion of the whole land, and thus, even where
the land is unappropriated, they would, with the growth of
population, more rapidly approach the point where the
practical abundance of land, its actual unlimitedness in
proportion to population and capital, would cease to
exist.

It is of course quite certain that the colonists will not
pick out the least fertile land, but will choose the most
fertile, i.e., the land that will produce most, with the
means of cultivation at their disposal. But this is
not the sole limiting factor in their choice. The
first deciding factor for them is the situation, the
situation near the sea, large rivers etc. The land in
West America etc. may be as fertile as any; but the settlers
of course established themselves in New England,
Pennsylvania, North Carolina, Virginia etc., in short, on
the east coast of the Atlantic. If they selected the
most fertile land, then they only selected the most
fertile land in this region. This did not prevent
them from cultivating more fertile land in the West,
at a later stage, as soon as growth of population, formation
of capital, development of means of communication, building
of towns, made the more fertile land in this more
distant region accessible to them. They do not
look for the most fertile region, but for the most
favourably situated region, and within this, of
course—given equal conditions so far as the
situation is concerned—they look for the most
fertile land. But this certainly does not prove
that they progress from the more fertile region to the less
fertile region, only that within the same
region—provided the situation is the same—the
more fertile land is naturally cultivated before the
unfertile.

Ricardo, however, having rightly amended
“… abundance of rich and fertile
land…“ to read land of the “same
properties […] unlimited in quantity […]
uniform in quality”, comes to his example and from
there jumps back into the first false assumption:

“The most fertile, and most
favourably situated, land will be first
cultivated” (l.c., p. 60).

He senses the weakness and spuriousness [in this] and
therefore adds the new condition to the “most
fertile land”: “and the most favourably
situated”, which was missing at the outset.
“The most fertile land within the most
favourable situation” is how it should obviously read,
and surely this absurdity cannot be carried so far [as to
say] that the region of the country that happens to be the
most favourably situated for the newcomers, since it enables
them to keep in contact with the mother country and the old
folks at home and the outside world, is “the most
fertile region” in the whole of the land, which the
colonists have not yet explored and are as yet unable to
explore.

The assumption of the descending line, the transition
from the more fertile to the less fertile region, is thus
surreptitiously brought in. All that can be said is
this: In the region that is first cultivated, because it is
the most favourably situated, no rent is paid until,
within this region, there is a transition from the
more fertile to the less fertile land. Now if,
however, there is a transition to a second, more
fertile region than the first, then, according to the
assumption, this is worse situated. Hence it is
possible that the greater fertility of the soil is more than
counterbalanced by the greater disadvantage of the
situation, and in this case the land of region I will
continue to pay rent. But the “situation”
is a circumstance which changes historically, according to
the economic development, and must continually
improve with the installation of means of
communication, the building of towns, etc., and the growth
of the population. Hence it is clear that by and by,
the product produced in region II will be brought on to the
market at a price which will lower the rent in region I
again (for the same product), and that in time it will
emerge as the more fertile soil in the measure in which the
disadvantage of situation disappears.

| It is therefore
clear,

that where Ricardo himself states the condition for the
formation of differential rent correctly and in general
form: “…all land had[b] the same properties …
unlimited in quantity … uniform in
quality …“, the circumstance of the
transition from more fertile to less fertile land is
not included,

that this [transition] is also historically incorrect for
the settlement in the United States which, in common with
Adam Smith, he has in mind; therefore Carey’s objections,
which were justified on this point,

that Ricardo himself reverses the problem again, by his
addendum on “situation”: “The most
fertile, and most favourably situated, land will be
first cultivated…”,

that Ricardo proves his arbitrary
presupposition by an example in which that which is
to be proved, is postulated, namely, the transition
from the best to increasingly worse land,

that, finally <it is true, already with an eye to the
explanation of the tendency of the general rate of profit to
fall> he presupposes this, because he could not otherwise
account for differential rent, although the latter in
no way depends on whether there is a transition from I to
II, III, IV or from IV to III, II, I.

### [2. The Ricardian Assertion that Rent Cannot Possibly Influence the Price of Corn. Absolute Rent Causes the Prices of Agricultural Products to Rise]

In the example, three sorts of land are postulated,
Nos. 1, 2, 3, which, with an equal capital investment, yield
“a net produce” of 100, 90, 80 quarters of
corn. No. 1 is the first to be cultivated

“in a new country, where there is an
abundance of fertile land compared with the population, and
where therefore it is only necessary to cultivate
No. 1” (l.c., p. 57).

In this case the “whole net produce” belongs
to the “cultivator” and “will be the
profits of the stock which he advances” (l.c.,
p. 57). That this “net produce” is
immediately regarded as profit of stock, although no
capitalist production has been postulated in this case
<we are not speaking of plantations> is also
unsatisfactory here. But it may be that the colonist
coming from “the old country”, looks at it in
this way himself. If the population grows only to such
an extent that No. 2 has to be cultivated, then No. 1 bears
a rent of 10 quarters. It is of course assumed here
that No. 2 and No. 3 are “unappropriated”
and that their quantity has remained practically
“unlimited” in proportion to population and
capital. Otherwise there could be a different
turn to events. Under this assumption, therefore,
No. 1 will bear a rent of 10 quarters:

“For either there must be two
rates of profit on agricultural capital, or ten
quarters, or the value of ten quarters, must be
withdrawn from the produce of No. 1, for some other
purpose. Whether the proprietor of the land, or
any other person, cultivated No. 1, these ten quarters would
equally constitute rent; for the cultivator of No. 2 would
get the same result with his capital, whether he cultivated
No. 1, paying ten quarters for rent, or continued to
cultivate No. 2, paying no rent” (l.c., p. 58).

In fact, there would be two rates of profit in
agricultural capital, that is, No. 1 supplied an excess
profit of 10 quarters (which, in this case, can
consolidate itself as rent). But two pages later,
Ricardo himself says that not only two but many very
different rates of profit on capital of the same description
within the same sphere of production, hence also on
agricultural capital, are not only possible but
inevitable:

“The most fertile, and most favorably
situated, land will be first cultivated, and the
exchangeable value of its produce will be adjusted in the
same manner as the exchangeable value of all other
commodities, by the total quantity of labour necessary in
various forms, from first to last, to produce it, and bring
it to market. When land of an inferior quality is
taken into cultivation, the exchangeable value of raw
produce will rise, because more labour is required to
produce it.

“The exchangeable value of
all commodities, whether they he manufactured, or the
produce of the mines, or the produce of land, is always
regulated, not by the less quantity of labour that
will suffice for their production under circumstances highly
favorable, and exclusively enjoyed by those who have
peculiar facilities of production; but by the greater
quantity of labour necessarily bestowed on their
production by those who have no such facilities;
by those who continue to produce them under the most
unfavorable circumstances; meaning—by the most
unfavorable circumstances, the most unfavorable under which
the quantity of produce required,” <at the
old price> “renders it necessary to carry on the
production” (l.c., pp. 60-61).

Thus in each particular industry [there are] not
only two, but many rates of profit, that is to say,
deviations from the general rate of profit.

At this point it is not necessary to go into the further
details of the example (pp. 58-59), which is concerned with
the effect of employing different amounts of capital on the
same land. Only these two propositions [to be
noted]:

1. “Rent is always the difference between the
produce obtained by the employment of two | equal quantities of capital
and labour” (l.c., p. 59).

In other words, there is only a differential rent
(according to the assumption that there is no landed
property). For:

2. “there cannot be two rates of
profit” (l.c., p. 59).

“It is true, that on the best land,
the same produce would still be obtained with the same
labour as before, but its value would be enhanced in
consequence of the diminished returns obtained by those who
employed fresh labour and stock on the less fertile
land. Notwithstanding, then, that the advantages of
fertile over inferior lands are in no case lost, but only
transferred from the cultivator, or consumer, to the
landlord, yet, since more labour is required on the inferior
lands, and since it is from such land o n l y
that we are enabled to furnish ourselves with the
additional supply of raw produce, the comparative
value of that produce will continue permanently above
its former level, and make it exchange for more hats, cloth,
shoes, etc. […], in the production of which no such
additional quantity of labour is required.

“The reason then, why raw
produce rises in comparative value, is because more
labour is employed in the production of the last portion
obtained, and not because a rent is paid to the
landlord. The value of corn is regulated by
the quantity of labour bestowed on its production on that
quality of land, or with that portion of capital, which pays
no rent. Corn is not high because a rent is p a i
d, but a rent is paid because corn is high; and
it has been justly observed, that no reduction
would take place in the price of corn, although landlords
should forego the whole of their rent. Such a
measure would only enable some farmers to live like
gentlemen, but would not diminish the quantity of labour
necessary to raise raw produce on the least productive land
in cultivation” (l.c., pp. 62-63).

My earlier explanations render it unnecessary to expand
here on the erroneousness of the proposition that “the
value of corn is regulated by the quantity of labour
bestowed on its production on that quality of land …
which pays no rent” (l.c., p. 63). I have shown
that whether the last type of land pays rent, [or] pays no
rent, [whether it] pays the whole of the absolute rent,
[only a] part of it, or it pays besides the absolute rent a
differential rent (if the line is ascending), partly depends
on the direction of the line, whether it is ascending or
descending, and at all events, it depends on the relative
composition of agricultural capital as compared with the
composition of nonagricultural capital and, if as a result
of the difference in this composition absolute rent is
presupposed, the above cases depend on the state of the
market. But the Ricardian case in particular can only
occur under two circumstances (although even then
fermage can yet be paid, though no rent); either when
landed property does not exist, in law or in fact, or when
the best land provides an additional supply which can only
find its place within the market if there is a fall in
market-value.

But there is more besides which is wrong or one-sided in
the above passage. The comparative value—which
here means nothing but market-value—of raw produce can
rise for reasons other than the above. [Firstly] if,
up to now, it was sold below its value, perhaps below its
cost-price; this is always the case in a certain state of
society, where the production of raw produce is as yet
largely directed to the subsistence of the cultivator (also
in the Middle Ages, when the product of the town secured a
monopoly price); secondly, it can also happen when the raw
produce—in contrast to the other commodities
which are sold at their cost-price—is not yet sold at
its value.

Finally, it is correct to say that it makes no difference
to the price of corn if the landlord forgoes the
differential rent and the farmer pockets it. But this
does not apply to absolute rent. It is wrong to say
here that landed property does not enhance the price
of the raw produce. On the contrary the price goes up
because the intervention of landed property causes the raw
produce to be sold at its value which exceeds its
cost-price. Supposing, as above, that the
average non-agricultural capital consists of 80c+20v and the
surplus-value is 50 per cent, then the rate of profit is 10
[per cent] and the value of the produce is 110, The
agricultural | capital on
the other hand consists of 60c+40v, the value [of the
produce] is 120. The raw produce is sold at this
value. If landed property did not exist
legally—or in practice, because of the relative
abundance of land as in the colonies—then it would be
sold at 115. For the total profit of the first and the
second capital (i.e., on the 200) equals 30, hence average
profit equals 15. The non-agricultural produce would
be sold at 115 instead of 110; the agricultural produce at
115 instead of 120. The relative value of the
agricultural produce compared with the non-agricultural
produce would thus fall by one-twelfth; the average
profit for both capitals—or the total capital,
agricultural as well as industrial—would, however,
rise by 50 per cent, from 10 to 15. |

| Of his own conception
of rent, Ricardo says:

“I always consider it as the result
of a partial monopoly, never really regulating
price” [l.c., pp. 332-33]

(that is, never acting as a monopoly, hence also
never the result of monopoly. For him the only
result of monopoly could be that the rent is pocketed by the
owner of the better types of land rather than by the
farmer),

“…but rather as the effect of
it. If all rent were relinquished by landlords,
I am of opinion, that the commodities produced on the land
would be no cheaper, because there is always a portion of
the same commodities produced on land, for which no
rent is or can be paid, as the surplus produce
is only sufficient to pay the profits of stock” (l.c.,
p. 333).

Here surplus produce is equal to the excess over the
product absorbed by the wages. Assuming that certain
land never pays rent Ricardo’s assertion is only correct if
this land, or rather its product, regulates the
market-value. If, on the other hand, its product pays
no rent because the market-value is regulated by the more
fertile land, then this fact proves nothing.

It would, indeed, benefit the farmers if the differential
rent were “relinquished by landlords”. The
relinquishment of absolute rent, on the other hand, would
reduce the price of agricultural products and increase that
of industrial products to the extent that the average profit
grew by this process. |

| “The rise of
rent is always the effect of the increasing wealth of
the country, and of the difficulty of providing food for
its augmented population” (l.c., pp. 65-66).

The latter is wrong.

“Wealth increases most rapidly in
those countries where the disposable land is most fertile,
where importation is least restricted, and where through
agricultural improvements, productions can be multiplied
without any increase in the proportional quantity of labour,
and where consequently the progress of rent is
slow” (l.c., pp. 66-67).

The absolute amount of rent can also grow when the
rate of rent remains the same and only the capital
invested in agriculture is growing with the growth of
population; it can grow when no rent is paid on I and only a
part of the absolute rent on II, but the differential rent
has risen considerably as a result of their relative
fertility etc. (See the table.)

### [3. Smith’s and Ricardo’s Conception of the “Natural Price” of the Agricultural Product]

“If the high price of corn were the
effect, and not the cause of rent, price would be
proportionally influenced as rents were high or low, and
rent would be a component part of price. But
that corn which is produced by the greatest quantity of
labour is the regulator of the price of corn; and rent does
not and cannot enter in the least degree as a component
part of its price… Raw material enters into
the composition of most commodities, but the v a l u
e of that raw material, as well as corn, is regulated by
the productiveness of the portion of capital last
employed on the land, and paying no rent; and
therefore rent is not a component part of the p r
i c e of commodities” (l.c., p. 67).

There is much confusion here, resulting from the jumbling
up of “natural price” (for that is the
price under discussion here) and value, Ricardo has
adopted this confusion from Smith. In the case of the
latter it is relatively correct, because, and in so far as,
Smith departs from his own correct explanation of
value. Neither rent nor profit nor wages form a
component part of the value of a commodity. On the
contrary, the value of a commodity being given, the
different parts into which that value may be divided,
belong either to the category of accumulated labour
(constant capital) or wages or profit or rent. On the
other hand, when referring to the natural price or
cost-price, Smith can speak of its component
parts as given preconditions. But by confusing
natural price with value, he carries this over to the value
of the commodity.

Apart from the fact that the raw material and machinery
(in short the constant capital) enter into production with a
fixed price, which to the capitalist in each
particular sphere of production appears as determined from
outside, there are two things the capitalist must do when
calculating the price of his commodity: he has to add the
price of the wages, and this also appears to him as
given (within certain limits). The natural
price of the commodity is not the market-price
but the average market-price over a long period, or the
central point towards which the market-price
gravitates. In this context therefore the price of
wages is on the whole determined by the value of
labour-power. But the rate of profit—the
natural rate of profit—is determined by the
value of the aggregate of commodities created by the
aggregate of capitals employed in non-agricultural
industry. For it is the excess of this value over the
value of the constant capital contained in the commodity
plus the value of wages. The total surplus-value which
the total capital creates, forms the absolute amount of
profit. The ratio of this absolute amount to the whole
capital advanced determines the general rate of
profit. Thus this general rate of profit too,
appears—not only to the individual capitalist, but to
the capital in each particular sphere of production—to
be determined externally. The capitalist must add the
general profit, say of 10 per cent, | to the price of the raw
material, etc., contained in the product, and the natural
price of wages thus— as it must appear to him by way
of addition of component parts, or by composition—to
form the natural price of a given commodity. Whether
the natural price is paid, or more, or less, depends on the
level of the market-price prevailing at the time. Only
wages and profit enter into cost-price as
distinguished from value; rent enters only in so far
as it is already contained in the price of the expended raw
material, machinery, etc. That is, it does not enter
as rent for the capitalist, to whom, in any case, the price
of raw produce, machinery, in short of the constant capital,
appears as a predetermined total.

Rent does not enter into cost-price as a component
part. If, in special circumstances, the agricultural
product is sold at its cost-price, then no rent
exists. Economically landed property does
not then exist for capital, that is, when the product of the
type of land that sells at the cost-price, regulates the
market-value of the product of its sphere. (The
position in I, Table D is different.)

Or (absolute) rent exists. In this case the
agricultural product is sold above its
cost-price. It is sold at its value,
which is above its cost-price. Rent, however,
enters into the market-value of the product, or,
rather, forms a part of the market-value. But to the
farmer rent appears as predetermined, in the same way as
profit does to the industrialist. It is determined by
the excess of the value of the agricultural product
over its cost-price. The farmer, however,
calculates just like the capitalist: First the outlay,
secondly wages, thirdly the average profit, finally the
rent, which likewise appears to him as fixed. This is
for him the natural price of wheat, for
instance. Whether he obtains it, depends, in turn, on
the prevailing state of the market.

If the distinction between cost-price and
value is properly maintained, then rent can
never enter into cost-price as a constituent
part, and one can talk of constituent parts only in
relation to the cost-price as distinguished from the value
of the commodity. (Like excess profit, differential
rent never enters into cost-price, because it is
nothing but the excess of the market cost-price over
individual cost-price, or the excess of the market-value
over individual value.)

Accordingly, Ricardo is in substance right when, in
opposition to Adam Smith, he declares that rent never
enters into cost-price. But again he is wrong in that
he proves this, not by differentiating between cost-price
and value, but by identifying the two, as Adam Smith did,
for neither rent nor profit, nor wages form constituent
parts of value, although value is dissolvable into wages
and profits and rent, and, furthermore, the three parts are
of equal importance, if all three exist.
Ricardo reasons thus: Rent forms no constituent part of the
natural price of agricultural produce, because the
price of the product of the worst land, which is equal to
the cost-price of this product, and to the value
of this product, determines the market-value of
agricultural produce. Thus rent forms no [constituent]
part of the value because it forms no [constituent] part of
the natural price and this latter is equal to
value. This however is wrong. The price
of the product grown on the worst land equals its
cost-price, either because this product is sold
below its value—therefore not as Ricardo says,
because it is sold at its value—or because the
agricultural product belongs to that type, to that class, of
commodities in which, by way of exception, value and
cost-price are identical. This is the case when
the surplus-value which is made in a particular sphere of
production on a given capital, of say £ 100, happens
to coincide with the surplus-value which on the average
falls to the same relative portion of the total
capital (say £ 100). This then is Ricardo’s
confusion.

As to Adam Smith: in so far as he identifies
cost-price with value, he is justified, on the basis of this
false assumption, in saying that rent, as well as profit and
wages, form “constituent parts of the natural
price”. On the contrary it is rather
inconsistent that later in his further exposition he asserts
that rent does not enter into the natural price in the same
way as wages and profits. He commits this
inconsistency because observation and correct analysis
compel him nevertheless to recognise that there is a
difference in the determination of the natural price of
non-agricultural produce and the market-value of
agricultural produce. But more about this when
discussing Smith’s theory of rent.

### [4. Ricardo’s Views on Improvements in Agriculture. His Failure to Understand the Economic Consequences of Changes in the Organic Composition of Agricultural Capital]

| “We have seen,
that with every portion of additional capital which it
becomes necessary to employ on the land with a less
productive return, rent would rise.”

(But not every portion of additional capital yields a
less productive return.)

“It follows from the same principles,
that any circumstances in the society which should make it
unnecessary to employ the same amount of capital on the
land, and which should therefore make the portion last
employed more productive, would lower rent” (l.c.,
p. 68).

That is [lower] absolute rent, not necessarily
differential rent. (See Table B.)

Such circumstances might be the “reduction in the
capital of a country” followed by a reduction in the
population. But also a higher development of the
productive powers of agricultural labour.

“The same effects may however be
produced, when the wealth and population of a country are
increased, if that increase is accompanied by such marked
improvements in agriculture, as shall have the same effect
of diminishing the necessity of cultivating the poorer
lands, or of expending the same amount of capital on the
cultivation of the more fertile portions” (l.c.,
pp. 68-69).

(Oddly enough, Ricardo forgets here: improvements as
shall have the effect of improving the quality of poorer
lands and converting these into richer ones, an aspect
stressed by Anderson.)

The following proposition of Ricardo’s is entirely
wrong:

“With the same population, and no
more, there can be no demand for any additional quantity of
corn” (l.c., p. 69).

Quite apart from the fact that, with a fall in the price
of corn, an additional demand for other raw produce, green
vegetables, meat, etc., will spring up and that schnaps,
etc., can be made from corn, Ricardo assumes here that the
entire population consumes as much corn as it likes, This is
wrong.

{“Our enormous increase of consumption in 1848, 49,
50, shows that we were previously underfed, and that
prices were forced up by the deficiency of supply.”
(F. W. Newman, Lectures on Political Economy, London,
1851, p. 158.)

The same Newman says:

“The Ricardo argument,” that
rent cannot enhance price, “turns on the assumption
that the power of demanding rent can in no case of real life
diminish supply. But why not? There are
very considerable tracts which would immediately have been
cultivated if no rent could have been demanded for them, but
which were artificially kept vacant, either because
landlords could let them advantageously as shooting ground,
or […] prefer the […] romantic wilderness to
the[c] petty and
nominal rent which alone they could get by allowing them to
be cultivated.” (l.c., p. 159.) }

Indeed, [it is] in any case wrong to say that if he
withdraws the land from the production of corn, he may not
get a rent by converting it into pasture or building grounds
or, as in some counties in the highlands of Scotland, into
artificial woods for hunting purposes.

Ricardo distinguishes two kinds of improvements in
agriculture. The one type

“[those which] … increase the
productive powers of the land … [are] such
as the more skilful rotation of crops, or the better choice
of manure. These improvements absolutely enable us
to obtain the same produce from a smaller quantity of
land.” (David Ricardo, On the Principles of
Political Economy, and Taxation, third edition, London,
1821, p. 70.)

In this case, according to Ricardo, the rent must
fall.

“If, for example, the successive
portions of capital yielded 100, 90, 80, 70; whilst I
employed these four portions, my rent would be 60, or the
difference between

70 and 100 = 30
whilst the produce would be [340]
100

70 and 90 = 20
90

70 and 80 = 10
80

70

60
340

and while I employed these portions, the rent would
remain the same, although the produce of each should
have an equal augmentation.”

(If it had an unequal augmentation, it would be
possible for the rent to rise despite the increased
fertility.)

“If, instead of 100, 90, 80, 70, the produce should be increased
to 125, 115, 105, 95, the rent would still be 60, or the difference between

| 95 and 125 = 30

whilst the produce would be increased to 440

125

95 and 115 = 20

115

95 and 105 = 10

105

95

60

440

“But with such an increase of
produce, without an increase of demand, there could
be no motive for employing so much capital on the land; one
portion would be withdrawn, and consequently the last
portion of capital would yield 105 instead of 95, and rent
would fall to 30, or the difference between

105 and 125 = 20

whilst the produce will be still adequate to the wants
of the population, for it would be 345 quarters …

125

105 and 115 = 10

115

105

30

345”

(l.c., pp. 71-72).

Apart from demand being able to rise without a growth in
population when the price falls (Ricardo himself assumes
that it has risen by 5 quarters), there is a constant going
over to soils of decreasing fertility, because the
population grows every year, i.e., the part of the
population that consumes corn, eats bread, and this part
grows more rapidly than the population [as a whole], because
bread is the chief means of subsistence of the
majority. It is thus not necessary to assume that the
demand does not grow with the productivity of capital, and
that consequently the rent falls. And the rent can
rise, if the difference in the degree of fertility has been
unevenly affected by the improvement.

Otherwise it is certain (Tables B and E), that the
increase in fertility—while demand remains
constant—can not only throw the worst land out of the
market but can even force a part of the capital on better
land (Table B) to withdraw from the production of
corn. In this case the corn rent falls, if the
augmentation of the produce is equal on the different types
of land.

Now Ricardo passes on to the second aspect of
agricultural improvements.

“But there are improvements which may
lower the relative value of produce without lowering the
corn rent, though they will lower the money rent of
land. Such improvements do not increase the
productive powers of the land; but they enable us to obtain
its produce with less labour. They are rather
directed to the formation of the capital applied to the
land, than to the cultivation of the land
itself. Improvements in agricultural implements,
such as the plough and the thrashing machine, economy in the
use of horses employed in husbandry, and a better knowledge
of the veterinary art, are of this nature. Less
capital, which is the same thing as less labour,
will be employed on the land; but to obtain the same
produce, less land cannot be cultivated. Whether
improvements of this kind, however, affect corn rent,
must depend on the question, whether the difference between
the produce obtained by the employment of different portions
of capital be increased, stationary, or diminished”
(l.c., p. 73).

<Ricardo should also have adhered to this when dealing
with the natural fertility of the soils.
Whether the transition to these reduces the differential
rent, leaves it stationary, or increases it, depends on
whether the difference in the produce of the capital
employed on these different more fertile soils, be
increased, stationary, or diminished.>

“If four portions of capital, 50, 60,
70, 80, be employed on the land, giving each the same
results, and any improvement in the formation of such
capital should enable me to withdraw 5 from each, so that
they should be 45, 55, 65 and 75, no alteration would take
place in the corn rent; but if the improvements were such as
to enable me to make the whole saving on that portion of
capital, which is least productively employed, corn rent
would immediately fall, because the difference between the
capital most productive, and the capital least productive,
| would be diminished; and
it is this difference which constitutes rent”
(l.c., pp. 73-74).

This is correct for differential rent, which alone
exists for Ricardo.

On the other hand, Ricardo does not touch upon the real
question at all. For the solution of this question it
does not matter whether the value of the individual quarter
falls or whether the same quantity of land, the same
types of land as previously, needs to be cultivated, but
whether as a result of the reduction in the price of
constant capital—which, according to the
assumption, costs less labour—the quantity of
immediate labour employed in agriculture is reduced,
increased or unaltered. In short, whether
or not the capital undergoes an organic change.

Let us take our example from Table A (page 574,
notebook XI) and let us substitute quarters of corn for
tons.

It is assumed here that the composition of the
non-agricultural capital is £ 80c+£ 20v, that of
the agricultural capital £ 60c+£40v, the rate of
surplus-value in both cases being 50 per cent. Hence
the rent on the agricultural capital, or the excess of its
value over its cost-price, is £ 10. Thus we have
the following:

Class

Capital £

Qrs. of corn

Total value £

Market-value per qr. £

Individual value per qr.

I

100

65

120

2

£2=40s.

II

100

65

130

2

£111/13 = £1 1612/13s.

III

100

75

150

2

£13/5 = £ 1 12s.

Total

300

200

400

Differential value per qr.

Cost-price per qr.

Absolute rent £

Differential rent £

I

0

£15/6 = £1 162/3s.

10

5

II

£2/13 = 31/13s.

£19/13 = £13 11/13s.

10

10

III

£2/5 = 8s.

£17/15 = £1 91/3s.

10

20

30

35

Absolute in per qr.

Differential rent in qr.

Rental £

Rental in qrs.

I

5

0

10

5

II

5

5

20

10

III

5

15

40

20

15

20

70

35

In order to examine the problem in its pure form, one
must assume that the magnitude of the capital employed in
I, II, III is in all three classes affected
equally by the reduction in the price of constant
capital (100). For the uneven effect only
concerns differential rent, and has nothing to do with the
matter in hand. Supposing, therefore, that as a result
of improvements, the same amount of capital, which
previously cost £ 100, now only costs 90, it would
thus be reduced by one-tenth, or 10 per cent. The
question is then how the improvements affect the composition
of agricultural capital.

If the proportion of capital used as wages [to constant
capital] remains the same, then if [£] 100 consists of
£ 60c+£40v, £ 90 consists of £
54c+£ 36v, and in this case the value of the 60
quarters on land I is £ 108. But if the
reduction in price were such that the same constant
capital which previously cost £ 60, now only cost
£ 54, but that v (or the capital laid out in
wages) now only cost £ 32 2/5
instead of 36 (had also fallen by
1/10) , then £ 86
2/5 would be laid out instead of
£ 100. The composition of this capital would be
54c+32 2/5v. And reckoned on
£ 100, the composition would be £ 62
1/2c+£ 37
1/2v. Under these
circumstances, the value of the 60 quarters on I would be
equal to £ 102 3/5.
Finally, let us assume that although the value of the
constant capital decreases, the capital laid out in wages
remains the same absolutely, it therefore grows in
proportion to the constant capital; so that the
capital of £ 90 which has been laid out consists of
50c+40v, the composition of [a capital of] 100 would be
55 5/9c+44
4/9v.

Now let us see what happens to corn and money rent in
these three cases. In case B the proportion of
c to v remains the same although the value of
both decreases. In C the | value of c decreases, but
proportionately, that of v decreases even more.
In D, only the value of c decreases, not that of
v.

First let us reproduce the original table contained on
the previous page [and then let us compare it with the
new tables B, C and D, representing the
cases just described illustrating changes in value of the
organic component parts of the agricultural capital][d]

| From the accompanying
table it is evident that :

Originally in A the ratio is £
60c+£ 40v; the capital invested m each class is
100. The rent in money amounts to £ 70, in corn
to 35 quarters.

In B the constant capital becomes cheaper so that
only £ 90 [are] invested in each class, the variable
capital however becomes cheaper in the same proportion, so
that the ratio remains the same. Here the
money rent falls, the corn rent remains the same;
[the] absolute rent is also the same.
Money rent decreases because the capital invested
decreases. Corn rent remains the same, because less
money [produces relatively] more corn the ratio remaining
the same.

In C cheaper constant capital; but [the value of]
v decreases even more, so that the constant capital becomes
relatively dearer. Absolute rent falls.
Corn rent falls and money rent falls. Money rent,
because capital in general has decreased significantly, and
corn rent, because absolute rent has fallen while the
differences (between the various categories] have remained
the same, therefore all of them fall equally.

In D, however, the case is completely the
reverse. Only the constant capital falls; the variable
capital remains the same. This was Ricardo’s
assumption. In this case, because of the fall in
capital, the money rent falls, though the fall is quite
insignificant, in absolute figures it is only [£]
1/3, but in proportion to the capital
laid out, it rises considerably. The corn rent, on the
other hand, grows absolutely. Why? Because the
absolute rent has risen from 10 to 12
2/9 per cent, because v has grown in
proportion to c. Hence:

Capital

Absolute rent per cent

Absolute rent £

Differential rent £

Absolute rent qrs.

Differential rent qrs.

Rental £

Rental qrs.

A) 60c+40v

10

30

40

15

20

70

35

B) 54c+36v (60c+40v)

10

27

36

15

20

63

35

C) 54c + 32 2/5v (62
1/2c+37
1/2v)

8 3/4

22 17/25

34 1/5

13 5/19

20

56 22/25

33 5/19

D) 50c+40v

(55 5/9c+44
4/9v)

12 2/9

33

36 2/3

18

20

69 2/3

38

Ricardo continues:

“Whatever diminishes the
inequality in the produce obtained from successive
portions of capital employed on the same or on new land,
tends to lower rent; and […] whatever increases
that inequality, necessarily produces an opposite
effect, and tends to raise it” (l.c., p. 74).

The inequality can be increased, while capital is
withdrawn and while fertility increases, or even while the
less fertile land is thrown out of the market.

{Landlord and capitalist. In a leader of 15th July,
1862, the Morning Star [examines] whose duty it is
(voluntarily or compulsorily) to support the distressed (as
a result of the cotton famine and the civil war in America)
workmen in the cotton manufacture districts of Lancashire,
etc. It says:

“These people have a legal right to
maintenance out of the property they have mostly created
by their industry… It is said that the men
who have made fortunes by the cotton industry are
those upon whom it is especially incumbent to come forward
with a generous relief. No doubt it is so … the
mercantile and manufacturing sections […] have done
so… But are these the only class which has made
money by the cotton manufacture? Assuredly not.
The landed proprietors of Lancashire and North Cheshire have
enormously participated in the wealth thus produced.
And it is the peculiar advantage of these proprietors to
have participated in the wealth without lending a hand or a
thought to the industry that […] created
it… The mill-owner has given his capital, his
skill, and his unwinking vigilance to the | creation of this great
industry, now staggering under so heavy a blow; the
mill-hand has given his skill, his time, and his bodily
labour; but what have the landed proprietors of Lancashire
given? Nothing at all—literally nothing; and yet
they have made from it more substantial gains than either of
the other classes … it is certain that the increase
of the yearly income of these great landlords, attributable
to this single cause, is something enormous, probably not
less than threefold.”

The capitalist is the direct exploiter of the workers,
not only the direct appropriator but the direct creator of
surplus-labour. But since (for the industrial
capitalist) this can only take place through and in the
process of production, he is himself a functionary of this
production, its director. The landlord, on the other
hand, has a claim—through landed property (to absolute
rent) and because of the physical differences of the various
types of land (differential rent)-which enables him to
pocket a part of this surplus-labour or surplus-value, to
whose direction and creation he contributes nothing.
Where there is a conflict, therefore, the capitalist regards
him as a mere super-fetation, a Sybarite excrescence, a
parasite on capitalist production, the louse that sits upon
him.}

## Chapter III “On the Rent of Mines” [David Ricardo, On the Principles of Political Economy, and Taxation, third edition, London, 1821, p. 76].

[Class]

Capital £

Qrs.

Total value TV £

Market value MV per qr.

[Individual value] IV per qr.

[Differential value] DV per qr.

Cost-price per qr.

[Absolute rent] AR qrs.

[Differential rent] DR £

[Absolute rent] AR £

[Differential rent] DR qrs.

Rental £

Rental qrs.

[Composition of capital and rate of absolute value]

A

I

100

60

120

£2[=40s.]

£2[=40s.]

0

£15/6 = £1 162/3s.

10

0

5

0

10

0

60c+40v for [a non-industrial capital of £100]

II

100

65

130

£2[=40s.]

£111/13 = £1 1612/13s.

£2/13 = 31/13s.

£19/13 = £1 1311/13s.

10

10

5

5

20

10

80c+20v for an industrial capital of [£100]

III

100

75

150

£2[=40s.]

£13/5 = £1 12s.

£2/5=8s.

£17/15 = £1 91/3s.

10

30

5

15

40

20

Absolute rent 10 percent

Total

300

200

400

30

40

15

20

15

35

20

B

I

90

60

108

£14/5 = £ 1 16s.

£14/5 = £ 1 16s.

0

£139/60 = £ 13s.

9

0

5

0

9

5

54c+36v for £90

II

90

65

117

£14/5 = £ 1 16s.

£143/65 =£ 1 13 3/13s.

[£9/65=] 210/13s.

£1 34/65 = £1 106/13s.

9

9

5

5

18

10

60c+40v for £100

III

90

75

135

£14/5 = £1 16s.

£133/75 = £1 84/5s.

[£9/25=] 71/5s.

£124/75 = £1 62/5s.

9

27

5

15

36

20

Absolute rent 10 percent

Total

270

200

360

27

36

15

20

63

35

C

I

86 2/5

60

1023/5

[£171/100 = £1 14/5s.]

[£171/100] = £1 141/5s.

0

[£1 73/125=] £1 1117/25s.

7 14/25

0

48/19

0

714/25

48/19

54c+322/5v for £862/5

II

86 2/5

65

1113/20

[£171/100= £1 141/5s.]

[£1188/325 = £1 1137/65s.]

[£171/1300 = 241/65s.]

[£1751/1625 = £1 979/325s.

714/25

811/20

48/19

[1611/100]

[98/19]

621/2c+371/2v for £100

III

86 2/5

75

1281/4

[£171/100= £1 141/5s.]

[£146/125 = £1 79/25s.]

[£171/500 = 621/25s.]

[£1167/625 = £1 543/125s.

714/25

2513/20

48/19

[3321/100]

[198/19]

[Capital] £100=[value of the product] £1183/4. Hence absolute rent 83/4 per cent

Total

2591/5

200

342

22 17/25

34 1/5

13 5/19

20

5622/25

335/19

D

I

90

60

110

£15/6 = [£1 162/3s.]

£15/6 = [£1 162/3s.]

0

[£113/20=] £1 13s.

11

0

6

0

11

6

50c+40v = £90

II

90

65

1191/6

£15/6 = [£1 162/3s.]

[£19/13 = £1 1311/13s.]

[£11/78 = 232/39s.]

[£134/65 = £1 106/13s.

11

91/6

6

201/6

555/9c+444/9v= £100

III

90

75

1371/2

£15/6 = [£1 162/3s.]

[£17/15 = £1 71/3s.]

[£11/30 = 71/3s.]

[£18/25 = £1 62/5s.

11

271/2

6

381/2

[Capital] £100=[value of the product] £1222/9. Absolute rent 122/9 per cent

Total

270

200

3661/2

33

36 2/3

18

20

69 2/3

38

Here again:

“… this rent” (of mines)
“as well as the rent of land, is the effect, and never
the cause of the high value of their produce”
(l.c., p. 76).

So far as absolute rent is concerned, it is neither
effect nor cause of the “high value”, but
the effect of the excess of value over cost-price.
That this excess is paid for the produce of the mine, or the
land, and thus absolute rent is formed, is the effect, not
of that excess, because it exists for a whole class
of trades, where it does not enter into the price of the
produce of those particular branches of production, but is
the effect of landed property.

In regard to differential rent it may be said,
that it is the effect of “high value”; so
far as by “high value” is understood the excess
of the market-value of the produce over its real or
individual value, for the relatively more fertile classes of
land or mine.

That Ricardo understands by the “exchangeable
value” regulating the produce of the poorest land or
mine, nothing but cost-price, by cost-price nothing
but the advances plus the ordinary profit, and that he
falsely identifies this cost-price with real value, will
also be seen from the following passage:

“The metal produced from the poorest
mine that is worked, must at least have an exchangeable
value, not only sufficient to procure all the clothes, food,
and other necessaries consumed by those employed in working
it, and bringing the produce to market, but also to
afford the common and ordinary profits to him who
advances the stock necessary to carry on the
undertaking. The return for capital from the poorest
mine paying no rent, would regulate the rent of all the
other more productive mines. This mine is supposed
to yield the usual profits of stock. All that the
other mines p r o d u c e m o r e than t h i s, will
necessarily be paid to the owners for rent” (l.c.,
pp. 76-77).

Here, therefore, [he says] in plain language: rent equals
excess of the price (exchangeable value is the
same here) of the agricultural produce over its
cost-price, that is over the value of capital advanced
plus the usual (average) profits of stock. Hence, if
the value of the agricultural produce is higher than
its cost-price, it can pay rent quite irrespectively of
differences in land, the poorest land and the poorest mine
can pay the same absolute rent as the richest. If its
value were no higher than its cost-price, rent could
only arise from the excess of the market-value over the real
value of the produce derived from relatively more fertile
soils, etc.

“If equal quantities of labour,
with equal quantities of fixed capital, could at all
times obtain, from that mine which paid no rent, equal
quantities of gold… The
quantity” (of gold) “indeed would enlarge
with the demand, but its value would be
invariable” (l.c., p. 79).

What applies to gold and mines, applies to corn and
land. Hence if the same types of land continued to be
exploited and continued to yield the same product for the
same outlay in labour |,
then the value of the pound of gold or the quarter of
wheat would remain the same, although its quantity would
increase with the demand. Thus its rent
(the amount, not the rate of rent) [would] also grow
without any change in the price of produce. More
capital would be employed, although productivity would
remain constant. This is one of the major causes of
the rise in the absolute amount of rent, quite apart from
any rise in the price of produce, and, therefore, without
any proportional change in the rents paid by produce of
different soils and mines.

### [5. Ricardo’s Criticism of Adam Smith’s and Malthus’s Views on Rent]

## Chapter XXIV “Doctrine of Adam Smith concerning the Rent of Land.”

This chapter is of great importance for the difference
between Ricardo and Adam Smith. We shall postpone a
fuller discussion of this (in so far as it affects Adam
Smith), to when we consider ex professo Adam Smith’s
doctrine after that of Ricardo.

Ricardo begins by quoting a passage from Adam Smith
showing that he correctly determined when the price of the
agricultural produce yields a rent and when it does
not. But on the other hand Smith thought that some
parts of the produce of land, such as food, must always
yield a rent.

In this context Ricardo says the following, which is
significant for him:

“I believe that as yet in every
country, from the rudest to the most refined, there is land
of such a quality that it cannot yield a produce more
than sufficiently valuable to replace the stock employed
upon it, together with the profits ordinary and usual
in that country. In America we all know that is
the case, and yet no one maintains that the principles which
regulate rent, are different in that country and in
Europe” (l.c., pp. 389-90).

Indeed, these principles are substantially
“different”. Where no landed
property exists—actual or legal—no absolute
rent can exist. It is absolute rent, not differential
rent, which is the adequate expression of landed
property. To say that the same principles
regulate rent, where landed property exists and where it
does not exist, means that the economic form of land-ed
property is independent of whether landed property
exists or not.

Besides, what is the meaning of “there is land of
such a quality that it cannot yield a produce more than
sufficiently valuable to replace the stock …
with the ordinary profits…” (l.c.,
pp. 389-390). If the same quantity of labour produces
4 quarters, the product is no more valuable than if it
produces two, although the value of the individual quarter
is in one case twice as great as in the other. Whether
or not it yields a rent, is therefore in no way independent
on the magnitude of this “value” of the produce
as such. It can only yield a rent if its value is
higher than its cost-price, which depends on the cost-price
of all other products or, in other words, on the quota of
unpaid labour which is, on an average, appropriated by a
capital of £ 100 in each sphere of production.
But whether its value is higher than its cost-price is in no
way dependent on its absolute size, but on the composition
of the capital employed on it, compared with the average
composition of the capital employed in non-agricultural
industry.

“But if it were true that England had
so far advanced in cultivation, that at this time there were
no lands remaining which did not afford a rent, it would be
equally true, that there formerly must have been such lands;
and that whether there be or not, is of no importance to
this question, for it is the same thing if there be any
capital employed in Great Britain on land which yields only
the return of stock with its ordinary profits, whether it be
employed on old or on new land. If a farmer agrees for
land on a lease of seven or fourteen years, he may propose
to employ on it a capital of £10,000, knowing that at
the existing price of grain and raw produce, he can replace
that part of his stock which he is obliged to expend, pay
his rent, and obtain the general rate of profit. He
will not employ £ 11,000, unless the last £1,000
can be employed so productively as to afford him the usual
profits of stock. In his calculation, whether he
shall employ it or not, he considers only whether the price
of raw produce is sufficient to replace his expenses and
profits, for he knows that he shall have no additional rent
to pay. Even at the expiration of his lease his
rent will not be raised; for if his landlord should require
rent, because this additional £1,000 was employed, he
would withdraw it; since, by employing it, he gets, by the
supposition, only the ordinary and usual profits which he
may obtain by any other employment of stock; and, therefore,
he cannot afford to pay rent for it, unless the
price of raw produce should further rise, or,
which is the same thing, unless the usual and
general rate of profits should fall” (l.c.,
pp. 390-91).

Ricardo admits here that also the worst land can
bear a rent. How does he explain this? To
provide the additional supply which has become necessary in
consequence of an additional demand, a second amount of
capital is employed on the worst land |. This will only yield
the cost-price if the price of grain is rising. Hence
the first amount would now yield a surplus—that is
rent—over and above this cost-price. In fact
therefore before the second amount is invested the
first amount of capital yields a rent on the
worst land, because the market-value is above the
cost-price. Thus the only question is whether, for
this to happen, the market-value has to be above the
value of the worst product, or whether on the contrary its
value is above its cost-price, and the
rise in price merely enables it to be sold at its
value.

Furthermore: Why must the price be so high that it
equals the cost-price, i.e., the capital advanced plus
average profit? Because of the competition of capitals
in the different branches of production and the transfer of
capital from one branch to another. That is, as a
result of the action of capital upon capital. But by
what action could capital compel landed property to allow
the value of the product to fall to the cost-price?
Withdrawal of capital from agriculture cannot have this
effect, unless it is accompanied by a fall of the demand for
agricultural produce. It would achieve the reverse,
and cause the market-price of agricultural produce to rise
above its value. Transfer of new capital to land
cannot have this effect either. For it is precisely
the competition of capitals amongst themselves, which
enables the landlord to demand from the individual
capitalist that he should be satisfied with “an
average profit” and pay over to him the overplus of
the value over the price affording this profit.

But, it may be asked: If landed property gives the power
to sell the product above its cost-price, at
its value, why does it not equally well give the power to
sell the product above its value, at an arbitrary
monopoly price? On a small island, where there is no
foreign trade in corn, the corn, food, like every other
product, could unquestionably be sold at a monopoly price,
that is, at a price only limited by the state of demand,
i.e., of demand backed by ability to pay, and
according to the price level of the product supplied the
magnitude and extent of this effective demand can vary
greatly.

Leaving out of account exceptions of this
kind—which cannot occur in European countries; even in
England a large part of the fertile land is
artificially withdrawn from agriculture and from the
market in general, in order to raise the value of the other
part—landed property can only affect and paralyse the
action of capitals, their competition, in so far as the
competition of capitals modifies the determination of the
values of the commodities. The conversion of
values into cost-prices is only the consequence and result
of the development of capitalist production.
Originally commodities are (on the average) sold at their
values. Deviation from this is in agriculture
prevented by landed property.

Ricardo says that when a farmer takes land on a lease of
seven or fourteen years, he calculates that with a capital
investment of, say, £ 10,000, the value of the
corn (average market-value) permits him to replace his
outlay plus average profit, plus the contracted rent.
In so far as he takes a “lease” of a piece of
land, therefore, his first consideration is the average
market-value, which is equivalent to the value of the
product; profit and rent are only parts into which this
value is resolved, but they do not constitute
it. The existing market-price is for the
capitalist what the presupposed value of the product
is for the theory and the inner relationships of
production. Now to the conclusion which Ricardo draws
from this. If the farmer adds another £ 1,000,
he only considers whether, at the given market-price,
it yields him the usual profit. Ricardo therefore
seems to think that the cost-price is the determining
factor and that profit enters into this cost-price as
a regulating element, but rent does not.

Firstly, profit too does not enter into it as a
constituent element. For, according to the assumption,
the farmer takes the market-price as his
starting-point, and weighs up whether, at this given
market-price, the £1,000 will yield him the usual
profit. This profit is therefore not the cause, but
the effect of that price. But—Ricardo continues
his train of thought—the investment of the £
1,000 itself is determined by the calculation of whether or
not the price yields the profit. Thus the profit is
the decisive factor for the investment of the £ 1,000,
and for the price of production.

Furthermore: If the capitalist found that the £
1,000 did not yield the usual profit, he would not invest
it. The production of the additional food would not
take place. If it were necessary for the additional
demand, then the demand would have to raise the price, i.e.,
the market-price, until it yielded the profit. Thus
profit—in contradistinction to rent—enters as a
constituent element, not because it creates the value
of the product, but because the product | itself would not be created if
its price did not rise high enough to pay the usual rate of
profit as well as the capital expended. In this
case, however, it is not necessary for it to rise so high as
to pay rent. Hence, there exists an essential
difference between rent and profit, and in a certain sense,
it can be said that profit is a constituent element of
price, whereas rent is not. (This thought is evidently
also at the back of Adam Smith’s mind.)

In this case, it is correct.

But why?

Because in this case landed property cannot
confront capital as landed property, thus the very
combination [of circumstances] under which rent, absolute
rent, is formed, is not present—according to
the assumption. The additional corn produced with the
second investment of £ 1,000, provided the
market-value remains the same, in other words when an
additional demand arises only on the assumption that
the price remains the same, must be sold
below its value at the cost-price. This
additional produce of the £ 1,000 thus occurs under
the same circumstances as when new worse land is cultivated,
which does not determine the market-value, but can
provide the additional supply only on the condition that it
supplies it at the previously existing market-value,
i.e., at a price determined independently of this new
production. Under these circumstances it depends
entirely on the relative fertility of the additional soil
whether it yields a rent precisely because it does
not determine the market-value. It is just the
same with the additional £ 1,000 on the old
land. And for this very reason, Ricardo concludes
conversely, that the additional land or the
additional amount of capital determines the
market-value because, with a given, quite
independently determined market-value, the price of
its product yields not rent, but only profit, and only
covers the cost-price but not the value of the
product. This is a contradiction in terms.

Nevertheless, the product is produced in this
case, although it yields no rent! Certainly.
Landed property as an independent opposing element does not
exist for the farmer, i.e., the capitalist, during
the period in which the lease in fact makes him the
landowner of the land which he has rented.
Capital moves unimpeded in this element, and capital is
satisfied with the cost-price of the product. Even
when the lease expires, the farmer will naturally make the
amount of rent dependent on how far capital investment in
the land will supply a product which can be sold at its
value thus yielding a rent. Capital investment
which, with the given market-value, yields no excess
over the cost-price, no more enters into the calculation
than would the payment of rent—or contractual
undertaking to pay rent—on land whose relative
fertility is so low that the market-price is merely equal to
the cost-price [of its product].

In practice matters do not always work out in the
Ricardian manner. If the farmer possesses some spare
capital or acquires some during the first years of a lease
of 14 years, he does not demand the usual profit,
unless he has borrowed additional capital. For what is
he to do with the spare capital? Conclude a new lease
for additional land? Agricultural production favours
to a much higher degree more intensive capital investment,
than a more extensive cultivation of land with a
larger capital. Moreover, if no land could be leased
in the immediate vicinity of the old land, two farms would
split up the farmer’s work of super-intending them to a much
greater extent, than six factories would split up the work
of one capitalist in manufacture. Or should he invest
the money with the bank, for interest, in government bonds,
railway shares, etc.? Then, from the outset, he
forgoes at least a half or a third of the usual
profit. Hence, if he can invest it as additional
capital on the old farm, even below the average rate of
profit, say at 10 per cent, if his profit was 12, then, he
will still be gaining 100 per cent if the rate of interest
is 5 per cent. To invest the additional £ 1,000
in the old farm is, therefore, still a profitable
speculation for him. |

Hence it is quite wrong for Ricardo to identify this
investment of additional capital with the application of
additional capital to new soils. In the first case,
the product does not have to yield the usual profit, even in
capitalist production. It must only yield as much
above the usual rate of interest as will make worth while
the trouble and risk of the farmer to prefer the industrial
employment of his spare capital to its employment as money
capital.

But the following conclusion which Ricardo draws from
this observation is, as has been shown, quite absurd.

“If the comprehensive mind of Adam
Smith had been directed to this fact, he would not have
maintained that rent forms one of the component parts of
the price of raw produce; for price is everywhere
regulated by the return obtained by this last portion
of capital, for which no rent whatever is paid” (l.c.,
p. 391).

His illustration proves just the reverse: that the
application to land of this last portion of capital has been
regulated by a market-price which, independent of
that application, existed before it took place—and,
therefore comprises no rent, but only profit. That
profit is the only regulator for capitalist production is
quite true. And it is therefore true that no absolute
rent would exist if production were regulated solely
by capital. It arises precisely at the point where the
conditions of production enable the landowner to set up
barriers against the exclusive regulation of production by
capital.

Secondly, Ricardo reproaches Adam Smith (p. 391, et
seq.) for developing the correct principles of rent
[only] with regard to coal-mines; [he] even says:

“The whole principle of rent is here
admirably and perspicuously explained, but every word is as
applicable to land as it is to mines; yet he affirms that
‘it is otherwise in estates above
ground…’” (l.c., p. 392).

Adam Smith senses that, under certain circumstances, the
landlord has the power to offer effective resistance to
capital, to bring landed property into play, and thus to
demand absolute rent, though, under different circumstances,
he does not possess this power; that in particular however
the production of food establishes the law of rent, whereas
in other applications of capital to land, the rent is
determined by the agricultural rent.

“The proportion, both of their
produce and of their rent, is in proportion” (says
Adam Smith) “to their absolute, and not to
their relative fertility” (l.c., p. 392).

In his reply, Ricardo comes closest to the real principle
of rent. He says:

“But, suppose that there were no
land which did not afford a rent; then, the amount of
rent on the worst land would be in proportion to the excess
of the value of the produce above the expenditure of capital
and the ordinary profits of stock: the same principle
would govern the rent of land of a somewhat better quality,
or more favourably situated, and, therefore, the rent of
this land would exceed the rent of that inferior to it, by
the superior advantages which it possessed; the same might
be said of that of the third quality, and so on to the very
best. Is it not, then, as certain, that it is the
relative fertility of the land, which determines the
portion of the produce, which shall be paid for the rent of
land, as it is that the relative fertility of mines,
determines the portion of their produce, which shall be paid
for the rent of mines?” (l.c., pp. 392-93.)

Here Ricardo formulates the correct principle of rent, If
the worst land pays a rent, if therefore rent is paid
independently of the different natural fertility of the
land—i.e., absolute rent—then this rent must
equal “the excess of the value of the produce
above the expenditure of capital and the ordinary
profits of stock” [l.c., pp. 392-93] that is to say,
it must equal the excess of the value of the produce
above its cost-price. Ricardo presupposes that
such an excess cannot exist, because, in contradiction to
his own principles, he wrongly accepts the Smithian doctrine
| that value equals
cost-price of the produce.

As for the rest, he falls again into error.

Differential rent would of course be determined by the
“relative fertility”. Absolute rent would
have nothing to do with the “natural
fertility”.

Smith however would indeed be right when he asserts that
the actual rent paid by the worst land may
depend on the absolute fertility of the other soils and the
relative fertility of the worst soil, or on the absolute
fertility of the worst soil and the relative fertility of
the other soils.

For the actual amount of rent paid by the worst land
depends not, as Ricardo thinks, on the excess of the
value of its own produce over its cost-price, but on
the excess of the market-value over its
cost-price. But these are very different things If the
market-price were determined by the product of the worst
land, then the market-value would be equal to its real
value, hence, the excess of its market-value over its
cost-price would be equal to the excess of its own
individual value, its real value, over its cost-price.
But this is not the case if quite irrespective of this
product the market-price is determined by the other types of
land. Ricardo assumes a descending line. He
assumes that the worst land is cultivated last and is
only cultivated (in the case postulated), when the
additional demand has necessitated an additional supply at
the value of the produce derived from the worst and last
cultivated soil. In this case the value of the worst
land regulates the market-value. In the ascending line
(even according to him) this will only occur when the
additional supply of the better sorts of land only equals
the additional demand at the old market-value. If the
additional supply is greater, Ricardo assumes that the old
land must be thrown out of cultivation, but it only
follows from this that it will yield a lower rent
than before (or no rent at all).

The same happens in the descending line. Whether,
and to what extent, the worse land yields rent, if the
additional supply can only by provided at the old
market-value, depends on how much this market-value
stands above the cost-price of the product of the new, worse
land. In both cases its rent is determined by the
absolute fertility, not the relative fertility.
It depends on the absolute fertility of the new land how far
the market-value of the produce of better lands stands
above its own real, individual value.

Adam Smith makes a correct distinction here between land
and mines, because with the latter he presupposes that there
is never a transition to worse sorts—always to
better ones—and that they always provide more
than the necessary additional supply. The rent of the
worst land is then dependent on its absolute fertility.

“After Adam Smith has declared that
there are some mines which can only be worked by the
owners, as they will afford only sufficient to defray
the expense of working, together with the ordinary profits
of the capital employed, we should expect that he would
admit that it was these particular mines which regulated the
price of the produce from a l l mines. If the old
mines are insufficient to supply the quantity of coal
required, the price of coal will rise, and will
continue rising till the owner of a new and inferior mine
finds that he can obtain the usual profits of stock by
working his[e]
mine… It appears, then, that it is always
the least fertile mine which regulates the price of
coal. Adam Smith, however, is of a different
opinion: he observes that ‘the most fertile coal-mine,
too, regulates the price of coals at all the other mines in
its neighbourhood. Both the proprietor and the
undertaker of the work find, the one, that he can get a
greater rent, the other, that he can get a greater profit,
by somewhat underselling all their neighbours. Their
neighbours are soon obliged to sell at the same
price, though they cannot so well afford it, and though
it always diminishes, and sometimes takes away altogether,
both their rent and their profit. Some works are
abandoned altogether; others can afford no rent, and can
be wrought only by the proprietor’. If the
demand for coal should be diminished, ||617a| or if by new processes the
quantity should be increased, the price would fall,
and some mines would be abandoned; but in every
case, the price must be sufficient to pay the
expenses and profit of that mine which is worked without
being charged with rent. It is, therefore,
the least fertile mine which regulates price. Indeed,
it is so stated in another place by Adam Smith himself, for
be says: ‘The lowest price at which coals can
be sold for any considerable time is like that of all
other commodities, the price which is barely sufficient to
replace, together with its ordinary profits, the stock which
must be employed in bringing them to market. At a
coal-mine for which the landlord can get no rent, but
which he must either work himself, or let it alone all
together, the price of coals must generally be nearly
about this price’” (l.c., pp. 393-95).

Adam Smith is mistaken when he declares the particular
set of circumstances on the market, under which the most
fertile mine (or land) dominates the market, to be the
rule. But provided such a case is assumed his
reasoning is correct (on the whole) and Ricardo’s
wrong. Adam Smith presupposes that as a result of the
state of demand and because of its relative superior
fertility, the best mine can only force the whole of its
product on to the market if it undersells its competitors,
if its product is below the old market-value.
This causes the price to fall for the worse mines too.
The market-price falls. This in any case lowers the
rent on worse mines and can even make it disappear
completely. For the rent is equal to the excess of
market-value over cost-price of the produce, whether that
market-value be like the individual value of the produce of
a certain class [of land], or mines, or not. What
Smith fails to
notice, is that the profit can only be diminished by this if
it becomes necessary to withdraw capital and reduce the
scale of production. If the
market-price—regulated, as it is under the given
circumstances, by the produce of the best mines— falls
so low as to afford no excess above cost-price for the
product of the worst mine, then it can be worked only by its
owner. At this market-price, no capitalist will pay
him a rent. His ownership of land does not, in this
case, give him power over capital, but as far as he is
concerned it annuls the resistance which other capitalists
meet who wish to apply capital to land. Landed
property does not exist for him because he himself is
the landed proprietor. Hence he can use his land as a
mine, or in any other sphere of production, i.e., he can
employ it if the market-price, which he finds
predetermined and does not determine himself—if the
market-price of the product yields him the average profit,
that is, his cost-price.

And from this Ricardo concludes that Smith contradicts
himself! Because the old market-price determines how
far new mines can be opened up by their owners—in
other words they can be worked in circumstances where landed
property disappears, since at the old market-price they
yield their cultivators the cost-price—he
concludes that this cost-price determines the
market-price! But again he takes refuge in the
descending line and allows the less fertile mine to be
cultivated only when the market-price of the product rises
above the value of the product of the better mines, whereas
it is only necessary that it rises above the
cost-price or even that it equals the cost-price in the case
of the worse mines exploited by their proprietors
themselves. Incidentally, his assumption that
“… if by new processes the quantity” (of
coal) “should be increased, the price would
fall, and some mines would be abandoned”
[l.c., p. 394], depends only on the degree of the fall in
price and the state of demand. If, with this fall of
prices, the market can absorb the whole product, then the
bad mines will still yield a rent provided the fall of
market-price still leaves an excess of market-value over the
cost-price of the poorer mines, and [the mines will] be
worked by their owners, if the market-value only covers, or
is equal to, the cost-price. In either case, however,
[it is] absurd to say that the cost-price of the worst mine
regulates the market-price. Although the cost-price of
the worst mine determines the relation of the price of its
produce to the ruling market-price, and therefore
decides the question whether or not | the mine can be worked.
But the fact that a piece of land or a mine of a particular
degree of fertility can be exploited at a given
market-price, is obviously not related to or identical
with the determination of the market-price by the cost-price
of the produce of these mines. If an increased
market-value would make an additional supply
necessary or possible then the worst land would regulate the
market-value, but then it would also yield absolute
rent. This is the exact opposite of the case
assumed by Adam Smith.

Thirdly, Ricardo reproaches Smith for believing (p. 395,
et. seq.) that cheapness of raw produce, for instance
substitution of potatoes for corn, which would lower the
wage and diminish the cost of production, would cause a
larger share as well as a larger quantity to fall to the
landlord, Ricardo on the other hand [maintains that] :

“No part of that additional
proportion would go to rent, but the whole invariably to
profits … while lands of the same quality were
cultivated, and there was no alteration in their relative
fertility or advantages, rent would always bear the some
proportion to the gross produce” (l.c.,
p. 396).

This is positively wrong. The share of rent would
fall and, therefore, its quantity would decrease
relatively. The introduction of potatoes as the
principal means of subsistence, would reduce the value of
labour-power, shorten the necessary labour-time, increase
the surplus labour-time and therefore the rate of
surplus-value, hence—other circumstances remaining the
same—the composition of the capital would be altered,
the value of the variable part would diminish in comparison
with that of the constant part, although the quantity
of living labour employed remained the same. The
rate of profit would therefore rise. In this
case [there would be] a fall in absolute rent and
proportionately in differential rent. (See page 610
Table C.) This factor would affect equally
agricultural and non-agricultural capital. The general
rate of profit would rise and the rent would
consequently fall.

## Chapter XXVIII. “On the comparative Value of Gold, Corn, and Labour, in Rich and Poor Countries.”

“Dr. Smith’s error, throughout his
whole work, lies in supposing that the value of corn is
constant; that though the value of all other things may, the
value of corn never can be raised. Corn, according to
him, is always of the same value because it will always feed
the same number of people. In the same manner,
it might be said, that cloth is always of the same value,
because it will always make the same number of coats.
What can value have to do with the power of feeding and
clothing?” (l.c., pp. 449-50.)

“Dr. Smith … has so ably
supported the doctrine of the natural price of commodities
ultimately regulating their market-price
(l.c., p. 451).

“Estimated in corn, gold may be of
very different value in two countries. I have
endeavoured to shew that it will be low in rich countries,
and high in poor countries; Adam Smith is of a different
opinion: he thinks that the value of gold, estimated in
corn, is highest in rich countries” (l.c.,
p. 454).

## Chapter XXXII. “Mr. Malthus’s Opinions on Rent.”

“Rent is a creation of value …
but not a creation of wealth” (l.c., p.
485).

“In speaking of the high price of
corn, Mr. Malthus evidently does not mean the price per
quarter or per bushel, but rather the excess of price for
which the whole produce will sell, above the cost of its
production, including always in the term “cost of its
production”, profits as well as wages. One
hundred and fifty quarters of corn at £3 10s. per
quarter, would yield a larger rent to the landlord than 100
quarters at £4, provided the cost of production were
in both cases the same” (l.c., p. 487).
“Whatever the nature of the land may be, high rent
must depend on the high price of the produce; but, given the
high price, rent must be high in proportion to abundance and
not to scarcity” (l.c., p. 492).

“As rent is the effect of the high
price of corn, the loss of rent is the effect of a low
price. Foreign corn never enters into competition with
such home corn as affords a rent; the fall of price
invariably affects the landlord till the whole of his rent
is absorbed;—if it fall still more, the price will not
afford even the common profits of stock; capital will then
quit the land for some other employment, and the corn, which
was before grown upon it, will then, and not till then, be
imported. From the loss of rent, there will be a loss
of value, of estimated money value, but, there will be a
gain of wealth. The amount of the raw produce and
other productions together will be increased; from the
greater facility with which they are produced, they will,
though augmented in quantity, be diminished in value”
(l.c., p. 519).

[a] In the
manuscript: “soil”.—Ed.

[b] In the
manuscript: “of” instead of
“had”.—Ed.

[c] In the
manuscript: “a”.-Ed.

[d] There
follow the tables. Marx did not fill in some columns
in tables C and D. The missing figures,
as well as the heading of the last column, have been
inserted by the editors.—Ed.

[e] In the
manuscript: “of”.—Ed.


## [Chapter XIV] Adam Smith’s Theory of Rent

### [1. Contradictions in Smith’s Formulation of the Problem of Rent]

| At this stage we
shall not examine Smith’s interesting account of how the
rent of the principal vegetable food dominates all other
strictly agricultural rents (stock raising, timber,
industrial crops), because each of these branches of
production can easily be transformed into one of the
others. Adam Smith excludes rice from this,
wherever it is the principal vegetable food, since rice
fields (or bogs) are not convertible into grass land, wheat
lands, etc. and vice versa.

[In Chapter XI, Book I] Adam Smith correctly defines
rent as “the price paid for the use of
land” ([O.U.P., Vol. I, p. 162; Garnier,] t, I,
p. 299), the term land is intended to mean every power of
nature as such, therefore also water, etc.

In contrast to Rodbertus’s peculiar notion, Smith, from
the outset, enumerates the items of agricultural
capital:

“The stock from which he furnishes
the seed” (the raw material), “pays the labour,
and purchases and maintains the cattle and other
instruments of husbandry” ([O.U.P., Vol. I,
p. 163; Garnier,] l.c.).

Now what is this price paid for the use of land?

“Whatever part of the produce
or… of its price, is over and above this shame”
(which pays for the capital advanced “together with
the ordinary profits”), “he” (the
landlord) “naturally endeavours to reserve to
himself as the rent of his land” ([O.U.P.,
Vol. I, p. 163; Garnier,] l.c., p. 300).

This excess may “he considered as the
natural rent of land” ([O.U.P., Vol. I, p. 163;
Garnier,] l.c., p. 300).

Smith refuses to confuse rent with the interest on
capital invested in the land.

“The landlord demands a rent even for
unimproved land” ([O.U.P., Vol. I, p. 163; Garnier,]
l.c., pp. 300-01).

and, he adds, even this second form of rent [i.e., the
rent on the improved land] is peculiar in that the interest
from the capital used on improvement is interest on a
capital which has not been laid out by the landlord, but by
the farmer.

“He” (the landlord)
“sometimes demands rent for what is altogether
incapable of human improvements” ([O.U.P., Vol.
I, pp. 163-64; Garnier,] l.c., p. 301).

Smith stresses very strongly, that it is landed
property, the landlord, who as landlord
“demands the rent”. [Regarded] as a mere
effluence of landed property, rent is monopoly
price, this is perfectly correct, since it is only the
intervention of landed property which enables the product to
be sold for more than the cost-price, to be sold at its
value.

“The rent of land considered as the
price paid for the use of the land, is naturally a monopoly
price” ([O.U.P., Vol. I, p. 164; Garnier,] l.c.,
p. 302).

It is in fact a price which is only enforced through the
monopoly of landed property, and as a monopoly price, it
differs from the price of the industrial product.

From the standpoint of capital—and capital dominates
production—the cost-price only requires that the
product should pay the average profit in addition to the
capital advanced. In this case, the product, be it
product of the land or any other product, can “be
brought to market”.

“If the ordinary price is more than
this, the surplus part of it will naturally go to the
rent of the land. If it is not more, though the
commodity may be brought to market, it can afford no
rent to the landlord. Whether the price is, or is not
more, depends upon the demand” ([O.U.P., Vol. I,
p. 164; Garnier,] l.c., p. 303).

Why does rent enter into price differently from wages and
profit? That is the question. Originally, Smith
had resolved value correctly, into wages, profits and rents
(apart from constant capital). But almost at once he
takes the opposite course and identifies value with natural
price (the average price determined by competition or the
cost-price of the commodities) and builds up the latter from
wages, profit and rent.

“These three parts seem either
immediately or ultimately to make up the whole price”
([O.U.P., Vol. I, p. 55; Garnier,] l. I, ch. VI,
p. 101).

“In the most improved societies,
however, there are always a few commodities of which the
price r e s o l v e s i t s e l f into two parts
only, the wages of labour and the profits of
stock; and a still smaller number, in which it
consists altogether in the wages of labour. In the
price of sea-fish, for example, one part pays the labour of
the fishermen, and the other the profits of the capital
employed in the fishery. Rent very seldom makes
any part | of
it… In some parts of Scotland, a few poor
people make a trade of gathering, along the sea-shore, those
little variegated stones commonly known by the name of
Scotch pebbles. The price which is paid to them
by the stone-cutter, is altogether the wages of
their labour; neither rent nor profit makes any part of
it.

“But the whole price of any
commodity must still finally resolve itself into some
one or other or all of those three parts”
([O.U.P., Vol. I. pp. 56-57; Garnier,] l. I, ch. VI,
pp. 103-04).

In these passages, the resolving of value into wages,
etc. and the compounding of price from wages, etc., are
jumbled together (this applies to Chapter VI in general
which deals with “the Component Parts of the Price
of Commodities”). (Natural price and
market-price are for the first time discussed in Chapter
VII).

Book I, Chapters I, II, III deal with the
“division of labour”, Chapter IV with
money. In these, as in the following chapters,
value is determined in passing. Chapter
V deals with the real and nominal price of
commodities, with the transformation of value into
price; “the Component Parts of the Price of
Commodities” are considered in Chapter VI; the
natural and market-price in Chapter VII.
Then Chapter VIII deals with the wages of labour,
Chapter IX with the profits of stock; Chapter
X with the Wages and Profit in the different
Employments of Labour and Stock; finally, Chapter
XI with the Rent of Land.

But in this connection we want first to draw attention to
the following: According to the passages cited above, there
are commodities whose price consists solely of wages,
others, whose price consists only of wages and profit, and
finally a third group of commodities, whose price consists
of wages, profit and rent. Hence:

“The whole price of any
commodity must still … resolve itself into
some one or other or all of those three
parts.”

According to this, there would be no grounds for saying
that rent enters into price in a different manner from
profit and wages, but one could say that rent and profit
enter into price in a different way from wages, since the
latter always enters [into price], the former not
always. Whence, then, the difference?

Moreover, Smith should have investigated, whether it is
possible that the few commodities which only comprise
wages, are sold at their value, or whether the
poor people who gather the Scotch pebbles are not in fact
the wage-labourers of the stone-cutters, who pay them
only the usual wages for the commodity, in other words for a
whole working-day, which apparently belongs to them,
these people receive only as much as a worker in other
trades, where part of the working-day forms profit
and belongs not to him but to the capitalist. Smith
should have either affirmed this or else asserted that in
this case the profit only seems to be confounded with
wages. He says himself:

“When those three different sorts of
revenue belong to different persons, they are readily
distinguished; but when they belong to the same, they are
sometimes confounded with one another, at least in common
language” ([O.U.P., Vol. I, p. 58; Garnier,] l. I,
ch. VI, p. 106).

He nevertheless works out this problem in the
following manner:

If an independent labourer (like those poor people of
Scotland) uses only labour (without recourse to capital),
if, altogether, he only employs his labour and the elements,
then the price resolves itself solely into wages. If
he employs a small capital as well, then the same individual
receives wages and profit. If, finally, he employs his
labour, his capital and his landed property, then he unites
in his person the characters of landowner, farmer and
worker.

{The whole absurdity of Smith’s approach comes to light
in one of the final passages of Chapter VI, Book I:

“As in a civilised country there are
but few commodities of which the exchangeable value
arises from labour only” (here labour is
identified with wages) “rent and profit
contributing largely to that of the far greater part of
them, so the annual produce of its labour”
(here, after all, the commodities are the produce of
labour, although the whole value of this produce does
not arise from labour only) “will always be sufficient
to purchase or command a much greater quantity of
labour than what was employed in raising, preparing, and
bringing that produce to market” ( [O.U.P.,
Vol. I, pp. 59-60; Garnier,] l.c., pp. 108-09).

The produce of labour [is] not equal to the
value of this produce. On the contrary (one may
gather) this value is increased by the addition of
profit and rent. The produce of labour can therefore
command, purchase, more labour, i.e., pay a greater value in
labour, than the labour contained in it. This
proposition would be correct if it ran like this:

| Smith
says:

According to him himself, it should read:

“As in a civilised country there are but few
commodities of which the exchangeable value arises
from labour only, rent and profit
contributing largely to that of the far greater
part of them, so the annual produce of its labour will
always be sufficient to purchase or command a much greater
quantity of labour than what was employed in raising,
preparing, and bringing that produce to market.”

“As in a civilised country there are but few
commodities of which the exchangeable value
resolves itself into wages only and since, for a
far greater part of them, this value largely
resolves itself into rent and profit, so the annual
produce of its labour will always be sufficient to
purchase or command a much greater quantity of
labour than what had to be paid” (and
therefore employed) “in raising, preparing, and
bringing that produce to market.”

(Here Smith returns again to his second conception of
value, a concept of which he writes the following in the
same chapter.

“The real value of all the different
component parts of price, it must be observed, is measured
by the quantity of labour which they can, each of them,
purchase or command. Labour” (in this sense)
“measures the value, not only of that part of price
which resolves itself into labour” (should read: into
wages) “but of that which resolves itself into rent,
and of that which resolves itself into profit”
([O.U.P., Vol. I, p. 55; Garnier,] l. I, ch. VI,
p. 100).

(In Chapter VI, the resolution of value into wages,
profit and rent is still dominant. It is only in
Chapter VII, on the natural price and market-price, that the
compounding of the price from these constituent elements
wins the upper hand.)

Hence: The exchangeable value of the annual product of
labour consists not only of the wages of the labour employed
in order to bring forth this product, but also of profit and
rent. This labour however is only commanded or
purchased with that part of the value which resolves into
wages. It is thus possible to set into motion a much
larger amount of labour, if a part of the profit and rent is
used to command or purchase labour, i.e., if it is converted
into wages. So it amounts to this: the exchangeable
value of the annual product of labour resolves itself into
paid labour (wages) and unpaid labour (profit and
rent). If therefore a part of that part of the value
which resolves itself into unpaid labour is converted into
wages, one can purchase a greater quantity of labour than if
one merely assigns that part of the value which consists of
wages, to the purchase of new labour.)

Let us go back then:

“An independent manufacturer, who has
stock enough both to purchase materials, and to maintain
himself till he can carry his work to market, should gain
both the wages of a journeyman who works under a master, and
the profit which that master makes by the sale of that
journeyman’s work. His whole gains, however, are
commonly called profit, and wages are, in this case too,
confounded with profit.

“A gardener who cultivates his own
garden with his own hands, unites in his own person the
three different characters of landlord, farmer, and
labourer. His produce, therefore, should pay him
the rent of the first, the profit of the second, and the
wages of the third. The whole, however, is commonly
considered as the earnings of his labour. Both
rent and profit are, in this case, confounded with
wages” ([O.U.P., Vol. I, p. 59; Garnier,] l. I,
ch. VI, p. 108).

This is indeed confounded. Is not the whole
“the earnings of his labour”? And are not,
on the contrary, the conditions of capitalist
production—in which, with the alienation of labour
from its objective conditions, the worker, capitalist and
landowner confront one another as different characters
too—transferred to this gardener, so that the product
of his labour or rather the value of the product is
regarded, part of it as wages, in payment of his labour,
part of it as profit, on account of the capital employed,
and part of it as rent, as the portion due to the land or
rather the proprietor of the land? Within
capitalist production(it is) quite correct, when considering
those conditions of labour in which these elements are
not separated (in actual fact), to assume them to be
separated and so to regard this gardener as his own | journeyman and as his own
landowner in one person. The vulgar conception however
that wages arise from labour, but profit and
rent—independently of the labour of the
worker—arise out of capital and land as separate
sources, not for the appropriation of alien labour, but of
wealth itself, evidently creeps into Adam Smith’s writing
already at this stage. In this fantastic fashion, the
profoundest concepts intermingle with the craziest notions,
such as the common mind forms in an abstract manner from the
phenomena of competition.

Having first resolved value into wages, profits,
rents, he then on the contrary compounds value out of
wages, profit and rent, whose magnitudes are determined
independently of value. Since Adam Smith has thus
forgotten the origin of profit and rent correctly explained
by himself, he is able to say:

“Wages, profit, and rent, are the
three original sources of all revenue, a s
w e l l a s of all exchangeable value”
([O.U.P., Vol. I, p. 57; Garnier,] l. I, ch. VI,
p. 105).

In accordance with his own explanation, he should have
said:

“The value of a commodity
arises exclusively out of the labour (the amount of labour)
which is embodied in this commodity. This value
resolves itself into wages, profit and rent. Wages,
profit and rent are the original forms in which the worker,
the capitalist and the landlord participate in the value
created by the labour of the worker. In this sense
they are the three original sources of all revenue,
although none of these so-called sources enters into the
formation of the value.”

From the passages quoted it can be seen how in Chapter
VI, on the “Component Parts of the Price of
Commodities”, Adam Smith arrives at the resolution
of price into wages, where only (immediate) labour enters
into the production; into wages and profit, where, instead
of the independent workman, a journeyman is employed by a
capitalist (i.e., capital); and finally into wages, profit
and rent, where “land” enters into the
production besides capital and labour. In this latter
case, however, it is assumed that the land is appropriated,
that consequently alongside the worker and the capitalist,
there is also a landowner (although he notes that it is
possible for all three or two of these characters to be
united in one person).

In Chapter VII, on natural price and
market-price, rent (where land enters into the
production) is presented as a component part of the natural
price in exactly the same way as wages and profit. The
following passages will show this:

(Book I, Chapter VII).

“When the price of any commodity is
neither more nor less than what is sufficient to pay the
r e n t o f the land, the wages of the labour, and
the profits of the stock employed in raising,
preparing, and bringing it to market, according to their
natural rates, the commodity is then sold for what
may be called its natural price.

“The commodity is then sold
precisely for what it is worth”
([O.U.P., Vol. I, p. 61; Garnier,] l.c., p. 111). (At the
same time, it is stated here that the natural price is
identical with the value of the commodity.)

“The market price of every
particular commodity is regulated by the proportion between
the quantity which is actually brought to market, and the
demand of those who are willing to pay the natural
price of the commodity, or the whole value of the
rent, labour, and profit, which must be paid in order
to bring it thither” ([O.U.P., Vol. I, pp. 61-62;
Garnier,] l.c., p. 112).

“When the quantity of any commodity
which is brought to market Jolts short of the
effectual demand, all those who are willing to pay the
whole value o f t h e r e n t, wages, and
profit, which must be paid in order to bring it thither,
cannot be supplied with the quantity which they want
… the market price will rise more or less
above the natural price, according as either
the greatness of the deficiency, or the wealth
and wanton luxury of the competitors, happen to animate more
or less the eagerness of the competition” ([O.U.P.,
Vol. I, p. 62; Garnier,] l.c., p. 113).

“When the quantity brought to market
exceeds the effectual demand, it cannot be all sold to those
who are willing to pay the whole value of the rent, wages,
and profit, which must be paid in order to bring it
thither… The market price will sink more
or less below the natural price, according as the
greatness of the excess increases more or less the
competition of the sellers, or according as it happens to be
more or less important to them to get immediately rid of the
commodity” ([O.U.P., Vol. I, pp. 62-63; Garnier,]
l.c., p. 114).

“When the quantity brought to market
is just sufficient to supply the effectual demand, and no
more, the market price naturally comes to be …
exactly …, the same with the natural
price… The competition of the different
dealers obliges them all to accept of this price, but does
not oblige them to accept of less” ([O.U.P., Vol. I,
p. 63; Garnier,] l.c., pp. 114-15).

| If, in consequence of
the state of the market, his rent sinks below, or rises
above, its natural rate, Adam Smith allows the landowner to
withdraw his land or transfer it from the production
of one commodity (such as wheat) to that of another
(such as pasture for instance).

“If at any time it” (the
quantity brought to market) “exceeds the effectual
demand, some of the component parts of its price must be
paid below their natural rate. I f i t
i s r e n t, the interest of the landlords will
immediately prompt them to withdraw a part of their
land” ([O.U.P., Vol. I, p. 63; Garnier,] l.c.,
p. 115).

“If, on the contrary, the quantity
brought to market should at any time fall short of the
effectual demand, some of the component parts of its
price must rise above their natural rate. I
f i t i s r e n t, the interest
of all other landlords will naturally prompt them to prepare
more land for the raising of this commodity” ([O.U.P.,
Vol. I, p. 63; Garnier,] l.c., p. 116).

“The occasional and temporary
fluctuations in the market price of any commodity
fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which
resolves itself into rent is less affected by them”
([O.U.P., Vol. I, p. 65; Garnier,] l.c., pp. 118-19).

“The price of monopoly is
upon every occasion the highest which can be got. The
natural price, or the price of free competition, on
the contrary, is the lowest which can be taken, not upon
every occasion indeed, but for any considerable time
together” ([O.U.P., Vol. I, p. 68; Garnier,] l.c.,
p. 124).

“The market price of any
particular commodity, though it may continue long above, can
seldom continue long below, its natural price.
Whatever part of it was paid below the natural
rate, the persons whose interest it affected would
immediately feel the loss, and would immediately
withdraw either so much land, or so much labour,
or so much stock, from being employed about it, that the
quantity brought to market would soon be no more than
sufficient to supply the effectual demand. Its
market price, therefore, would soon rise to the
natural price; this at least would be the case where
there was perfect liberty” ([O.U.P., Vol. I,
pp. 68-69; Garnier,] l.c., p. 125).

After this exposition of the subject in Chapter VII, it
is difficult to see how Adam Smith can justify his
proposition in Book I, Chapter XI, “Of the Rent of
Land”, that rent does not always enter into price
where appropriated land enters into production; how he can
differentiate between the manner in which rent enters into
price from that in which profit and wages enter into it,
since in chapters VI and VII he has turned rent into a
component part of the natural price, in just
the same way as profit and wages. Now let us return to
this Chapter XI (Book I).

We have seen that there rent is defined as the
surplus which remains from the price of the
product, after the expenses of the capitalist (farmer)
plus the average profit have been paid.

In this Chapter XI, Smith makes a complete
turn-about. Rent no longer enters into the natural
price. Or, rather, Adam Smith takes refuge in an
ordinary price which is as a rule different from the
natural price, although we were told in Chapter VII, that
the ordinary price can never, for any length of time, be
below the natural price and that none of the
component parts of the natural price can for any length of
time, be paid below its natural rate and even less, not paid
at all, as he now asserts in relation to rent. Neither
does Adam Smith tell us whether the produce is sold below
its value when it pays no rent, or whether it is sold
above its value, when it pays rent.

Previously, the natural price of the commodity
was

“the whole value of the rent,
labour, and profit, which must be paid in order to bring
it thither” [to market] ([O.U.P., Vol. I,
pp. 61-62, Garnier,] l.c., p. 112).

Now we are told that:

“Such parts only of the
produce of land can commonly be brought to market, of
which the ordinary price is sufficient to replace
the stock which must be employed in bringing them thither,
together with its ordinary profits” ([O.U.P.,
Vol. I, p. 164; Garnier,] l.c., pp. 302-03).

The ordinary price is therefore not the natural
price, and the natural price need not be paid, in order
to bring these commodities to market.

| Previously we were
told that if the ordinary price (that time, the
market-price) were not sufficient to pay the whole
rent (“the whole value of the rent,” etc.),
land will be withdrawn until the market-price rises to the
level of the natural price and pays the whole rent.
Now, on the other hand:

“If the ordinary price is more
than this” (sufficient to replace the stock
together with its ordinary profits), “the
surplus part of it will naturally go to the rent of
the land. If it is not more, though the commodity
may be brought to market, it can afford no rent to the
landlord. Whether the price is, or is not more,
depends upon the demand” ([O.U.P., Vol. 1, p. 164;
Garnier,] l. I, ch. XI, p. 303).

Thus rent, from being a component part of the natural
price suddenly turns into a surplus over the
sufficient price,[a] a surplus whose existence or
non-existence depends on the state of demand. But the
sufficient price is that price which is required for
the commodity to appear on the market, and therefore to be
produced, thus it is the price of production of the
commodity. For the price which is required for the
supply of the commodity, the price which is required for it
to come into existence at all, to appear as a commodity on
the market, is of course its price of production or
cost-price, That [is the condition] sine qua
non of the existence of the commodity. On the
other hand the demand for certain products of the land must
always be such that their ordinary price pays a
surplus over and above the price of production, that is, a
rent. For others it may or may not be so.

“There are some parts of the produce
of land for which the demand must always be such as to
afford a greater price than what is sufficient to bring them
to market; and there are others for which it either may or
may not be such as to afford this greater
price. The former must always afford a rent to
the landlord. The latter sometimes may, and sometimes
may not, according to different circumstances”
([O.U.P., Vol. I, pp. 164-65; Garnier,] l. I, ch. XI,
p. 303).

So instead of the natural price we have the
sufficient price here. The ordinary
price, in turn, is different from this sufficient
price. The ordinary price if it includes
the rent is above the sufficient price. If it
does not comprise rent it is equal to the sufficient
price. It is even characteristic of the sufficient
price that rent is excluded. The ordinary price is
below the sufficient price, when it does not pay the
average profit, in addition to replacing the capital.
Thus the sufficient price is in fact the price of
production or cost-price as abstracted by Ricardo
from Adam Smith and as it indeed presents itself from the
standpoint of capitalist production, in other words the
price which, apart from the outlay of the capitalist, pays
the ordinary profit; [it is] the average price brought about
by the competition of capitalists in the different
employments of capital. It is this abstraction based
on competition which induces Adam Smith to confront his
natural price with the sufficient price,
although in his presentation of the natural price he on the
contrary declares that in the long run only the ordinary
price which pays rent, profit and wages, the component parts
of the natural price, is sufficient. Since the
capitalist controls the production of commodities, the
sufficient price is [that] which is sufficient for
capitalist production from the standpoint of capital and the
price which is sufficient for capital does not include rent,
but, on the contrary, excludes it.

On the other hand: This sufficient price is not
sufficient for some products of the land. For them the
ordinary price must be high enough to yield a surplus
over and above the sufficient price, a rent for the
landowner. For others it depends on the
circumstances. The contradiction that the sufficient
price is not sufficient—that the price which suffices
to bring the product to market does not suffice to bring it
to market—does not worry Adam Smith.

Although he does not turn back, even for one moment, to
glance at chapters V, VI and VII, he admits to himself (not
as a contradiction, but as a new discovery which he has
suddenly hit upon), that with the sufficient price, he has
overthrown his whole doctrine of natural price.

“Rent, it is to be
observed, therefore” (in this extraordinarily
naive fashion Adam Smith progresses from an assertion to its
very opposite), “enters into the composition of the
price of commodities in a different way from wages and
profit. High or low wages and profit are the causes of
high or low price |;
high or low rent is the effect of it. It is
because high or low wages and profit must be paid, in
order to bring a particular commodity to market,
that its price is high or low. But it is because its
price is high or low, a great deal more, or very little
more, or no more, than what is sufficient to pay those wages
and profit, that it affords a high rent, or a low rent,
or no rent at all” ([O.U.P., Vol. I, p. 165;
Garnier,] l.c., pp. 303-04).

Let us take the final proposition first. The
sufficient price, the cost-price, which only pays
wages and profit, excludes rent. If the product
pays a great deal more than the sufficient price,
then it pays a high rent. If it pays only a little
more, then it pays a low rent. If it pays only
exactly the sufficient price, then it pays no
rent. It pays no rent if the actual price of
the product coincides with the sufficient price,
which pays profit and wages. Rent is always a
surplus over and above the sufficient price. By
its very nature, the sufficient price excludes rent.
This is Ricardo’s theory. He accepts the
concept of the sufficient price, the cost-price, from
Adam Smith; but avoids Adam Smith’s inconsistency of
differentiating it from the natural price, and sets it forth
consistently. Having committed all these
inconsistencies, Smith is sufficiently inconsistent to
demand, for certain products of the land, a price which is
higher than their sufficient price. But
this inconsistency itself is in turn the result of a more
correct “observation”.

The beginning of the passage is truly amazing in its
naiveté. In Chapter VII Smith explained that
rent, profit and wages enter equally into the corn
position of the natural price, having first turned the
dissolution of value into rent, profit and wages
upside down and transformed it into the composition of value
from the natural price of rent, profit and wages. Now
he tells us that rent enters into “the composition
of the price of commodities” differently
from profit and wages. And in what way does it enter
differently into that composition? By
not entering into that composition at
all. And here we are first given a true
explanation of the sufficient price. The price of
the commodities is dear or cheap, high or low, because
wages and profit—their natural rates—are high or
low. The commodity will not be brought to market, will
not be produced, unless these high or low profits and wages
are paid. They form the price of production of
the commodity, its cost-price; and are thus in fact,
the constituent elements of its value or
price. Rent, on the other hand, does not
enter into the cost-price, the price of
production. It is not a constituent element of the
exchangeable value of the commodity. It is only
paid when the ordinary price of the commodity is
above its sufficient price. Profit and
wages as constituent elements of the price are
causes of the price; rent, on the other hand, is only
its effect, its result. It does not,
therefore, enter into the composition of the price as an
element, as do profit and wages. And this is what
Smith calls entering into this composition in a
different way from profit and wages. He does
not appear to be in the slightest bit aware of the fact that
he has thrown over his doctrine of natural price. For
what was the natural price? The central point around
which the market-price gravitated: the sufficient price,
below which in the long run the product could not fall,
if it were to be produced and brought to market.

Thus rent is now the surplus over the natural
price, previously [it was] a component part of the
natural price; now [it is the] effect, previously [it
was] the cause, of price.

There is however no contradiction in Adam Smith’s
assertion that for certain products of the land, the
circumstances of the market are always such that their
ordinary price must be above their sufficient price, in
other words: that landed property has the power to
force the price above that level which would be sufficient
for the capitalist if he were not confronted by a
counteracting influence.

| Having thus, in
Chapter XI, thrown overboard chapters V, VI and VII, he
calmly proceeds by saying that: he will now make it his
business to consider 1. the produce of the land which always
affords rent; 2. the produce of the land which sometimes
affords rent and sometimes not; finally 3. the variations
which take place, in the different periods of development of
society, in the relative value, partly of these two sorts of
produce compared with one another and partly in their
relationship to manufactured commodities.

### [2. Adam Smith’s Hypothesis Regarding the Special Character of the Demand for Agricultural Produce. Physiocratic Elements in Smith’s Theory of Rent]

“Part I. Of the Produce of
Land which always affords Rent.”

Adam Smith begins with the theory of population.
The mean s of subsistence always create a
demand for themselves. If the means of subsistence
increase, then the people, the consumers of the means of
subsistence, also increase. The supply of these
commodities thus creates the demand for them.

“As men, like all other animals,
naturally multiply in proportion to the means of
their subsistence, food is always more or less in
demand. It can always purchase or command a
greater or smaller quantity of labour, and somebody can
always be found who is willing to do something in order to
obtain it” ([O.U.P., Vol. I, p. 165; Garnier,] l. I,
ch. XI p. 305).

“But <why?> “land,
in almost any situation, produces a greater quantity of
food than what is sufficient to maintain all the
labour necessary for bringing it to market, in the most
liberal way in which that labour is ever maintained.
The surplus, too, is always more than sufficient to
replace the stock which employed that labour, together
with its profits. Something, therefore, always
remains for a rent to the landlord” ([O.U.P., Vol. I,
p. 166; Garnier,] l.c., pp. 305-06).

This sounds quite physiocratic and contains
neither proof nor explanation of why the
“price” of these particular commodities
pays a rent, a surplus over and above the
“sufficient price”.

As an example he immediately refers to pasture and
uncultivated pasture. Then follows the
proposition on differential rent:

“The rent of land not only varies
with its fertility, whatever be its produce, but with its
situation, whatever be its fertility” ([ibid., p.
166] l.c., p. 133).

On this occasion rent and profit appear as mere
surplus of the product, after that part of it
has been deducted in kind which feeds the
worker. (This is really the physiocratic view,
which is based on the fact that in an agricultural country
man lives almost exclusively on the agricultural product,
and industry manufacture, itself appears as a rural
side-line which uses the local product of
nature.)

“A greater quantity of labour,
therefore, must be maintained out of it[b]; and the surplus, from which are
drawn both the profit of the farmer and the rent of
the landlord, must be diminished” ([O.U.P.,
Vol. I, p. 166; Garnier,] l.c., p. 307).

The growing of corn must therefore yield a greater profit
than pasture.

“A cornfield of moderate
fertility produces a much greater quantity of food for
man than the best pasture of equal extent.”

(Thus it is not a question of price here, but of the
absolute quantity of food for man.)

“Though its cultivation requires
much more labour, yet the surplus which
remains after replacing the seed and maintaining all that
labour, is likewise much greater.”

(Although corn costs more labour, the cornfield
yields a larger surplus of food, after labour has
been paid, than a meadow used for stock raising. And
it is worth more, not because corn costs more labour,
but because the surplus in corn contains more
nourishment.)

“If a pound of butcher’s meat,
therefore, was never supposed to be worth more
than a pound of bread, this greater surplus”
(because the same area of land yields more pounds of corn
than meat) “would everywhere be of greater
value,” <because it is assumed, that a
pound of bread equals a pound of meat (in value), and that,
after the workers have been fed, more pounds of bread than
pounds of meat are left over from the same area of land>
“and constitute a greater fund both for the profit of
the farmer and the rent of the landlord”
([O.U.P., Vol. I, pp. 167-68; Garnier,] l.c.,
pp. 308-09).

Having replaced the natural price by the sufficient
price, and declared rent to be the surplus over and above
the sufficient price, Smith forgets altogether, that it is a
question of price, and derives rent from the ratio
between the amount of food yielded by agriculture and
the amount of food consumed by the agricultural
worker.

In point of fact—apart from this
physiocratic interpretation—he
postulates that the price of the agricultural
product which supplies the principal food pays rent
in addition to profit. This is the starting-point for
his further arguments. With the extension of
cultivation, the natural pastures become insufficient for
stock raising and cannot satisfy the demand for butcher’s
meat. Cultivated land has to be employed for this
purpose. | The price
of meat therefore has to rise to the point where it pays not
only the labour which is employed in stock raising,
but also:

“the rent which the landlord, and
the profit which the farmer, could have drawn from such land
employed in tillage. The cattle bred upon the most
uncultivated moors, when brought to the same market, are, in
proportion to their weight or goodness, sold at the same
price as those which are reared upon the most improved
land. The proprietors of those moors profit by it, and
raise the rent of their land in proportion to the price
of their cattle.”

(In this passage Adam Smith correctly derives the
differential rent from the surplus of the market-value over
the individual value. In this case, however, the
market-value rises, not because there is a transition from
better to worse, but from less fertile to more fertile
land.)

“It is thus that, in the progress of
improvement, the rent and profit of unimproved
pasture come to be regulated in some measure by the rent
and profit of what is improved, and these again by the
rent and profit of corn” ([O.U.P., Vol. I,
pp. 168-69; Garnier,] pp. 310-11).

“But where there is no Local
advantage of this kind, the rent and profit of corn, or
whatever else is the common vegetable food of the people,
must naturally regulate, upon the land which is fit
for producing it, the rent and profit of pasture.

“The use of the artificial grasses,
of turnips, carrots, cabbages, and the other
expedients which have been fallen upon to make an
equal quantity of land feed a greater number of cattle
than when in natural grass, should somewhat reduce, it
might be expected, the superiority which, in an improved
country, the price of butcher’s meat naturally has over that
of bread. It seems accordingly to have done so”
etc. ([O.U.P., Vol. I, p. 171; Garnier,] l.c.,
p. 315).

Having thus set forth the relationship between rent
yielded by pasture and by tilled land, Smith
continues:

“In all great countries, the greater
part of the cultivated lands are employed in producing
either food for men or food for cattle. The rent and
profit of these regulate the rent and profit of all other
cultivated land. If any particular produce afforded
less, the land would soon be turned into corn or pasture;
and if any afforded more, some part of the lands in corn or
pasture would soon be turned to that produce”
([O.U.P., Vol. I, pp. 172-73; Garnier,] l.c., p. 318).

Then he speaks of vineyards, fruit and vegetable gardens,
etc

“The rent and profit of those
productions, therefore, which require either a greater
original expense of improvement in order to fit the land for
them, or a greater annual expense of cultivation, though
often much superior to those of corn and pasture, yet when
they do no more than compensate such extraordinary expense,
are in reality regulated by the rent and profit of those
common crops” ([O.U.P., Vol. I, p. 176; Garnier,]
pp. 323-24).

Then he passes on to sugar cultivation in the colonies
[and] tobacco.

“It is in this manner that the rent
of the cultivated land, of which the produce is human food,
regulates the rent of the greater part of other cultivated
land.”

“In Europe, corn is the principal
produce of land, which serves immediately for human
food. Except in particular situations, therefore, the
rent of corn-land regulates in Europe that of all other
cultivated land” ([O.U.P., Vol. I, p. 180; Garnier,]
l.c., pp. 331-32).

Adam Smith then returns to the physiocratic theory, as
interpreted by him, namely that food creates consumers for
itself. [He asserts that] if corn were replaced by
some other crop, which with the same amount of labour
yielded a much greater quantity of food on the most common
land, then

“the rent of the landlord,
o r the sur plus quantity of food which would remain
to him, after paying the labour, and replacing the stock of
the farmer, together with its ordinary profits, would
necessarily be much greater. Whatever was the rate at
which labour was commonly maintained in that country, this
greater surplus could always maintain a greater quantity
of it, and, consequently, enable the landlord to
purchase or command a greater quantity of it”
([O.U.P., Vol. I, p. 181; Garnier,] l.c., p. 332).

Adam Smith cites rice as an example.

“In Carolina … the
planters, as in other British colonies, are
generally both farmers and landlords, and rent,
consequently, is confounded with profit” ([O.U.P.,
Vol. I, p. 181; Garnier,] l.c., p. 333).

| The rice field,
however

“is unfit either for corn, or
pasture, or vineyard, or, indeed, for any other vegetable
produce that is very useful to men; and the lands which are
fit for those purposes are not fit for rice. Even in
the rice countries, therefore, the rent of rice lands cannot
regulate the rent of the other cultivated land which can
never be turned to that produce” ([O.U.P., Vol. I,
pp. 181-82; Garnier,] l.c., p. 334).

Second example potatoes (Ricardo’s criticism of
this has been mentioned earlier). If potatoes became
the principal food, in place of corn,

“…the same quantity of
cultivated land would maintain a much greater number
of people; and the labourers being generally fed with
potatoes, a greater surplus would remain after
replacing all the stock, and maintaining all the labour
employed in cultivation. A greater share of
this surplus, too, would belong to the landlord.
Population would increase, and rents would rise much beyond
what they are at present” ([O.U.P., Vol. I, p. 182;
Garnier,] l.c., p. 335).

A few more comments on wheaten bread, bread made of
oatmeal, and on potatoes conclude the first section of
Chapter XI.

One can therefore sum up this section, which deals with
the product of land which always pays a rent, as
follows: after postulating the rent of the principal
vegetable food, it sets forth how this rent regulates the
rent of cattle-breeding, wine-growing, market gardening,
etc. There is nothing about the nature of rent
itself, except the general thesis that, provided rent
exists, its amount is determined by fertility and
situation. But this only relates to differences in
rents, differences in the magnitude of rents. But why
does his product always pay a rent? Why is its
ordinary price always higher than its sufficient
price? Smith leaves price out of account here and
reverts to the physiocratic theory. What runs through
it, however, is that the demand is always so great
because the product itself creates the demand, [since it
creates] its own consumers. Even provided that this
were so it is incomprehensible why the demand should rise
above the supply and thus force the price above the
sufficient price. But there is here a secret
recollection of the image of the natural price which
includes rent as well as profit and wages and which is paid
when supply corresponds with demand.

“When the quantity brought to market
is just sufficient to supply the effectual demand, and no
more, the market price naturally comes to be …
exactly … the same with the natural
price” ([O.U.P., Vol. I, p. 63; Garnier,] l.c.,
p. 114).

It is however characteristic that Adam Smith nowhere in
this section states this clearly. In opening Chapter
XI, he had just said that rent does not enter into price as
a component part. The contradiction was too
conspicuous.

### [3. Adam Smith’s Explanation of How the Relation Between Supply and Demand Affects the Various Types of Products from the Land. Smith’s Conclusions Regarding the Theory of Rent]

“Part II: Of the Produce of Land which sometimes
does, and sometimes does not, afford Rent.”

It is actually only in this section that the general
nature of rent is first discussed.

“Human food seems to be the
only produce of land, which always and
necessarily affords some rent to the
landlord.” (Why “always” and
“necessarily”, has not been shown.)
“Other sorts of produce sometimes may, and sometimes
may not, according to different circumstances”
([O.U.P., Vol. I, p. 183; Garnier,] l.c., p. 337).

“After food, clothing and
lodging are the two great wants of mankind.

“Land, in its original rude state,
can afford the materials of clothing and lodging to a
much greater number of people than it can
feed.” As a result of this
“superabundance of those materials” in
proportion to the number of people the land can feed, i.e.,
in proportion to the population, these materials
“cost” little or nothing. A large part of
these “materials” lies around unused and useless
“and the price of what is used is considered as
equal only to the labour and expense of fitting it for
use.” This price however affords “no rent to
the landlord”. On the other hand, where the land
is in an improved state, the number of people whom “it
can feed”, i.e., the population, is greater than the
quantity of those materials which it supplies, at least
“in the way in which they require them, and are
willing to pay for them”. There is a relative
“scarcity” of these materials “which
necessarily augments their value” …
“there is frequently a demand for more than can be
had.” More is paid for them than “the
expense of bringing them to market. Their price,
therefore, can always afford some rent to the
landlord” ([O.U.P., Vol. I, p. 184; Garnier,] l.c.,
pp. 338 to 339).

| Here therefore an
explanation of rent [is] derived, from the excess of
demand over the supply which can be provided at
the sufficient price.

The original materials of clothing were the furs and
skins “of the larger animals”. Among
nations of hunters and shepherds, whose food consists
chiefly of the flesh of animals, “every man, by
providing himself with food, provides himself with the
materials of more clothing than he can wear
“. Without foreign trade, the greater part of
them would be thrown away as useless. Through the
additional demand provided by foreign trade, the price of
this surplus of materials is raised “above what it
costs to send them” to be sold. This price
“affords, therefore, some rent to the
landlord”. Through its market in Flanders,
English wool thus added “something to the rent of the
land which produced it” ([O.U.P., Vol. I, pp. 184-85;
Garnier,] l.c., pp. 339-40).

Foreign trade here raises the price of an
agricultural by-product to such an extent, that the land
which produces it can yield some rent.

“The materials of lodging
cannot always be transported to so great a distance as those
of clothing, and do not so readily become an object of
foreign commerce. When they are superabundant
in the country which produces them, it frequently happens,
even in the present commercial state of the world, that they
are of no value to the landlord.” Thus a stone
quarry in the neighbourhood of London may yield a rent,
whereas in many parts of Scotland and Wales, it may
not. Similarly with timber. “In a populous
and well-cultivated country” it will provide a rent,
but “in many parts of North America” it will rot
on the ground. The landowner would be glad to get rid
of it. “When the materials of lodging are so
superabundant, the part made use of is worth only the labour
and expense of fitting it for that use. It affords no
rent to the landlord, who generally grants the use of it to
whoever takes the trouble of asking it. The
demand of wealthier nations, however, sometimes
enables him to get a rent for it” ([O.U.P., Vol. I,
pp. 185-86; Garnier,] l.c., pp. 340-41).

Countries are populated, not in proportion to the
“number of people whom their produce can clothe and
lodge, but in proportion to that of those whom
it can feed. When food is provided, it is easy to
find the necessary clothing and lodging. But though
these are at hand, it may often be difficult to find
food. In some parts of the British Dominions, what is
called a house may be built by one day’s labour of one
man.” Among savage and barbarous nations, a hundredth
of the labour of a whole year will be sufficient to provide
them with what they require in clothing and lodging.
The other 99 hundredths [are] often necessary to provide
them with the food they need. “But when, by the
improvement and cultivation of land, the labour of one
family can provide food for two, the labour of half the
society becomes sufficient to provide food for the
whole.” The other half can then satisfy the
other wants and fancies of mankind. The principal
objects of those wants and fancies are clothing, lodging,
household furniture, and what is called
luxury. The desire for food is limited.
Those other desires are unlimited. Those who possess a
surplus of food “are always willing to exchange the
surplus”. “The poor, in order to obtain
food”, exert themselves to satisfy those
“fancies” of the rich, and, moreover, compete
with one another in their endeavours. The
number of workmen increases with the quantity of food, i.e.,
in proportion to the progress of agriculture. [The
nature of] their “business admits of the utmost
subdivisions of labour”; the quantity of materials
which they work up therefore increases even more rapidly
than their numbers. “Hence arises a demand for
every sort of material which human invention can employ,
either usefully or ornamentally, in building, dress,
equipage, or household furniture; for the fossils and
minerals contained in the bowels of the earth, the precious
metals, and the precious stones.

“Food is, in this
manner, not only the original source of rent, but
every other part of the produce of land which afterwards
affords rent, derives that part of its value from the
improvement of the powers of labour in producing food,
by means of the improvement and cultivation of land”
([O.U.P., Vol. I, pp. 186-88; Garnier,] l.c.,
pp. 342-45).

What Smith says here, is the true physical basis of
Physiocracy, namely, that the creation of surplus-value
(including rent) always has its basis in the relative
productivity of agriculture. The first real form of
surplus-value is surplus of agricultural produce (food) ,
and the first real form of surplus labour arises when one
person is able to produce the food for two. Otherwise
this has nothing to do with the development of rent, this
specific form of surplus-value, which presupposes capitalist
production.

Adam Smith continues:

The other parts of the produce of the land (apart from
food), which later afford rent, do not afford it
always. The demand for them, even in the most
cultivated countries, is not always great enough,
“to afford a greater price than what is
sufficient to pay the labour, and replace, together with
its ordinary profits, the stock which must be employed in
bringing them to market. | Whether it is or is
not such, depends upon different circumstances”
([O.U.P., Vol. I, p. 188; Garnier,] l,c., p. 345).

Here therefore again: Rent arises from the demand
being greater than the supply at the sufficient price
which only includes wages and profits, but no
rent. What else does this mean, but that the
supply at the sufficient price is so great that
landed property cannot offer any resistance to the
equalisation of capitals or labour? That therefore,
even though landed property exists legally, it does not
exist in practice, or cannot be effective as such in
practice? Adam Smith’s mistake is that he fails to
recognise that if landed property sells [products]
above the sufficient price, it sells [them] at their
value. His positive point, compared with
Ricardo, is that he realises it depends on the
circumstances, whether or not landed property can assert
itself economically. It is therefore essential to
follow this part of his argument step by step. He
begins with the coal mine, then goes over to timber and then
returns to the coal mine, etc. Accordingly we shall
let him start with timber.

The price of wood varies with the state of
agriculture, for the same reasons as does the price of
cattle. When agriculture was in its infancy, forests
were dominant and a sheer nuisance to the landowner, who
would gladly give it to anyone for the cutting. As
agriculture advances, there is clearance of forests, partly
through the expansion of tillage, partly through the
increase in herds of cattle, which eat up, gnaw at, roots
and young trees. “These” [cattle] though
they do not increase in the same proportion as corn,
which is altogether the acquisition of human
industry, yet multiply under the care and protection of
men.” The scarcity of wood, thus created, raises its
price. Hence it can afford so high a rent that
tilled land (or land that could be used for tillage) is
converted into woodland. This is the case in Great
Britain. The rent of wood can never, for any length of
time, rise above that of corn or pasture, but it may
reach that level ([O.U.P., Vol. I, pp. 189-90; Garnier,]
l.c., pp. 347-49).

Thus in fact, the rent of woodland is by nature identical
with that of pasture. It belongs therefore in this
category, although wood does not serve for food. The
economic category does not depend on the use-value of
the product, but on whether or not it is convertible into
arable land and vice versa.

Coal mines. Smith observes correctly, that
the fertility or in-fertility of mines in general depends on
whether the same quantity of labour can extract a larger or
a smaller amount of mineral from the mine.
Infertility can offset the favourable
situation, so that such mines cannot be exploited at
all. On the other hand, an unfavourable
situation can offset the fertility, so that despite
its natural fertility, such a mine cannot be
exploited. This is in particular the case where there
are neither good roads, nor shipping ([O.U.P., Vol. I,
pp. 188-89; Garnier,] l.c., pp. 346-47).

There are mines whose produce just reaches the
sufficient price. Hence they pay profit for the
entrepreneur but no rent. They can therefore be worked
only by the landowner himself. In this way he gets
“the ordinary profit of the capital which he
employs”. There are many mines of this type in
Scotland. These could not be exploited in any other
way.

“The landlord will allow nobody
else to work them without paying some rent, and nobody can
afford to pay any” ([O.U.P., Vol. I, p. 188;
Garnier,] l.c., p. 346).

Here Adam Smith has correctly defined under what
circumstances land which has been appropriated pays
no rent, namely where landowner and entrepreneur are
one person. He has already told us earlier that
this is so in the colonies.

A farmer cannot cultivate the land there because he
cannot pay any rent. But the owner can cultivate it
with profit, although it does not pay him a rent. This
is the case, for example, in the colonies in Western
America, because new land can always be appropriated.
The land as such is not an element that offers resistance,
and the competition of landowners who cultivate the land
themselves is here in fact competition between workers or
capitalists. The position of coal mines, or mines in
general, is different in the supposed circumstances.
The market-value, as determined by the mines which supply
their product at this value, yields a smaller rent, or no
rent at all but just covers the cost-price in the case of
mines that are less fertile or less favourably
situated. These mines can only be worked by persons
for whom the resistance of landed property and the
consequent exclusion of others from the land, does not
exist, because they are landowners and capitalists in one
person; [this] only happens where in fact landed
property disappears as an independent element opposed to
capital. The position differs from that of the
colonies in that: in the latter, the landowner cannot
prohibit the exploitation of new land by
anyone. In the former he can do so. He only
gives himself the permission to exploit the mine. This
does not enable him to draw a rent, but it does enable him
to exclude others and to invest his capital in the mine,
with profit.

What Adam Smith writes about the regulation of rent by
the most fertile mine, I have already commented on, when
discussing Ricardo and his polemic. Here only one
proposition needs to be stressed:

“The lowest price”
(previously sufficient price) “at which coals can be
sold for any considerable time, is, like that of all other
commodities, the price which is barely sufficient to
replace, together with its ordinary profits, the stock which
must be employed in bringing them to market”
([O.U.P., Vol. I, p. 191; Garnier,] l.c., p. 350).

It is evident that the sufficient price has taken
the place of the natural price, Ricardo regards them
as identical, and rightly so.

| Smith maintains,

that the rent of coal mines is much smaller than that of
agricultural products: while with the latter the rent
commonly amount to one third [of the gross produce), in coal
mines a fifth is a very great rent, and a tenth the common
rent. Metal mines are not so dependent on their
situation, since [their products] are more easily
transported and the world market is therefore open to
them. Their value, therefore, is more dependent on
their fertility than their situation, while with coal mines,
the opposite is the case. The products of the most
distant metal mines compete with one another.
“The price, therefore, of the coarse, and still more
that of the precious metals, at the most fertile
mines in the world, must necessarily more or less affect
their price at every other in it” ([O.U.P., Vol. I,
pp. 191-92; Garnier,] l.c., pp. 351-52).

“The price of every metal, at every
mine, therefore, being regulated in some measure by its
price at the most fertile mine in the world that is actually
wrought, it can, at the greater part of mines, do
very little more than pay the expense of working, and
can seldom afford a very high rent to the
land-lord. Rent accordingly, seems at the greater part
of mines to have but a small share in the price of the
coarse, and a still smaller in that of the precious
metals. Labour and profit make up the greater part of
both” ([O.U.P., Vol. I. p. 192; Garnier,] l.c.,
pp. 353-54).

Adam Smith correctly sets forth here the case presented
in Table C.

When speaking of rent in connection with precious
metals. Adam Smith again gives his interpretation of
the sufficient price, which he puts in the place of the
natural price. Where he speaks of non-agricultural
industry, he has no need for this, since the sufficient and
the natural price coincide here, according to his original
explanation namely that it is the price which repays the
capital outlay plus the average profit.

“The lowest price at which the
precious metals can be sold … during any considerable
time, is regulated by the same principles which fix the
lowest ordinary price of all other goods. The stock
which must commonly be employed, the food, clothes, and
lodging, which must commonly be consumed in bringing them
from the mine to the market, determine it. It must at
least he sufficient to replace that stock, with the ordinary
profits” ([O.U.P., Vol. I, p. 195; Garnier,] l.c.,
p. 359).

With regard to precious stones, he observes
that:

“The demand for the precious
stones arises altogether from their beauty. They
are of no use but as ornaments; and the merit of their
beauty is greatly enhanced by their scarcity, or by the
difficulty and expense of getting them from the mine,
Wages and profit accordingly make up, upon most occasions,
almost the whole of the high price. Rent comes in but
for a very small share, frequently no share; and the most
fertile mines only afford any considerable rent”
([O.U.P., Vol. I, p. 197; Garnier,] l.c., p. 361).

There can only be a differential rent here.

“As the price, both of the precious
metals and of the precious stones, is regulated all over the
world by their price at the most fertile mine in it, the
rent which a mine of either can afford to its proprietor is
in proportion, not to its absolute, but to what may
be called its relative fertility, or to its
superiority over other mines of the same kind. If new
mines were discovered as much superior to those of Potosi as
they were superior to those of Europe, the value of silver
might be so much degraded as to render even the mines of
Potosi not worth the working” ([O.U.P., Vol. 1,
p. 197; Garnier,] l.c., p. 362).

The products of the less fertile precious metal and
precious stone mines carry no rent, because it is
always the most fertile mine which determines
market-value and ever more fertile new mines are being
opened up—the line is always in the ascending
direction, Hence they are sold below their value,
merely at their cost-price.

“A produce, of which the value is
principally derived from its scarcity, is necessarily
degraded by its abundance” ([O.U.P., Vol. I, p. 198;
Garnier,] l.c., p. 363).

Then Adam Smith’s argument again goes somewhat wrong.

“It is otherwise in estates above
ground. The value, both of their produce and of their
rent, is in proportion to their absolute, and not to
their relative fertility. The land which
produces a certain quantity of food, clothes, and lodging,
can always feed, clothe, and lodge a certain number of
people; and whatever may be the proportion of the
landlord” (the very question is whether he takes
any share of the produce, and in what proportion) | “it will always give him
a proportionable command of the labour of those people, and
of the commodities with which that labour can supply
him” ([O.U.P., Vol. I, p. 198; Garnier,] l.c.,
pp. 363-64).

“The value of the most barren lands
is not diminished by the neighbourhood of the most
fertile. On the contrary, it is generally increased by
it. The great number of people maintained by the
fertile lands afford a market to many parts of the
produce of the barren, which they could never have found
among those whom their own produce could
maintain.”

(But only if it does not produce the same
product as the fertile lands in its neighbourhood; only
if this product of the barren lands does not compete
with that of the more fertile. In this case Adam Smith
is right and indeed, this is of importance to the way in
which the total amount of rent from different kinds of
natural products may increase in consequence of the
fertility of the land which yields food.)

“Whatever increases the fertility of
land in producing food, increases not only the value of the
lands upon which the improvement is bestowed” (it may
reduce this value and even destroy it), “but
contributes likewise to increase that of many other lands,
by creating a new demand for their produce” or,
rather by creating a demand for new
products.” ([O.U.P., Vol. I, p. 198; Garnier,] l.c.,
p. 364.)

But in all this, Adam Smith does not offer any
explanation for absolute rent, which he presupposes to exist
for land that produces food. He is correct when he
observes that it does not necessarily exist for other lands,
mines, for instance, because they are always available in
such relatively unlimited quantities (in comparison
with demand), that landed property cannot offer any
resistance to capital [so that] even if it exists in a legal
sense, it does not exist in the economic sense.

(See p. 641 on house rent.) |

| See p. 632. On
house rent Adam Smith says:

“Whatever part of the whole rent of a
house is over and above what is sufficient for
affording this reasonable profit” (to the
builder) “naturally goes to the ground-rent; and where
the owner of the ground, and the owner of the building, are
two different persons, it is in most cases, completely paid
to the former. In country houses, at a distance from
any great town, where there is a plentiful choice of ground,
the ground-rent is scarcely any thing, or no more than what
the space upon which the house stands, would pay employed in
agriculture.” (Book V, Chapter II.)

In the case of the ground-rent of houses,
situation constitutes just as decisive a factor for
the differential rent, as fertility (and situation) in the
case of agricultural rent.

Adam Smith shares with the Physiocrats, not only the
partiality for agriculture and the landlord, but also the
view that they are particularly suitable objects of
taxation. He says:

“Both ground-rents, and the ordinary
rent of land, are a species of revenue, which the owner in
many cases enjoys, without any care or attention of his
own. Though a part of this revenue should be taken
from him, in order to defray the expenses of the State, no
discouragement will thereby be given to any sort of
industry. The annual produce of the land and labour of
the society, the real wealth and revenue of the great body
of the people, might be the same after such a tax as
before. Ground-rents, and the ordinary rent of land
are, therefore, perhaps, the species of revenue, which can
best bear to have a peculiar tax imposed upon them”
(Book V, Ch. II).

The considerations which Ricardo (p. 230) advances
against Adam Smith’s views on the subject, are very
philistine. |

### [4. Adam Smith’s Analysis of the Variations in the Prices of Products of the Land]

| “Part
III, Of the variations in the Proportion between the
respective Values of that sort of Produce which always
affords Rent, and of that which sometimes does, and
sometimes does not, afford Rent.” ([Garnier,] Book
I, Vol. II, Ch. XI.)

“In a country naturally fertile, but
of which the far greater part is altogether uncultivated,
cattle, poultry, game of all kinds, etc., as they can be
acquired with a very small quantity of labour, so they will
purchase or command but a very small quantity.”
([O.U.P., Vol. I, p. 212; Garnier,] Vol. II, p. 25.)

The peculiar manner in which Adam Smith mixes up
the measuring of value by the quantity of labour, with the
price of labour or the quantity of labour which a commodity
can command, is evident from the above quotation, and
especially from the following passage, which also shows how
it has come about that at times he elevates corn to the
measure of value.

“In every state of society, in every
stage of improvement, corn is the production of human
industry. But the average produce of every sort of
industry is always suited, more or less exactly, to the
average consumption; the average supply to the average
demand. In every different stage of
improvement, besides, the raising of equal
quantities of corn in the same soil and climate, will, at an
average, require nearly equal quantities of
labour; or, what comes to the same thing, the price
of nearly equal quantities; the continual increase of
the productive powers of labour, in an improved state of
cultivation, being more or less counterbalanced by the
continual increasing price of cattle, the
principal instruments of agriculture. Upon all
these accounts, therefore, we may rest assured, that
equal quantities of corn will in every state of
society, in every state of improvement, more nearly
represent, or be equivalent to, equal quantities of
labour, than equal quantities of any other part of the
rude produce of land. Corn, accordingly … is,
in all the different stages of wealth and improvement, a
more accurate measure of value than any other commodity or
set of commodities… Corn, besides, or
whatever else is the common and favourite vegetable food of
the people, constitutes, in every civilised country, the
principal part of the subsistence of the
labourer… The money price of labour,
therefore, depends much more upon the average money price of
corn, the subsistence of the labour, than upon that of
butcher’s meat, or of any other part of the rude produce of
land. The real value of gold and silver, therefore,
the real quantity of labour which they can purchase or
command, depends much more upon the quantity of corn which
they can purchase or command, than upon that of butcher’s
meat, or any other part of the rude produce of land”
([O.U.P., Vol. I, pp. 213-14; Garnier,] l.c.,
pp. 26-28).

When comparing the value of gold and silver, Adam Smith
once more sets forth his views on the sufficient price and
notes | expressly that
it excludes rent:

“A commodity may be said to be
dear or cheap not only according to the
absolute greatness or smallness of its usual price, but
according as that price is more or less above the lowest for
which it is possible to bring it to market for any
considerable time together. This lowest price is
that which barely replaces, with a moderate profit, the
stock which must be employed in bringing the commodity
thither. It is the price which affords nothing to the
landlord, of which rent makes not any component part, but
which resolves itself altogether into wages and
profit” ([O.U.P., Vol. I, p. 243; Garnier,]
Vol. II, p. 81).

“The price of diamonds and other
precious stones may, perhaps, be still nearer to the lowest
price at which it is possible to bring them to market, than
even the price of gold” ([O.U.P., Vol. I, p. 244;
Garnier,] Vol. II, p. 83).

There are three sorts of raw products ([O.U.P., Vol. I,
p. 248; Garnier,] Vol. II, p. 89). The first,
whose increase is almost, or entirely, independent of human
industry; the second, which can be increased in
proportion to the demand; the third, upon whose
increase human industry only exercises a “limited or
uncertain” influence.

First sort: Fishes, rare birds, different sorts of
game, almost all wild-fowl, in particular the birds of
passage, etc. The demand for these increases greatly
with wealth and luxury.

“The quantity of such commodities,
therefore, remaining the same, or nearly the same, while the
competition to purchase them is continually increasing,
their price may rise to any degree of extravagance”
([O.U.P., Vol. I, pp. 248-49; Garnier,] Vol. II,
p. 91).

Second sort: “It consists in those useful
plants and animals, which, in uncultivated countries, nature
produces with such profuse abundance, that they are of
little or no value, and which, as cultivation advances, are
therefore forced to give place to some more profitable
produce. During a long period in the progress of
improvement, the quantity of these is continually
diminishing, while, at the same time, the demand for them is
continually increasing. Their real value, therefore,
the real quantity of labour which they will purchase or
command, gradually rises, till at last it gets so high as to
render them as profitable a produce as any thing else which
human industry can raise upon the most fertile and best
cultivated land. When it has got so high, it cannot
well go higher. If it did, more land and more industry
would soon be employed to increase their quantity”
([O.U.P., Vol. I, pp. 250-51; Garnier,] Vol. II,
pp. 94-95). So, for instance, with cattle.

“Of all the different substances,
however, which compose this second sort of rude produce,
cattle is, perhaps, that of which the price, in the progress
of improvement, rises first to this height” ([O.U.P.,
Vol. I, p. 252; Garnier,] Vol. II, pp. 96-97).
“As cattle are among the first, so perhaps
venison is among the last parts of this sort of rude
produce which bring this price” (i.e., that price
which makes it worth while cultivating the soil in order to
feed them). “The price of venison in Great
Britain, how extravagant soever it may appear, is not near
sufficient to compensate the expense of a deer park, as is
well known to all those who have had any experience in the
feeding of deer” ([O.U.P., Vol. I, p. 256; Garnier,]
Vol. II, p. 104).

“Thus, in every farm, the offals of
the barn and stable will maintain a certain number of
poultry. These, as they are fed with what would
otherwise be lost, are a mere save-all; and as they cost the
farmer scarce any thing, so he can afford to sell them for
very little.” While this supply is sufficient, poultry
[is] as cheap as butcher’s meat. With the growth of
wealth, the demand grows, and consequently the price of
poultry [rises] above that of butcher’s meat, until
“it becomes profitable to cultivate land for the sake
of feeding them” ([O.U.P., Vol. I, p. 257; Garnier,]
Vol. II, pp. 105-06). Thus in France, etc.

The hog, like poultry, is “originally kept
as a save-all.” It lives on refuse. In the end
the price rises until land must be cultivated specifically
for its food ([O.U.P., Vol. I, pp. 258-59; Garnier,]
Vol. II, pp. 108-09).

Milk, dairy farming ([O.U.P., Vol. I, p. 259,
et. seq.; Garnier,] Vol. II, p. 110, et. seq.).
(Butter, cheese ibid.)

According to Adam Smith, the gradual rise in the
price of these raw products only proves that, little
by little, they are becoming products of human
industry, while previously, they were practically only
products of nature. Their transformation from
products of nature into products of industry is itself the
result of the advance of cultivation, which is increasingly
limiting the scope of the spontaneous productions of
nature. On the other hand, under less developed
conditions of production, a large part of these products was
sold below its value. The commodities are sold
at their value (hence the rise in prices), as soon as
they cease to be a by-product and become an independent
product of some branch of agriculture.

“The lands of no country, it is
evident, can ever be completely cultivated and improved,
till once the price of every produce, which human
industry is obliged to raise upon them, has got so high as
to pay for the expense of complete improvement and
cultivation. In order to do this, the price of
each particular produce must be sufficient, first, to pay
the rent of good corn land, as it is that which regulates
the rent of the greater part of other cultivated land; and,
secondly, to pay the labour and expense of the farmer as
well as they are commonly paid upon good corn land; or, in
other words, to replace with the ordinary profits the
stock which he employs about it. This rise in
the price of each particular produce must evidently
| be previous to
the improvement and cultivation of the land which is
destined for raising it” “… those
different sorts of rude produce … have become
worth, not only a greater quantity of silver, but a
greater quantity of labour and subsistence than
before. As it costs a greater quantity of labour
and subsistence to bring them to market, so, when they
are brought thither, they represent or are
equivalent to a greater quantity” ([O.U.P.,
Vol. I, pp. 261-62; Garnier,] Vol. II, pp. 113-15).

Here it is once more evident, how Smith is only able to
use value as determined by the quantity of labour it [value]
can buy, in so far as he confuses it with value as
determined by the quantity of labour required for the
production of the commodities.

Third sort: This is the raw product,

“in which the efficacy of human
industry, in augmenting the quantity, is either limited or
uncertain” ([O.U.P., Vol. I, p. 262; Garnier,] Vol.
II, p. 115).

Wool and raw hides are limited by the
number of large and small cattle that are kept. But
the first by-products already have a large
market, while the animal itself does not yet have
this. The market for butcher’s meat is almost always
confined to the inland market. Wool and raw hides,
even in the rude beginnings [of cultivation], are in most
cases already sold in foreign markets. They are easily
transported and furnish the raw material of many
manufactured goods. They may thus find a market in
countries which are more developed industrially when the
industry in the country where they are produced does not yet
require them.

“In countries ill cultivated, and
therefore but thinly inhabited, the price of the wool and
the hide bears always a much greater proportion to that of
the whole beast, than in countries where, improvement and
population being further advanced, there is more demand for
butcher’s meat.” The same applies to
“tallow”, In the progress of industry and
population, the rise in price of cattle affects the
carcase more than the wool or
hide. For with the increase in industry and
population of a country, the market for meat expands,
whereas that for the by-products already previously extended
beyond the boundaries of the country. But with the
development of industry in the country itself, the price for
wool, etc., will nevertheless also rise somewhat.
([O.U.P., Vol. I, pp. 263-64; Garnier,] Vol. II,
pp. 115-19).

Fish. ([Garnier,] Vol. II,
pp. 129-30.) If the demand for fish rises, then its
supply requires more labour. “The fish must
generally be sought for at a greater distance, larger
vessels must be employed, and more expensive machinery of
every kind made use of.” “.., it will generally
be impossible to supply the … extended market,
without employing a quantity of labour greater than in
proportion to what had been requisite for supplying the
narrow and confined one.” “The real price
of this commodity, therefore, naturally rises in the
progress of improvement” ([O.U.P., Vol. I, p. 270;
Garnier,] Vol. II, p. 130).

Here Adam Smith therefore determines the real
price by the quantity of labour necessary for the
production of the commodity.

According to Adam Smith, the real price of
vegetable food (corn, etc.) must fall in the
course of civilisation.

“The extension of improvement and
cultivation, as it necessarily raises more or less,
in proportion to the price of corn, that of every sort of
animal food, so it as necessarily lowers that of,
I believe, every sort of vegetable food. It
raises the price of animal food; because a great part of the
land which produces it, being rendered fit for
producing corn, must afford to the landlord and farmer the
rent and profit of corn land. It lowers the price
of vegetable food; because, by increasing the
fertility of the land, it increases its abundance.
The improvements of agriculture, too, introduce many sorts
of vegetable food, which requiring less land, and not more
labour than corn, come much cheaper to market. Such
are potatoes and maize… Many sorts of vegetable
food, besides, which in the rude state of agriculture are
confined to the kitchen garden, and raised only by the
spade, come, in its improved state, to be introduced into
common fields, and to be raised by the plough; such as
turnips, carrots, cabbages, etc.” ([O.U.P., Vol. I,
pp. 278-79; Garnier,] Vol. II, pp. 145-46).

Adam Smith sees that the price of manufactured
commodities in general has fallen wherever

“the real price of the rude
materials either does not rise at all, or does not rise
very much” ([O.U.P., Vol. I, p. 280; Garnier,]
p. 149).

On the other hand, he asserts that the real price of
labour, i.e., wages, has risen with the progress in
production. Hence also, according to him, the prices
of commodities do not necessarily rise because of a rise in
wages, or the price of labour, although wages [form]
“a component part of the natural price” and even
of the “sufficient price” or the “lowest
price at which commodities can be brought to
market”. So how does Adam Smith explain
this? By a fall in profits? No. (Although
he assumes that the general rate of profit falls in the
course of civilisation.) Or of rent? No
again. He says:

“In consequence of better machinery,
| of greater dexterity,
and of a more proper division and distribution of work, all
of which are the natural effects of improvement, a much
smaller quantity of labour becomes requisite for
executing any particular piece of work; and though,
in consequence of the flourishing circumstances of
society, the real price of labour should rise very
considerably, yet the great diminution of the
quantity,” requisite for each particular article[c], “will
generally much more than compensate the greatest rise which
can happen in the price.” ([O.U.P., Vol. I, p. 280;
Garnier,] Vol. II, p. 148.)

Thus the value of the commodities falls, because a
smaller quantity of labour is required to produce them; the
value moreover falls although the real price of
labour rises. If here the real price of labour
means the value [of labour], then the profit must
fall, if the price of the commodity falls as a result
of the fall in its value. If, on the other
hand, it means the quantity of the means of subsistence
received by the worker, then the Smithian thesis is correct
even where profit is rising.

The extent to which Adam Smith uses the correct
definition of value, wherever he actually analyses [facts]
can be seen at the end of the chapter where he examines why
woollen cloths were dearer in the 16th century,
etc.

“It cost a greater quantity of
labour to bring the goods to market. When they
were brought thither, therefore, they must have purchased,
or exchanged for the price of, a greater
quantity” ([O.U.P., Vol. I, p. 284; Garnier,] Vol. II,
p. 156).

The mistake here consists only in the use of the word
price.

### [5. Adam Smith’s Views on the Movements of Rent and His Estimation of the Interests of the Various Social Classes]

Conclusion of the Chapter. Adam Smith
concludes his chapter on rent with the observation that

“every improvement in the
circumstances of the society tends, either directly or
indirectly, to raise the real rent of land.”

“The extension of improvement and
cultivation tends to raise it directly. The landlord’s
share of the produce necessarily increases with the increase
of the produce.” The “rise in the real price of
those parts of the rude produce of land, which is first the
effect of the extended improvement and cultivation, and
afterwards the cause of their being still further
extended” for instance the rise in the price of
cattle, raises, firstly, the real value of the landlord’s
share, but also the proportion of that share, because:
“That produce, after the rise in its real price,
requires no more labour to collect it than
before. A smaller proportion of it will,
therefore, be sufficient to replace, with the ordinary
profit, the stock which employs that labour. A
greater proportion of it must consequently belong to the
landlord” ([O.U.P., Vol. I, pp. 285-86; Garnier,]
Vol. II, pp. 158-59).

In exactly the same way Ricardo explains the increase in
the proportion of rent, as the price of corn rises on the
more fertile land, only this rise in price is not the result
of improvement, and therefore leads Ricardo to the opposite
conclusion from Adam Smith.

Adam Smith says that the landlord moreover benefits from
every development of the productive power of labour in
manufacture.

“Whatever reduces the real price of
the latter” [i.e., manufactured goods] “raises
that of the former” [i.e., of agricultural
produce]. Furthermore, with every increase of the real
wealth of the society, the population increases; with the
population increases the demand for agricultural produce and
consequently the capital employed in agriculture; “and
the rent increases with the produce”. On the
other hand all circumstances which hinder the growth of
general wealth, will have the opposite effect and lead to a
fall in rent and hence a decrease in the real wealth of the
landowners ([O.U.P., Vol. I, pp. 286-87; Garnier,] Vol. II,
pp. 159-60).

From this Adam Smith concludes that the interests of the
landlord are always in harmony with the “general
interest of society”. This also applies to the
labourers ([O.U.P., Vol. I, pp. 287-88; Garnier,]
Vol. II, pp. 161-62). But Adam Smith is honest enough
to make the following distinction:

“The order of proprietors may perhaps
gain more by the prosperity of the society than that of
labourers; but there is no order that suffers so cruelly
from its” [society’s] “decline” [as do the
labourers] ([O.U.P., Vol. p. 288; Garnier,] Vol. II,
p. 162).

The interests of the capitalists (manufacturers and
merchants), on the other hand, are not identical with
the

“general interest of the
society… ” “The interest of the
dealers, however, in any particular branch of trade or
manufactures, is always in some respects
different from, and even opposite to, that of
the public.” [The dealers are]… an order
of men, whose interest |
is never exactly the same with that of the public, who have
generally an interest to deceive and even to oppress the
public, and who accordingly have, upon many occasions, both
deceived and oppressed it” ([O.U.P., Vol. I,
pp. 289-90; Garnier,] Vol. II, pp. 163-65). | .

[a] The term
“prix suffisant” (sufficient price) is used in
the French translation of the Wealth of Nations from
which Marx quotes.—Ed.

[b] i.e., out of the
product of the land situated at a greater distance from the
market.—Ed.

[c]
“requisite for each particular article” inserted
by Garnier in the French version.—Ed.


## [Chapter XV] Ricardo’s Theory of Surplus-Value

## [A. The Connection Between Ricardo’s Conception of Surplus-Value and his Views on Profit and Rent]

### [1. Ricardo’s Confusion of the Laws of Surplus-Value with the Laws of Profit]

| Nowhere does Ricardo
consider surplus-value separately and independently
from its particular forms—profit (interest) and
rent. His observations on the organic composition of
capital, which is of such decisive importance, are therefore
confined to those differences in the organic composition
which he took over from Adam Smith (actually from the
Physiocrats), namely, those arising from the process of
circulation (fixed and circulating cap-ital). Nowhere
does he touch on or perceive the differences in the organic
composition within the actual process of production.
Hence his confusion of value with cost-price,
his wrong theory of rent, his erroneous laws relating to the
causes of the rise and fall in the rate of profit, etc.

Profit and surplus-value are only identical when the
capital advanced is identical with the capital laid out
directly in wages. (Rent is not taken into account
here since the surplus-value is, in the first place,
entirely appropriated by the capitalist, [irrespective of]
what portion he has subsequently to hand over to his
co-partners. Furthermore, Ricardo himself presents
rent as an item which is separated, detached from
profit.) In his observations on profit and wages,
Ricardo also abstracts from the constant part of capital,
which is not laid out in wages. He treats the matter
as though the entire capital were laid out directly in
wages. To this extent, therefore, he considers
surplus-value and not profit, hence it is
possible to speak of his theory of surplus-value. On
the other hand, however, he thinks that he is dealing with
profit as such, and in fact views which are based on the
assumption of profit and not of surplus-value, constantly
creep in. Where he correctly sets forth the laws of
surplus-value, he distorts them by immediately expressing
them as laws of profit. On the other hand, he seeks to
present the laws of profit directly, without the
intermediate links, as laws of surplus-value.

When we speak of his theory of surplus-value, we are,
therefore, speaking of his theory of profit, in so far as he
confuses the latter with surplus-value, i.e., in so far as
he only considers profit in relation to variable capital,
the part of capital laid out in wages. We shall later
deal with what he says of profit as distinct from
surplus-value.

It is so much in the nature of the subject-matter that
surplus-value can only be considered in relation to the
variable capital, i.e., capital laid out directly in
wages—and without an understanding of surplus-value no
theory of profit is possible—that Ricardo treats the
entire capital as variable capital and abstracts from
constant capital, although he occasionally mentions it in
the form of advances.

| In Chapter XXVI
“On Gross and Net Revenue” Ricardo speaks
of:

“trades where profits are in
proportion to the capital, and not in
proportion to the quantity of labour employed”
([David Ricardo, On the Principles of Political Economy, and Taxation, third edition,] p. 418).

What does his whole doctrine of average profit (on which
his theory of rent depends) mean, but that profits are
“in proportion to the capital, and not
in proportion to the quantity of labour
employed”? If they were “in proportion to
the quantity of labour employed”, then equal capitals
would yield very unequal profits, since their profit
would be equal to the surplus-value created in their own
sphere of production; the surplus-value however depends not
on the size of the capital as a whole, but on the size of
the variable capital, which is equivalent to the quantity of
labour employed. What then is the meaning of
attributing to a specific use of capital, to specific
trades, by way of exception, that in them profits are
proportionate to the amount of capital and not to the
quantity of labour employed? With a given rate of
surplus-value, the amount of surplus-value for a particular
capital must always depend, not on the absolute size of the
capital, but on the quantity of labour employed. On
the other hand, if the average rate of profit is given, the
amount of profit must always depend on the size of the
capital employed and not on the quantity of labour
employed. Ricardo expressly mentions the

“carrying trade, the distant foreign
trade, and trades where expensive machinery is
required” (l.c., p. 418).

That is to say, he speaks of trades which employ
relatively large amounts of constant, and little variable
capital. At the same time, they are trades in which,
compared with others, the total amount of the capital
advanced is large, or which can only be carried on with
large capitals. If the rate of profit is given,
the amount of profit depends entirely on the size of
the capitals advanced. This, however, by no means
distinguishes the trades in which large capitals and much
constant capital are employed (the two always go together)
from those in which small capitals are employed, but is
merely an application of the theory that equal capitals
yield equal profits, a larger capital therefore yields more
profit than a smaller capital. This has nothing to do
with the “quantity of labour employed”.
But whether the rate of profit in general is great or small,
depends indeed on the total quantity of labour employed by
the capital of the whole class of capitalists and on the
proportion of unpaid labour; and, lastly, on the
ratio of the capital spent on labour and the capital that is
merely reproduced as a condition of production.

Ricardo himself argues against Adam Smith’s view,

“… that the great profits
which are sometimes made by particular merchants in foreign
trade, will elevate the general rate of profits in the
country…” (l.c., Chapter VII “On
Foreign Trade”, p. 132).

He says:

“… They contend, that 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 subside to the general
level” (l.c., pp. 132-33).

We shall see later, how far his view is correct that
exceptional profits (when they are not caused by the rise in
market-price above the value) do not raise the general rate
of profit in spite of the equalisation of profits,
and also how far his view is correct that foreign trade and
the expansion of the market cannot raise the rate of
profit. But granted that he is right, and, on the
whole granted “the equality of profits”, how can
he distinguish between trades “where profits are in
proportion to the capital”and others
where they are “in proportion to the quantity of
labour employed”?

In Chapter XXVI, “On Gross and Net
Revenue”, quoted above, Ricardo says:

“I admit, that from the nature of
rent, a given capital employed in agriculture, on any but
the land last cultivated, puts in motion a greater quantity
of labour than an equal capital employed in manufactures and
trade” (l.c., p. 419).

The whole statement is nonsense. In the first
place, according to Ricardo, a greater quantity of labour is
employed on the land last cultivated than on all the other
land. That is why, according to him, rent arises on
the other land. How, therefore, is a given capital to
set in motion a greater quantity of labour than in
manufactures and trade, on all other land except the
land last cultivated? That the product of the better
land has a market-value that is higher than
the individual value, which is determined by the
quantity of labour employed by the capital that cultivates
it, is surely not the same thing as that this capital
“puts in motion a greater quantity of labour than an
equal capital employed in manufactures and
trade”? But it would have been correct, had
Ricardo said that, apart from differences in the fertility
of the land, altogether rent arises because agricultural
capital sets in motion a greater quantity of labour in
proportion to the constant part of the capital, than does
the average non-agricultural capital.

| Ricardo overlooks the
fact that, with a given surplus-value, various
factors may raise or lower and in general influence the rate
of profit. Because he identifies surplus-value with
profit, he quite consistently seeks to demonstrate that the
rise and fall in the rate of profit is caused only by
circumstances that make the rate of surplus-value rise or
fall. Apart from the circumstances which, when the
amount of surplus-value is given, influence the rate of
profit, although not the amount of profit, he
furthermore overlooks the fact that the rate of profit
depends on the amount of surplus-value, and by no
means on the rate of surplus-value. When
the rate of surplus-value, i.e., of surplus-labour, is
given, the amount of surplus-value depends on the organic
composition of the capital, that is to say, on the number of
workers which a capital of given value, for instance £
100, employs. It depends on the rate of surplus-value
if the organic composition of the capital is given. It
is thus determined by two factors: the number of workers
simultaneously employed and the rate of
surplus-labour. If the capital increases, then the
amount of surplus-value also increases whatever its organic
composition, provided it remains unchanged. But this
in no way alters the fact that for a capital of given value,
for example 100, it [the amount of surplus-value] remains
the same. If in this case it is 10, then it is 100 for
£ 1,000, but this does not alter the proportion.

<Ricardo:

“There cannot be two rates of
profit in the same employment, and therefore when the
value of produce is in different proportions to capital, it
is the rent which will differ, and not the profit”
(l.c., Chapter XII “Land-Tax,”
pp. 212-13).

This only applies to the normal rate of profit “in
the same employment”. Otherwise it is in direct
contradiction to the statements quoted earlier on:

“The exchangeable value of all
commodities, whether they be manufactured, or the produce of
the mines, or the produce of land, is always regulated, not
by the less quantity of labour that will suffice for their
production under circumstances highly favourable, and
exclusively enjoyed by those who have peculiar facilities of
production; but by the greater quantity of labour
necessarily bestowed on their production by those who have
no such facilities; by those who continue to produce them
under the most unfavourable circumstances; meaning—by
the most unfavorable circumstances, the most unfavorable
under which the quantity of produce required, renders it
necessary to carry on the production” (l.c.,
Chapter II “On Rent”, pp. 60-61).>

In Chapter XII “Land-Tax”, Ricardo
incidentally makes the following remark directed against
Say; it shows that the Englishman is always very conscious
of the economic distinctions whereas the Continental
constantly forgets them:

“M. Say supposes, ‘A landlord
by his assiduity, economy and skill, to increase his
annual revenue by 5,000 francs;’ but a landlord has no
means of employing his assiduity, economy and skill on his
land, unless he farms it himself; and then it is in quality
of capitalist and farmer that he makes the improvement, and
not in quality of landlord. It is not conceivable that
he could so augment the produce of his farm by any
peculiar skill” (the “skill”
therefore is more or less empty talk) “on his part,
without first increasing the quantity of capital employed
upon it” (l.c., p. 209).

In Chapter XIII “Taxes on Gold”
(important for Ricardo’s theory of money), Ricardo makes
some additional reflections or further definitions relating
to market-price and natural price. They
amount to this, how long the equalisation of the two prices
takes depends on whether the particular sphere of production
permits a rapid or slow increase or reduction of supply,
which in turn is equivalent to a rapid or slow
transfer or withdrawal of capital to or from the
sphere in question. Ricardo has been criticised by
many writers (Sismondi, etc.) because, in his observations
on rent, he disregards the difficulties that the
withdrawal of capital presents for the farmer who
employs a great deal of fixed capital, etc. (The
history of England from 1815 to 1830 provides strong
proof for this.) Although this objection is quite
correct, it does not in any way affect the theory, it
leaves it quite untouched, because in this case it is
invariably only a question of the more or less rapid or slow
operation of the economic law. But as regards the
reverse objection, which refers to the application of
new capital to new land, the situation is quite
different. Ricardo assumes that this can take place
without the intervention of the landlord, that in
this case capital is operating in a field of action |, in which it does not meet
with any resistance. But this is fundamentally
wrong. In order to prove this assumption, that
this is indeed so, where capitalist production and landed
property are developed, Ricardo always presupposes cases in
which landed property does not exist, either in fact
or in law, and where capitalist production too is not
yet developed, at least not on the land.

The statements just referred to are the following:

“The rise in the price of
commodities, in consequence of taxation or of difficulty of
production, will in all cases ultimately ensue; but the
duration of the interval, before the market-price
will conform to the natural price, must depend on the
nature of the commodity, and on the facility with
which it can be reduced in quantity. If the
quantity of the commodity taxed could not be diminished, if
the capital of the farmer or of the hatter for instance,
could not be withdrawn to other employments, it would be of
no consequence that their profits were reduced below the
general level by means of a tax; unless the demand for their
commodities should increase, they would never be able to
elevate the market-price of corn and of bats up to their
increased natural price. Their threats to leave their
employments, and remove their capitals to more favoured
trades, would be treated as an idle menace which could not
be carried into effect; and consequently the price would not
be raised by diminished production.
Commodities, however, of all descriptions can be
reduced in quantity, and capital can be removed from
trades which are less profitable to those which are more so,
but with different degrees of rapidity. In
proportion as the supply of a particular commodity can be
more easily reduced, without inconvenience to the producer,
the price of it will more quickly rise after the difficulty
of its production has been increased by taxation, or by any
other means” (l.c., pp. 214-15).

“The agreement of the market and
natural price of all commodities, depends at all times on
the facility with which the supply can be increased or
diminished. In the case of gold, houses, and labour,
as well as many other things, this effect cannot, under some
circumstances, be speedily produced. But it is
different with those commodities which are consumed and
cloth; they may be reduced, if necessary, and the interval
cannot be long before the supply is contracted in proportion
to the increased charge of producing them” (l.c., pp.
220-21).

### [2. Changes in the Rate of Profit Caused by Various Factors]

In the same Chapter XIII “Taxes on
Gold”, Ricardo speaks of

“rent being not a creation, but
merely a transfer of wealth” (l.c., p. 221).

Is profit a creation of wealth, or is it not
rather a transfer of the surplus-labour, from the
workman to the capitalist? In fact wages too,
are not a creation of wealth. But they are not
a transfer. They are the appropriation of part of the
produce of labour by those who produced it.

In the same chapter Ricardo says:

“A tax on raw produce from the
surface of the earth, will…fall on the
consumer, and will in no way affect rent; unless, by
diminishing the funds for the maintenance of labour, it
lowers wages, reduces the population, and diminishes the
demand for corn” (l.c., p. 221).

Whether Ricardo is right when he says that “a tax
on raw produce from the surface of the earth”
falls neither on the landlord nor on the farmer but on the
consumer, does not concern us here. I maintain,
however, that, if he is right, such a tax may raise the
rent, whereas he thinks that it does not affect it,
unless, by increasing the price of the means of subsistence,
etc., it diminishes capital, population and the demand for
corn, etc. For Ricardo imagines that an increase in
the price of raw produce only affects the rate of
profit in so far as it raises the price of the means
of subsistence of the worker. And it is true that
an increase in the price of raw produce can only in
this way affect the rate of surplus-value and
consequently surplus-value itself, thereby
affecting the rate of profit. But assuming a given
surplus-value, an increase in the price of the
“raw produce from the surface of the earth”
would raise the value of constant capital in
proportion to the variable, would increase the ratio of
constant capital to variable and therefore reduce the
rate of profit, thus raising the rent.
Ricardo starts out from the view point | that in so far as the rise or
fall in the price of the raw produce does not affect
wages, it does not affect profit; for, he argues

<except in one passage to which we shall return at a
later stage> that the rate of profit remains the same,
whether the value of the capital advanced falls or
rises. If the value of the capital advanced grows,
then the value of the product grows and also the part of the
product which forms the surplus-product, i.e., profit.
The reverse happens when the value of the capital advanced
falls. This [Ricardo’s assertion] is only correct, if
the values of variable and constant capital change in the
same proportion, whether the change is caused by a
rise in the price of raw materials or by taxes, etc.
In this case the rate remains unaffected, because no change
has occurred in the organic composition of the
capital. And even then it must be
assumed—as is the case with temporary
changes—that wages remain the same, whether the price
of raw produce rises or falls (in other words wages remain
the same, that is, their value remains unchanged
irrespective of any rise or fall in the use-value of the
wages).

The following possibilities exist:

First the two major differences:

A. A change in the method of production
brings about a change in the proportion between the
amounts of constant and variable capital employed. In
this case the rate of surplus-value remains the same
provided wages remain constant (in terms of value) <i.e.,
in terms of the labour-time they represent>. But
the surplus-value itself is affected if a different number
of workers is employed by the same capital, i.e., if there
is an alteration in the variable capital. If the
change in the method of production results in a relative
fall in constant capital, the surplus-value grows and thus
the rate of profit. The reverse case produces the
opposite result.

It is here assumed throughout that the value pro
tanto, per £ 100 for example, of constant
and variable capital remains the same.

In this case the change in the method of production
cannot affect constant and variable capital equally; that
is, for instance, constant and variable
capital—without a change in value—cannot
increase or diminish to the same extent, for the fall or
rise is here always the result of a change in the
productivity of labour. A change in the method of
production has not the same but a different effect
[on constant and variable capital]; and this has nothing to
do with whether a large or small amount of capital has to be
employed with a given organic composition of
capital.

B. The method of production remains the
same. There is a change in the ratio of
constant to variable capital, while their relative
volume [in physical units] remains the same (so that each of
them forms the same proportion of the total capital as
before). This change in their ratio is caused by a
change in the value of the commodities which enter
into constant or variable capital.

The following possibilities exist here:

[1.] The value of the constant capital remains the same
while that of the variable capital rises or falls.
This would always affect the surplus-value, and thereby the
rate of profit.

[2.] The value of the variable capital remains the same
while that of the constant rises or falls. Then the
rate of profit would fall in the first case and rise in the
second.

[3.] If both fall simultaneously, but in different
proportions, then the one has always risen or fallen as
compared with the other.

[4.] The value of the constant and of the variable
capital is equally affected, whether both rise or
both fall. If both rise, then the rate of profit
falls, not because the constant capital rises but because
the variable capital rises and accordingly the
surplus-value falls (for only the value [of the variable
capital] rises, although it sets in motion the same number
of workers as before. or perhaps even a smaller
number). If both fall, then the rate of profit rises,
not because constant capital falls, but because the variable
falls (in terms of value) and therefore the surplus-value
increases.

C. Change in the method of production and change
in the value of the elements that form constant or variable
capital. Here one change may neutralise the other,
for example, when the amount of constant capital grows while
its value falls or remains the same (i.e., it falls pro
tanto, per £ 100) or when its amount falls but its
value rises in the same proportion or remains the same
(i.e., it rises pro tanto). In this case there
would be no change at all in the organic composition.
The rate of profit would remain unchanged. But it can
never happen—except in the case of agricultural
capital—that the amount of the constant capital falls
as compared with the variable capital, while its value
rises.

This type of nullification cannot possibly apply to
variable capital (while the real wage remains
unchanged).

Except for this one case, it is therefore only possible
for the value and amount of the constant capital to fall or
rise simultaneously in relation to the variable capital, its
value therefore rises or falls absolutely as compared with
the variable capital. This case has already been
considered. Or they may fall or rise simultaneously
| but in unequal
proportion. On the assumption made, this possibility
always reduces itself to the case in which the value of the
constant capital rises or falls relatively to the
variable.

This also includes the other case. For if the
amount of the constant capital rises, then the amount of the
variable capital falls relatively, and vice versa.
Similarly with the value. |

### [3. The Value of Constant Capital Decreases While That of Variable Capital Increases and Vice Versa, and the Effect of These Changes on the Rate of Profit]

 In regard to case C, [page], 640, it
should also be noted:

It would be possible for the wages to rise but for
constant capital to fall in terms of value, not in
physical terms. If the rise and fall were
proportional on both sides, the rate of profit could remain
unchanged. For instance, if the constant capital were
£ 60, wages [£] 40 and the rate of surplus-value
50 per cent, then the product would be [£] 120.
The rate of profit would be 20 per cent. If the
constant capital fell to [£] 40, although its volume
[in physical terms] remained unchanged, and wages rose to
£ 60, while the surplus-value fell from 50 per cent to
33 1/3 per cent, then the product
would be £ 120 and the rate of profit 20 per
cent. This is wrong.

According to the assumption, the total value of the
quantity of labour employed is £ 60. Hence, if
the wage rose to £ 60, surplus-value and therefore the
rate of profit would be nil, But if it did not rise to such
an extent, then any rise in the wage would bring about a
fall in the surplus-value. If wages rose to £
50, then the surplus-value would be £ 10, if [they
rose] to £ 45, then [the surplus-value would be]
£ 15, etc. Under all circumstances, therefore,
the surplus-value and the rate of profit would fall to the
same degree. For we are measuring the unchanged total
capital here. While the magnitude of the capital (the
total capital) remains the same the rate of profit must
always rise and fall, not with the rate of surplus-value but
with the absolute amount of surplus-value. But if, in
the above example, the flax fell so low that the amount
which the same number of workers were spinning could be
bought for £40, then we would have the following:

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

40

50

10

100

90

111/9 per cent

The rate of profit would have fallen below 20 per
cent. But supposing:

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

30

50

10

90

80

121/2 per cent

Supposing:

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

20

50

10

80

70

142/7 per cent

According to the assumption, the fall in the value of the
constant capital never completely counterbalances the rise
in the value of the variable capital. On the
assumption made, it can never entirely cancel it out, since
for the rate of profit to be 20, [£] 10 would have to
be a fifth of the total capital advanced. But in the
case in which the variable capital amounts to [£] 50,
this would only be possible when the constant capital is
nil. Assume, on the other hand, that variable capital
rose only to [£] 45; in this case the surplus-value
would be [£] 15. And, say, the constant capital
fell

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

30

45

15

90

75

20 per cent

In this case the two movements cancel each other out
entirely.

| Assume further:

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

20

45

15

80

65

231/13 per cent

Even with the fall in the surplus-value, therefore, the
rate of profit could rise in this case, because of
the proportionately greater fall in the value of the
constant capital. More workers could be employed with
the same capital of 100, despite the rise in wages and the
fall in the rate of surplus-value. Despite the fall in
the rate of surplus-value, the amount of surplus-value, and
hence the profit, would increase, because the number of
workers had increased, For the above ratio of 20c + 45v
gives us the following proportions with a capital outlay of
100:

constant capital

Variable capital

Surplus-value

Value of the product

Capital advanced

Rate of Profit

3010/13

693/13

231/13

1231/13

100

231/13 per cent

The relation between the rate of surplus-value and the
number of workers becomes very important here. Ricardo
never considers it. |

| It is clear that what
has been regarded here as a variation within the
organic composition of one capital, can apply equally
to the difference in the organic composition between
different capitals, capitals in different spheres of
production.

Firstly: Instead of a variation in the organic
composition of one capital—a difference in the
organic composition of different capitals.

Secondly: Alteration in the organic composition
through a change in value in the two parts of one
capital, similarly a difference in the value of the
raw materials and machinery employed by
different capitals. This does not apply to variable
capital, since equal wages in the different branches of
production are assumed. The difference in the
value of different days of labour in different
spheres has nothing to do with it. If the
labour of a goldsmith is dearer than that of a labourer,
then the surplus-time of the goldsmith is proportionately
dearer than that of the labourer. |

### [4. Confusion of Cost-Prices with Value in the Ricardian Theory of Profit]

| In Chapter XV
“Taxes on Profits” Ricardo says:

“Taxes on those commodities, which
are generally denominated luxuries, fall on those only who
make use of them… But taxes on necessaries do
not affect the consumers of necessaries, in proportion to
the quantity that may be consumed by them, but often in a
much higher proportion.” “For example, a tax on
corn…it alters the rate of profits of
stock… Whatever raises the wages of labour,
lowers the profits of stock; therefore every tax on any
commodity consumed by the labourer, has a tendency to lower
the rate of profits” (l.c. p. 231).

Taxes on consumers are at the same time taxes on
producers, in so far as the object taxed enters not only
into individual consumption but also into industrial
consumption, or only into the latter. This does not,
however, apply only to the necessaries consumed by
workmen. It applies to all materials industrially
consumed by the capitalist. Every tax of this kind
reduces the rate of profit, because it raises the value of
the constant capital in relation to the variable. For
example, a tax imposed on flax or wool. | The flax rises in price.
The flax spinner can therefore no longer purchase the same
quantity of flax with a capital of £ 100. Since
the method of production has remained the same, he needs the
same number of workers to spin the same quantity of
flax. But the flax has a greater value than before, in
relation to the capital laid out in wages. The rate of
profit therefore falls. It does not help him at all
that the price of linen-yarn rises. The absolute level
of this price is in fact immaterial to him. What
matters is only the excess of this price over the price of
the capital advanced. If he wanted to raise [the price
of] the total product, not only by [the amount necessary to
cover the increase in] the price of the flax, but to such an
extent that the same quantity of yarn would yield him the
same profit as before, then the demand —which is
already falling as a result of the rising price of the raw
material of the yarn—would fall still further because
of the artificial rise due to the higher profit.
Although the average rate of profit is given, it is not
possible in such cases to raise the price in this way.

| [In] Chapter
XV “Taxes on Profits” Ricardo says:

“In a former part of this work, we
discussed the effects of the division of capital into fixed
and circulating, or rather into durable and perishable
capital, on the prices of commodities. We skewed that
two manufacturers might employ precisely the same amount of
capital, and might derive from it precisely the same amount
of profits, but that they would sell their commodities for
very different sums of money, according as the capitals they
employed were rapidly, or slowly, consumed and
reproduced. The one might sell his goods for £
4,000, the other for £ 10,000, and they might both
employ £10,000 of capital, and obtain 20 per cent
profit, or £ 2,000. The capital of one might
consist, for example,[a] of £ 2,000 circulating
capital, to be reproduced, and £ 8,000 fixed, in
buildings and machinery; the capital of the other, on the
contrary, might consist of £ 8,000 of circulating, and
of only £ 2,000 fixed capital in machinery and
buildings. Now, if each of these persons were to be
taxed ten per cent on his income, or £ 200, the one,
to make his business yield him the general rate of profit,
must raise his goods from £ 10,000 to £10,200;
the other would also be obliged to raise the price of his
goods from £ 4,000 to £ 4,200. Before the
tax, the goods sold by one of these manufacturers were 2
1/2 times more valuable than the goods
of the other; after the tax they will be 2.42 times more
valuable: the one kind will have risen two per cent; the
other five per cent: consequently a tax upon income, whilst
money continued unaltered in value, would alter the relative
prices and value of commodities” (l.c.,
pp. 234-35).

The error lies in this final
“and”—”prices and
value”. This change of prices would only
show—just as in the case of capital containing
different proportions of fixed and circulating
capital—that the establishment of the general rate
of profit requires that the prices or cost-prices which
are determined and regulated by that general rate of profit
[are] very different from the values of the
commodities. And this most important aspect of the
question does not exist for Ricardo at all.

In the same chapter he says:

“If a country were not taxed, and
money should fall in value, its abundance in every
market” (here [he expresses] the absurd notion that a
fall in the value of money ought to be accompanied by its
abundance in every market) | “would produce similar
effects in each. If meat rose 20 per cent, bread,
beer, shoes, labour, and every commodity, would also
rise 20 per cent; it is necessary they should do so, to
secure to each trade the same rate of profits. But
this is no longer true when any of these commodities is
taxed; if, in that case, they should all rise in proportion
to the fall in the value of money, profits would be
rendered unequal; in the case of the commodities taxed,
profits would be raised above the general level, and
capital would be removed from one employment to another,
till on equilibrium of profits was restored, which could
only be, after the relative prices were
altered” (l.c., pp. 236-37).

And so this equilibrium of profits is after all brought
about by the relative values, the “real
values” of the commodities being altered, and so
adjusted that they correspond, not to their real value, but
to the average profit which they must yield.

### [5. The General Rate of Profit and the Rate of Absolute Rent in Their Relation to Each Other. The Influence on Cost-Prices of a Reduction in Wages]

In Chapter XVII: “Taxes on other Commodities
than Raw Produce”, Ricardo says:

“Mr. Buchanan considers corn and raw
produce as at a monopoly price, because they yield
a rent : all commodities which yield a rent,
he supposes must be at a monopoly price; and thence
he infers, that all taxes on raw produce would fall on the
landlord, and not on the consumer. ‘The price
of corn,’ he says, ‘which always affords a
rent, being in no respect influenced by the expenses of
its production, those expenses must be paid out of
the rent; and when they rise or fall, therefore, the
consequence is not a higher or lower price, but
a higher or […] lower rent. In this
view, all taxes on farm servants, horses, or the implements
of agriculture, are in reality land-taxes; the burden
falling on the farmer during the currency of his lease, and
on the landlord, when the lease comes to be renewed.
In like manner all those improved implements of husbandry
which save expense to the farmer, such as machines for
threshing and reaping, whatever gives him easier access to
the market, such as good roads, canals and bridges, though
they lessen the original cost of corn, do not lessen its
market price. Whatever is saved by those
improvements, therefore, belongs to the landlord as part of
his rent.’

“It is evident” (says Ricardo)
“that if we yield to Mr. Buchanan the basis on which
his argument is built, namely, that the price of corn always
yields a rent, all the consequences which he contends for
would follow of course” (l.c., pp. 292-93).

This is by no means evident. What Buchanan bases
his argument on is not that all corn yields a rent, but that
all corn which yields a rent is sold at a monopoly
price, and that monopoly price—in the sense in
which Adam Smith explains it and it has the same meaning
with Ricardo—is “the very highest price at which
the consumers are willing to purchase it”.[b]

But this is wrong. Corn which yields a rent (apart
from differential rent) is not sold at a monopoly price in
Buchanan’s sense. It is sold at a monopoly price,
only in so far as it is sold above its cost-price and at
its value. Its price is determined by the one
quantity of labour embodied in it, not by the cost of
producing it, and the rent is the excess of the value over
the cost-price, it is therefore determined by the
latter. The smaller is the cost-price relatively to
the value, the greater will be the rent, and the greater the
cost-price in relation to the Value, the smaller the
rent. All improvements lower the value of the corn
because [they reduce] the quantity of labour required for
its production. Whether they reduce the rent, depends
on various circumstances. If the corn becomes cheaper,
and if wages are thereby reduced, then the rate of
surplus-value rises. Furthermore, the farmer’s
expenses in seeds, fodder, etc., would fall. And
therewith the rate of profit in all other, non-agricultural,
branches of production would rise, hence also in
agriculture. The relative amounts of immediate and
accumulated labour would remain unchanged in the
non-agricultural spheres of production; the number of
workers (in relation to constant capital) would remain the
same, but the value of the variable capital [would] fall,
the surplus-value | would
therefore rise, and also the rate of profit.
Consequently [they would] also rise in
agriculture. Rent falls here because the rate of
profit rises. Corn becomes cheaper, but its
cost-price rises. Hence the difference between its
value and its cost-price falls.

According to our assumption the ratio for the average
non-agricultural capital was £ 80c+£ 20v, the
rate of surplus-value 50 per cent, hence surplus-value
£ 10 and the rate of profit 10 per cent. The
value of the product of the average capital of £ 100
was therefore £ 110.

If one assumes, that as a result of the lowering of the
price of grain, wages fell by one-quarter, then the same
number of workers employed on a constant capital of
£ 80, that is on the same amount of raw material and
machinery, would now cost only £ 15. And the
same amount of commodities would be worth £
80c+£ 15v+£ 15s, since, according to the
assumption, the quantity of labour which they perform equals
£ 30. Thus the value of the same amount of
commodities is £ 110, as before. But the capital
advanced would now amount only to £ 95 and [the rate
of profit], £ 15 on £ 95, would be 15
15/19 per cent. If, however, the
same amount of capital were laid out, that is £ 100,
then the ratio would be: £ 84
4/19c+£ 15
15/19v. The profit, however,
would be £ 15 15/19. And
the value of the product would amount to £ 115
15/19. According to the
assumption, however, the agricultural capital was £
60c+£ 40v and the value of its product was £
120. Rent was £ 10, while the cost-price was
£ 110. Now the rent would only be £ 4
4/19. For £ 115
15/19+£ 4
4/19=£ 120.

We see here that the average capital of £ 100
produces commodities at a cost-price of £ 115
15/19 instead of the previous £
110. Has this caused the average price of the
commodity to rise?

Its value has remained the same, since the same amount of
labour is required to transform the same amount of raw
material and machinery into product. But the same
capital of £ 100 sets in motion more labour, and while
previously it transformed £ 80, now it transforms
£ 84 4/19 constant capital into
product. A greater proportion of this labour is,
however, now unpaid. Hence there is an increase in
profit and in the total value of the commodities
produced by [a capital of] £ 100. The value of
the individual commodity has remained the same, but more
commodities at the same value are being produced with
a capital of £ 100. What is however the position
of the cost-price in the individual branches of
production?

Let us assume that the non-agricultural capital consisted
of the following capitals:

[the price of the] product [must be:]

Difference between value and cost-price

I. 80c+20v

In order to

110 (value = 110)

0

II. 60c+40v

sell at the

110 (value = 120)

-10

III. 85c+15v

same cost-

110 (value = 1071/2)

+21/2

IV. 95c+5v

prices

110 (value = 1021/2)

+71/2

Thus the average capital = 80c + 20v

For II the difference is -10, for III and IV [taken
together] +10. For the whole capital of £ 400,
it is 0-10+10=0. If the product of the capital of
£ 400 is sold at £ 440, then the commodities
produced by it are sold at their value. This
yields [a profit of] 10 per cent. But in case II, the
commodities are sold at £ 10 below their value, in
case III at [£] 2 1/2 above
their value and in case IV at [£] 7
1/2 above their value. Only in
case I are they sold at their value if they are sold at
their cost-price, i.e., £ 100 capital + £ 10
profit.

| But what would be the
situation as a result of the fall in wages by
one-quarter?

For capital I: Instead of £
80c+£20v, [the outlay is] now 84
4/19c+15 15/19v,
profit £ 15 15/19,
value of the product £ 115
15/19.

For capital II: Now only £30 laid out in
wages, since 1/4 of 40=10 and
40-10=30. The product is £60c+£30v and the
surplus-value £30. (For the value of the
labour applied is £ 60.) [30 surplus-value]
on a capital of £90 equals 331/3
per cent. For a [capital of] £ 100 the ratio is:
£662/3c+£331/3v
and the value [of the product] is
£1331/3. The rate of
profit is 331/3.

For capital III: Now only 11
1/4 [laid out] in wages, for
1/4 of 15=3 3/4
and 15-3 3/4=11
1/4. The product would be
£ 85c+£ 111/4v and
surplus-value £ 11 1/4.
(Value of labour applied is £ 22
1/2.) [11
1/4] on a capital of £ 96
1/4. This amounts to 11
53/77 per cent. For £ 100
the ratio is 88 24/77c+11
53/77v. The rate of profit is
£ 11 53/77 and [the value of
the] product £ 111 53/77.

For capital IV: Now only 3
3/4 laid out in wages, for
1/4 of 5=1 1/4
and 5-11/4=3
3/4. The product is £
95c+£ 33/4v and the
surplus-value £ 3 3/4 (for the
value of the total labour is 7
1/2). [3
3/4] on a capital of 98
3/4. This amounts to 3
63/79 per cent. For 100 the
ratio is: 96 16/79c+3
63/79v. The rate of profit is 3
63/79. The value [of the
product] is 103 63/79.

We would therefore have the following:

Rate of profit

[the price of the] product [must be:]

Difference between cost-price and value

I. 844/19c + 1515/19v

1515/19

In order

116 (value = 11515/19)

+4/190

II. 662/3c+331/3v

331/3

to sell at

116 (value = 1131/3)

-171/3

III. 8824/77c+1153/77v

1153/77

the same

116 (value = 11153/77)

+424/77

IV. 9616/79c + 363/79v

363/79

cost-prices

116 (value = 10363/77)

+1216/79

Total 400

64 (to the nearest whole number)

This makes 16 per cent. More exactly, a little more
than 16 1/7 per cent. The
calculation is not quite correct because we have
disregarded, not taken into account a fraction of the
average profit; this makes the negative difference in II
appear a little too large and [the positive] in 1,111, IV a
little too small. But it can be seen that otherwise
the positive and negative differences would cancel out;
further, it can be seen that on the one hand the sale of II
below its value and of III and particularly of IV
above their value would increase considerably.
True, the addition to or reduction of the price would not be
so great for the individual product as might appear here,
since in all four categories more labour is employed and
hence more constant capital (raw materials and machinery) is
transformed into product. The increase or reduction in
price would thus be spread over a larger volume of
commodities. Nevertheless it would still be
considerable.

It is thus evident that a fall in wages would cause a
rise in the cost-prices of I, III, IV, in fact a very
considerable rise in the cost-price of IV. It is the
same law as that developed by Ricardo in relation to the
difference between circulating and fixed capital, but he did
not by any means prove, nor could he have proved, that this
is reconcilable with the law of value and that the value of
the products remains the same for the total capital.

| The calculation and
the adjustment becomes much more complicated if we take into
account those differences in the organic composition of the
capital which arise from the circulation process. For
in our calculation, above, we assumed that the whole of the
constant capital which has been advanced, enters into
the product, i.e., that it contains only the wear and
tear of the fixed capital, for one year, for example
(since we have to calculate the profit for the year).
The values of the total product would otherwise be very
different, whereas here they only change with the variable
capital. Secondly, with a constant rate of
surplus-value but varying periods of circulation, there
would be greater differences in the amount of
surplus-value created, relatively to the capital
advanced. Leaving out of account any differences in
variable capital, the amounts of the surplus-values would be
proportionate to the amounts of the values created by the
same capitals. The rate of profit would be even lower
where a relatively large part of the constant capital
consisted of fixed capital and considerably higher, where a
relatively large part of the capital consisted of
circulating capital. It would be highest where the
variable capital was relatively large as compared with the
constant capital and where the fixed portion of the latter
was at the same time relatively small. If the ratio of
circulating to fixed capital in the constant capital were
the same in the different capitals, then the only
determining factor would be the difference between variable
and constant capital. If the ratio of variable to
constant capital were the same, then it would be the
difference between fixed and circulating capital, that is,
only the difference within the constant capital itself.

As we have seen above, the farmer’s rate of profit would
rise, in any case, if, as a result of the lower price of
corn, the general rate of profit of the non-agricultural
capital increased. The question is whether his rate of
profit would rise directly, and this appears to depend on
the nature of the improvements. If the improvements
were of such a kind that the capital laid out in wages
decreased considerably compared with that laid out in
machinery, etc., then his rate of profit need not
necessarily rise directly. If, for example, it was
such that he required one-quarter less workers, then instead
of his original outlay of £40 in wages, he would now
pay only £ 30. Thus his capital would be £
60c+£ 30v, or on £ 100 it would be £ 66
2/3c+£ 33
1/3v. And since the labour
costing £ 40 [provides a surplus-value of] £ 20,
the labour costing £ 30 provides £ 15. And
£ 16 2/3 [surplus-value is
derived] from the labour costing £ 33
1/3. Thus the organic
composition would approach that of the non-agricultural
capital. And in the above case, with a simultaneous
decrease in wages by one-quarter, it would fall even
below that of the non-agricultural capital. In
this case, rent (absolute rent) would disappear.

Following upon the above-quoted passage on Buchanan,
Ricardo says:

“I hope I have made it sufficiently
clear, that until a country is cultivated in every part, and
up to the highest degree, there is always a portion of
capital employed on the kind which yields no rent,
and” (!) “that it is this portion of
capital, the result of which, as in manufactures, is divided
between profits and wages that regulates the price of
corn. The price of corn, then, which does not
afford a rent, being influenced by the expenses of its
production, those expenses cannot be paid out of rent.
The consequence therefore of those expenses increasing, is a
higher price, and not a lower rent” (l.c.,
p. 293).

Since absolute rent is equal to the excess of the value
of the agricultural product over its price of production, it
is clear that all factors which reduce the total
quantity of labour required in the production of corn,
etc., reduce the rent, because they reduce the value, hence
the excess of the value over the price of production.
In so far as the price of production consists of expenses,
its fall is identical and goes hand in hand with the fall in
value. But in so far as the price of production (or
the expenses) is equal to the capital advanced plus the
average profit, the very reverse is the case. The
market-value of the product falls, but that part of it,
which is equal to the price of production, rises, if the
general rate of profit rises as a result of the fall in the
market-value of corn. The rent, therefore, falls,
because the expenses in this sense rise—and this is
how Ricardo takes expenses elsewhere, when he speaks of cost
of production. Improvements in agriculture, which
bring about an increase in constant capital as compared with
variable, would reduce rent considerably, even if the total
quantity of labour employed fell only slightly, or so
slightly that it did not influence wages (surplus-value,
directly) at all. Suppose, as a result of such
improvements, the composition of the capital altered from
£ 60c+£ 40v to £
662/3c+£
331/3v (this might occur, for example,
as a result of rising wages, caused by emigration, war,
discovery of new markets, prosperity in the non-agricultural
industry [or it could occur as a result of the] competition
of foreign corn, the farmer might feel impelled to find
means of employing more constant capital and less variable;
the same circumstances could continue to operate after the
introduction of the improvement and wages therefore might
not fall despite the improvement).

| Then the value of the
agricultural product would be reduced from £ 120 to
£ 116 2/3, that is, by £ 3
1/3. The rate of profit would
continue to be 10 per cent. The rent would fall from
£ 10 to £ 6 2/3 and,
moreover, this reduction would have taken place without any
reduction whatsoever in wages.

The absolute rent may rise because the general rate of
profit falls, owing to new advances in industry. The
rate of profit may fall due to a rise in rent, because of an
increase in the value of agricultural produce which is
accompanied by an increase in the difference between its
value and its cost-price. (At the same time, the rate
of profit falls because wages rise.)

The absolute rent can fall, because the value of
agricultural produce falls and the general rate of profit
rises. It can fall, because the value of the
agricultural produce falls as a result of a fundamental
change in the organic composition of capital, without the
rate of profit rising. It can disappear completely, as
soon as the value of the agricultural produce becomes
equal to the cost-price, in other words when the
agricultural capital has the same composition as the
non-agricultural, average capital.

Ricardo’s proposition would only be correct if expressed
like this : When the value of agricultural produce equals
its cost-price, then there is no absolute rent. But he
is wrong because he says: There is no absolute rent
because value and cost-price are altogether
identical, both in industry and in agriculture.* On the contrary,
agriculture would belong to an exceptional class of
industry, if its value and cost-price were identical.

Even when admitting that there may be no portion of land
which does not pay a rent, Ricardo believes that by
referring to the fact that at least some portion of the
capital employed on this land pays no rent he substantially
improves his case. The one fact is as irrelevant to
the theory as the other. The real question is this: Do
the products of these lands or of this capital regulate the
market-value? Or must they not rather sell their
products below their value, because their additional
supply is only saleable at, not above, this
market-value which is regulated without them. So far
as the portion of capital is concerned, the matter is
simple, because for the farmer who invests an additional
amount of capital landed property does not exist and as
a capitalist he is only concerned with the cost-price; if he
possesses the additional capital, it is more advantageous
for him to invest it on his farm, even below the
average profit, than to lend it out and to receive
only interest and no profit. So far as the land is
concerned, those portions of land which do not pay a rent
form component parts of estates that pay rent and are not
separable from the estates with which they are let; they
cannot however be let in isolation from the rest to a
capitalist farmer (but perhaps to a cottager or to a small
capitalist). In relation to these bits of land, the
farmer is again not confronted by “landed
property”. Alternatively, the owner of the land
must cultivate it himself. The farmer cannot pay a
rent for it and the landlord does not let it for
nothing, unless he wants to have his land made arable in
this fashion without incurring any expense.

The situation would be different in a country in which
the composition of the agricultural capital was equal to the
average composition of the non-agricultural capital, which
presupposes a high level of development in agriculture or a
low level of development in industry. In this case the
value of the agricultural produce would be equal to its
cost-price. Only differential rent could be paid
then. The land which yields no differential rent but
only an agricultural rent, could then pay no
rent. For if the farmer sells the agricultural produce
at its value, it only covers its cost-price. He
therefore pays no rent. The landowner must then
cultivate the land himself, or the so-called rent collected
by him is a part of his tenant’s profit or even of his
wages. That this might be the case in one country does
not mean that the opposite might not happen in another
country. Where, however, industry—and therefore
capitalist production—is at a low level of
development, there are no capitalist farmers, whose
existence would presuppose capitalist production on the
land. Thus, quite different circumstances have to be
considered here, from those involved in the economic
organisation in which landed property as an economic
category exists only in the form of rent.

In the same Chapter XVII, Ricardo says:

“Raw produce is not at a monopoly
price, because the market price of barley and wheat is as
much regulated by their cost of production, as the
market price of cloth and linen. The only difference
is this, that one portion of the capital employed in
agriculture regulates the price of corn, namely, that
portion which pays no rent; whereas, in the production of
manufactured commodities, every portion of capital is
employed with the same results; and as no portion
pays rent, every portion is equally a regulator of
price” (l.c., pp. 290-91).

This assertion, that every portion of capital is employed
with the same results and that none pays rent (which is,
however, called excess profit here) is not only wrong, but
has been refuted by Ricardo himself | as we have seen
previously.

We now come to the presentation of Ricardo’s theory of
surplus-value.

## [B. Ricardo on the Problem of Surplus-Value]

### 1. Quantity of Labour and Value of Labour. [As Presented by Ricardo the Problem of the Exchange of Labour for Capital Cannot Be Solved]

Ricardo opens Chapter I, “On Value”,
with the following heading of Section I:

“The value of a commodity, or the
quantity of any other commodity for which it will exchange,
depends on the relative quantity of labour which is
necessary for its production, and not on the greater or less
compensation which is paid for that labour”
(l.c., p. 1).

In the style which runs through the whole of his enquiry,
Ricardo begins his book here by stating that the
determination of the value of commodities by labour-time is
not incompatible with wages, in other words
with the varying compensation paid for that labour-time or
that quantity of labour. From the very outset, he
turns against Adam Smith’s confusion between the
determination of the value of commodities by the relative
quantity of labour required for their production and
the value of labour (or the compensation paid for
labour).

It is clear that the proportional quantity of labour
contained in two commodities A and B, is absolutely
unaffected by whether the workers who produce A and B
receive much or little of the product of their labour.
The value of A and B is determined by the quantity of
labour which their production costs, and not by the
costs of labour to the owners of A and B.
Quantity of labour and value of labour are two different
things. The quantity of labour which is contained in A
and B respectively, has nothing to do with how much of the
labour contained in A and B the owners of A and B,
have paid or even performed themselves.
A and B are exchanged not in proportion to the paid
labour contained in them, but in proportion to the total
quantity of labour they contain, paid and unpaid.

“Adam Smith, who so accurately
defined the original source of exchangeable value, and who
was bound in consistency to maintain, that all things became
more or less valuable in proportion as more or less labour
was bestowed on their production, has himself erected
another standard measure of value, and speaks of things
being more or less valuable, in proportion as they will
exchange for more or less of this standard measure
… as if these were two equivalent expressions, and
as if because a man’s labour had become doubly efficient,
and he could therefore produce twice the quantity of a
commodity, he would necessarily receive twice the former
quantity in exchange for it” (that is for his
labour).

“If this indeed were true, if the
reward of the labourer were always in proportion to what he
produced, the quantity of labour bestowed on a commodity,
and the quantity of labour which that commodity would
purchase, would be equal, and either might accurately
measure the variations of other things: but they are not
equal” (l.c., p. 5).

Adam Smith nowhere asserts that “these were two
equivalent expressions”. On the contrary, he says:
Because in capitalist production, the wage of the worker is
no longer equal to his product, therefore, the
quantity of labour which a commodity costs and the quantity
of commodities that the worker can purchase with this labour
are two different things—for this very reason
the relative quantity of labour contained in commodities
ceases to determine their value, which is now determined
rather by the value of labour, by the quantity of
labour that I can purchase, or command with a given amount
of commodities. Thus the value of labour,
instead of the relative quantity of labour becomes
the measure of value. Ricardo’s reply to Adam Smith is
correct—that the relative quantity of labour
which is contained in two commodities is in no way affected
by how much of this quantity of labour falls to the workers
themselves and by the way this labour is remunerated; if the
relative quantity of labour was the measure of value
of commodities before the supervention of wages
(wages that differ from the value of the products
themselves), there is therefore no reason at all, why it
should not continue to be so after wages have come
into being. He argues correctly, that Adam Smith could
use both expressions so long as they were equivalent, but
that this is no reason for using the wrong expression
instead of the right one when they have ceased to be
equivalent.

But Ricardo has by no means thereby solved the problem
which is the real cause of Adam Smith’s contradiction.
Value of labour and quantity of labour remain
“equivalent expressions”, so long as it is a
question of materialised labour. | They cease to be equivalents
as soon as materialised labour is exchanged for
living labour.

Two commodities exchange in proportion to the
labour materialised in them. Equal quantities
of materialised labour are exchanged for one another.
Labour-time is their standard measure, but precisely for
this reason they are “more or less valuable, in
proportion as they will exchange for more or less of this
standard measure” [l.c., p. 5]. If the commodity
A contains one working-day, then it will exchange against
any quantity of commodities which likewise contains one
working-day and it is “more or less valuable” in
proportion as it exchanges for more or less materialised
labour in other commodities, since this exchange
relationship expresses, is identical with, the relative
quantity of labour which it itself contains.

Now wage-labour, however, is a commodity. It
is even the basis on which the production of products
as commodities takes place. The law of
values is not applicable to it. Capitalist
production therefore is not governed at all by this
law. Therein lies a contradiction. This is the
first of Adam Smith’s problems. The second—which
we shall find further amplified by Malthus—lies in the
fact that the utilisation of a commodity (as capital)
is proportional not to the amount of labour it contains, but
to the ‘extent to which it commands the labour of
others, gives power over more labour of others
than it itself contains. This is in fact a second
latent reason for asserting that since the beginning of
capitalist production, the value of commodities is
determined not by the labour they contain but by the living
labour which they command, in other words, by the value
of labour.

Ricardo simply answers that this is how matters are in
capitalist production. Not only does he fail to solve
the problem; he does not even realise its existence in Adam
Smith’s work. In conformity with the whole arrangement
of his investigation, Ricardo is satisfied with
demonstrating that the changing value of labour—in
short, wages—does not invalidate the
determination of the value of the commodities, which
are distinct from labour itself, by the relative quantity of
labour contained in them. “They are not
equal”, that is “the quantity of labour
bestowed on a commodity, and the quantity of labour which
that commodity would purchase” (l.c., p.5). He
contents himself with stating this fact. But how does
the commodity labour differ from other commodities?
One is living labour and the other
materialised labour. They are, therefore, only
two different forms of labour. Since the difference is
only a matter of form, why should a law apply to one and not
to the other? Ricardo does not answer—he does
not even raise this question.

Nor does it help when he says:

“Is not the value of labour …
variable; being not only affected, as all other
things” (should read commodities) “are, by the
proportion between the supply and demand, which uniformly
varies with every change in the condition of the community,
but also by the varying price of food and other necessaries,
on which the wages of labour are expended?”
(l.c., p. 7).

That the price of labour, like that of other commodities,
changes with supply and demand proves nothing in regard to
the value of labour, according to Ricardo, just as
this change of price with supply and demand proves nothing
in regard to the value of other commodities. But that
the “wages of labour”—which is only
another expression for the value of labour—are
affected by “the varying price of food and other
necessaries, on which the wages of labour are
expended”, shows just as little why the value of
labour is (or appears to be) determined differently from the
value of other commodities. For these too are affected
by the varying price of other commodities which enter into
their production and against which they are
exchanged. That the wages of labour are
spent upon food and necessaries, means after all only
that the value of labour is exchanged against food
and necessaries. The question is just why
labour and the commodities against which it is
exchanged, do not exchange according to the law of
value, i.e., according to the relative quantities of
labour.

Posed in this way, presupposing the law of
value, the question is intrinsically insoluble, because
labour as such is counterposed to commodity, a
definite quantity of immediate labour as such is
counterposed to a definite quantity of materialised
labour.

This weakness in Ricardo’s discourse, as we shall see
later, has contributed to the disintegration of his school,
and led to the proposition of absurd hypotheses.

| Wakefield is
right when he says:

“Treating labour as a
commodity, and capital, the produce of labour,
as another, then, if the value of these two
commodities were regulated by equal quantities of
labour, a given amount of labour would, under all
circumstances, exchange for that quantity of capital which
had been produced by the same amount of labour,
antecedent labour […] would always exchange
for the same amount of present labour […] It
follows, that[c] the
value of labour in relation to other commodities, in so far,
at least, as wages depend upon share, is determined, not
by equal quantities of labour, but by the proportion
between supply and demand.” (E. G. Wakefield, Note on
p. 230 of Vol. I of his edition of Adam Smith’s Wealth of
Nations, London, 1835.)

This is also one of Bailey’s hobby-horses; to be
looked up later. Also Say, who is very pleased
to find that here, all of a sudden, supply and demand are
said to be the decisive factors. |

| Re 1.
Another point to be noted here: Chapter I, Section 3,
bears the following superscription:

“Not only the labour applied
immediately to commodities affects their value, but the
labour also which is bestowed on the
implements, tools, and buildings, with which such labour is
assisted” (David Ricardo, On the Principles of
Political Economy, and Taxation, London, 1821,
p. 16).

Thus the value of a commodity is equally determined by
the quantity of materialised (past) labour and by the
quantity of living (immediate) labour required for
its production. In other words: the quantities of
labour are in no way affected by the formal
difference of whether the labour is materialised or
living, past or present (immediate). If this
difference is of no significance in the determination of the
value of commodities, why does it assume such decisive
importance when past labour (capital) is exchanged against
living labour? Why should it, in this case, invalidate
the law of value, since the difference in itself, as
shown in the case of commodities, has no effect on the
determination of value? Ricardo does not answer this
question, he does not even raise it. |

### 2. Value of Labour-Power. Value of Labour. [Ricardo’s Confusion of Labour with Labour-Power. Concept of the “Natural Price of Labour”]

| In order to determine
surplus-value, Ricardo, like the Physiocrats, Adam Smith,
etc., must first determine the value of labour-power
or, as he puts it—following Adam Smith and his
predecessors—the value of labour. |

| How then is the
value or natural price of labour
determined? According to Ricardo, the
natural price is in fact nothing but the
monetary expression of value.

“Labour, like all other things
which are purchased and sold, and which may be increased or
diminished in quantity” (that is like all other
commodities) “has its natural and its market
price. The natural price of labour is that
price which is necessary to enable the labourers, one with
another, to subsist and to perpetuate their race, without
either increase or diminution.” (Should read: with
that rate of increase, required by the average progress of
production.)

“The power of the labourer to support
himself, and the family which may be necessary to keep up
the number of labourers … depends on the price of
the food, necessaries, and conveniences required for the
support of the labourer and his family. With a
rise in the price of food and necessaries, the natural price
of labour will rise; with the fall in their price, the
natural price of labour will fall” (l.c., p. 86).

“It is not to be understood that the
natural price of labour, estimated even in food and
necessaries, is absolutely fixed and constant. It
varies at different times in the same country, and very
materially differs in different countries. It
essentially depends on the habits and customs of the
people” (l.c., p. 91).

The value of labour is therefore determined by the
means of subsistence which, in a given society, are
traditionally necessary for the maintenance and
reproduction of the labourers.

But why? By what law is the value of labour
determined in this way?

Ricardo has in fact no answer, other than that the law of
supply and demand reduces the average price of labour to the
means of subsistence that are necessary (physically or
socially necessary in a given society) for the maintenance
of the labourer. |
He determines value here, in one of the basic
propositions of the whole system, by demand and
supply—as Say notes with malicious pleasure (see
Constancio’s translation).

Instead of labour, Ricardo should have discussed
labour-power. But had he done so,
capital would also have been revealed as the material
conditions of labour, confronting the labourer as power that
had acquired an independent existence and capital would at
once have been revealed as a definite social
relationship. Ricardo thus only distinguishes
capital as “accumulated labour” from
“immediate labour”. And it is something
purely physical, only an element in the
labour-process, from which the relation between
labour and capital, wages and profits, could never be
developed.

“Capital is that part of the
wealth of a country which is employed in production, and
consists of food, clothing, tools, raw materials, machinery,
etc., necessary to give effect to labour” (l.c.,
p. 89). “Less capital, which is the
same thing as less labour …“
(l.c., p. 73). “Labour and capital (that
is accumulated labour)[d]” (l.c., p. 499).

The jump which Ricardo makes here is correctly sensed by
Bailey:

“Mr. Ricardo, ingeniously enough,
avoids a difficulty, which, on a first view, threatens to
encumber his doctrine, that value depends on the quantity of
labour employed in production. If this principle is
rigidly adhered to, it follows, that the value of
labour depends on the quantity of labour employed in
producing it—which is evidently absurd. By a
dexterous turn, therefore, Mr. Ricardo makes the value of
labour depend on the quantity of labour required to produce
wages, or, to give him the benefit of his own language, he
maintains, that the value of labour is to be
estimated by the quantity of labour required to produce
wages, by which lie means, the quantity of labour required
to produce the money or commodities given to the
labourer. This is similar to saying, that the value of
cloth is to be estimated, not by the quantity of labour
bestowed on[e] its
production, but by the quantity of labour bestowed on the
production of the silver, for which the cloth is
exchanged.” (Samuel Bailey, A Critical Dissertation
on the Nature, Measures, and Causes of Value, etc.,
London, 1825, pp. 50-51.)

Literally the objection raised here is
correct. Ricardo distinguishes between nominal
and real wages. Nominal wages are wages
expressed in money, money wages.

Nominal wages are “the number of pounds that
may be annually paid to the labourer” but real
wages are “the number of day’s work,
necessary to obtain those pounds” (David Ricardo,
l.c., p. 152).

As wages are equal to the necessary means of subsistence
of the labourer, and the value of these wages (the real
wages) is equal to the value of these means of subsistence,
it is obvious that the value of these necessary means of
subsistence is also equal to the real wages, that is, to the
labour which they can command. If the value of the
means of subsistence changes, then the value of the real
wages changes. Assume that the means of subsistence of
the labourer consist only of corn, and that the quantity of
means of subsistence which he requires is 1 quarter of corn
per month. Then the value of his wages [for one month]
equals the value of 1 quarter of corn; if the value of the
quarter of corn rises or falls, then the value of the
month’s labour rises or falls. But however much the
value of the quarter of corn rises or falls (however much or
little labour the quarter of corn contains), it is always
equal to the value of one month’s labour.

And here we have the hidden reason for Adam
Smith’s assertion, that as soon as capital, and consequently
wage-labour, intervenes, the value of the product is not
regulated by the quantity of labour bestowed upon it, but by
the quantity of labour it an command. The value of
corn (and of other means of subsistence) determined by
labour-time, changes; but, so long as the natural price of
labour is paid, the quantity of labour that the quarter of
corn can command remains the same. Labour has
therefore, a permanent relative value as compared with
corn. That is why for Smith too, the value of
labour and the value of corn ([representing] food [in
general]. See Deacon Hume) are standard
measures of value, because so long as the natural price of
labour is paid, a given quantity of corn always commands
[the same] quantity of labour, whatever the quantity of
labour bestowed upon one quarter of corn may be. The
same quantity of labour always commands the same
use-value, or rather the same use-value always
commands the same quantity of labour.

Even Ricardo determines the value of labour, its natural
price, in this way. Ricardo says: The quarter of corn
may have very different values, although it always
commands—or is commanded by—the same | quantity of labour. Yes,
says Adam Smith: However much the value of the quarter of
corn, determined by labour-time, may change, the worker must
always pay (sacrifice) the same quantity of labour in order
to buy it. The value of corn therefore alters, but the
value of labour does not, since one month’s labour equals
one quarter of corn. The value of the corn too changes
only in so far as we are considering the labour required for
its production. If, on the other hand, we examine the
quantity of labour against which it exchanges, which it sets
into motion, its value does not change. And that is
precisely why the quantity of labour, against which a
quarter of corn is exchanged, is the standard measure of
value. But the values of the other commodities
have the same relation to labour as they have to corn.
A given quantity of corn commands a given quantity of
labour. A given quantity of every other commodity
commands a certain quantity of corn. Hence every other
commodity—or rather the value of every other
commodity—is expressed by the quantity of labour it
commands, since it is expressed by the quantity of corn it
commands, and the latter is expressed by the quantity of
labour it commands.

But how is the value of other commodities in relation to
corn (means of subsistence) determined? By the
quantity of labour they command. And how is the
quantity of labour they command determined? By the
quantity of corn that labour commands. Here Adam Smith
is inevitably caught up in a vicious circle.
(Incidentally, he never uses this measure of value
when making an actual analysis.) Moreover here he
confuses—as Ricardo also often does—labour, the
intrinsic measure of value, with money, the
external measure, which presupposes that value is
already determined; although he and Ricardo have declared
that labour is “the foundation of the value of
commodities” while “the comparative quantity of
labour which is necessary to their production” is
“the rule which determines the respective quantities
of goods which shall be given in exchange for each
other” (Ricardo, l.c., p.80).

Adam Smith errs when he concludes from the fact that a
definite quantity of labour is exchangeable for a definite
quantity of use-value, that this definite quantity of
labour is the measure of value and that it always has
the same value, whereas the same quantity of
use-value can represent very different
exchange-values. But Ricardo errs twice over; firstly
because he does not understand the problem which causes Adam
Smith’s errors; secondly because disregarding the law of
value of commodities and taking refuge in the law of supply
and demand, he himself determines the value of
labour, not by the quantity of labour expended in the
production of labour-power, but by the quantity of
labour expended in the production of the wages which the
labourer receives. Thus in fact he says: The value of
labour is determined by the value of the money which is paid
for it! And what determines this? What
determines the amount of money ‘that is paid for
it? The quantity of use-value that a given amount of
labour commands or the quantity of labour that a definite
quantity of use-value commands. And thereby he falls
literally into the very inconsistency which he
himself condemned in Smith.

This, as we have seen, also prevents him from grasping
the specific distinction between commodity and
capital, between the exchange of commodity for
commodity and the exchange of capital for commodity—in
accordance with the law of exchange of commodities.

The above example was this: 1 quarter of corn equals 1
month’s labour, say 30 working-days. (A working-day of
12 hours.) In this case the value of 1 quarter corn is
less than 30 working-days. If 1 quarter corn were the
product of 30 working-days, the value of the labour would be
equal to its product. There would be no surplus-value,
and therefore no profit. No capital. In actual
fact, therefore, if 1 quarter corn represents the wages for
30 working-days, the value of 1 quarter corn is always less
than 30 working-days. The surplus-value depends on how
much less it is. For example, 1 quarter corn may be
equal to 25 working-days. Then the surplus-value
equals 5 working-days, which is 1/6 of
the total labour-time. If 1 quarter (8 bushels) equals
25 working-days, then 30 working-days are equal to 1 quarter
1 3/5 bushels. The value
of the 30 working-days (i.e., the wage) is therefore always
smaller than the value of the product which contains the
labour of 30 days. The value of the corn is thus
determined not by the |
labour which it commands, for which it exchanges, but by the
labour which is contained in it. On the other hand,
the value of the 30 days’ labour is always determined
by 1 quarter corn, whatever this may be.

### 3. Surplus-Value. [An Analysis of the Source of Surplus-Value Is Lacking in Ricardo’s Work. His Concept of Working-Day as a Fixed Magnitude]

Apart from the confusion between labour and labour-power,
Ricardo defines the average wages or the value of labour
correctly. For he says that it [the value of labour]
is determined neither by the money nor by the means of
subsistence which the labourer receives, but by the
labour-time which it costs to produce it; that is, by
the quantity of labour materialised in the means of
subsistence of the labourer. This he calls the
real wages. (See later.)

This definition [of the value of labour], moreover,
necessarily follows from his theory. Since the value
of labour is determined by the value of the necessary
means of subsistence on which this value is to be
expended, and the value of the means of subsistence,
like that of all other commodities, is determined by the
quantity of labour they contain, it naturally follows
that the value of labour equals the value of the means of
subsistence, which equals the quantity of labour expended
upon them.

However correct this formula is (apart from the direct
opposition of labour and capital), it is, nevertheless,
inadequate. Although in replacement of his wages the
individual labourer does not directly produce—or
reproduce, taking into account the continuity of this
process—products on which he lives <he may produce
products which do not enter into his consumption at all, and
even if he produces necessary means ‘of subsistence,
he may, due to the division of labour, only produce a single
part of the necessary means of subsistence, for instance
corn—and even that only in one form (for example in
that of corn, not bread)>, but he produces
commodities to the value of his means of subsistence,
that is, he produces the value of his means of
subsistence. This means, therefore, if we consider his
daily average consumption, that the labour-time which is
contained in his daily means of subsistence, forms one part
of h i s working-day. He works one part of the
day in order to reproduce the value of his means of
subsistence; the commodities which he produces in this part
of the working-day have the same value, or represent a
quantity of labour-time equal to that contained in
his daily means of subsistence. It depends on the
value of these means of subsistence—in other words
on the social productivity of labour and not on the
productivity of the individual branch of production in which
he works—how great a part of his working-day is
devoted to the reproduction or production of the
value, i.e., the equivalent, of his means of
subsistence.

Ricardo of course assumes that the labour-time contained
in the daily means of subsistence is equal to the
labour-time which the labourer must work daily in order to
reproduce the value of these means of subsistence. But
by not directly showing that one part of the
labourer’s working-day is assigned to the
reproduction of the value of his own labour-power, he
introduces a difficulty and obscures the clear understanding
of the relationship. A twofold confusion arises from
this. The origin of surplus-value does not
become clear and consequently Ricardo is reproached by his
successors for having failed to grasp and expound the nature
of surplus-value. That is part of the reason for their
scholastic attempts at explaining it. But because thus
the origin and nature of surplus-value is not clearly
comprehended, the surplus-labour plus the necessary labour,
in short, the total working-day, is regarded as a
fixed magnitude, the differences in the amount of
surplus-value are overlooked, and the productivity of
capital, the compulsion to perform
surplus-labour—on the one hand [to perform]
absolute surplus-labour, and on the other its innate urge to
shorten the necessary labour-time—are not recognised,
and therefore the historical justification for
capital is not set forth. Adam Smith, however, had
already stated the correct formula. Important as it
was, to resolve value into labour, it was equally important
to resolve surplus-value into surplus-labour, and to do so
in explicit terms.

Ricardo starts out from the actual fact of capitalist
production. The value of labour is smaller than the
value of the product which it creates. The value of
the product is therefore greater than the value of the
labour which produces it, or the value of the wages.
The excess of the value of the product over the value
of the wages is the surplus-value. (Ricardo wrongly
uses the word profit, but, as we noted earlier, he
identifies profit with surplus-value here and is really
speaking of the latter.) For him it is a fact, that
the value of the product is greater than the value of the
wages. How this fact arises, remains unclear.
The total working-day is greater than that part of
the working-day which is required for the production of the
wages. Why? That does not emerge. The
magnitude of the total working-day is therefore
wrongly assumed to be fixed, and directly entails
wrong conclusions. The increase or decrease in
surplus-value can therefore be explained only from
the growing or diminishing productivity of social labour
which produces the means of subsistence. That is to
say, only relative surplus-value is understood.

| It is obvious that if
the labourer needed his whole day to produce his own means
of subsistence (i.e., commodities equal to the value of his
own means of subsistence), there could be no surplus-value,
and therefore no capitalist production and no
wage-labour. This can only exist when the productivity
of social labour is sufficiently developed to make possible
some sort of excess of the total working-day over the
labour-time required for the reproduction of the
wage—i.e., surplus-labour, whatever its
magnitude. But it is equally obvious, that with a
given labour-time (a given length of the working-day) the
productivity of labour [may be very different], on the other
hand, with a given productivity of labour, the labour-time,
the length of the working-day, may be very different.
Furthermore, it is clear that though the existence of
surplus-labour presupposes that the productivity of
labour has reached a certain level, the mere
possibility of this surplus-labour (i.e., the
existence of that necessary minimum productivity of labour),
does not in itself make it a reality. For this
to occur, the labourer must first be compelled to
work in excess of the [necessary] time, and this compulsion
is exerted by capital. This is missing in Ricardo’s
work, and therefore also the whole struggle over the
regulation of the normal working-day.

At a low stage of development of the social productivity
of labour, that is to say, where the surplus-labour is
relatively small, the class of those who live on the labour
of others will generally be small in relation to the number
of labourers. It can considerably grow
(proportionately) in the measure in which productivity and
therefore relative surplus-value develop.

It is moreover understood that the value of labour
varies greatly in the same country at different periods and
in different countries during the same period. The
temperate zones are however the home of capitalist
production. The social productive power of
labour may be very undeveloped; yet this may be compensated
precisely in the production of the means of subsistence, on
the one hand, by the fertility of the natural agents, such
as the land; on the other hand, by the limited requirements
of the population, due to climate, etc.—this is, for
instance, the case in India. Where conditions are
primitive, the minimum wage may be very small
(quantitatively in use-values) because the social needs are
not yet developed though it may cost much labour. But
even if an average amount of labour were required to produce
this minimum wage, the surplus-value created, although it
would be high in proportion to the wage (to the necessary
labour-time) , would, even with a high rate of
surplus-value, be just as meagre
(proportionately)—when expressed in terms of
use-values—as the wage itself.

Let the necessary labour-time be 10 hours, the
surplus-labour 2 hours, and the total working-day 12
hours. If the necessary labour-time were 12 hours, the
surplus-labour 2 2/5 hours and the
total working-day 14 2/5 hours, then
the values produced would be very different. In the
first case they would amount to 12 hours, in the second to
14 2/5 hours. Similarly, the
absolute magnitude of the surplus-value: In the former case
it would be 2 hours, in the latter 2
2/5. And yet the rate of
surplus-value or of surplus-labour would be the
same, because 2:10=2 2/5:12. If,
in the second case, the variable capital which is laid out
were greater, then so also would be the surplus-value or
surplus-labour appropriated by it. If in the latter
case, the surplus-labour were to rise by
5/5 hours instead of by
2/5 hours, so that it would amount to
3 hours and the total working-day to 15 hours, then,
although the necessary labour-time or the minimum
wage had increased, the rate of surplus-value would
have risen, for 2:10=1/5; but
3:l2=1/4. Both could occur if,
as a result of the corn, etc., becoming dearer, the minimum
wage had increased from 10 to 12 hours. Even in this
case, therefore, not only might the rate of surplus-value
remain the same, but the amount and rate of surplus-value
might grow.

But let us suppose that the necessary wage amounted to 10
hours, as previously, the surplus-labour to 2 hours and all
other conditions remained the same (that is, leaving out of
account here any lowering in the production costs of
constant capital). Now let the labourer work 2
2/5 hours longer, and appropriate 2
hours, while the 2/5 forms
surplus-labour. In this case wages and surplus-value
would increase in equal proportion, the former, however,
representing more than the necessary wage or the necessary
labour-time.

If one takes a given magnitude and divides it into
two parts, it is clear that one part can only increase in so
far as the other decreases, and vice versa, But this is by
no means the case with expanding (elastic) magnitudes.
And the working-day represents such an elastic magnitude, as
long as no normal working-day has been won. With such
magnitudes, both parts can grow, either to an equal or
unequal extent. An increase in one is not brought
about by a decrease in the other and vice versa. This
is moreover the only case in which wages and surplus-value,
in terms of exchange-value, can both increase
and possibly even in equal proportions. That
they can increase in terms of use-value is self-evident;
this can increase | even
if, for example, the value of labour decreases. From
1797 to 1815, when the price of corn and [also] the nominal
wage rose considerably in England, the daily hours of labour
increased greatly in the principal industries, which were
then in a phase of ruthless expansion; and I believe that
this arrested the fall in the rate of profit, because it
arrested the fall in the rate of surplus-value. In
this case, however, whatever the circumstances, the normal
working-day is lengthened and the normal span of life of the
labourer, hence the normal duration of his labour-power, is
correspondingly shortened. This applies where a
permanent lengthening of the working-day occurs. If it
is only temporary, in order to compensate for a temporary
rise in wages, it may (except in the case of children and
women) have no other result than to prevent a fall in the
rate of profit in those enterprises where the nature of the
work makes a prolongation of labour-time possible.
(This is least possible in agriculture.)

Ricardo did not consider this at all since he
investigated neither the origin of surplus-value nor
absolute surplus-value and therefore regarded the
working-day as a given magnitude. For this case,
therefore, his law—that surplus-value and wages
(he erroneously says profit and wages) in terms of
exchange-value can rise or fall only in inverse
proportion—is incorrect.

Firstly let us assume that the necessary labour-time and
the surplus-labour remain constant. That is 10 hours
+2 hours; the working-day equals 12 hours, surplus-value
equals 2 hours; the rate of surplus-value is
1/5.

[In the second example] the necessary labour-time remains
the same; surplus-labour increases from 2 to 4 hours.
Hence l0+4=a working-day of 14 hours; surplus-value equals 4
hours; rate of surplus-value is
4:10=4/10=2/5.

In both cases the necessary labour-time is the same; but
the surplus-value in the one case is twice as great as in
the other and the working-day in the second case is
one-sixth longer than in the first. Furthermore,
although the wage is the same, the values produced,
corresponding to the quantities of labour, would be very
different; in the first case it would be equal to 12 hours,
in the second to 12+12/6=14
hours. It is therefore wrong to say that, provided the
wage is the same (in terms of value, of necessary
labour-time), the surplus-value contained in two commodities
is proportionate to the quantities of labour contained in
them. This is only correct where the normal
working-day is the same.

Let us further assume that as a result of the rise in the
productive power of labour, the necessary wage (although it
remains constant in terms of use-values) falls from 10 to 9
hours and similarly that the surplus labour-time falls from
2 to 14/5 hours
(9/5). In this case
10:9=2:14/5. Thus the surplus
labour-time would fall in the same proportion as the
necessary labour-time. The rate of surplus-value would
be the same in both cases, for 2=10/5
and
14/5=9/5.
14/5:9=2:10. The quantity of
use-values that could be bought with the surplus-value,
would—according to the assumption—also remain
the same. (But this would apply only to those
use-values which are necessary means of subsistence.)
The working-day would decrease from 12 to 10
4/5 [hours]. The amount of value
produced in the second case would be smaller than that
produced in the first. And despite these unequal
quantities of labour, the rate of surplus-value would be the
same in both cases.

In discussing surplus-value we have distinguished between
surplus-value and the rate of surplus-value, Considered in
relation to one working-day, the surplus-value is equal to
the absolute number ‘of hours which it represents, 2,
3, etc. The rate is equal to the proportion of this
number of hours to the number of hours which makes up the
necessary labour-time. This distinction is very
important, because it indicates the varying length of the
working-day. If the surplus-value equals 2 hours, then
[the rate] is 1/5, if the necessary
labour-time is 10 hours; and 1/6, if
the necessary labour-time is 12 hours. In the first
case the working-day consists of 12 hours and in the second
of 14. In the first case the rate of surplus-value is
greater, while at the same time the labourer works a smaller
number of hours per day. In the second case the rate
of surplus-value is smaller, the value of the labour-power
is greater, while at the same time the labourer works a
greater number of hours per day. This shows that, with
a constant surplus-value, but a working-day of unequal
length, the rate of surplus-value may be different.
The earlier case, 10:2 and 9:1 4/5,
shows how with a constant rate of surplus-value, but a
working-day of unequal length, the surplus-value itself may
be different, in one case 2 hours and in the other 1
4/5 hours.

I have shown previously (Chapter II), that if the length
of the working-day and the necessary labour-time, and
therefore the rate of surplus-value are given, the amount of
surplus-value depends on the number of workers
simultaneously employed by the same capital. This was
a tautological statement. For if 1 working-day gives
me 2 surplus hours, then 12 working-days give me 24 surplus
hours or 2 surplus days. The statement, however,
becomes very important in connection with the determination
of profit, which is equal to the proportion of surplus-value
to the capital advanced, thus depending on the absolute
amount of surplus-value. It becomes important because
capitals of equal size but different organic composition
employ unequal numbers of labourers; they must thus produce
unequal amounts of surplus-value, and therefore unequal
profits. With a falling rate of surplus-value, the
profit may rise and with a rising rate of surplus-value, the
profit may fall; or the profit may remain unchanged, if a
rise or fall in the rate of surplus-value is compensated by
a counter movement affecting the number of workers
employed. Here we see immediately, how extremely wrong
it is | to identify the
laws relating to the rise and fall of surplus-value with the
laws relating to the rise and fall of profit. If one
merely considers the simple law of surplus-value, then it
seems a tautology to say that with a given rate of
surplus-value (and a given length of the working-day), the
absolute amount of surplus-value depends on the amount of
capital employed. For an increase in this amount of
capital and an increase in the number of labourers
simultaneously employed are, on the assumption made,
identical, or merely [different] expressions of the same
fact. But when one turns to an examination of profit,
where the amount of the total capital employed and the
number of workers employed vary greatly for capitals of
equal size, then the importance of the law becomes
clear.

Ricardo starts by considering commodities of a
given value, that is to say, commodities which represent a
given quantity of labour. And from this
starting-point, absolute and relative surplus-value appear
to be always identical. (This at any rate explains the
one-sidedness of his mode of procedure and corresponds with
his whole method of investigation: to start with the
value of the commodities as determined by the
definite labour-time they contain, and then to examine to
what extent this is affected by wages, profits, etc.)
This appearance is nevertheless false, since it is not a
question of commodities here, but of capitalist production,
of commodities as products of capital.

Assume that a capital employs a certain number of
workers, for example 20, and that wages amount to £
20. To simplify matters let us assume that the fixed
capital is nil, i.e., we leave it out of account.
Further, assume that these 20 workers spin £ 80 of
cotton into yarn, if they work 12 hours per day. If 1
lb. of cotton costs is then 20lbs. cost £ 1 and
£ 80 represents, 1,600 lbs. If 20 workers spin
1,600 lbs. in 12 hours, then they spin
1,600/12 lbs., which is 133
1/3 lbs. in one hour. Thus, if
the necessary labour-time is 10 hours, then the surplus
labour-time is 2 hours and this equals 266
2/3 lbs. yarn. The value of the
1,600 lbs. would be £ 104. For if 10 hours of
work equal £ 20, then 1 hour of work equals £ 2
and 2 hours of work £ 4, hence 12 [hours of work] are
equal to £ 24. ([Raw material] £
80+£ 24 [the newly-created value] are equal to £
104.)

But if each of the workers worked 4 hours of
surplus-labour, then their product would be equal to
£8 (I mean the surplus-value which he
creates—his product is in fact equal to £
28.) The total product would be £ 121
1/3. And this £ 121
1/3 would be the equivalent of 1,866
2/3 lbs. of yarn. As before,
since the conditions of production remained the same, 1
lb. of yarn would have the same value; it would contain the
same amount of labour-time. Moreover, according to the
assumption, the necessary wages— their value, the
labour-time they contained would have remained
unchanged.

Whether these 1,866 2/3 lbs. of
yarn were being produced under the first set of conditions
or under the second, i.e., with 2 or with 4 hours
surplus-labour, they would have the same value in both
cases. The value therefore of the additional 266
2/3 lbs. of cotton that are spun, is
£ 13 1/3. This, added to
the £ 80 for the 1,600 lbs., amounts to £ 93
1/3 and in both cases 4 working-hours
more for 20 men amount to £ 8. Altogether
£ 28 for the labour, that is
£1211/3. The wages are, in
both cases, the same. The pound of yarn costs in both
cases 13/10 s. Since the value
of the pound of cotton is 1s., what remained for the
newly-added labour in 1 lb. of yarn would in both cases
amount to 3/10 s., equal to 3
3/5d (or
18/5d.).

Nevertheless, under the conditions assumed, the relation
between value and surplus-value in each pound of yarn would
be very different. In the first case, since the
necessary labour was equal to £ 20 and the
surplus-labour to £ 4, or since the former amounted to
10 hours and the latter to 2 hours, the ratio of
surplus-labour to necessary labour would be
2:10=2/10=1/5.
(Similarly £ 4:£
20=4/20=1/5.)
The 3 3/5d. [newly-added labour] in a
pound of yarn would in this case contain
1/5 unpaid labour, that is
18/25 d. or
72/25 farthings equal to 2
22/25 farthings. In the second
case, on the other hand, the necessary labour would be
£ 20 (10 working-hours), the surplus-labour £8
(4 working-hours). The ratio of surplus-labour to
necessary labour would be
8:20=8/20=4/10=2/5.
Thus the 3 3/5 d, [of newly-added
labour] in a pound of yarn would contain
2/5 unpaid labour, i.e., 5
19/25 farthings or 1 d. 1
19/25 farthings. | Although the yarn has the same
value in both cases and although the same wages are paid in
both cases, the surplus-value in a pound of yarn is in one
case twice as large as in the other. The ratio of
value of labour to surplus-value is of course the same in
the individual commodity, that is, in a portion of the
product, as in the whole product.

In the one case, the capital advanced is £ 93
1/3 for cotton, and how much for
wages? The wages for 1,600 lbs. amount to £ 20
here, hence for the additional 266 2/3
lbs. a further £3 1/3.
This makes £23 1/3. And
the total capital outlay is £ 93
1/3+£
231/3=£ 116
2/3. The product comes to
£ 121 1/3. (The additional
outlay in [variable] capital, of £3
1/3, only yields 13
1/3s.[£2/3]
surplus-value. £ 20 :£ 4=£ 3
1/3+£
2/3).

In the other case, however, the capital outlay would
amount to only £93 1/9 +
£20 = £ 113 1/3 and
£ 4 would have to be added to the £ 4
surplus-value. The same number of pounds of yarn are
produced in both cases and both have the same value, that is
to say, they represent equal total quantities of labour, but
these equal total qualities of labour are set in motion by
capitals of unequal size, although the wages are the same;
but the working-days are of unequal length and,
therefore, unequal quantities of unpaid labour are
produced. Taking the individual pound of yarn, the
wages paid for it, or the amounts of paid labour a
pound contains, are different. The same wages are
spread over a larger volume of commodities here, not because
labour is more productive in the one case than in the other,
but because the total amount of unpaid labour which is set
into motion in one case is greater than in the other.
With the same quantity of paid labour,
therefore, more pounds of yarn are produced in the one case
than in the other, although in both cases the same
quantities of yarn are produced, representing the same
quantity of total labour (paid and unpaid). If, on the
other hand, the productivity of labour had increased in the
second case, then the value of the pound of yarn would at
all events have fallen, whatever the ratio of surplus-value
to variable capital.

In such a case, therefore, it would be wrong to say
that—because the value of the pound of yarn is
fixed at is, 3 3/5d., the value of the
labour which is added is also fixed and amounts to 3
3/5 d., and the wages, i.e., the
necessary labour-time, remain, according to the
assumption, unchanged—the surplus-value [must] be the
same and the two capitals under otherwise equal conditions
would have produced the yarn with equal profits. This
would be correct if we were concerned with one pound of
yarn, but we are in fact concerned here with a capital which
has produced 1,866 2/3
lbs. yarn. And in order to know the amount of profit
(actually of surplus-value) on one pound, we must know the
length of the working-day, or the quantity of unpaid labour
(when the productivity is given) that the capital sets in
motion. But this information cannot be gathered by
looking at the individual commodity.

Thus Ricardo deals only with what I have called the
relative surplus-value. From the outset he
assumes, as Adam Smith and his predecessors seem to have
done as well, that the length of the working-day is
given. (At most, Adam Smith mentions differences
in the length of the working-day in different
branches of labour, which are levelled out or compensated by
the relatively greater intensity of labour, difficulty,
unpleasantness, etc.) On the basis of this postulate
Ricardo, on the whole, explains relative surplus-value
correctly. Before we give the principal points of his
theory, we shall cite a few more passages to illustrate
Ricardo’s point of view.

“The labour of a million of men in
manufactures, will always produce the same value, but
will not always produce the same riches” (l.c.,
p. 320).

This means that the product of their daily labour will
always be the product of a million working-days containing
the same labour-time; this is wrong, or is only true
where the same normal working-day—taking into
account the various difficulties etc. in different branches
of labour—has been generally established.

Even then, however, the statement is wrong in the general
form in which it is expressed here. If the normal
working-day is 12 hours, and the annual product of one man
is, in terms of money, £ 50 and the value of money
remains unchanged, then, in this case, the product of 1
million men would always amount to £ 50 million per
year. If the necessary labour is 6 hours, then the
capital laid out for these million men would be £
25,000,000 per annum. The surplus-value would also be
£ 25 million. The product would always be 50
million, whether the workers received 25 or 30 or 40
million. But in the first case the surplus-value would
be 25 million, in the second it would be 20 million and in
the third 10 million. If the capital advanced
consisted only of variable capital, i.e., only of the
capital which is laid out in the wages of these 1
million men, then Ricardo would be right. He is,
therefore, only right in the one case, where the
total capital equals the variable capital; a presupposition
which pervades all his, and Adam Smith’s, | observations regarding the
capital of society as a whole, but in capitalist production
this precondition does not exist in a single branch of
industry, much less in the production of society as a
whole.

That part of the constant capital which enters
into the labour-process without entering into the process of
the creation of value. does not enter into the
product, into the value of the product, and,
therefore, important as it is in the determination of the
general rate of profit, it does not concern us here, where
we are considering the value of the annual
product. But matters are quite different with that
part of constant capital which enters into the annual
product. We have seen that a portion of this part of
constant capital, or what appears as constant capital in one
sphere of production, appears as a direct product of labour
within another sphere of production, during the same
production period of one year; a large part of the capital
laid out annually, which appears to be constant
capital from the standpoint of the individual capitalist or
the particular sphere of production, therefore, resolves
itself into variable capital from the standpoint of
society or of the capitalist class. This part is thus
included in the 50 million, in that part of the 50 million
which forms variable capital or is laid out in wages.

But the position is different with that part of
constant capital which is used up in order to replace
the constant capital consumed in industry and
agriculture—with the consumed part of the constant
capital employed in those branches of production which
produce constant capital, raw material in its primary form,
fixed capital and auxiliary materials. The value of
this part reappears, it is reproduced in the product.
In what proportion it enters into the value of the whole
product depends entirely on its actual
magnitude—provided the productivity of labour does not
change; but however the productivity may change, this part
of the constant capital will always have a definite
magnitude. (On the average, apart from certain
exceptions in agriculture, the amount of the product, i.e.,
the riches—which Ricardo distinguishes from the
value—produced by one million men will, indeed, also
depend on the magnitude of this constant capital which is
antecedent to production.) This part of the value of
the product would not exist without the new labour of the
million men during the year. On the other hand, the
labour of the million men would not yield the same amount of
product without this constant capital which exists
independently of their year’s labour. It enters into
the labour-process as a condition of production but not a
single additional hour is worked in order to reproduce the
value of this part. As value it is, therefore, not the
result of the year’s labour, although its value would not
have been reproduced without this year’s labour.

If the part of the constant capital which enters into the
product were 25 million, then the value of the product of
the one million men would be 75 million; if this part
of the constant capital were 10 million, then the value of
the product would only be 60 million, etc. And since
the ratio of constant capital to variable capital increases
in the course of capitalist development, the value of the
annual product of a million men will tend to rise
continuously, in proportion to the growth of the past labour
which plays a part in their annual production. This
alone shows that Ricardo was unable to understand either the
essence of accumulation or the nature of profit.

With the growth in the proportion of constant to variable
capital, grows also the productivity of labour, the
productive forces brought into being, with which social
labour operates. As a result of this increasing
productivity of labour, however, a part of the existing
constant capital is continuously depreciated in value, for
its value depends not on the labour-time that it cost
originally, but on the labour-time with which it can be
reproduced, and this is continuously diminishing as the
productivity of labour grows. Although, therefore, the
value of the constant capital does not increase in
proportion to its amount, it increases nevertheless, because
its amount increases even more rapidly than its value
falls. But we shall return later to Ricardo’s views on
accumulation.

It is evident, however, that if the length of the
working-day is given, the value of the annual product of the
labour of one million men will differ greatly according to
the different amount of constant capital that enters into
the product; and that, despite the growing productivity of
labour, the value of this product will be greater where the
constant capital forms a large part of the total capital,
than under social conditions where it forms a relatively
small part of the total capital. With the advance in
the productivity of social labour, accompanied as it is by
the growth of constant capital, a relatively ever increasing
part of the annual product of labour will, therefore, fall
to the share of capital as such, and thus property in the
form of capital (apart from revenue) will be constantly
increasing and proportionately that part of value which the
individual worker and even the working class creates, will
be steadily decreasing, |
compared with the product of their past labour that
confronts them as capital. The alienation and the
antagonism between labour-power and the objective conditions
of labour which have become independent in the form of
capital, thereby grow continuously. (Not taking into
account the variable capital, i.e., that part of the product
of the annual labour which is required for the reproduction
of the working class; even these means of subsistence,
however, confront them as capital.)

Ricardo’s view, that the working-day is given,
limited, a fixed magnitude, is also expressed by him in
other forms, for instance:

“They” (the wages of labour and
profit of stock) are “together always of the
same value” (l.c., p. 499, [in] Chapter XXXII
“Mr. Malthus’s Opinions on Rent”),

in other words this only means that the (daily)
labour-time whose product is divided between the
wages of labour and the profits of stock, is always the
same, is constant.

“Wages and profits together will be
the same value” (l.c., p. 491, note).

I hardly need to repeat here that in these passages one
should always read “surplus-value” instead of
“profit”.

“Wages and profits taken together
will continue always of the same value” (l.c.,
pp. 490-91).

“Wages are to be estimated by their
real value, viz., by the quantity of labour and
capital employed in producing them, and not by their
nominal value either in coats, hats, money, or
corn” (l.c., Chapter I, “On Value”
p. 50).

The value of the means of subsistence which the worker
obtains (buys with his wages), corn, clothes, etc., is
determined by the total labour-time required for their
production, the quantity of immediate labour as well as the
quantity of materialised labour necessary for their
production. But Ricardo confuses the issue because he
does not state it plainly, he does not say: “their
real value, viz., that quantity of the working-day
required to reproduce the value of their [the workers] own
necessaries, the equivalent of the necessaries paid to them,
or exchanged for their labour”. Real wages have
to be determined by the average time which the worker must
work each day in order to produce or reproduce his own
wages.

“The labourer is only paid a really
high price for his labour, when his wages will purchase the
produce of a great deal of labour” (l.c., p. 322,
(note]).

### 4. Relative Surplus-Value. [The Analysis of Relative Wages Is One of Ricardo’s Scientific Achievements]

This is in fact the only form of surplus-value which
Ricardo analyses under the name of profit.
[According to him:]

The quantity of labour required for the production of a
commodity, and contained in it, determines its value, which
is thus a given factor, a definite
amount. This amount is divided between
wage-labourer and capitalist. (Ricardo, like Adam
Smith, does not take constant capital into account
here.) It is obvious that the share of one can only
rise or fall in proportion to the fall or rise of the share
of the other. Since the value of the commodities is
due to the labour of the workers, labour is under all
circumstances the precondition of value, but there can be no
labour unless the worker lives and maintains himself, i.e.,
receives the necessary wages (the minimum wages—wages
is synonymous with the value of his labour-power).
Wages and surplus-value— these two categories into
which the value of the commodity or the product itself is
divided—are therefore not only in inverse proportion
to each other, but the primary, the determinant factor is
the movement of wages. Their rise or fall causes the
opposite movement on the part of profit
(surplus-value). Wages do not rise or fall because
profit (surplus-value) falls or rises, but on the contrary
surplus-value (profit) falls or rises because wages rise or
fall. The surplus-product (one should really
say surplus-value) which remains after the working
class has received its share of its own annual production
forms the substance on which the capitalist class lives.

Since the value of the commodities is determined by the
quantity of labour contained in them, and since wages and
surplus-value (profit) are only shares, proportions
in which two classes of producers divide the value of the
commodity between themselves, it is clear that a rise or
fall in wages, although it determines the rate of
surplus-value (profit), does not affect the value of the
commodity or the price (as the monetary expression of the
value of a commodity). The proportion in which a whole
is divided between two shareholders makes the whole neither
larger nor smaller. It is, therefore, an erroneous
preconception to assume that a rise in wages raises the
prices of commodities; it only makes profit
(surplus-value) fall. Even the exceptions cited by
Ricardo, where a rise in wages is supposed to make the
exchange-values of some commodities fall and those of others
rise, are wrong so far as value is concerned and only
correct for cost-prices.

| Since the rate of
surplus-value (profit) is determined by the relative height
of wages, how is the latter determined? Apart from
competition, by the price of the necessary means of
subsistence. This, in turn, depends on the
productivity of labour, which increases with the fertility
of the land (Ricardo assumes capitalist production
here). Every “improvement” reduces the
prices of commodities, of the means of subsistence.
Wages or the value of labour, thus rise and fall in inverse
proportion to the development of the productive power of
labour, in so far as the latter produces necessary means of
subsistence which enter into the average consumption of the
working class. The rate of surplus-value (profit)
falls or rises, therefore, in direct proportion to the
development of the productive power of labour, because this
development reduces or raises wages.

The rate of profit (surplus-value) cannot fall unless
wages rise, and cannot rise unless wages fall.

The value of wages has to be reckoned not according to
the quantity of the means of subsistence received by the
worker, but according to the quantity of labour which these
means of subsistence cost (in fact the proportion of the
working-day which he appropriates for himself), that is
according to the relative share of the total product,
or rather of the total value of this product, which the
worker receives. It is possible that, reckoned in
terms of use-values (quantity of commodities or money), his
wages rise as productivity increases and yet the value of
the wages may fall and vice versa. It is one of
Ricardo’s great merits that he examined relative or
proportionate wages, and established them as a definite
category. Up to this time, wages had always been
regarded as something simple and consequently the worker was
considered an animal. But here he is considered in his
social relationships. The position of the classes to
one another depends more on relative wages than on the
absolute amount of wages.

Now these propositions have to be substantiated by
quotations from Ricardo.

“The value of the deer, the
produce of the hunter’s day’s labour, would be
exactly equal to the value of the fish, the produce of the
fisherman s day’s labour. The comparative value
of the fish and the game, would be entirely regulated by the
quantity of labour realised in each, whatever might be
the quantity of production, or however high or low
general wages or profits might be. If … the
fisherman … employed ten men, whose annual labour
cost £ 100 and who in one day obtained by
their labour twenty salmon: If … the hunter
[…] also employed ten men, whose annual labour
cost £ 100 and who in one day procured him ten
deer; then the natural price of a deer would be two salmon,
whether the proportion of the whole produce bestowed on
the men who obtained [it,] were large or small.
The proportion which might be paid for wages,
is of the utmost importance in the question of
profits; for it must at once be seen, that profits
would be high or low, exactly in proportion as wages were
low or high; but it could not in the least affect the
relative value of fish and game, as wages would be high or
low at the same time in both occupations” (l.c.,
Chapter I “On Value”, pp. 20-21).

It can be seen that Ricardo derives the whole value of
the commodity from the labour of the men
employed. It is their own labour or the product of
that labour or the value of this product, which is divided
between them and capital.

“No alteration in the wages of labour
could produce any alteration in the relative value of these
commodities; for suppose them to rise, no greater
quantity of labour would be required in any of these
occupations, but it would be paid for at a higher
price… Wages might rise twenty per cent and
profits consequently fall in a, greater or less proportion,
without occasioning the least alteration in the relative
value of these commodities” (l.c., p. 23).

“There can be no rise in the value
of labour without a fall of profits. If the corn
is to be divided between the farmer and the labourer,
the larger the proportion that is given to the
latter, the less will remain for the former. So if
cloth or cotton goods be divided between the workman
and his employer, the larger the proportion given to
the former, the less remains for the latter” (l.c.,
p. 31).

“Adam Smith, and all the writers who have followed
him, have, without one exception that I know of, maintained
that a rise in the price of labour would be uniformly
followed by a rise in the price of all
commodities. I hope I have succeeded in showing,
that there are no grounds for such an opinion” (l.c.,
p. 45).

“A rise of[f] wages, from the circumstance of the
labourer being more liberally rewarded, or from a difficulty
of procuring the necessaries on which wages are expended,
does not, except in some instances, produce the effect of
raising price, but has a great effect in lowering
profits.”

The position is different, however, when
the rise of wages is due to “… an alteration in
the value of money… In the one case”
<(namely, in the last-mentioned case> “no
greater proportion of the annual labour of the
country is devoted to the support of [the]
labourers; in the other case, a larger portion is so
devoted” (l.c., p. 48). | .

“With a rise in the price of food and necessaries, the
natural price of labour will rise; with the[g] fall in their price, the natural
price of labour will fall” (l.c., p. 86).

“The surplus produce
remaining, after satisfying the wants of the existing
population, must necessarily be in proportion to the
facility of production, viz., to the smaller
number of persons employed in production” (l.c.,
p. 93).

“Neither the farmer who cultivates
that quantity of land, which regulates price, nor the
manufacturer, who manufactures goods, sacrifice any portion
of the produce for rent. The whole value of their
commodities is divided into two portions only:
one constitutes the profits of stock, the other the wages of
labour” (l.c., p. 107).

“Suppose the price of silks, velvets,
furniture, and any other commodities, not required by the
labourer, to rise in consequence of more labour being
expended on them, would not that affect profits?
Certainly not : for nothing can affect profits but a rise in
wages; silks and velvets are not consumed by the labourer,
and therefore cannot raise wages” (l.c., p. 118).

“If the labour of ten men will, on
land of a certain quality, obtain 180 quarters of wheat, and
its value be £4 per quarter, or £ 720”
(l.c., p. 110), …in all cases, the same sum of
£ 720 must be divided between wages and
profits… Whether wages or profits rise or fall,
it is this sum of £ 720 from which they must both be
provided. On the one hand, profits can never rise so
high as to absorb so much of this £ 720 that enough
will not he left to furnish the labourers with absolute
necessaries; on the other hand, wages can never rise so high
as to leave no portion of this sum for profits” (l.c.,
p. 113).

“Profits depend on high or law
wages, wages on the price of necessaries, and the price
of necessaries chiefly on the price of food, because all
other requisites may be increased almost without
limit” (l.c., p. 119).

“Although a greater value is
produced” (with a deterioration of the land) “a
greater proportion of what remains of that value,
after paying rent, is consumed by the producers,”
<he identifies labourers with producers here>
“and it is this, and this alone, which
regulates profits” (l.c., p. 127).

“It is the essential quality of an
improvement to diminish the quantity of labour before
required to produce a commodity; and this diminution cannot
take place without a fall of its price or relative
value” (l.c., p. 70).

“Diminish the cost of production of
hats, and their price will ultimately fall to their new
natural price, although the demand should be doubled,
trebled, or quadrupled. Diminish the cost of
subsistence of men, by diminishing the natural price of the
food and clothing, by which life is sustained, and wages
will ultimately fall, notwithstanding that the demand for
labourers | may very
greatly increase” (l.c., p. 460).

“In proportion as less is
appropriated for wages, more will be appropriated for
profits, and vice versa” (l.c., p. 500).

“It has been one of the objects of
this work to shew, that with every fall in the real value of
necessaries, the wages of labour would fall, and that the
profits of stock would rise—in other words, that of
any given annual value a less portion would be paid to
the labouring class, and a larger portion to those
whose funds employed this class.”

<It is only in this statement, which has now become a
commonplace, that Ricardo expresses the nature of capital,
though he may not be aware of it. It is not
accumulated labour which is employed by the labouring class,
by the labourers themselves, but the “funds”,
“accumulated labour”, which “employ this
class”, employ present, immediate labour.>

“Suppose the value of the
commodities produced in a particular manufacture to be
£ 1,000, and to be divided between the
master and his labourers” <here again be
expresses the nature of capital; the capitalist is the
master, the workers are his labourers>
“in the proportion of £ 800 to labourers, and
£ 200 to the master; if the value of these commodities
should fall to £ 900, and £ 100 be saved from
the wages of labour, in consequence of the fall of
necessaries, the net income of the masters would be in no
degree impaired” (l.c., pp. 511-12).

“If the shoes and clothing of the
labourer, could, by improvements in machinery, be produced
by one-fourth of the labour now necessary to their
production, they would probably fall 75 per cent; but so far
is it from being true, that the labourer would thereby be
enabled permanently to consume four coats, or four pair of
shoes, instead of one, that it is probable his wages
would in no long time be adjusted by the effects of
competition, and the stimulus to population, to the new
value of the necessaries on which they were
expended. If these improvements extended to all the
objects of the labourer’s consumption, we should find him
probably at the end of a very few years, in possession of
only a small, if any, addition to his enjoyments, although
the exchangeable value of those commodities, compared with
any other commodity […] had sustained a very
considerable reduction; and though they were the produce of
a very considerably diminished quantity of labour”
(l.c., p. 8).

“When wages rise, it is always at the
expense of profits, and when they fall, profits always
rise” (l.c., p. 491, note).

“It has been my endeavour to shew
throughout this work, that the rate of profits can never be
increased but by a fall in wages, and that there can be no
permanent fall of wages but in consequence of a fall of the
necessaries on which wages are expended. If,
therefore, by the extension of foreign trade, or by
improvements in machinery, the food and necessaries
of the labourer can be brought to market, at a
reduced price, profits will rise. If, instead of
growing our own corn, or manufacturing the clothing and
other necessaries of the labourer, we discover a new market
from which we can supply ourselves with these commodities at
a cheaper price, wages will fall and profits rise; but
if the commodities obtained at a cheaper rate[h], by the extension of
foreign commerce, or by the improvement of machinery, be
exclusively the commodities consumed by the rich, no
alteration will take place in the rate of profits. The
rate of wages would not be affected, although wine, velvets,
silks, and other expensive commodities should fall 50 per
cent, and consequently profits would continue unaltered.

“Foreign trade, then, though highly
beneficial to a country, as it increases the amount and
variety of the objects on which revenue may be expended, and
affords, by the abundance and cheapness of commodities,
incentives to saving” (and why not incentives to
spending?), “and to the accumulation of
capital, has no tendency to raise the profits of stock,
unless the commodities imported be of that description on
which the wages of labour are expended.

“The remarks which have been made
respecting foreign trade, apply equally to home trade.
The rate of profits is never increased”

<he has just said the very opposite; evidently he
means never, unless the value of labour is diminished by the
improvements mentioned)

“by a better distribution of
labour, by the invention of machinery, by the
establishment of roads and canals, or by any means
of abridging labour […] in the manufacture or
in the conveyance of goods. These are
causes which operate on price, and never fail to be highly
beneficial to consumers; since they enable them, with the
same labour […] to obtain in exchange a greater
quantity of the commodity to which the improvement is
applied; but they have no effect whatever on profit.
On the other hand, | every
diminution in the wages of labour raises profits, but
produces no effect on the price of commodities. One is
advantageous to all classes, for all classes are
consumers”

<but how is it advantageous to the labouring
class? For Ricardo presupposes that if these
commodities enter into the consumption of the wage-earner
they reduce wages, and if these commodities become cheaper
without reducing wages they are not commodities on which
wages are expended>;

“the other is beneficial only to
producers; they gain more, but every thing remains at its
former price.”

<Again, how is this possible, since Ricardo
presupposes that the reduction of wages which raises profits
takes place precisely because the price of the necessaries
has fallen and therefore by no means does “every thing
remain at its former price”.>

“In the first case they get the same
as before; but every thing” <wrong
again; should read every thing, with the exception of the
necessaries> “on which their gains are
expended, is diminished in exchangeable value” (l.c.,
pp. 137-38).

It is evident that this passage is rather loosely
worded. But apart from this formal aspect, the
statements are only true if one reads “rate of
surplus-value” for rate of profit, and this applies to
the whole of this investigation into relative
surplus-value. Even in the case of luxury articles,
such improvements can raise the general rate of profit,
since the rate of profit in these spheres of production, as
in all others, bears a share in the levelling out of all
particular rates of profit into the average rate of
profit. If in such cases, as a result of the
above-mentioned influences, the value of the constant
capital falls proportionately to the variable, or the period
of turnover is reduced (i.e., a change takes place in the
circulation process) , then the rate of profit rises.
Furthermore, the influence of foreign trade is expounded in
an entirely one-sided way. The development of the
product into a commodity is fundamental to capitalist
production and this is intrinsically bound up with the
expansion of the market, the creation of the world market,
and therefore foreign trade.

Apart from this, Ricardo is right when he states that all
improvements, be they brought about through the division of
labour, improvements in machinery, the perfection of means
of communication, foreign trade—in short all measures
that reduce the necessary labour-time involved in the
manufacture or transport of commodities increase the
surplus-value (hence profit) and thus enrich the capitalist
class because, and in so far as, these
“improvements” reduce the value of labour.

Finally, in this section, we must quote a few passages in
which Ricardo analyses the nature of relative
wages.

“If I have to hire a labourer for a
week, and instead of ten shillings I pay him eight, no
variation having taken place in the value of money, the
labourer can probably obtain more food and necessaries, with
his eight shillings, than he before obtained for ten: but
this is owing, not to a rise in the real value of his
wages, as stated by Adam Smith, and more recently by
Mr. Malthus, but to a fall in the value of the things on
which his wages are expended, things perfectly distinct; and
yet for calling this a fall in the real value of
wages, I am told that I adopt new and unusual language,
not reconcilable with the true principles of the
science” (l.c., pp. 11-12).

“It is not by the absolute
quantity of produce obtained by either class, that we
can correctly judge of the rate of profit, rent, and wages,
but by the quantity of labour required to obtain that
produce. By improvements in machinery and agriculture,
the whole produce may be doubled; but if wages, rent, and
profit be also doubled, these three will bear the same
proportions to one another as before, and neither could
be said to have relatively varied. But if wages
partook not of the whole of this increase; if they, instead
of being doubled, were only increased one-half …it
would, I apprehend, be correct for me to say that
…wages had fallen while profits had risen; for if we
had an invariable standard by which to measure the
value of this produce, we should find that a less
value had fallen to the class of labourers …, and a
greater to the class of capitalists, than had been given
before” (l.c., p. 49).

“It will not the less be a real fall,
because they” (the wages) “might furnish him
with a greater quantity of cheap commodities than his former
wages” (l.c., p. 51).

De Quincey points out the contrast between some of
the propositions developed by Ricardo and those of the other
economists.

“When it was asked” [by the
economists before Ricardo] “what determined the value
of all commodities: it was answered that this value was
chiefly determined by wages. When again it was
asked—what determined wages ?—it was recollected
that wages must […] be adjusted to the value of the
commodities upon which they were spent; and the answer was
in effect that wages were determined by the value of
commodities.” ([Thomas de Quincey], Dialogues of
Three Templars on Political Economy, Chiefly in Relation to
the Principles of Mr. Ricardo in The London
Magazine, Vol. IX, 1824, p. 560.)

| The same
Dialogues contains the following passage about the
law governing the measurement of value by the quantity of
labour and by the value of labour:

“So far are the two formulae from
presenting merely two different expressions of the same law,
that the very best way of expressing negatively
Mr. Ricardo’s law (viz. A is to B in value as the
quantities of the producing labour) would be to
say—A is not to B in value as the values
of the producing labour” [l.c., p. 348].

(If the organic composition of the capital in A and B
were the same, then it could in fact be said that their
relation to one another is proportionate to the
values of the producing labour. For the
accumulated labour in each would be in the same proportion
as the immediate labour in each. The quantities of
paid labour in each, however, would be proportionate to the
total quantities of immediate labour in each. Assume
the composition to be 80c+20v and the rate of surplus-value
equal to 50 per cent. If one capital were equal to
£ 500 and the other to £ 300, then the product
in the first case would be £ 550 and in the second
£ 330. The products would then be as
5×20=100 (wages) to 3×20=60; that is as 100:60,
as 10:6, as 5:3. [And] 550:330=55:33 or as
55/11:33/11
(5×11=55 and 3×11=33); i.e., as 5:3. But
even then one would only know their relation to one another
and not their true values, since many different values
correspond to the ratio 5:3.)

“If the price is ten shillings, then
[…] wages and profits, taken as a whole, cannot
exceed ten shillings. […] But do not the wages
and profits as a whole, themselves, on the contrary,
predetermine the price? No; that is the old
superannuated doctrine.” (Thomas de Quincey, The
Logic of Political Economy, Edinburgh and London, 1844,
p. 204.)

“The new economy has shown that all
price is governed by proportional quantity of the producing
labour, and by that only. Being itself once settled,
then, ipso facto, price settles the fund out
of which both wages and profits must draw their separate
dividends” (l.c., p. 204). “Any change
that can disturb the existing relations between wages and
profits, must originate in wages” (l.c.,
p. 205).

Ricardo’s doctrine is new in so far as he
poses the question whether in fact it sets aside the law of
actual value (l.c., p. 158).[i]

[a] In the
manuscript: “f.i.”—Ed.

[b] In the
manuscript: “the commodity”.—Ed.

* | (The following passage shows
that Ricardo consciously identifies value with
cost of production: “Mr. Malthus appears to
think that it is a part of my doctrine, that the cost
and value of a thing should be the same;—it is,
if he means by cost, ‘cost of production’
including profits” (l.c., p. 46, note).)

[c] In the
manuscript “but” instead of “It follows,
that”.—Ed.

[d] The brackets are
omitted in the manuscript—Ed.

[e] In the
manuscript: “upon”.—Ed.

[f] In the
manuscript: “in”.—Ed.

[g] In the
manuscript: “a”.—Ed.

[h] In the
manuscript: “price”.—Ed.

[i] Marx
summarises very briefly here—in his own
words—the idea developed by de Quincey.—Ed.


## [CHAPTER XVI] RICARDO’S THEORY OF PROFIT

### [1. Individual Instances in Which Ricardo Distinguishes Between Surplus-Value and Profit]

It has already been shown in some detail, that the laws
of surplus-value—or rather of the rate of
surplus-value—(assuming the working-day as given) do
not so directly and simply coincide with, nor are they
applicable to, the laws of profit, as Ricardo supposes.
It has been shown that he wrongly identifies surplus-value
with profit and that these are only identical in so far as
the total capital consists of variable capital or is laid
out directly in wages; and that therefore what Ricardo deals
with under the name of “profit” is in fact
surplus-value. Only in this case can the total product
simply be resolved into wages and surplus-value. Ricardo
evidently shares Smith’s view, that the total value
of the annual product resolves itself into revenues.
Hence also his confusion of value with cost-price.

It is not necessary to repeat here that the rate of
profit is not directly governed by the same laws as the rate
of surplus-value.

Firstly: We have seen that the rate of profit can
rise or fall as a result of a fall or rise in rent,
independently of any change in the value of labour.

Secondly: The absolute amount of profit is equal
to the absolute amount of surplus-value.
The latter,
however, is determined not only by the rate of surplus-value
but just as much by the number of workers employed.
The same
amount of profit is therefore possible, with a falling rate
of surplus-value and a rising number of workers and vice
versa, etc.

Thirdly: With a given rate of
surplus-value, the rate of profit depends on the organic
composition of capital.

Fourthly: With a given surplus-value (the
organic composition of capital per £ 100 is
also assumed to be given) the rate of profit depends on the
relative value of the different parts of the capital,
which may be differently affected, partly by economy of
power etc. in the use of the means of production, partly by
variations in value which may affect one part of capital
while they leave the rest untouched.

Finally, one has to take into account the differences in
the composition of capital arising from the process of
circulation.

| Some of the observations that occur in Ricardo’s
writing should have led him to the distinction between
surplus-value and profit.
Because he fails to make this
distinction, he appears in some passages to descend to the
vulgar view—as has already been indicated in the
analysis of Chapter I “On
Value”—the view that profit is a mere
addition over and above the value of the commodity; for
instance when he speaks of the determination of profit on
capital in which the fixed capital predominates,
etc.[1]
This was the source of much nonsense among his successors.
This vulgar view is bound to arise, if the proposition (which in
practice is correct) that on the average, capitals of
equal size yield equal profits or that profit depends on
the size of the capital employed, is not connected by a
series of intermediary links with the general laws of value
etc.: in short, if profit and surplus-value are treated as
identical, which is only correct for the aggregate
capital.
Accordingly Ricardo has no means for determining a
general rate of profit.

Ricardo realises that the rate of profit is
not modified by those variations of the value of
commodities which affect all parts of capital equally
as, for example, variations in the value of money.
He should
therefore have concluded that it is affected by such
variations in the value of commodities which do not
affect all parts of capital equally; that therefore
variations in the rate of profit may occur while the value
of labour remains unchanged, and that even the rate of
profit may move in the opposite direction to variations in
the value of labour.
Above all, however, he should have kept
in mind that here the surplus-product, or what is for
him the same thing, surplus-value, or again the same
thing, surplus-labour, when he is considering it
sub specie profit, is not calculated in proportion to
the variable capital alone, but in proportion to the
total capital advanced.

With reference to a change in the value of money, he
says:

“The variation in the value of money, however
great, makes no difference in the rate of profits;
for suppose the goods of the manufacturer to rise from
£ 1,000 to £ 2,000, or 100 per cent, if his
capital, on which the variations of money have as much
effect as on the value of produce, if his machinery,
buildings, and stock in trade rise also 100 per cent, his
rate of profits will be the same…

“If, with a capital of a given value, he can, by
economy in labour, double the quantity of produce, and it
fall to half its former price, it will bear the same
proportion to the capital that produced it which it did
before and consequently profits will still be at the
same rate.

“If, at the same time that he doubles the quantity
of produce by the employment of the same capital, the value
of money is by any accident lowered one half, the produce
will sell for twice the money value that it did before; but
the capital employed to produce it will also be of twice its
former money value; and therefore in this case too, the
value of the produce will bear the same proportion to the
value of the capital as it did before.” (David
Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, pp. 51–52.)

If Ricardo means surplus produce when he writes
produce in the last passage then this is correct.
For the rate of profit is equal to the surplus produce
(value) divided by the capital employed. Thus if the
surplus produce is 10 and the capital 100, the rate of
profit is 10/100, which equals
1/10, which equals 10 per cent. If
however he means the total product, then the way he puts it
is not accurate. In that case by proportion of the value
of the produce to the value of capital, he evidently means
nothing but the excess of the value of the commodity over
the value of the capital advanced. In any case, it is
obvious that here he does not identify profit with
surplus-value or the rate of profit with the rate of
surplus-value, [the latter is] equal to the
surplus-value divided by the value of labour or the
variable capital.

Ricardo says (Chapter XXXII):

“The raw produce of which
commodities are made, is supposed to have fallen in price,
and, therefore, commodities will fall on that account.
True, they will fall, but their fall will not be attended
with any diminution in the money income of the producer.
If he sell his commodity for less money, it is only because
one of the materials from which it is made has fallen in
value. If the clothier sell his cloth for £ 900
instead of £ 1,000, his income will not be less, if the
wool from which it is made, has declined £ 100 in
value” (l.c., p. 518).

(The particular point with which Ricardo is actually
dealing, the effect in a practical case, does not concern us
here.
But a sudden fall in the value of wool would of course
affect (adversely) the money income of those clothiers who
had on their hands a large stock of finished cloth
manufactured at a time when wool was dearer and which has to
be sold after the price | of wool has dropped.)

If, as Ricardo assumes here, the clothiers set in motion
the same amount of labour as before <they could set in
motion a much greater amount of labour because a part of the
capital which was previously expended only on raw material
is now at their disposal and can be expended on raw material
plus labour>, it is clear that their “money
income” taken in absolute terms, “will not be
less” but their rate of profit will be
greater than previously; for—say it was 10 per
cent, i.e., £ 100—the same amount as before
would now have to be reckoned on £ 900 instead of
£ 1,000.
In the first case the rate of profit was 10
per cent.
In the second it is 1/9 or 11 1/9 per cent.
Since
Ricardo moreover presupposes that the raw produce of which
commodities are made has fallen generally, the general rate
of profit would rise and not only the rate of profit in one
branch of production.
It is all the more strange that
Ricardo does not realise this, because he understands it
when the opposite takes place.

For in Chapter VI “On Profits” Ricardo
deals with the case where, as a result of an increase in the
price of necessaries owing to the cultivation of worse land
and the consequent rise in differential rent, firstly wages
rise and secondly all raw produce from the surface of the
earth.
(This assumption is by no means necessary; cotton may
very well fall in price, so can silk and even wool and
linen, although the price of corn may be rising.)

In the first place he says that the surplus-value
(he calls it profit) of the farmer will fall because the
value of the product of the ten men whom he employs,
continues to be £ 720 and from this fund of £
720 he has to hand over more in wages.
And he continues:

“But the rate of profits will fall still
more, because the capital of the farmer …
consists in a great measure of raw produce, such as his corn
and hay-ricks, his unthreshed wheat and barley, his horses
and cows, which would all rise in price in consequence of
the rise of produce.
His absolute profits
would fall from £ 480 to £ 445 15s.; but if from
the cause which I have just stated, his capital should rise
from £ 3,000 to £ 3,200, the rate of his
profits would, when corn was at £ 5 2s. l0d., be
under 14 per cent.

“If a manufacturer had also employed £ 3,000
in his business, he would be obliged in consequence of the
rise of wages, to increase his capital, in order to be
enabled to carry on the same business.
If his commodities
sold before for £ 720 they would continue to sell at
the same price; but the wages of labour, which were
before.
£ 240, would rise when corn was at £ 5
2s. l0d., to £ 274 5s.
In the first case he would have
a balance of £ 480 as profit on £ 3,000, in the
second he would have a profit only of £ 445 15s., on
an increased capital, and therefore his profits would
conform to the altered rate of those of the farmer”
(l.c., pp. 116–17).

In this passage, therefore, Ricardo distinguishes between
absolute profit (equal to surplus-value) and
rate of profit and also shows that the rate of profit
falls more as a result of the change in the value of the
capital advanced, than the absolute profit (surplus-value)
falls as a result of the rise in the value of labour.
The
rate of profit would have also fallen, if the value pf
labour [had] remained the same, because the
same absolute profit would have to be calculated on a
greater capital.
The reverse result, i.e., a rise in the
rate of profit (as distinct from a rise in surplus-value or
absolute profit), would take place in the first instance
cited from him, where the value of the raw produce falls.
It
is evident, therefore, that rises and falls in the rate of
profit may also be brought about by circumstances other than
the rise and fall in the absolute profit and the rise and
fall in its rate, reckoned on the capital laid out in
wages.

In connection with the last quoted passage Ricardo
writes:

“Articles of jewellery, of iron, of plate, and of
copper, would not rise, because none of the raw
produce from the surface of the earth enters into their
composition” (l. c., p. 117).

The prices of these commodities would not rise, but the
rate of profit in these branches of production would rise
above that in the others.
For in the latter, a smaller
surplus-value (because of the rise in wages) would
correspond to a capital outlay that had grown in value for
two reasons: firstly, because the outlay in wages had
increased; secondly, because the outlay in raw materials had
increased.
In the second case [i.e. jewellery etc.] |
there is a smaller surplus-value on a capital outlay in
which only the variable part has grown because of the rise
in wages.

In these passages, Ricardo himself throws overboard his
whole theory of profit, which is based on the false
identification of the rate of surplus-value with the rate of
profit.

“In every case, agricultural, as well as
manufacturing profits are lowered by a rise in the price
of raw produce, if it be accompanied by a rise of
wages” (l. c., pp. 113–14).

It follows from what Ricardo himself has said, that, even
if [the rise in the price of raw produce] is not accompanied
by a rise of wages, the rate of profit would be
lowered by an increase of that part of the advanced capital
which consists of raw produce.

“Suppose the price of silks, velvets, furniture,
and any other commodities, not required by the labourer, to
rise in consequence of more labour being expended on
them, would not that affect profits? Certainly not: for
nothing can affect profits but a rise in wages; silks
and velvets are not consumed by the labourer, and therefore
cannot raise wages” (l. c., p. 118).

The rate of profit in these particular spheres of
production would certainly fall, although the value of
labour—wages—remained the same.
The raw material
used by the silk manufacturers, piano manufacturers,
furniture manufacturers, etc. would have become dearer, and
therefore the proportion borne by the same surplus-value to
the capital laid out would have fallen and hence the rate of
profit.
And the general rate of profit consists of
the average of the particular rates of profit in all
branches of business.
Or, in order to make the same average
profit as before, these manufacturers would raise the price
of their commodities.
Such a nominal rise in prices does not
directly affect the rate of profit, but the distribution of
profit.

Ricardo returns once more to the case considered above,
where the surplus-value (absolute profit) falls, because the
price of the necessaries (and along with these, also rent)
rises.

“I must again observe that the rate of
profits would fall much more rapidly than I have
estimated in my calculation: for the value of the
produce being what I have stated it under the
circumstances supposed, the value of the farmer’s
stock would be greatly increased from its necessarily
consisting of many of the commodities which had risen in
value.
Before corn could rise from £ 4 to £
12, his capital would probably be doubled in
exchangeable value, and be worth £ 6,000 instead of
£ 3,000.
If then his profit were £ 180, or 6 per
cent on his original capital, profits would not at
that time be really at a higher rate than 3 per cent;
for £ 6,000 at 3 per cent gives £ 180; and on
those terms only could a new farmer with £6,000
money in his pocket enter into the farming business.

“Many trades would derive some advantage,
more or less; from the same source.
The brewer, the
distiller, the clothier, the linen manufacturer, would be
partly compensated for the diminution of their profits,
by the rise in the value of their stock of raw and finished
materials; but a manufacturer of hardware, of jewellery,
and of many other commodities, as welt as those whose
capitals uniformly consisted of money, would be subject to
the whole fall in the rate of profits, without any
compensation whatever” (l. c., pp. 123–24).

What is important here is only something of which Ricardo
is not aware, namely, that he throws overboard his
identification of profit with surplus-value and [admits]
that the rate of profit can be affected by a variation in
the value of the constant capital independently of the value
of labour.
Moreover, his illustration is only partially
correct.
The advantage which the farmer, clothier etc. would
derive from the rise in price of the stock of commodities
they have on hand and on the market, would of course cease
as soon as they had sold these commodities.
The increased
value of their capital would similarly no longer represent a
gain for them, when this capital was used up and had to be
replaced.
They would then all find themselves in the
position of the new farmer cited by Ricardo himself, who
would have to advance a capital of £ 6,000 in order to
make a profit of 3 per cent.
On the other hand, ||XIII-670|
the jeweller, manufacturer of hardware, money-dealer
etc.—although at first they would not [receive] any
compensation for their losses—would realise a rate of
profit of more than 3 per cent, for only the capital laid
out in wages would have risen in value whereas their
constant capital remained unchanged.

One further point of importance in connection with this
compensation of the falling profit by the rise in value of
the capital, mentioned by Ricardo, is that for the
capitalist—and generally, as far as the division of
the product of annual labour is concerned—it is a
question not only of the distribution of the product among
the various shareholders in the revenue, but also of the
division of this product into capital and revenue.

### [2.] Formation of the General Rate of Profit. (Average Profit or “Usual Profit”)

### [a) The Starting-Point of the Ricardian Theory of Profit Is the Antecedent Predetermined Average Rate of Profit]

Ricardo is by no means theoretically clear here.

“I have already remarked, that the market
price of a commodity may exceed its natural or
necessary price, as it may be produced in less abundance
than the new demand for it requires.
This, however, is but a
temporary effect.
The high profits on capital
employed in producing that commodity, will naturally attract
capital to that trade; and as soon as the requisite funds
are supplied, and the quantity of the commodity is duly
increased, its price will fall, and the profits of
the trade will conform to the general level.
A fall
in the general rate of profits is by no means
incompatible with a partial rise of profits in particular
employments.
It is through the inequality of profits, that
capital is moved from one employment to
another.
Whilst then general profits are falling,
and gradually settling at a lower level in consequence of
the rise of wages, and the increasing difficulty of
supplying the increasing population with necessaries, the
profits of the farmer may, for an interval of some little
duration, be above the former level.
An extraordinary
stimulus may be also given for a certain time, to a
particular branch of foreign and colonial trade(l.c.,
pp. 118–19).

“It should be recollected that prices always vary
in the market, and in the first instance, through the
comparative state of demand and supply.
Although cloth could
be furnished at 40s. per yard, and give the usual profits
of stock, it may rise to 60 or 80s, from a general
change of fashion… The makers of cloth will for a
time have unusual profits, but capital will naturally flow
to that manufacture, till the supply and demand are again at
their fair level, when the price of cloth will again sink to
40s., its natural or necessary price.
In the same manner,
with every increased demand for corn, it may rise so high as
to afford more than the general profits to the farmer.
If
there be plenty of fertile land, the price of corn will
again fall to its former standard, after the requisite
quantity of capital has been employed in producing it, and
profits will be as before; but if there be not plenty of
fertile land, if, to produce this additional quantity, more
than the usual quantity of capital and labour be required,
corn will not fall to its former level.
Its natural price
will be raised, and the farmer, instead of obtaining
permanently larger profits, will find himself obliged to be
satisfied with the diminished rate which is the inevitable
consequence of the rise of wages, produced by the rise of
necessaries” (l.c., pp. 119–20).

If the working-day is given (or if only such
differences occur in the working-day in different trades as
are compensated by the particular characteristics of the
different kinds of labour) then the general rate of
surplus-value, i.e., of surplus-labour, is given
since wages are on the average the same, Ricardo is
preoccupied with this idea, and he confuses the general
rate of surplus-value with the general rate of
profit.
I have shown that with the same general rate
of surplus-value, the rates of profit in
different branches of production must be very different, if
the commodities are to be sold at their respective
values.

The general rate of profit is formed through the
total surplus-value produced being calculated on the total
capital of society (of the class of capitalists).
Each
capital, therefore, in each particular branch, represents a
portion of a total capital of the same |
organic composition, both as regards constant and
variable capital, and circulating and fixed capital.
As such
a portion, it draws its dividends from the surplus-value
created by the aggregate capital, in accordance with its
size.
The surplus-value thus distributed, the amount of
surplus-value which falls to the share of a block of capital
of given size, for example £ 100, during a given
period of time, for example one year, constitutes the
average profit or the general rate of profit,
and as such it enters into the costs of production of every
sphere of production.
If this share [per 100] is 15, then
the usual profit equals 15 per cent and the cost-price is
£115.
It can be less if, for instance, only a part of
the capital advanced enters as wear and tear into the
process of the creation of value.
But it is always equal to
the capital consumed +15 [per cent] , the average profit on
the capital advanced.
If in one case £ 100 entered
into the product and in another only £ 50, then in the
first case the cost-price would be 100+15=115 and in the
second case it would be 50+15=65; thus both capitals would
have sold their commodities at the same cost-price,
i.e., at a price which yielded the same rate of profit to
both.
It is evident, that the emergence, realisation,
creation of the general rate of profit necessitates
the transformation of values into cost-prices
that are different from these values.
Ricardo on the
contrary assumes the identity of values and cost-prices,
because he confuses the rate of profit with the rate of
surplus-value.
Hence he has not the faintest notion of the
general change which takes place in the prices of
commodities, in the course of the establishment of a general
rate of profit, before there can be any talk of a general
rate of profit.
He accepts this rate of profit as something
pre-existent which, therefore, even plays a part in his
determination of value.
(See Chapter I “On
Value”.) Having postulated the general rate of
profit, he only concerns himself with the exceptional
modifications in prices which are necessary for the
maintenance, for the continued existence of this
general rate of profit.
He does not realise at all
that in order to create the general rate of profit
values must first be transformed into cost-prices and that
therefore, when he presupposes a general rate of profit, he
is no longer dealing directly with the values of
commodities.

Moreover, the passage under consideration, only
[expresses] the Smithian concept and even this in a
one-sided way, because Ricardo is preoccupied with his
notion of a general rate of surplus-value.
According to him, the rate of profit rises above the
[average] level only in particular branches of
production, because there the market-price rises above the
natural price owing to the relation between supply and
demand, under-production or over-production.
Competition,
influx of new capital into one branch of production or
withdrawal of old capital from another, will then equalise
market-price and natural price and reduce the profit
of the particular branch to the general level.
Here the real
level of profit is assumed as constant and
predetermined, and it is only a question of reducing
the profit to this level in particular spheres of production
in which it has risen above or fallen below it, as a result
of the action of supply and demand.
Ricardo, moreover,
always assumes that the commodities whose prices yield more
than the average profit stand above their value and
that those which yield less than the average profit stand
below their value.
If competition makes their
market-value conform to their value, then the
level is established.

According to Ricardo, the level itself can only
rise or fall if wages fall or rise (for a relatively long
period), that is to say, if the rate of relative
surplus-value falls or rises; and this occurs without
any change in prices.
(Yet Ricardo himself admits here that
there can be very significant variations in prices in
different spheres .of production, according to the ratio of
circulating and fixed capital.)

But even when a general rate of profit is
established and therefore cost-prices, the rate of
profit in particular branches may rise, because the
hours of work, in them are longer and
consequently the rate of absolute surplus-value
rises.
That competition between the workers cannot level
this out, is proved by the intervention of the
state.
The rate of profit will rise in these particular
spheres without the market-price rising above the natural
price.
Competition between capitals, however, can and in the
long run will prevent that this excess profit accrues
entirely to the capitalists in these particular fields.
They will have to reduce the prices of their commodities below
their “natural prices”, or the other spheres
will raise their prices a little (or if they do not
actually raise them, because a fall in value of these
commodities may supervene,
then | at any rate they will
not lower them as much as the development of the productive
power of labour in their own branches of production
required).
The general level will rise and the cost-prices
will change.

Furthermore : if a new branch of production comes into
being in which a disproportionate amount of living labour is
employed in relation to accumulated labour, in which
therefore the composition of capital is far below the
average composition which determines the average profit, the
relations of supply and demand in this new trade may make it
possible to sell its output above its cost-price, at
a price approximating more closely to its actual
value.
Competition can level this out, only through the
raising of the general level [of profit] , because
capital on the whole realises, sets in motion, a greater
quantity of unpaid surplus-labour.
The relations of
supply and demand do not, in the first instance as Ricardo
maintains, cause the commodity to be sold above its
value, but merely cause it to be sold above its
cost-price, at a price approximating to its value.
The equalisation can therefore bring about not its reduction
to the old level, but the establishment of a new
level.

### [b) Ricardo’s Mistakes Regarding the Influence of Colonial Trade, and Foreign Trade in General, on the Rate of Profit]

The same applies, for example, to colonial trade,
where as a result of slavery and the bounty of nature, the
value of labour is lower than in the old country, or perhaps
because, in fact or in law, landed property has not
developed there.
If capitals from the mother country can be
freely transferred to this new trade, then they will reduce
the specific excess profit in this trade, but will raise the
general level of profit (as Adam Smith observes quite
correctly).

On this point, Ricardo always helps himself out with the
phrase: But in the old trades the quantity of labour
employed has nevertheless remained the same, and so have
wages.
The general rate of profit is, however, determined by
the ratio of unpaid labour to paid labour and to the capital
advanced not in this or that sphere of the economy, but in
all spheres to which the capital may be freely
transferred.
The ratio may stay the same in nine-tenths; but
if it alters in one-tenth, then the general rate of profit
in the ten-tenths must change.
Whenever there is an increase
in the quantity of unpaid labour set in motion by a capital
of a given size, the effect of competition can only be that
capitals of equal size draw equal dividends, equal shares in
this increased surplus-labour; but not that the dividend of
each individual capital remains the same or is reduced to
its former share in surplus-labour, despite the increase of
surplus-labour in proportion to the total capital
advanced.
If Ricardo makes this assumption he has no grounds
whatsoever for contesting Adam Smith’s view that the rate of
profit is reduced merely by the growing competition between
capitals due to their accumulation.
For he himself assumes
here that the rate of profit is reduced simply by
competition, although the rate of surplus-value is
increasing. This is indeed connected with his second false
assumption, that (leaving out of account the lowering or
raising of wages) the rate of profit can never rise or fall,
except as a result of temporary deviations of the
market-price from the natural price.
And what is natural
price?
That price which is equal to the capital outlay plus
the average profit.
Thus one arrives again at the assumption
that average profit can only fall or rise in the same way as
the relative surplus-value.

Ricardo is therefore wrong when, contradicting Adam
Smith,

“Any change from one foreign trade to another, or
from home to foreign trade, cannot, in my opinion, affect
the rate of profits” (l.c., p. 413).

He is equally wrong in supposing that the rate of profit
does not affect cost-prices because it does not affect
values.

Ricardo is wrong in thinking that if, in consequence of
particularly favourable circumstances, profits in a branch
of foreign trade [rise above the general level,] the general
level [of profits] must always be re-established by reducing
[these profits] to the former level and not by raising the
general level of profits.

“They contend, that 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 subside to the general level” (l.c.,
pp. 132–33).

Because of his completely wrong conception of the rate of
profit, Ricardo misunderstands entirely the influence of
foreign trade, when it does not directly lower the price of
the labourers’ food.
He does not see how enormously
important it is for England, for example,
to secure |
cheaper raw materials for industry, and that in this case,
as I have shown previously, the rate of profit rises
although prices fall, whereas in the reverse case,
with rising prices, the rate of profit can fall, even
if wages remain the same in both cases.

“It is not, therefore, in consequence of the
extension of the market that the rate of profit is
raised” (l. c., p. 136).

The rate of profit does not depend on the price of the
individual commodity but on the amount of surplus-labour
which can be realised with a given capital.
Elsewhere
Ricardo also fails to recognise the importance of the
market because he does not understand the nature of
money.

* * *

| (In connection with the above it must be noted
that Ricardo commits all these blunders, because he attempts
to carry through his identification of the rate of
surplus-value with the rate of profit by means of forced
abstractions.
The vulgar mob has therefore concluded that
theoretical truths are abstractions which are at variance
with reality, instead of seeing, on the contrary, that
Ricardo does not carry true abstract thinking far enough and
is therefore driven into false abstraction. |

### [3.] Law of the Diminishing Rate of Profit

### [a) Wrong Presuppositions in the Ricardian Conception of the Diminishing Rate of Profit]

This is one of the most important points in the Ricardian
system.

The rate of profit has a tendency to fall.
Why?
Adam Smith says: As a result of the growing accumulation and the
growing competition between capitals which accompanies it.
Ricardo retorts: Competition can level out profits in
the different spheres of production (we have seen above that
he is not consistent in this); but it cannot lower the
general rate of profit.
This would only be possible if, as a
result of the accumulation of capital, the capital grew so
much more rapidly than the population, that the demand for
labour were constantly greater than its supply, and
therefore wages—both nominal and real wages and in
terms of use-value—were constantly rising in value and
in use-value.
This is not the case.
Ricardo is not an
optimist who believes such fairy-tales.

But because for Ricardo the rate of profit and the
rate of surplus-value— that is, the relative
surplus-value, since he assumes the length of the
working-day to be constant—are identical terms, a
permanent fall in profit or the tendency of profit to fall
can only be explained as the result of the same
causes that bring about a permanent fall or tendency to
fall in the rate of surplus-value, i.e., in that part
of the day during which the worker does not work for himself
but for the capitalist.
What are these causes?
If the length
of the working-day is assumed to remain constant, then the
part of it during which the worker works for nothing for the
capitalist can only fall, diminish, if the part during which
he works for himself grows.
And this is only possible
(assuming that labour is paid at its value), if the
value of the necessaries—the means of
subsistence on which the worker spends his wages—
increases.
But as a result of the development of the
productivity of labour, the value of industrial commodities
is constantly decreasing.
The diminishing rate of profit can
therefore only be explained by the fact that the value of
food, the principal component part of the means of
subsistence, is constantly rising.
This happens because
agriculture is becoming less productive.
This is the same
presupposition which, according to Ricardo’s interpretation,
explains the existence and growth of rent.
The continuous
fall in profits is thus bound up with the continuous rise in
the rate of rent.
I have already shown that Ricardo’s view
of rent is wrong.
This then cuts out one of the grounds for
his explanation of the fall in the rate of profits.
But secondly, it rests on the false assumption that the rate
of surplus-value and the rate of profit are
identical, that therefore a fall in the rate of profit is
identical with a fall in the rate of surplus-value, which in
fact could only be explained in Ricardo’s way.
And this puts
an end to his theory.
The rate of profit falls, although the
rate of surplus-value remains the same or rises, because the
proportion of variable capital to constant capital decreases
with the development of the productive power of labour.
The
rate of profit thus falls, not because labour becomes less
productive, but because it becomes more productive.
Not
because the worker is less exploited, but because he is more
exploited, whether the absolute surplus-time grows or, when
the state prevents this, the relative surplus-time grows,
for capitalist production is inseparable from falling
relative value of labour.

Thus Ricardo’s theory rests on two false
presuppositions:

1.
The false supposition that the existence and growth of
rent is determined by the diminishing productivity of
agriculture;

2.
The false assumption that the rate of profit is equal
to the rate of relative surplus-value and can only rise or
fall in inverse proportion to a fall or rise in wages.

| I shall now place together the statements in which
Ricardo expounds the view that has just been described.

### [b) Analysis of Ricardo’s Thesis that the Increasing Rent Gradually Absorbs the Profit]

First, however, some comments on the way in which, given
his concept of rent, Ricardo thinks that rent gradually
swallows up the rate of profit.

We shall use the tables on page 574, but with the
necessary modifications.

In these tables it is assumed that the capital employed
consists of £ 60c+£ 40v, the surplus-value is 50
per cent, the value of the product is therefore
£ 120, whatever the productivity of labour.
Of this
£ 10 was profit and £ 10 absolute rent.
Say, the
£ 40 represents wages for 20 men (for a week’s labour
for example or rather, because of the rate of profit, say, a
year’s labour; but this does not matter here at
all).
According to Table A, where land I determines
the market-value, the number of tons is 60, therefore 60
tons=£ 120, 1 ton=120/60=£
2.
The wages, £ 40, are thus equal to 20 tons or
quarters of grain.
This then is the necessary wage for the
number of workers employed by the capital of £
100.
Now if it were necessary to descend to an inferior type
of soil, where a capital of £ 110 (£ 60 constant
capital and the 20 workers which this sets in motion, that
is, £ 60 constant capital and £ 50 variable
capital) was required, in order to produce 48 tons.
In this
case the surplus-value would be £ 10, and the price
per ton would be £ 2 1/2.
If we descended to an even
worse type of land where £ 120 would be equal to 40
tons, the price per ton would be 120/40=£ 3.
In this
case there would be no surplus-value on the worse type of
land.
What the 20 men produce is always equal to the value
of £ 60 (£ 3 equals a working-day of a given
length).
Thus if wages grow from £ 40 to £ 60,
the surplus-value disappears altogether.
It is assumed
throughout that one quarter is the necessary wage for one
man.

Assume that in both these cases a capital of only £
100 is to be laid out.
Or, which is the same thing,
whatever capital may be laid out, what is the proportion for
100?
For instead of calculating that, if the same number of
workers and the same constant capital is employed as before,
the capital outlay will amount to 110 or 120, we shall
calculate on the basis of the same organic composition (not
measured in value but in amount of labour employed and
amount of constant capital) how much constant capital and
wages a capital of £ 100 contains (in order to keep to
the comparison of 100 with the other classes).
The
proportion 110:60=100:54 6/11 and 110:50=100:45 5/11.
20 men
set in motion £60 constant capital; so how many [men]
set in motion 54 6/11?

The situation is as follows : The value obtained from
employing a number of workers (say 20) is £ 60, In
this case 20 quarters or tons, equal to £ 40, will
fall to the share of the workers employed, if the value of
the ton or quarter is £ 2.
If the value of a ton rises
to £ 3, the surplus-value disappears.
If it rises to 2
1/2, then that half of the surplus-value disappears, which
constituted the absolute rent.

In the first case, where a capital of £ 120
(60c+60v) is laid out the product amounts to £
120, that is 40 tons (40X3), In the second case, where a
capital of £ 110 (60c and 50v is laid out the product
amounts to £ 120, which is 48 tons (48X2 1/2).

In the first case, if the capital laid out were £
100 (50c and 50v) the product would come to £ 100,
i.e., 33 1/3 tons (3X33 1/3=100).
Moreover, since only the
land has deteriorated while the capital has undergone no
change, the proportionate number [of workers] who set in
motion the constant capital of £ 50 will be the same
as that previously setting in motion the capital of £
60.
Thus if the latter was set in motion by 20 men (who
received £ 40 while the value of 1 ton was £ 2)
it will now be set in motion by 16 2/3 men, who receive
£ 50 since the value of a ton has risen to £
3.
As before, 1 man receives 1 ton or 1 quarter equal to
£ 3, for 16 2/3X3=50.
If the
value created by 16 2/3 men is £ 50, then that created
by 20 men is £ 60.
Thus the assumption that a day’s
labour of 20 men is equal to £ 60 remains
unchanged.

Now let us take the second case.
With a capital outlay of
£ 100, the product is £ 109 1/11, equal to 43
7/11 tons (2 1/2X43
7/11=109 1/11).
The constant capital is £
54 6/11 and the variable £ 45 5/11.
How many men does
the £ 45 5/11 represent?
18 2/11 men, |
for if the value of a day’s labour of 20 men equals £
60, then that of 18 2/11 men equals £ 54 6/11 hence
the value of the product is £ 109 1/11.

It can be seen that in both cases the same capital sets
in motion fewer men who, however, cost more.
They work for
the same length of time, but the surplus-labour [time]
decreases or disappears altogether, because they produce a
smaller amount of product in the same time (and this product
consists of their necessaries) , therefore they use
more labour-time for the production of 1 ton or 1 quarter
although they work the same length of time as
before.

In his calculations, Ricardo always presupposes that the
capital must set in motion more labour and that
therefore a greater capital, i.e., £ 120 or
£ 110, must be laid out instead of the previous
£ 100.
This is only correct if the same
quantity is to be produced, i.e., 60 tons in the cases
cited above, instead of 40 tons being produced in case I,
with an outlay of £ 120, and 48 in case II with an
outlay of £ 110.
With an outlay of £ 100,
therefore, 33 1/3 tons are produced in case I and 43 7/11
tons in case II.
Ricardo thus departs from the correct view
point, which is not that more workers must be employed in
order to create the same product, but that a given number of
workers create a smaller product, a greater share of which
is in turn taken up by wages.

We shall now compile two tables, firstly Table A
from page 574 and the new table which follows from the data
given above.

[Class]

Capital £

[Number of] tons

TV [Total value] £

MV [Mar-ket value] per ton £

IV [Indi-vidual value] per ton
£

DV [Differential value] per ton
£

CP [Cost price] per ton £

AR [Absolute rent] £

DR [Differential rent] £

AR [Absolute rent] tons

I

100

60

120

2

2

0

1 5/6

10

0

5

II

100

65

130

2

1 11/13

2/13

1 9/13

10

10

5

III

100

75

150

2

1 3/5

2/5

1 7/15

10

30

5

300

200

400

30

40

15

[Class]

DR [Differ-ential rent] tons

Rental £

Rental tons

Composition of capital

Rate of surplus-value per cent

Number of workers

Wages £

Wages tons

Rate of profit per cent

I

0

10

5

60c+40v

50

20

40

20

10

II

5

20

10

60c+40v

50

20

40

20

10

III

15

40

20

60c+40v

50

20

40

20

10

20

70

35

If this table were constructed in the reverse direction,
according to Ricardo’s descending line: that is beginning
from III and if at the same time one assumed that the more
fertile land which is cultivated first, pays no rent, then
we would, in the first place, have a capital of £ 100
in III, [which] produces a value of £ 120, consisting
of £ 60 constant capital and £ 60 newly-added
labour.
According to Ricardo, one would further have to
assume, that the rate of profit stood at a higher level than
entered in Table A, since, when the ton of coal
(quarter of wheat) was £ 2, the 20 men received 20
tons, equal to £ 40; now that, as a result of the fall
in the value, the ton is equal to £ 1 9/15, or £
1 12s., the 20 men receive only £ 32 (equal to 20
tons).
The capital advanced to employ the same number of
workers would amount to £ 60c and £
32v=£ 92 and the produced value would be
£ 120, since the value of the work carried out by the
20 men equals £ 60 as before.
Accordingly, a capital
of £ 100 would produce a value of £ 130 10/23,
for 92:120=100:130 10/23
(or 23:30=100:130 10/23).
Moreover this
capital of £ 100 would be composed as follows: £
65 5/23c and £ 34
18/23v.
Thus the capital would be
£ 65 5/23c+£ 34
18/23v; the value of the product
would amount to £ 130 10/23.
The number of
workers would be 21 17/23 and the rate of surplus-value
87 1/2 per cent.

1. So we would have:

[Class]

Capital £

Number of tons

TV [Total Value] £

MV [Market] value per ton £

IV [Individual value] per ton
£

DV [Differential value] per ton
£

III

100

81 12/23

130 20/23

1 3/5

1 3/5

0

Rent £

Profit £

Rate of Profit per cent

Composition of capital

Rate of Surplus value per cent

Number of workers

0

30 10/23

30 10/23

65 5/23c + 34 18/23v

87 1/2

21 17/23

Expressed in tons, wages would be equal to 21 17/23 tons
and profit to 19 1/46 tons.

| Continuing on the Ricardian assumption, let us now
suppose that as a result of the increasing population, the
market-price rises so high that class II must be cultivated,
where the value per ton is £ 1 11/13.

In this case it is impossible to assume as Ricardo wants
that the 21 17/23 workers produce always the same value,
i.e., £ 65 5/23 (wages added to surplus-value).
For
the number of workers whom III can employ, and
therefore exploit, decreases—according to his own
assumption—hence also the total amount of
surplus-value.

At the same time, the composition of the agricultural
capital always remains the same.
Whatever their wages may
be, 20 workers are always required (with a given length of
the working-day) in order to set in motion £ 60c.

Since these 20 workers receive 20 tons and the ton is
equal to £ 1 11/13, 20 workers cost £ 20
(1+11/13) =£ 20+£ l6 12/13=£ 36 12/13.

The value which these 20 workers produce, whatever the
productivity of their labour, equals [£] 60; thus the
capital advanced amounts to £ 96 12/13, the value [of
the product] is £ 120, and profit £ 23 1/13.
The
profit on a capital of £ 100 will therefore be
[£] 23 17/21 and the composition: £ 61
19/21c+£
382/21v.
20 40/63 workers [are]
employed.

Since the total value is £ 123 17/21, and the
individual value per ton in class III is £ 1 3/5, of
how many tons does the product consist?
77 8/21 tons.
The
rate of surplus-value is 62 1/2 per cent.

But III sells the ton at £ 1 11/13, This results in
a differential value of 4 12/13 s.
or £ 16/65 per ton,
and on 77 8/21 tons it amounts to 77 8/21 X
16/65 =£ 19 1/21.

Instead of selling its product at £ 123 17/21, III
sells at £ 123 17/21+£ 19 1/21=£ 142
6/7.
The £ 19 1/21 constitutes the rent.

Thus we would have the following for III :

[Class]

Capital £

[Number of] tons

[ATV] Actual total value £

[TMV] Total market value £

MV [Market value per ton] £

IV [Individual value per ton] £

III

100

77 8/21

123 17/21

142 6/7

1 11/13

1 3/5

DV Differential value [per ton]

Rent £

Rent in tons

Rate of profit per cent

Composition of capital

Rate of surplus-value per cent

Number of workers

[+£16/65=]
+412/13s.

19 1/21

10 20/63

23 17/21

61 19/21c+38 2/21v

62 1/2

20 40/63

The wages measured in tons are 20 40/63 tons.
And the
profit is 12 113/126 tons.

We now pass on to class II; there is no rent
here.
Market-value and individual value are equal.
The
number of tons produced by II is 67 4/63.

Thus we have the following for II:

[Class]

Capital £

[Number of] tons

TV [Total value] £

MV [Market value per ton] £

IV [Individual value per ton] £

II

100

67 4/63

123 17/21

1 11/13

1 11/23

DV [Differential value per ton]

Rent £

Rate of profit per cent

Composition of capital

Rate of surplus-value per cent

Number of workers

0

0

23 17/21

61 19/21c + 38 2/21v

62 1/2

20 40/63

Wages measured in tons are 20 40/63 and profit is 12
113/126tons.

| 2.
For the second case, in which class II and rent
comes into existence, we have the following:

[Class]

Capital £

[Number of] tons

[ATV] Actual total value £

[TMV] Total market value £

MV [Market value per ton] £

IV [Individual value per ton] £

DV [Differential value per ton] £

III

100

77 8/21

123 17/21

142 6/7

1 11/13

1 3/5

[+£16/65=] +4 12/13s.

II

100

67 4/63

123 17/21

123 17/21

1 11/13

1 11/13

0

Composition of capital

Number of workers

Rate of surplus-value per cent

Rate of profit per cent

Wages in tons

Profit in tons

Rent £

Rent in tons

61 19/21c+ 38 2/21v

20 40/63

62 1/2

23 17/21

20 40/63

12 113/126

19 1/21

10 20/63

61 19/21c+ 38 2/21v

20 40/63

62 1/2

23 17/21

20 40/63

12 113/126

0

0

Let us now pass on to the third case and, like Ricardo,
let us assume that mine I, a poorer mine, must and can be
worked, because the market-value has risen to £
2.
Since twenty workers are required for a constant capital
of £ 60 and their wages are now £ 40, we have
the same composition of capital as in Table A page
574, i.e., £ 60c+£ 40v, and as the value
produced by the 20 workers is always equal to £ 60,
the total value of the product produced by a capital of
£ 100 is £ 120, whatever its productivity.
The
rate of profit in this case is 20 per cent and the
surplus-value 50 per cent.
Measured in tons, the profit is
10 tons.
We must now see what changes occur in III and II as
a result of this change in the market-value and the
introduction of I, which determines the rate of profit.

Although III works the most fertile land he can with
£ 100 only employ 20 workers, costing him £ 40,
for a constant capital of £ 60 requires 20 workers.
The number of workers employed with a capital of £ 100
therefore falls to 20.
And the actual total value of the
product is now £ 120.
But how many tons have been
produced by III when the individual value of one ton is
equal to £ 19/15?
75 tons, since 120 divided by 24/15
(£ 19/15)=75.
The number of tons produced by III
decreases because he can employ less labour with the
same capital, not more (as Ricardo wrongly declares,
because he always considers merely how much labour is
required in order to create the same output; and not
how much living labour can be employed with the new
composition of capital though this is the only important
point).
But he sells these 75 tons at £ 150 (instead
of at £ 120, which is their value) and so the rent
rises to £ 30 in III.

So far as II is concerned, the value of the product here
is also £ 120 etc.
But, as the individual value per
ton is £ 1 11/13, 65 tons are produced (for 120
divided by 24/13 (1 11/13)=65).
In short, we arrive here at
Table A from page 574.
But since for our purpose we
need new headings here, now that I is introduced and the
market-value has risen to £ 2 we set out the table
anew.

3. [Third Case:]

[Class]

Capital £

[Number of] tons

ATV [Actual total value] £

TMV [Total market-value] £

MV [Market-value per ton] £

IV [Individual value per ton] £

DV [Differential value per ton] £

III

100

75

120

150

2

1 3/5

[£2/5=]8s.

II

100

65

120

130

2

1 11/13

[£2/13=]31/13s.

I

100

60

120

120

2

2

0

Composition of capital

Number of workers

Rate of surplus-value per cent

Rate of profit per cent

Wages in tons

Profit in tons

Rent £

Rent in tons

60 c + 40 v

20

50

20

20

10

30

15

60 c + 40 v

20

50

20

20

10

10

5

60 c + 40 v

20

50

20

20

10

0

0

40

20

| In short, this case III corresponds to Table
A page 574 (apart from absolute rent which appears as
a part of profit here) only the order is reversed.

Let us now go on to the newly assumed cases.

First of all the class which still yields a profit.
Let
it be called Ib.
With a capital of £ 100 it only
yields 43 7/11 tons.

The value of a ton has risen to £ 2 1/2.
The
composition of the capital is [£]
546/11c+[£] 45
5/11v.
The value of the product is
£ 109 1/11.
£ 45 5/11 is enough to pay 18 2/11
men.
And since the value of a day’s labour of 20 men is
£ 60, that of 18 2/11 men is [£] 54 6/11.
The
value of the product is therefore [£] 109 1/11.
The
rate of profit is £ 9 1/11, that is, 3 7/11
tons.
The rate of surplus-value is 20 per cent.

Since the organic composition of the capitals in III, II,
I is the same as in Ib and they must pay the same wages,
they too can employ only 18 2/11 men with £ 100, these
men produce a total value of [£] 54 6/11, and
therefore a surplus-value of 20 per cent and a rate of
profit of 9 1/11 per cent as in Ib.
The total value of the
product here, as in Ib, is £ 109 1/11.

But since the individual value of a ton in III is £
1 3/5, III produces (or its product is equal to) £ 109
1/11 divided by 1 3/5 or 24/15=68 2/11 tons.
Moreover, the
difference between the market-value of a ton and the
individual value amounts to £ 2 1/2 -£ 1
3/5.
That is £ 2 l0s.-£ 1 12s.=18s.
And on 68
2/11 tons this amounts to 18(68+2/11)s.=1,227
3/11s.=£ 617 3/11s.
Instead of selling at £ 109 1/11, III sells at
£170 9 5/11s.
And this excess equals the rent of
III.
This rent, expressed in tons, is 24 6/11 tons.

Since the individual value of a ton in II is £ 1
11/13, II produces [£] 109 1/11 divided by 1 11/13 and
this is 59 1/11 tons.
The difference between the
market-value of one ton in II and its individual value is
£ 2 1/2 -£ 1 11/13 which is £ 17/26.
And
on 59 1/11 tons, this amounts to £38 7/11.
And this is
the rent.
The total market-value [of the product] amounts
to £ 147 8/11.
The rent expressed in tons is 15 5/11
tons.

Finally, since the individual value of a ton in I is
£ 2, £ 109 1/11 is equal to 54 6/11 tons.
The
difference between the market-value and the individual-value
is £ 2 1/2 -£ 2=10s.
And on 54 6/11 tons, this
amounts to (59+6/11) l0s.=590s .+60/11s. =£27+5
5/11s.
The total market-value [of the
product] is therefore £ 136 7
3/11s.
And the value of the rent
expressed in tons is 10 10/11 tons.

Bringing together all the data for case 4, one gets the
following:

| 4.
[Fourth Case:]

[Class]

Capital £

[Number of] tons

ATV [Actual total value] £

TMV [Total market-value] £

MV [Market-value per ton] £

IV [Individual value per ton] £

DV [Differential value per ton] £

III

100

68 2/11

109 1/11

[£1705/11=] £170 91/11s.

2 1/2

1 3/5

[£9/10]=18s.

II

100

59 1/11

109 1/11

[£147 8/11=] £147 146/11s.

2 1/2

1 11/13

[£17/26=] 131/13s.

I

100

54 6/11

109 1/11

[£136 4/11=] £136 73/11s.

2 1/2

2

[£1/2=]10s.

Ib

100

43 7/11

109 1/11

[£109 1/11 [=£109 19/11s.

2 1/2

2 1/2

0

Composition of capital

Number of workers

[Rate of] surplus-value per cent

Rate of profit per cent

Wages [in] tons

Profit [in] tons

Rent £

Rent [in] tons

54 6/11c+45 5/11v

18 2/11

20

9 1/11

18 2/11

3 7/11

[£61 4/11=] £61 7 3/11s.

24 6/11

54 6/11c+45 5/11v

18 2/11

20

9 1/11

18 2/11

3 7/11

[£38 7/11=] £38 12 8/11s.

15 5/11

54 6/11c+45 5/11v

18 2/11

20

9 1/11

18 2/11

3 7/11

[£27 3/11=] £27 5 5/11s.

10 10/11

54 6/11c+45 5/11v

18 2/11

20

9 1/11

18 2/11

3 7/11

0

0

Finally let us look at the last case in which, according
to Ricardo, the entire profit, disappears and there
is no surplus-value.

In this case the value of the product rises to £ 3,
so that if 20 men are employed, their wage is £ 60
which is equal to the value produced by them.
The
composition of the capital is £ 50c+£ 50v.
Now
16 2/3 men are employed.
If the value produced by 20
men is £ 60, then that produced by 16 2/3 men is
£ 50.
The wages, there-fore, swallow up the whole
value.
Now, as before, a man receives 1 ton.
The value of
the product is £ 100 and therefore the number of tons
produced is 33 1/3 tons, of which one-half merely replaces
the value of the constant capital and the other half the
value of the variable capital.

Since in III, the individual value of the ton is £
1 3/5 or £ 24/15, how many tons does III produce?
100
divided by 24/15, i.e., 62 1/2 tons, whose value is £
100.
The difference, however, between market-value and
individual value is £ 3-£ 1 3/5=£ 1 6/15
or £ 1 2/5.
On 62 1/2 tons this amounts to £ 87
1/2 .
Hence the total market-value of the product is £
187 1/2 .
And the rent in tons is 29 1/6 tons.

In II the individual value of a ton is £ 1
11/13.
Hence the differential value is £ 3-£ 1
11/13=£ 1 2/13.
Since the individual value of a ton is
here £ 1 11/13 or £ 24/13, the capital of
£ 100 produces (100 divided by 24/13) 54 1/6 tons.
On
this number of tons, that difference amounts to £ 62
l0s.
And the [total] market-value of the product is £
162 l0s.
Expressed in tons, the rent is 20 5/6 tons.

In I the individual value of a ton is £ 2.
The
differential value therefore equals £ 3-£
2=£ 1.
Since the individual value of a ton is £
2 here, a capital of £ 100 produces 50 tons.
This
makes a difference of £ 50.
The [total] market-value
of the product is £ 150 and the rent in tons is 16 2/3
tons.

We now come to Ib, which until now has not carried a
rent.
Here the individual value is £ 2 1/2.
Hence
differential value equals 3–2 1/2=£ 1/2 or l0s.
And
since the individual value of a ton is here equal to £
2 1/2 or £ 5/2, £ 100 produces 40 tons.
The
differential value on these is £ 20, so that the total
market-value [of the product] amounts to £ 120.
And
the rent expressed in tons is 6 2/3 tons.

Let us now construct case 5 in which, according to
Ricardo, profit disappears.

| 5. [Fifth Case:]

[Class]

Capital £

[Number of] tons

ATV [Actual total value] £

TMV [Total market-value] £

MV [Market-value per ton] £

IV [Individual value per ton] £

DV [Differential value per ton] £

III

100

62 1/2

100

187 1/2

3

1 3/5

1 2/5

II

100

54 1/6

100

162 1/2

3

1 11/13

1 2/13

I

100

50

100

150

3

2

1

Ib

100

40

100

120

3

2 1/2

1/2

Ia

100

33 1/3

100

100

3

3

0

Composition of capital

Number of workers

Rate of surplus-value per cent

Rate of profit per cent

Wages in tons

Rent £

Rent in tons

50c + 50v

16 2/3

0

0

16 2/3

87 1/2

29 1/6

50c + 50v

16 2/3

0

0

16 2/3

62 1/2

20 5/6

50c + 50v

16 2/3

0

0

16 2/3

50

16 2/3

50c + 50v

16 2/3

0

0

16 2/3

20

6 2/3

50c + 50v

16 2/3

0

0

16 2/3

0

0

On the following page I shall now put all five cases in
tabular form.|

||681–82| The Movement of the Rent
According to Ricardo with Certain Corrections

[Class]

Capital £

[Number of] tons

Actual total value £

Total market-value £

Market value per ton £

Individual value per ton £

Differential value per ton £

Composition of capital

Number of workers

Rate of surplus-value per cent

Profit £

Profit in tons

Wages in tons

Money rent £

Rent in tons

A. Only the best class, III, is cultivated.
Non-existence of rent.
Only the most fertile land or mine is cultivated.

III

100

81 12/23

130 10/23

130 10/23

1 3/5

1 3/5

0

65 5/23c + 34 18/23v

21 17/23

87 1/2

30 10/23

19 1/46

21 17/23

0

0

B.
Second class, II, is added.
Rent comes into
existence on land(mine) III

III

100

77 8/21

123 17/21

142 6/7

1 11/13

1 3/5

[16/65=] 4 12/13s.

61 19/21c + 38 2/21v

20 40/63

62 1/2

23 17/21

12 113/126

20 40/63

19 1/21

10 20/63

I

100

67 4/63

123 17/21

123 17/21

1 11/13

1 11/13

0

61 19/21c + 38 2/21v

20 40/63

62 1/2

23 17/21

12 113/126

20 40/63

0

0

Total

200

144 4/9

247 13/21

266 2/3

41 17/23

47 13/21

25 50/63

41 17/63

19 1/21

10 20/63

C.
Third class, I[6], is added.
Rent comes into existence on land (mine) II

III

100

75

120

150

2

1 3/5

[£2/5=]8s.

60c + 40v

20

50

20

10

20

30

15

II

100

65

120

130

2

1 11/13

[£2/13=] 3 1/13s.

60c + 40v

20

50

20

10

20

10

5

I

100

60

120

120

2

2

0

60c + 40v

20

50

20

10

20

0

0

Total

300

200

360

400

60

60

30

60

40

20

D.
Fourth class, Ib, is added.
Rent comes into
existence on land (mine) I

III

100

68 2/11

109 1/11

[£170 5/11=] £170 9 1/11s.

2 1/2

1 3/5

[£9/10=] 18s.

54 6/11c + 45 5/11v

18 2/11

20

9 1/11

3 7/11

18 2/11

[£61 4/11=] £61 7 3/11s.

24 6/11

II

100

59 1/11

109 1/11

[£147 5/11=] £147 146/11s.

2 1/2

1 11/13

[£17/26=] 13 1/13s.

54 6/11c + 45 5/11v

18 2/11

20

9 1/11

3 7/11

18 2/11

[£38 7/11=] £38 128/11s.

15 5/11

I

100

54 6/11

109 1/11

[£136 4/11=] £136 7 3/11s.

2 1/2

2

[£1/2=] 10s.

54 6/11c + 45 5/11v

18 2/11

20

9 1/11

3 7/11

18 2/11

[£27 3/11=] £27 5 5/11s.

10 10/11

Ib

100

43 7/11

109 1/11

[£109 1/11=] £109 1 9/11s.

2 1/2

2 1/2

0

54 6/11c + 45 5/11v

18 2/11

20

9 1/11

3 7/11

18 2/11

0

0

Total

400

225 5/11[7]

436 4/11

[£563 7/11=]
£563 12 8/11s.

72 8/11

36 4/11

14 6/11

72 8/11

E.
Fifth class, Ib, is added.
Surplus-value and profit
disappear altogether.

III

100

62 1/2

100

187 1/2

3

1 3/5

1 2/5

50c+50v

16 2/3

0

0

0

16 2/3

87 1/2

29 1/6

II

100

54 1/6

100

162 1/2

3

1 11/13

1 2/13

50c+50v

16 2/3

0

0

0

16 2/3

62 1/2

20 5/6

I

100

50

100

150

3

2

1

50c+50v

16 2/3

0

0

0

16 2/3

50

16 2/3

Ib

100

40

100

120

3

2 1/2

1/2

50c+50v

16 2/3

0

0

0

16 2/3

20

6 2/3

Ia

100

33 1/3

100

100

3

3

0

50c+50v

16 2/3

0

0

0

16 2/3

0

0

Total

500

240

500

720

83 1/3

83 1/3

220

73 1/3

### [c) Transformation of a Part of Profit and a Part of Capital into Rent. The Magnitude of Rent Varies in Accordance with the Amount of Labour Employed in Agriculture]

| If in the first place we examine Table E on
the previous page, we see that the position in the last
class, Ia, is very clear.
In this case wages swallow up the
whole product and the whole value of the [newly-added]
labour.
Surplus-value is non-existent, hence there is
neither profit nor rent.
The value of the product is equal
to the value of the capital advanced, so that the
workers—who are here in possession of their own
capital—can invariably reproduce their wages and the
conditions of their labour, but no more.
In this last class
it cannot be said that the rent swallows up the
profit.
There is no rent and no profit because there is no
surplus-value.
Wages swallow up the surplus-value and
therefore the profit.

In the four other classes the position is prima
facie by no means clear.
If there is no surplus-value,
how can rent exist?
Moreover, the productivity of labour on
the types of land Ib, I, II and III has not altered at
all.
The non-existence of surplus-value must
therefore be sheer illusion.

Furthermore, another phenomenon becomes apparent and
this, prima facie, is equally inexplicable.
The rent
in tons for III amounts to 29 1/6 tons or quarters, whereas
in Table A, where only land III was cultivated, where
there was no rent and where, moreover, 21 17/23 men were
employed whereas now only 16 2/3 men are employed, the
profit (which absorbed the entire surplus-value) only
amounted to 19 1/46 tons.

The same contradiction is apparent in II, where the rent
in Table E amounts to 20 5/6
tons or quarters while in Table B the profit, which
absorbed the entire surplus-value (20
40/63 men being employed instead of 16
2/3 men now), amounted to only 12
113/126 tons or quarters.

Similarly in I, where the rent in Table E is 16
2/3 tons or quarters, while in Table
C the profit of I, which absorbs the entire
surplus-value, is only 10 tons (20 men being employed,
instead of the present 16 2/3).

Finally in Ib, where the rent in Table E is 6
2/3 tons or quarters, while the profit
of Ib in Table D, where the profit absorbed the
entire surplus-value, was only 3 7/11
tons or quarters (while 18 2/11 men
were employed instead of the 16 2/3
now being employed).

It is, however, clear, that whereas the rise in
market-value above the individual value of the products of
III, II, I, Ib can alter the distribution of the product,
shifting it from one class of shareholders to the other, it
can by no means increase the product which represents the
surplus-value over and above the wages.
Since the
productivity of the various types of land has remained the
same, as has the productivity of capital, how can III to Ib
become more productive in tons or quarters through the entry
into the market of the less productive type of land or mine
Ia?

The riddle is solved in the following manner:

If a day’s labour of 20 men produces £ 60, then
that of 16 2/3 men produces £ 50.
And since in land of
class III, the labour-time contained in £ 1 3/5 or
£ 8/5 is represented in 1 ton or 1 quarter, £ 50
will be represented in 3 11/4 tons or quarters.
16 2/3 tons
or quarters have to be deducted from this for wages, thus
leaving 14 7/12 as surplus-value.

Furthermore, because the market-value of a ton has risen
from £ 1 3/5 or £ 8/5 to £ 3, 16 2/3 tons
or quarters out of the product of 62 1/2 tons or quarters,
will suffice to replace the value of the constant
capital.
On the other hand, so long as the ton or quarter
produced on III itself determined the market-value, and the
latter was therefore equal to its individual value, 31 1/4
tons or quarters were required in order to replace a
constant capital of £ 50.
Instead of the 31 1/4 tons
or quarters—the part of the product which was
necessary to replace the capital when the value of a ton was
£ 1 3/5—only 16 2/3 are
now required.
Thus 31 1/4–16 2/3 tons or quarters,
| i.e., 14 7/12 tons or quarters, become available and
fall to the share of rent.

If one now adds the surplus-value produced by 16 2/3
workers with a constant capital of £ 50 on III, which
amounts to 14 7/12 tons or quarters, to 14 7/12 tons or
quarters, the part of the product which instead of replacing
the constant capital now takes on the form of
surplus-produce, then the total surplus-produce amounts to
28 14/12 tons or quarters =29 2/12=29 1/6 quarters or
tons.
And this is exactly the ton or corn rent of III in
Table E.
The apparent contradiction in the amount of
ton or corn rent in classes II, I, Ib in Table E is
solved in exactly the same way.

Thus it becomes evident that the differential
rent—which arises on the better types of land owing to
the difference between market-value and individual value of
the products raised on them— in its material
form as rent in kind, surplus-product, rent in
tons or corn in the above example, is made up of two
elements and due to two
transformations.
(Firstly:) The surplus-product which
represents the surplus-labour of the workers or the
surplus-value, is changed from the form of profit to the
form of rent, and therefore falls to the landlord instead of
the capitalist.
Secondly: a part of the product which
previously—when the product of the better type of land
or mine was being sold at its own value—was needed to
replace the value of the constant capital, is now,
when each portion of the product possesses a higher
market-value, free and appears in the form of
surplus-product, thus falling to the landlord instead of the
capitalist.

The rent in kind in so far as it is differential
rent comes into being as the result of two processes: the
transformation of the surplus-produce into rent, and not
into profit, and the transformation of a portion of
the product which was previously allotted for the
replacement of the value of the constant capital into
surplus-product, and thus into rent.
The latter
circumstance, that a part of the product is converted into
rent instead of capital, has been overlooked by Ricardo and
all his followers.
They only see the transformation of
surplus-product into rent, but not the transformation of a
part of the product which previously fell to the share of
capital (not of profit) into surplus-product.

The nominal value of the surplus-product or
differential rent thus constituted, is determined
(according to the presupposition made) by the value of the
product produced on the worst land or in the worst mine.
But this market-value only instigates the different
distribution of this product, it does not bring it
about.

These same two elements [are present] in all excess
profit, for instance, if as a result of new machinery etc.,
a cheaply produced product is sold at a higher market-value
than its own value.
A part of the surplus-labour of the
workers appears as surplus-product (excess profit) instead
of as profit.
And a part of the product which—if the
product were sold at its own lower value—would have to
replace the value of the capitalist’s constant capital, now
becomes free, has not got to replace anything, becomes
surplus-product and therefore swells the profit.

* * *

| {Incidentally, when speaking of the law of the
falling rate of profit in the course of the
development of capitalist production, we mean by profit, the
total sum of surplus-value which is seized in the first
place by industrial capitalist, [irrespective of] how he may
have to share this later with the money-lending capitalist
(in the form of interest) and the landlord (in the form of
rent).
Thus here the rate of profit is equal to
surplus-value divided by the capital outlay.
The rate of
profit in this sense may fall, although, for instance, the
industrial profit rises proportionately to interest or vice
versa, or although rent rises proportionately to industrial
profit or vice versa.
If P is the profit, P’
the industrial profit, I interest and R rent,
then P=P’+I+R.
And it is clear, that whatever the
absolute magnitude of P—P’, I, R can increase
or decrease as compared with one another, independently of
the magnitude of P or the rise and fall of
P.
The reciprocal rise of P’, I and R
only represents an altered distribution of P among
different persons.
A further examination of the
circumstances on which this distribution of P depends
but which does not coincide with a rise or fall of P
itself, does not belong here, but into a consideration of
the competition between capitals.
That, however, R
can rise to a level higher even than that of P, if it
were only divided into P’ and I, is
therefore—as has already been explained—due to
an illusion which arises from the fact that a part of
the product whose value is rising, becomes free and is
converted into rent instead of being reconverted into
constant capital.} |

* * *

| It was assumed
throughout this discussion, that the product whose price
(according to market-value) had risen did not enter in kind
into the composition of the constant capital, but only into
wages, only into the variable capital. If the former
were the case, Ricardo says that this would cause the rate
of profit to fall even more and the rent to rise. This
has to be examined.

We have assumed until now, that the value of the
product has to replace the value of the constant capital,
i.e., the £ 50 in the case cited above.
Thus if 1 ton
or quarter costs £3, it is obvious that not so many
tons or quarters are required for the replacement of this
value than would be needed if the ton or quarter cost only
£ 1 9/15.
But supposing that the coal or the corn or
whatever other product of the earth, the product produced by
agricultural capital, itself enters in kind into the
formation of the constant capital.
Let us assume for
instance that it makes up half of the constant capital.
In
this case it is clear that whatever the price of the coal or
the corn | a constant capital of definite size, in
other words, one which is set in motion by a definite number
of workers, always requires a definite portion of the total
product in kind for its replacement—since the
composition of agricultural capital has, according to the
assumption, remained unchanged in its proportionate
amounts of accumulated and living labour.

If for example, half the constant capital consists of
coal or corn and half of other commodities, then the
constant capital of £ 50 will consist of £ 25 of
other commodities and £ 25 (or 15 5/8 quarters or
tons) [coal or corn] , when the value of a ton is £
8/5 or £ 1 3/5.
And however the market-value of a ton
or a quarter may change, 16 2/3 men require a constant
capital of £ 25 plus 15 5/8 quarters or tons, for the
nature of the constant capital remains the same, and so does
the proportionate number of workers required to set it in
motion.

Now if, as in Table E, the value of a ton or
quarter rises to £ 3, then the constant capital
required for the 16 2/3 men would be £ 25+£ 3
(15+5/8)=£ 25+£ 45+£ 15/8=£71
7/8.
And since the 16 2/3 men cost £ 50, they would
require a total capital outlay of £ 71 7/8+£
50=£ 121 7/8.

The correlation of values within the agricultural
capital would have changed while organic composition
remained the same.

It would be £71 7/8c+£
50v (for 16 2/3 workers).
For [£] 100 the composition
would be £ 58 38/39c+£ 41
1/39v.
Slightly more than 13 2/3
workers (that is, leaving out of account the fraction 1/117)
Since 16 2/3 workers set in motion 15 5/8
tons or quarters constant capital, 13 79/117 workers
set in motion 12 32/39 tons or quarters, equal to £ 38
6/13.
The remainder of the constant capital, equal to
£ 20 20/39, would consist of other
commodities.
Whatever the circumstances, 12 32/39 tons or
quarters would always have to be deducted from the product
in order to replace that part of constant capital into which
they enter in kind.
Since the value produced by 20 workers
equals £ 60, that produced by 13 79/117 equals £
41 1/39.
Wages in Table E, however, also amount to
£ 41 1/39.
Therefore no surplus-value.

The total number of tons would be [51 11/13, of which] 12
32/39 tons are needed to replace [part of the constant
capital in kind]; a further 13 79/117 are for the workers; 6
98/117 tons, at £ 3 a ton, are used to replace the
remainder of the constant capital.
That is altogether 33 1/3
tons.
This would leave 17 37/39 tons for the rent.

To shorten the matter, let us take the most extreme case,
the one most favourable to Ricardo, i.e., that the constant
capital, just as the variable, consists purely of
agricultural produce whose value rises to £ 3 per
quarter or ton, when class la governs the market.

The technological composition of the capital remains the
same; that is, the ratio between living labour or
number of workers (since the normal working-day has been
assumed to be constant) represented by the variable capital
and the quantity of the instruments of labour
required, which now, according to our assumption, consist of
tons of coal or quarters of corn, remains constant for a
given number of workers.

Since with the original composition of the capital, of
£ 60c+£ 40v, and the price per ton of £ 2,
£ 40v represented 20 workers or 20 quarters, or tons,
£ 60c represented 30 tons; and since these 20 workers
produced 75 tons on III, 13 1/3 workers (and £ 40v is
equal to 13 1/3tons or workers if the ton costs £ 3)
produce 50 tons and set in motion a constant capital
of 60/3 | equal to 20 tons or quarters.

Moreover, since 20 workers produce a value of £ 60,
13 1/3[workers] produce £ 40.

Since the capitalist must pay £ 60 for the 20 tons
and £ 40 for the 13 1/3workers, but the latter only
produce a value of £ 40, the value of the product is
£ 100; the outlay is £ 100.
Surplus-value and
profit are nil.

But because the productivity of III has remained the
same, as has already been said, 13 1/3men produce 50 tons or
quarters.
The outlay in kind of tons, or quarters, however,
only amounts to 20 tons for constant capital and 13 1/3tons
for wages, i.e., 33 1/3 tons.
The 50 tons thus leave a
surplus-product of 16 2/3 and this forms the rent.

But what do the 16 2/3 represent?

Since the value of the product is [£] 100
and the product itself equals 50 tons, the value of the ton
produced here would in fact be £ 2, which is
100/50.
And so long as the product in kind is greater than
what is required for the replacement of the capital in kind,
the individual value of a ton must remain smaller than its
market-value according to this criterion.

The farmer must pay £60 in order to replace the 20
tons [constant capital], and he reckons the 20 tons at
£ 3, since this is the market-value per ton and a ton
is sold at this price.
Similarly he must pay £ 40 for
the 13 1/3 workers, or for the tons or quarters which he
pays to the workers.
Thus the workers only receive 13
1/3tons in the transaction.

In actual fact, however, so far as class III is
concerned, the 20 tons cost £ 40 and the 13 1/3cost
only £ 26 2/3, But the 13 1/3workers produce a value
of £ 40, and therefore a surplus-value of £
131/3.
At £ 2 per ton, this amounts to 64/6 or 62/3
tons.

And since the 20 tons [constant capital] cost only
£ 40 on III, this leaves an excess of £ 20 equal
to 10 tons.

The 16 2/3 tons rent are thus equal to 6 2/3 tons
surplus-value which is converted into rent and 10 tons
capital which is converted into rent.
But because the
market-value per ton has risen to £ 3, the 20 tons
cost the farmer £60 and the 13 1/3cost him £ 40,
while the 16 2/3 tons, that is the excess of the
market-value over the [individual] value of his product,
appear as rent, and [cost] £ 50.

How many tons are produced by 13 1/3men in class II?
20
men produce 65 here, 13 1/3[men] therefore 43 1/3 tons.
The
value of the product is £ 100, as above.
Of the 43 1/3
tons, however, 33 1/3 are required for the replacement of
the capital.
This leaves 43 1/3-33 1/3=l0 tons as
surplus-product or rent.

But this rent of 10 tons can be explained as follows: the
value of the product of II is £ 100, the product
amounts to 43 1/3 [tons], thus the value of a ton is 100/43
1/3 =£ 2 4/13.
The 13 1/3workers therefore cost
£ 30 10/13, and this leaves a surplus-value of £
9 3/13.
Moreover, the 20 tons constant capital cost
[£] 46 2/13 and of the [£] 60 that are paid for
this, there remain [£] 1311/13.
Together with the
surplus-value this comes to £ 23 1/13, which is
correct to the last farthing.

Only in class Ia, where in fact 33 1/3 tons or quarters,
that is the total product, is required in kind to replace
constant capital and wages, there is neither surplus-value,
nor surplus-product, nor profit, nor rent.
So long as this
is not the case, so long as the product is greater than is
necessary to replace the capital in kind, there will be
conversion of profit (surplus-value) and capital into
rent.
Conversion of capital into rent takes place when a
part of the product is freed, which, with a lower value,
would have had to replace the capital, or [when] a part of
the product which would have been converted into capital and
surplus-value falls to rent.

At the same time it is evident that if constant capital
becomes dearer as a result of dearer agricultural produce,
the rent is very much reduced, for example, the rent of III
and II [is reduced] from 50 tons, equal to £ 150 with
a market-value of £ 3, to 26 2/3 tons, i.e., almost to
half.
Such a reduction is inevitable | since the number
of workers employed with the same capital of £ 100 is
reduced for two reasons, firstly, because wages rise, i.e.,
the value of the variable capital rises, secondly, because
the value of the means of production, the constant capital,
rises.
In itself, the rise in wages necessitates that out of
the £ 100 less can be laid out in labour, hence
relatively less (if the value of the commodities that enter
into the constant capital remains the same) can be laid out
in constant capital; thus £ 100 represents less
accumulated and less living labour.
In addition, however,
the rise in the value, of the commodities which enter into
the constant capital, reduces the amount of accumulated
labour and for this reason of living labour, which can be
employed for the same sum of money, as the technological
ratio between accumulated and living labour remains the
same.
But since, with the same productivity of the land and
a given technological composition of the capital, the total
product depends on the quantity of labour employed, as the
latter decreases, so the rent must also decrease.

This only becomes evident when profit
disappears.
So long as there is a profit, the rent can
increase despite the absolute decrease in the product in
all classes, as shown in the table on page 681.
It is
after all obvious that as soon as rent alone exists, the
decrease in the product, hence in the surplus-product, must
hit rent itself.
This would occur more rapidly at the
outset, if the value of the constant capital increased with
that of variable capital.

But this apart, the table on page 681 shows that with
declining fertility in agriculture, the growth of
differential rent is always accompanied, even on the
better classes of land, by a diminishing volume of total
product in proportion to a capital outlay of a definite
size, say £ 100.
Ricardo has no inkling of this.
The
rate of profit decreases, because the same capital, say
£ 100, sets in motion less labour and pays more
for this labour, thus yielding an ever smaller surplus.
The
actual product, however, like the surplus-value, depends on
the number of workers employed by the capital, when the
productivity is given.
This is overlooked by Ricardo.
He
also ignores the manner in which the rent is formed: not
only by transforming surplus-value into rent, but also
capital into surplus-value.
Of course this is only an
apparent transformation of capital into surplus-value.
Each
particle of surplus-produce would represent surplus-value or
surplus-labour, if the market-value were determined by the
value of the product of III etc.
Ricardo, moreover, only
considers that in order to produce the same volume of
product, more labour has to be employed, but disregards the
fact that with the same capital, an ever diminishing
quantity of living labour is employed, of which an ever
greater part is necessary labour and an ever smaller part
surplus-labour, and this is the decisive factor for the
determination of both the rate of profit and the quantity of
product produced.

All this considered, it must be said that even if rent is
taken to be purely differential rent, Ricardo has not made
the slightest advance over his predecessors.
His important
achievement in this field is, as De Quincey pointed out, the
scientific formulation of the question.
In solving it
Ricardo accepts the traditional views.

Namely :

“The innovation that Ricardo introduced into the
theory of rent, is that he resolves it into the
question whether it really invalidates the law of
value.”9
(Thomas de Quincey,
The Logic of Political Economy, Edinburgh and London,
1844, p. 158.)

On page 163 of the same work, De Quincey says
further:

“Rent is […] that portion of the produce
from the soil (or from any agency of
production) which is paid to the landlord for the
use of its differential powers, as measured by
comparison with those of similar agencies operating on the
same market.”

Furthermore on page 176:

The objections against Ricardo are that the owners of No,
l will not give it away for nothing.
But in the
period (this mythical period), when only No, 1 is
being cultivated “no separate class of occupants
and tenants distinct from the class of owners
| can have been formed”.

So according to De Quincey this law of landownership [is
valid] so long as there is no landownership in the modern
sense of the word.

Now to the relevant quotations from Ricardo.

### [d) Historical Illustration of the Rise in the Rate of Profit with a Simultaneous Rise in the Prices of Agricultural Products. The Possibility of an Increasing Productivity of Labour in Agriculture]

(First the following note on differential rent: In
reality, the ascending and descending lines alternate, run
across one another and intertwine.

But it cannot by any means be said that if for individual
short periods (such as 1797–1813) the descending line
clearly predominates, that because of this, the rate
of profit must fall (in so far, that is, as the latter is
determined by the rate of surplus-value).
Rather I believe
that during that period, the rate of profit in England rose
by way of exception, despite the greatly increased prices of
wheat and agricultural produce generally.
I do not know of
any English statistician who does not share this view on the
rise in the rate of profit during that period.
Individual
economists, such as Chalmers, Blake, etc. have advanced
special theories based on this fact.
Moreover I must add
that it is foolish to attempt to explain the rise in the
price of wheat during that period by the depreciation of
money.
No one who has studied the history of the prices of
commodities during that period, can agree with this.
Besides, the rise in prices begins much earlier and reaches
a high level before any kind of depreciation of money
occurs.
As soon as it appears it must simply be allowed
for.
If one asks why the rate of profit rose despite the
rising corn prices, this is to be explained from the
following circumstances:
Prolongation of the working-day, the direct consequence
of the newly introduced machinery; depreciation of the
manufactured goods and colonial commodities which enter into
the consumption of the workers; reduction of wages (although
the nominal wage rose) below their traditional
average level <this fact is acknowledged for that period;
J. P. Stirling in The Philosophy of Trade etc.,
Edinburgh, 1846, who, on the whole, accepts Ricardo’s theory
of rent, seeks, however, to prove that the immediate
consequence of a permanent (that is, not accidental,
dependent on the seasons) rise in the price of corn, is
always reduction in the average wage>; finally, the rise
in the rate of profit was due to rising nominal
prices of commodities, because loans and government
expenditure increased the demand for capital even more
rapidly than its supply, and this enabled the manufacturers
to retrieve part of the product paid to the landowning
rentiers and other persons who have a fixed income in the
form of rent etc.
This transaction is of no concern to us
here, where we are considering the basic relationships, and
therefore are concerned only with three classes: landlords,
capitalists and workmen.
On the other hand it plays a
significant part in practice, under appropriate
circumstances as Blake has shown.) |

* * *

{Mr. Hallett from Brighton exhibited “pedigree nursery
wheat” at the 1862 exhibition.
“Mr. Hallett insists that ears of corn, like
racehorses, must be carefully reared, instead of, as is done
ordinarily, grown in higgledy-piggledy fashion, with no
regard to the theory of natural selection. In
illustration of what good education may do, even with wheat,
some remarkable examples are given. In 1857,
Mr. Hallett, planted [the grains of] an ear of the first
quality of the red wheat, exactly 4
3/8 inches long, and containing 47
grains. From the product of the small crops ensuing,
he again selected, in 1858, the finest ear, 6
1/2 inches long, and with 79 grains;
and this was repeated, in 1859, again with the best
offspring, this time 7 3/4 inches
long, and containing 91 grains. The next year, 1860,
was a bad season for agricultural education, and the wheat
refused to grow any bigger and better; but the year after,
1861, the best ear came to be 8 3/4
inches long, with no less than 123 grains on the single
stalk. Thus the wheat had increased, in five years, to
very nearly double its size, and to a threefold amount of
productiveness in number of grains. These results were
obtained by what Mr. Hallett calls the ‘natural
system’ of cultivating wheat; that is, the planting of
single grains at such a distance—about 9 inches from
each other—every way—as to afford each
sufficient space for full development…” He
asserts that the corn produce of England may be doubled by
adopting ‘pedigree wheat’ and the ‘natural
system’ of cultivation. He states that from
single grains, planted at the proper time, one only on each
square foot of ground, he obtained plants consisting of 23
ears on the average, with about 36 grains in each ear.
The produce of an acre at this rate was, accurately counted,
1,001,880 ears of wheat; while, when sown in the ordinary
fashion, with an expenditure of more than 20 times the
amount of seed, the crop amounted to only 934,120 ears of
corn, or 67,760 ears less…”[10]}

### [e) Ricardo’s Explanation for the Fall in the Rate of Profit and Its Connection with His Theory of Rent]

[Ricardo establishes the fall in the rate of profit as
follows:]

“With the progress of society the natural price
of labour has always a tendency to rise, because one
of the principal commodities by which its natural price is
regulated, has a tendency to become dearer, from the greater
difficulty of producing it.
As, however, the
improvements in agriculture, the discovery of new markets,
whence provisions may be imported, may for a time counteract
the tendency to a rise in the price of necessaries, and may
even occasion their natural price to fall, so will the same
causes produce the correspondent effects on the natural
price of labour.

“The natural price of all commodities, excepting
raw produce and labour, has a tendency to fall, in the
progress of wealth and population; for though, on one hand,
they are enhanced in real value, from the rise in the
natural price of the raw material of which they are made,
this is more than counterbalanced by the improvements in
machinery, by the better division and distribution of
labour, and by the increasing skill, both in
science and art, of the producers.” ([David
Ricardo, On the Principles of Political Economy,
and Taxation, third edition, London, 1821,]
pp. 86–87.)

“As population increases, these necessaries will be
constantly rising in price, because more labour will be
necessary to produce them… Instead, therefore,
of the money wages of labour falling, they would rise; but
they would not rise sufficiently to enable the labourer to
purchase as many comforts and necessaries as he did before
the rise in price of those commodities…

“Notwithstanding, then, that the labourer would be
really worse paid, yet this increase in his wages would
necessarily diminish the profits of the manufacturer;
for his goods would sell at no higher price and yet the
expense of producing them would be
increased…

“It appears, then, that the same cause which
raises rent […] the increasing difficulty of
providing an additional quantity of food with the same
proportional quantity of labour, will also raise wages;
and therefore if money be of an unvarying value, both rent
and wages will have a tendency to rise with the progress of
wealth and population.

“But there is this essential difference between the
rise of rent and the rise of wages.
The rise in the money
value of rent is accompanied | by an increased share of
the produce; not only is the landlord’s money rent greater,
but his corn rent also… The fate of the labourer
will be less happy; he will receive more money wages, it is
true, but his corn wages will be reduced; and not only his
command of corn, but his general condition will be
deteriorated, by his finding it more difficult to maintain
the market rate of wages above their natural rate”
(l. c., pp. 96–98).

Supposing[10]
corn and manufactured goods always to sell at the same price, profits would be
high or low in proportion as wages were low or high.
But suppose corn to rise in price because more labour is
necessary to produce it; that cause will not raise the price
of manufactured goods in the production of which no
additional quantity of labour is required… if,
as is absolutely certain, wages should rise with the rise of
corn, then their profits[11] would
necessarily fall” (l.c., p. 108).

But it may be asked, “…whether the farmer
at least would not have the same rate of profits,
although he should pay an additional sum for wages?
Certainly not: for he will not only have to pay, in common
with the manufacturer, an increase of wages to each labourer
he employs, but he will be obliged either to pay rent, or
to employ an additional number of labourers to obtain the
same produce; and the rise in the price of raw
produce[12] will be proportioned only to
that rent, or that additional number, and will not
compensate him for the rise of wages” (l. c.,
p. 108).

“We have shewn that in early stages of
society, both the landlord’s and the labourer’s share of
the value of the produce of the earth, would be but
small; and that it would increase in proportion to the
progress of wealth, and the difficulty of procuring
food” (l.c., p. 109).

These “early stages of society” are a
peculiar bourgeois fantasy.
In these early stages, the labourer is either slave or self-supporting peasant, etc.
In the first case he belongs to the landlord, together with the
land; in the second case he is his own landlord.
In neither case does any capitalist stand between the landlord and the labourer.
The subjugation of agriculture to
capitalist production, and hence the transformation
of slaves or peasants into wage-labourers and the
intervention of the capitalist between landlord and
labourer—which is only the final result of capitalist
production—is regarded by Ricardo as a phenomenon
belonging to the “early stages of society”.

“The natural tendency of profits then
is to fall; for, in the progress of society and wealth, the
additional quantity of food required is obtained by the
sacrifice of more and more labour. This tendency, this
gravitation as it were of profits, is happily checked at
repeated intervals by the improvements in machinery,
connected with the production of necessaries, as well as by
discoveries in the science of agriculture which enable us to
relinquish a portion of labour before required, and
therefore to lower the price of the prime necessary of the
labourer” (l.c., pp. 120–21).

In the following sentence, Ricardo says in plain terms
that by rate of profit he understands the rate of
surplus-value:

“Although a greater value is produced, a
greater proportion of what remains of that value,
after paying rent, is consumed by the producers, and it
is this, and this alone, which regulates
profits” (l.c., p. 127).

In other words, apart from rent, the rate of profit is
equal to the excess of the value of the commodity over the
value of the labour which is paid during its production, or
that part of its value which is consumed by the
producers. [In this context] Ricardo calls only
the workers producers. He assumes that the produced
value is produced by them. He thus defines
surplus-value here, as that part of the value created by the
workers which the capitalist retains.(1)

But if Ricardo identifies rate of surplus-value with rate
of profit—and at the same time assumes, as he does,
that the working-day is of given length—then the
tendency of the rate of profit to fall can only be explained
by the same factors which make the rate of surplus-value
fall.
But, with a given working-day, the rate of
surplus-value can only fall if the rate of wages is rising permanently.
This is only possible if the value of necessaries is rising permanently.
And this only if agriculture is constantly deteriorating, in other words, if
Ricardo’s theory of rent is accepted.
Since Ricardo
identifies rate of surplus-value with rate of profit, |
and since the rate of surplus-value can only be reckoned in
relation to variable capital, capital laid out in wages,
Ricardo, like Adam Smith, assumes that the value of the
whole product—after deduction of rent—is
divided between workmen and capitalists, into wages and profit.
This means that he makes the false presupposition
that the whole of the capital advanced consists only of variable capital.
Thus, for example, after the passage quoted above, he goes on:

“When poor lands are taken into cultivation, or
when more capital and labour are expended on the old land,
with a less return of produce, the effect must be permanent.
A greater proportion of that part of the produce
which remains to be divided, after paying rent, between the
owners of stock and the labourers, will be apportioned to
the latter” (l.c., pp. 127–28).

The passage continues:

“Each man may, and probably will, have a less
absolute quantity; but as more labourers are employed in
proportion to the whole produce retained by the farmer, the
value of a greater proportion of the whole produce will be
absorbed by wages, and consequently the value of a smaller
proportion will be devoted to profits” (l.c.,
p. 128).

And shortly before:

“The remaining quantity of the produce of the land,
after the landlord and labourer are paid, necessarily
belongs to the farmer, and constitutes the profits of his
stock” (l.c., p. 110).

At the end of the section (Chapter VI) “On
Profits”, Ricardo says that his thesis on the
fall of profits remains true, even if— which is
wrong—it were assumed, that the prices of
commodities rose with a rise in the money wages of the
labourers.

“In the Chapter on Wages, we have endeavoured to
shew that the money price of commodities would not be
raised by a rise of wages...
But if it were otherwise, if the prices of commodities were permanently raised by high
wages, the proposition would not be less true, which asserts
that high wages invariably affect the employers of labour,
by depriving them of a portion of their real
profits.
Supposing the hatter, the hosier, and the shoemaker
each paid £ 10 more wages in the manufacture of a
particular quantity of their commodities, and that the price
of hats, stockings, and shoes, rose by a sum sufficient to
repay the manufacturer the £ 10; their situation
would be no better than if no such rise took place.
If the hosier sold his stockings for £ 110 instead of
£ 100, his profits would be precisely the same money
amount as before; but as he would obtain in exchange for
this equal sum, one-tenth less of hats, shoes and every
other commodity, and as he could with his former amount
of savings” (that is with the same capital)
“employ fewer labourers at the increased wages,
and purchase fewer raw materials at the increased prices, he
would be in no better situation than if his money profits
had been really diminished in amount, and every thing had
remained at its former price” (l.c., p. 129).

Whereas elsewhere in his argument Ricardo always only
stressed that in order to produce the same quantity of
product on worse land, more labourers have to be
paid, here at last he stresses what is decisive for the rate
of profit, namely, that with the same amount of capital
fewer labourers are employed at increased wages.
Apart from this, he is not quite right in what he says.
It makes no difference to the capitalist, if the price
of hats etc. rises by 10 per cent, but the landlord would
have to give up more of his rent.
His rent may have risen for example, from £ 10 to £ 20.
But he gets proportionately fewer hats etc. for his £ 20 than for
the £ 10.

Ricardo says quite rightly :

“In an improving state of society, the net produce
of land is always diminishing in proportion to its gross
produce” (l. c., p. 198).

By this he means that the rent diminishes in an improving state of society.
The real reason is that in an improving state of society, the variable capital decreases in
proportion to the constant capital. |

| That with the
progress of production, the constant capital grows in
proportion to the variable, Ricardo himself admits, but only
in the form that the fixed capital grows in proportion to
the circulating.

“In rich and powerful countries, where large
capitals are invested in machinery, more distress will be
experienced from a revulsion in trade, than in poorer
countries where there is proportionally a much smaller
amount of fixed, and a much larger amount of circulating
capital, and where consequently more work is done by
the labour of men.
It is not so difficult to withdraw a circulating as a fixed capital, from any employment in which
it may be engaged.
It is often impossible to divert the
machinery which may have been erected for one manufacture,
to the purposes of another; but the clothing, the food, and
the lodging of the labourer in one employment may be devoted
to the support of the labourer in another;”

(here, therefore, circulating capital comprises only
variable capital, capital laid out in wages)

“or the same labourer may receive the same food,
clothing and lodging, whilst his employment is changed.
This, however, is an evil to which a rich nation
must submit; and it would not be more reasonable to complain
of it, than it would be in a rich merchant to lament that
his ship was exposed to the dangers of the sea, whilst his
poor neighbour’s cottage was safe from all such
hazard” (l. c., p. 311).

Ricardo himself mentions one reason for the rise in rent,
which is quite independent of the rise in the price of
agricultural produce :

“Whatever capital becomes fixed on the land, must
necessarily be the landlord’s, and not the tenant’s,
at the expiration of the lease.
Whatever compensation the
landlord may receive for this capital, on re-letting his
land, will appear in the form of rent; but no rent
will be paid, if, with a given capital, more corn can be
obtained from abroad, than can be grown on this land at
home” (l.c., p. 315, note).

On the same subject Ricardo says:

“In a former part of this work, I have noticed the
difference between rent, properly so called, and the
remuneration paid to the landlord under that name, for the
advantages which the expenditure of his capital has procured
to his tenant; but I did not perhaps sufficiently
distinguish the difference which would arise from the
different modes in which this capital might be applied.
As a
part of this capital, when once expended in the improvement
of a farm, is inseparably amalgamated with the land, and
tends to increase its productive powers, the remuneration
paid to the landlord for its use is strictly of the nature
of rent, and is subject to all the laws of rent.
Whether the improvement be made at the expense of the
landlord or the tenant, it will not be undertaken in the
first instance, unless there is a strong probability that
the return will at least be equal to the profit that
can be made by the disposition of any other equal capital;
but when once made, the return obtained will ever after
be wholly of the nature of rent, and will be subject to
all the variations of rent.
Some of these expenses, however, only give advantages to the land for a limited period, and
do not add permanently to its productive powers: being
bestowed on buildings, and other perishable improvements,
they require to be constantly renewed, and therefore do not
obtain for the landlord any permanent addition to his real
rent” (l.c., p. 306, note).

Ricardo says:

“In all countries, and all times, profits
depend on the quantity of labour requisite to provide
necessaries for the labourers, on that land or with that
capital which yields no rent” (l.c., p. 128).

According to this, the profit of the farmer on that
land—the worst land, which according to Ricardo pays
no rent—regulates the general rate of profit.
The reasoning is this: the product of the worst land is sold at
its value and pays no rent.
We see here exactly, therefore, how much surplus-value remains for the capitalist
after deduction of the value of that part of the product
which is merely an equivalent for the worker.
And this surplus-value is the profit.
This is based on the assumption
that cost-price and value are identical, that
this product, because it is sold at its cost-price, is sold
at its value.

This is incorrect, historically and theoretically.
I have shown that, where there is capitalist production and where
landed property exists, the land or mine of the worst type
cannot pay a rent, because the corn is sold below its
[individual] value if it is sold at the market-value,
which is not regulated by it.
For the market-value only covers its cost-price.
But what regulates this cost-price?
The rate of profit of the non-agricultural
capital, into whose determination the price of corn
naturally enters as well, however far removed the latter may
be from being its sole determinant.
Ricardo’s assertion
would only be correct if values and cost-prices were |
identical.
Historically too, as the capitalist mode of
production appears later in agriculture than in industry,
agricultural profit is determined by industrial profit, and
not the other way about.
The only correct point is that on
the land which pays a profit but no rent, which sells its
product at the cost-price, the average rate of profits
becomes apparent, is tangibly presented, but this
does not mean at all that the average profit is thereby
regulated; that would be a very different matter.

The rate of profit can fall, without any rise in
the rate of interest and rate of rent.

“From the account which has been
given of the profits of stock, it will appear, that no
accumulation of capital will permanently lower
profits,(2) unless there be some
permanent cause for the rise of wages… If
the necessaries of the workman could be constantly increased
with the same facility, there could be no permanent
alteration in the rate of profit or wages,” (this
should read: in the rate of surplus-value and the value of
labour) “to whatever amount capital might be
accumulated. Adam Smith, however, uniformly
ascribes the fall of profits to the accumulation of
capital, and to the competition which will result from
it, without ever adverting to the increasing difficulty
of providing food for the additional number of labourers
which the additional capital will employ” (l. c.,
pp. 338–39).

The whole thing would only be right if profit were equal
to surplus-value.

Thus Adam Smith says that the rate of profit falls with
the accumulation of capital, because of the growing
competition between the capitalists; Ricardo says that it
does so because of the growing deterioration of agriculture
(increased price of necessaries).
We have refuted his view, which would only be correct if rate of surplus-value and
rate of profit were identical, and therefore the rate of
profit could not fall unless the rate of wages rose,
provided the working-day remained unchanged.
Adam Smith’s view rests on his compounding value out of wages, profits
and rents (in accordance with his false view, which he
himself refuted).
According to him, the accumulation of
capitals forces the reduction in arbitrary
profits—for which there is no inherent
measure—through the reduction in the prices of
commodities; profits, according to this conception, being
merely a nominal addition to the prices of commodities.

Ricardo is of course theoretically right when he
maintains, in opposition to Adam Smith, that the
accumulation of capitals does not alter the determination of
the value of commodities; but Ricardo is quite wrong when he
seeks to refute Adam Smith by asserting that
over-production in one country is impossible.
Ricardo denies the plethora of capital, which later became an
established axiom in English political economy.

Firstly he overlooks that in reality, where not only the
capitalist confronts the workman, but capitalist, workman,
landlord, moneyed interest, [people receiving] fixed incomes
from the state etc., confront one another, the fall in the
prices of commodities which hits both the industrial
capitalist and the workman, benefits the other classes.

Secondly he overlooks that the output level is by no
means arbitrarily chosen, but the more capitalist production
develops, the more it is forced to produce on a scale which
has nothing to do with the immediate demand but depends on a
constant expansion of the world market.
He has recourse to Say’s trite assumption, that the capitalist produces not for
the sake of profit, surplus-value, but produces use-value
directly for consumption— for his own consumption.
He overlooks the fact that the commodity has to be converted
into money.
The demand of the workers does not suffice,
since profit arises precisely from the fact that the demand
of the workers is smaller than the value of their product,
and that it [profit] is all the greater the smaller,
relatively, is this demand.
The demand of the capitalists among themselves is equally insufficient.
Over-production does not call forth a constant fall in profit, but
periodic over-production recurs constantly.
It is followed by periods of under-production etc.
Over-production arises precisely from the fact that the mass of the people
can never consume more than the average quantity of
necessaries, that their consumption therefore does not grow
correspondingly with the productivity of labour.
But the whole of this section belongs to the competition of
capitals.
All that Ricardo says on this isn’t worth a rap.
(This is contained in Chapter XXI, “Effects of Accumulation on Profits and
Interest”.)

“There is only one case, and that will be
temporary, in which the accumulation of capital with
a low price of food may be attended with a fall of profits;
and that is, when the funds for the maintenance of labour
increase much more rapidly than population;—wages will
then be high, and profits low” (l. c., p. 343).

[In the same chapter] Ricardo directs against Say
the following ironical remarks on the relation between
profits and interest:

“M. Say allows, that the rate of interest depends
on the rate of profits; but it does not therefore follow,
that the rate of profits depends on the rate of interest.
One is the cause, the other the effect, and it is
impossible for any circumstances to make them change
places” (l.c., p. 353, note).

However, the same causes which bring down profits can
make interest rise, and vice versa.

[In the Chapter “On Colonial Trade” Ricardo
writes:]

“M. Say acknowledges that the cost of
production is the foundation of price, and yet in
various parts of his book he maintains that price is
regulated by the proportion which demand bears to
supply” (l. c., p. 411).

Ricardo should have seen from this that | the
cost of production is something very different from
the quantity of labour employed for the production of a
commodity.

Instead he continues:

“The real and ultimate regulator of the relative
value of any two commodities, is the cost of their
production” (l. c., p. 411).

“And does not Adam Smith agree in this
opinion” (that prices are regulated neither by wages
nor profits) “when he says, that ‘the
prices of commodities, or the value of gold
and silver as compared with commodities, depends upon the
proportion between the quantity of labour which is
necessary in order to bring a certain quantity of gold and
silver to market, and that which is necessary to bring
thither a certain quantity of any other sort of
goods?’ That quantity will not be affected, whether
profits be high or low, or wages low or high.
How then can prices be raised by high profits?” (l. c.,
pp. 413–14).

In the passage quoted, Adam Smith means by prices
nothing other than the monetary expression of the values of commodities.
That these and the gold and silver against which they exchange, are determined by the
relative quantities of labour required for producing those
two sorts of commodities <commodities on the one side,
gold and silver on the other>, in no way contradicts the
fact that the actual prices of commodities, i.e.,
their cost-prices “… can […] be raised
by high profits” [l.c., p. 414].
Although not all prices simultaneously, as Smith thinks.
But as a result of high profits, some commodities will rise higher above their
value, than if the average profits were low, while another
group of commodities will sink to a smaller extent below
their value.

Author’s Footnotes

(1)| Regarding the origin
of surplus-value [Ricardo says]:

“In the form of money … capital is
productive of no profit; in the form of materials,
machinery, and food, for which it might be exchanged, it
would be productive of revenue… “ (l.c.,
p. 267).
“The capital of the stockholder | can
never be made productive—it is, in fact, no
capital.
If he were to sell his stock, and employ the
capital he obtained for it, productively, he could only do
so by detaching the capital of the buyer of his stock from a
productive employment” (l.c., p. 289,
note). |

(2) By profits Ricardo means here that part
of surplus-value which the capitalist appropriates, but by
no means the [entire] surplus-value; and wrong as it is to
say that accumulation can cause the surplus-value to fall,
so it is right that accumulation can cause a fall in
profit.

Editors’ Footnotes

1
See this volume, pp. 181–82—Ed.

6In the manuscript: “III”—obviously a slip of the pen—Ed

7
In the manuscript: “4/11”—obviously a slip of the pen—Ed

8
Marx gives here, in his own words, a brief summary of the idea developed by De
Quincey.—Ed.

9
The source of this quotation has not been established.—Ed

10
In the manuscript: “Suppose”.—Ed.

11
i.e., the profits of manufacturers.—Ed.

12
In the manuscript: “of the raw produce”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XVII] Ricardo’s Theory of Accumulation and a Critique of it. (The Very Nature of Capital Leads to Crises)

### [1. Adam Smith’s and Ricardo’s Error in Failing to Take into Consideration Constant Capital. Reproduction of the Different Parts of Constant Capital]

First we shall compare Ricardo’s propositions, which are
widely scattered over the whole of his work.

“All the productions of a country are
consumed; but it makes the greatest difference imaginable
whether they are consumed by those who reproduce, or by
those who do not reproduce another value. When we
say that revenue is saved, and added to
capital, what we mean is, that the portion of
revenue, so said to be added to capital, is
consumed by productive instead of unproductive
labourers.” (This is the same distinction as Adam
Smith makes.) “There can be no greater error
than in supposing that capital is increased by
non-consumption. If the price of labour should
rise so high, that notwithstanding the increase of capital,
no more could be employed, I should say that such
increase of capital would be still unproductively
consumed” (l.c., p. 163, note).

Here, therefore—as with Adam Smith and
others—[it is] only [a question] of whether [the
products] are consumed by workers or not. But it is at
the same time also a question of the industrial
consumption of the commodities which form constant
capital, and are consumed as instruments of labour or
materials of labour, or are consumed in such a way that
through this consumption they are transformed into
instruments of labour or materials of labour. The
conception that accumulation of capital is identical with
conversion of revenue into wages, in other words, that it is
synonymous with accumulation of variable capital—is
one-sided, that is, incorrect. This leads to a wrong
approach to the whole question of accumulation.

Above all it is necessary to have a clear understanding
of the reproduction of constant capital. We are
considering the annual reproduction here, taking the
year as the time measure of the process of reproduction.

A large part of the constant capital—the fixed
capital—enters into the annual process of labour
without entering into the annual process of the creation of
value. It is not consumed and, therefore, does not
need to be reproduced. Because it enters into the
production process and remains in contact with living labour
it is kept in existence—and along with its
use-value, also its exchange-value. The greater this
part of capital is in a particular country in one year, the
greater, relatively, will be its purely formal reproduction
(preservation) in the following year, providing that the
production process is renewed, continued and kept flowing,
even if only on the same scale. Repairs and so
on, which are necessary to maintain the fixed capital, are
reckoned as part of its original labour costs. This
has nothing in common with preservation in the sense used
above.

A second part of the constant capital is consumed
annually in the production of commodities and must therefore
also be reproduced. This includes the whole of that
part of fixed capital which enters annually into the process
of creating value, as well as the whole of that part of
constant capital which consists of circulating capital, raw
materials and auxiliary materials.

As regards this second part of constant capital, the
following distinctions must be made: | A large part of what
appears as constant capital—instruments and
materials of labour—in one sphere of production, is
simultaneously the product of another, parallel
sphere of production. For example, yarn which forms
part of the constant capital of the weaver, is the product
of the spinner, and may still have been in the process of
becoming yarn on the previous day. When we use the
term simultaneous here, we mean produced during
the same year. The same commodities in
different phases pass through various spheres of production
in the course of the same year. They emerge as
products from one sphere and enter another as commodities
constituting constant capital. And as constant capital
they are all consumed during the year; whether only their
value enters into the commodity, as in the case of fixed
capital, or their use-value too, as with circulating
capital. While the commodity produced in one sphere of
production enters into another, to be consumed there as
constant capital—in addition to the same commodity
entering a succession of spheres of
production—the various elements or the various phases
of this commodity are being produced simultaneously,
side by side. In the course of the same year, it is
continuously consumed as constant capital in one sphere and
in another parallel sphere it is produced as a
commodity. The same commodities which are thus
consumed as constant capital in the course of the year are
also, in the same way continuously being produced during the
same year. A machine is wearing out in sphere A.
It is simultaneously being produced in sphere B. The
constant capital that is consumed during a year in those
spheres of production which produce the means of
subsistence, is simultaneously being produced in
other spheres of production, so that during the
course of the year or by the end of the year it
is renewed in kind. Both of them, the means of
subsistence as well as this part of the constant capital,
are the products of new labour employed during the year.

In the spheres producing the means of subsistence, as I
have shown earlier, that portion of the value of the
product which replaces the constant capital in these
spheres, forms the revenue of the producers of this
constant capital.

But there is also a further portion of the constant
capital which is consumed annually, without entering
as a component part into the spheres of production which
produce the means of subsistence (consumption goods).
Therefore, it cannot be replaced [by products] from these
spheres. We mean instruments of labour, raw materials
and auxiliary materials, i.e., that portion of constant
capital which is itself consumed industrially in the
creation or production, of constant capital, that is to say,
machinery, raw materials and auxiliary materials. This
part, as we have seen, is replaced in kind either directly
out of the product of these spheres of production
themselves—as in the case of seeds, livestock and to a
certain extent coal—or through the exchange of a
portion of the products of the various spheres of production
manufacturing constant capital. In this case capital
is exchanged for capital.

The existence and consumption of this portion of constant
capital increases not only the mass of products, but also
the value of the annual product. The portion
of the value of the annual product which equals
the value of this section of the consumed constant capital,
buys back in kind or withdraws from the annual product that
part of it, which must replace in kind the constant capital
that is consumed. For example, the value of the seed
sown determines the portion of the value of the harvest (and
thus the quantity of corn) which must be returned to the
land, to production, as constant capital. This portion
would not be reproduced without the labour newly added
during the course of the year; but it is in fact
produced by the labour of the year before, or past
labour and—in so far as the productivity of labour
remains unchanged—the value which it adds to
the annual product is not the result of this year’s labour,
but of that of the previous year. The greater,
proportionately, is the constant capital employed in
a country, the greater will also be the part of the constant
capital which is consumed in the production of the constant
capital, and which not only expresses itself in a greater
quantity of products, but also raises the value of this
quantity of products. This value, therefore, is
the result not only of the current year’s labour, but
equally the result of the labour of the previous year, of
past labour, although without the immediate labour of
the current year it would not reappear, any more than would
the product of which it forms a part. If this portion
[of constant capital] grows, not only does the annual mass
of products grow, but also their value, even if the
annual labour remains the same. This growth is one
form of the accumulation of capital, which it is
essential to understand. And nothing could be further
removed from such an understanding than Ricardo’s
proposition:

“The labour of a million of men in
manufactures, will always produce the same value, but will
not always produce the same riches” (l.c.,
p. 320).

These million men—with a given
working-day—will not only produce very different
quantities of commodities depending on the productivity of
labour, but the value of these quantities of commodities
will be very different, according to whether they are
produced with much or little constant capital, that is,
whether much or little value originating in the past
labour of previous years is added to them.

### [2. Value of the Constant Capital and Value of the Product]

For the sake of simplicity, when we speak of the
reproduction of constant capital we shall in the first place
assume that the productivity of labour, and consequently the
method of production, remain the same. At a given
level of production, the constant capital which has to be
replaced is a definite quantity in kind. If
productivity remains the same, then the value | of this quantity also remains
constant. If there are changes in the productivity of
labour which make it possible to reproduce the same
quantity, at greater or less cost, with more or less labour,
then similarly changes will occur in the value of the
constant capital, which will affect the surplus-product
after deduction of the constant capital.

For example, supposing 20 quarters [of wheat] at £ 3,
totalling £ 60, were required for sowing. If a third
less labour is used to reproduce a quarter it would now cost
only £2. 20 quarters have to be deducted from the
product, for the sowing, as before; but their share in the
value of the whole product only amounts to £40. The
replacement of the same constant capital thus requires a
smaller portion of value, a smaller share in kind out of the
total product, although, as previously, 20 quarters have to
be returned to the land as seed.

If the constant capital consumed annually by one nation
were £ 10 million and that consumed by another were
only 1 million and the annual labour of 1 million men
amounted to £ 100 million, then the value of the
product of the first nation would be 110 and of the second
only 101 million. It would be, moreover, not only
possible, but certain, that the individual commodity of
nation I would be cheaper than of nation II, because the
latter would produce a much smaller quantity of commodities
with the same amount of labour, much smaller than the
difference between 10 and 1. It is true that a greater
portion of the value of the product goes to the replacement
of capital in nation I as compared with nation II, and
therefore also a greater portion of the total product.
But the total product is also much greater.

In the case of factory-made commodities, it is known that
a million (workers) in England produce not only a much
greater product but also a product of much greater value
than in Russia for example, although the individual
commodity is much cheaper. In the case of agriculture,
however, the same relation between capitalistically
developed and relatively undeveloped nations does not appear
to exist. The product of the more backward nation is
cheaper than that of the capitalistically developed nation,
in terms of its money price. And yet the
product of the developed nation appears to be produced by
much less (annual) labour than that of the backward
one. In England, for example, less than one-third (of
the workers) are employed in agriculture, while in Russia it
is four-fifths; in the former 5/15, in
the latter 12/15. These figures
are not to be taken literally. In England, for
instance, a large number of people in non-agricultural
occupations—in engineering, trade, transport
etc.—are engaged in the production and distribution of
elements of agricultural production, but this is not the
case in Russia. The proportion of persons engaged in
agriculture cannot therefore be directly determined by the
number of individuals immediately employed in
agriculture. In countries with a capitalist mode of
production, many people participate indirectly in
agricultural production, who in less developed countries are
directly included in it. The difference therefore
appears to be greater than it is. For the civilisation
of the country as a whole, however, this difference is very
important, even in so far as it only means that a large
section of the workers involved in agriculture do not
participate in it directly; they are thus saved from the
narrow parochialism of country life and belong to the
industrial population.

But let us leave aside this point for the moment and also
the fact that most agricultural peoples are forced, to sell
their product below its value whereas in countries
with advanced capitalist production the agricultural product
rises to its value. At any rate, a portion of the
value of the constant capital enters into the value of the
product of the English farmer, which does not enter into the
product of the Russian farmer. Let us assume that this
portion of value is equal to a day’s labour of 10 men, and
that one English worker sets this constant capital in
motion. I am speaking of that part of the constant
capital of the agricultural product, which is not replaced
by new labour, such as is the case, for example, with
agricultural implements. If five Russian workers were
required in order to produce the same product which one
Englishman produces with the help of the constant capital,
and if the constant capital used by the Russian were equal
to one (day’s labour), then the English product would be
equal to 10+1=11 working-days, and that of the Russian would
be 5+1=6. If the Russian soil were so much more
fertile than the English, that without the application of
any constant capital or with a constant capital that was
one-tenth the size, it could produce as much corn as the
Englishmen with a constant capital ten times as great, then
the values of the same quantities of English and
Russian corn would compare as 11:6. If the quarter of
Russian corn were sold at £ 2, then the English would
be sold at £32/3, for
2:32/3 = 6:11. The money price and
the value of the English corn would thus be much higher than
that of the Russian, but nevertheless, the English corn
would be produced with less labour, since the past
labour, which reappears in the quantity as well as in the
value of product, costs no additional new labour. This
would always be the case, if the Englishman uses less
immediate labour than the Russian, but the greater constant
capital which he uses—and which costs him
nothing, although it has cost something and must be
paid for—does not raise the productivity of labour to
such an extent that it compensates for the natural fertility
of the Russian soil. The money prices of agricultural
products can, therefore, be higher in countries of
capitalist production than in | less developed countries,
although in fact they cost less labour. They contain
more immediate and past labour, but this past labour costs
nothing. The product would be cheaper if the
difference in natural fertility did not intervene.
This would also explain the higher money price of the
labourer’s wage.

Up to now we have only spoken of the reproduction of the
capital involved. The labourer replaces his wage with
a surplus-product or surplus-value, which forms the profit
(including rent) of the capitalist. He replaces that
part of the annual product which serves him anew as
wages. The capitalist has consumed his profit during
the course of the year, but the labourer has created a
portion of the product which can again be consumed as
profit. That part of the constant capital which is
consumed in the production of the means of subsistence, is
replaced by constant capital which has been produced by new
labour, during the course of the year. The producers
of this new portion of constant capital realise their
revenue (profit and wages) in that part of the means of
subsistence which is equal to the value of the constant
capital consumed in their production. Finally, the
constant capital which is consumed in the production of
constant capital, in the production of machinery, raw
materials and auxiliary materials, is replaced in kind or
through the exchange of capital, out of the total product of
the various spheres of production which produce constant
capital.

### [3. Necessary Conditions for the Accumulation of Capital. Amortisation of Fixed Capital and Its Role in the Process of Accumulation]

What then is the position with regard to the
increase of capital, its accumulation as
distinct from reproduction, the transformation of
revenue into capital?

In order to simplify the question, it is assumed that the
productivity of labour remains the same, that no changes
occur in the method of production, that therefore the same
quantity of labour is required to produce the same quantity
of commodities, and consequently that the increase in
capital costs the same amount of labour as the production of
capital of the same size cost the previous year.

A portion of the surplus-value must be transformed into
capital, instead of being consumed as revenue. It must
be converted partly into constant and partly into variable
capital. And the proportion in which it is divided
into these two different parts of capital, depends on the
given organic composition of the capital, since the method
of production remains unaltered and also the proportional
value of both parts. The higher the development of
production, the greater will be that part of surplus-value
which is transformed into constant capital, compared with
that part of the surplus-value which is transformed into
variable capital.

To begin with, a portion of the surplus-value (and the
corresponding surplus-product in the form of means of
subsistence) has to be transformed into variable capital,
that is to say, new labour has to be bought with it.
This is only possible if the number of labourers grows or if
the labour-time during which they work, is prolonged.
The latter takes place, for instance, when a part of the
labouring population was only employed for half or
two-thirds [of the normal time], or also, when for longer or
shorter periods, the working-day is absolutely prolonged,
this however, must be paid for. But that cannot be
regarded as a method of accumulation which can be
continuously used. The labouring population can
increase, when previously unproductive labourers are turned
into productive ones, or sections of the population who did
not work previously, such as women and children, or paupers,
are drawn into the production process. We leave this
latter point out of account here. Finally, together
with the growth of the population in general, the labouring
population can grow absolutely. If accumulation is to
be a steady, continuous process, then this absolute growth
in population—although it may be decreasing in
relation to the capital employed—is a necessary
condition. An increasing population appears to
be the basis of accumulation as a continuous process.
But this presupposes an average wage which permits not only
reproduction of the labouring population but also its
constant growth. Capitalist production provides for
unexpected contingencies by overworking one section of the
labouring population and keeping the other as a ready
reserve army consisting of partially or entirely pauperised
people.

What then is the position with regard to the other
portion of the surplus-value which has to be converted into
constant capital? In order to simplify this question,
we shall leave out of account foreign trade and consider a
self-sufficing nation. Let us take an example.
Let us assume that the surplus-value produced by a linen
weaver amounts to £ 10,000, and that he wants to
convert into capital one half of it, i.e., £
5,000. Let one-fifth of this be laid out in wages in
accordance with the organic composition [of capital] in
mechanised weaving. In this case we are disregarding
the turnover of capital, which may perhaps enable him to
carry on with an amount sufficient for five weeks, after
which he would sell [his product] and so receive back from
circulation the capital for the payment of wages. We
are assuming that in the course of the year he will
gradually lay out in wages (for 20 men) £1,000 which
he must hold in reserve with his banker. Then £
4,000 are to be converted into constant capital.
Firstly he must purchase as much yarn as 20 men can weave
during the year. (The turnover of the circulating part
of capital is disregarded throughout.) Further, he
must increase the number of looms in his factory, and
perhaps install an additional steam-engine or enlarge the
existing one, etc. But in order to purchase all these
things, he must find yarn, looms etc. available on the
market. He must convert his £ 4,000 into yarn,
looms, coal etc., | i.e.,
he must buy them. In order to buy them, they must be
available. Since we have assumed that the reproduction
of the old capital has taken place under the old conditions,
the spinner of yarn has spent the whole of his capital in
order to supply the amount of yarn required by the weavers
during the previous year. How then is he to satisfy
the additional demand by an additional supply of yarn?

The position of the manufacturer of machines, who
supplies looms etc. is just the same. He has produced
only sufficient new looms in order to cover the average
consumption in weaving. But the weaver who is keen on
accumulation, orders yarn for £ 3,000 and for £
1,000 looms, coal (since the position of the coal producer
is the same), etc. Or in fact, he gives £ 3,000
to the spinner, and £ 1,000 to the machinery
manufacturer and the coal merchant, etc., so that they will
transform this money into yarn, looms and coal for
him. He would thus have to wait until this process is
completed before he could begin with his
accumulation—his production of new linen. This
would be interruption number I.

But now the owner of the spinning-mill finds himself in
the same position with the £ 3,000 as the weaver with
the 4,000, only he deducts his profit right away. He
can find an additional number of spinners, but he needs
flax, spindles, coal, etc. Similarly the coal producer
[needs] new machinery or implements apart from the
additional workers. And the owner of the engineering
works who is supposed to supply the new looms, spindles,
etc. [needs] iron and so forth, apart from additional
labourers. But the position of the flax-grower is the
worst of all, since he can supply the additional quantity of
flax only in the following year.

So that accumulation can be a continuous process and the
weaver able to transform a portion of his profit into
constant capital every year, without long-winded
complications and interruptions, he must find an additional
quantity of yarn, looms, etc. available on the market.
He [the weaver], the spinner, the producer of coal,
etc. require additional workers, only if they are able to
obtain flax, spindles and machines on the market.

A part of the constant capital which is calculated to be
used up annually and enters as wear and tear into the value
of the product, is in fact not used up. Take,
for example, a machine which lasts twelve years and costs
£ 12,000; its average wear and tear, which has to be
charged each year, amounts to £ 1,000. Thus,
since £ 1,000 is incorporated into the product each
year, the value of £ 12,000 will have been reproduced
at the end of the twelve years and a new, machine of the
same kind can be bought for this price. The repairs
and patching up which are required during the twelve years
are reckoned as part of the production costs of the machine
and have nothing to do with the question under
discussion. In fact, however, reality differs from
this calculation of averages. The machine may perhaps
run more smoothly in the second year than in the
first. And yet after twelve years it is no longer
usable. It is the same as with an animal whose average
life is ten years, but this does not mean that it dies by
one-tenth each year, although at the end of ten years it
must be replaced by a new individual. Naturally,
during the course of a particular year, a certain
quantity of machinery etc. always reaches the stage when it
must actually be replaced by new machines. Each year,
therefore, a certain quantity of old machinery etc. has in
fact to be replaced in kind by new machines etc. And
the average annual production of machinery etc. corresponds
with this. The value with which they are to be paid
for, lies ready; it is derived from the [proceeds of the]
commodities, according to the reproduction period of the
machines. But the fact remains, that although a large
part of the value of the annual product, of the value which
is paid for it each year, is needed to replace, for example,
the old machines after twelve years, it is by no means
actually required to replace one-twelfth in kind each year,
and in fact this would not be feasible. This fund may
be used partly for wages or for the purchase of raw
material, before the commodity, which is constantly thrown
into circulation but does not immediately return from
circulation, is sold and paid for. This cannot,
however, be the case throughout the whole year, since the
commodities which complete their turnover during the year
realise their whole value, and must therefore replace the
wages, raw material and used up machinery contained in them,
as well as pay surplus-value.

Hence where much constant capital, and therefore also
much fixed capital, is employed, that part of the value of
the product which replaces the wear and tear of the fixed
capital, provides an accumulation fund, which can be
invested by the person controlling it, as new fixed capital
(or also circulating capital), without any deduction
whatsoever having to be made from the surplus-value for this
part of the accumulation (see McCulloch). This
accumulation fund does not exist at levels of production and
in nations where there is not much fixed capital. This
is an important point, It is a fund for the continuous
introduction of improvements, expansions etc.

### [4. The Connection Between Different Branches of Production in the Process of Accumulation. The Direct Transformation of a Part of Surplus-Value into Constant Capital—a Characteristic Peculiar to Accumulation in Agriculture and the Machine-building Industry]

But the point we want to make here is the following: Even
if the total capital employed in machine-building were only
large enough to replace the annual wear and tear of
machinery, it would produce much more machinery each year
than required, since in part the wear and tear merely exists
nominally, and in reality it only has to be replaced in kind
after a certain number of years. The capital thus
employed, therefore yields annually a mass of machinery
which is available for new capital investments and
anticipates these new capital investments. For
example, the factory of the machine-builder begins
production, say, this year. He supplies £ 12,000
worth of machinery during the year. If he were merely
to replace the machinery produced by him, he would only have
to produce machinery worth £ 1,000 in each of the
eleven following years and even this annual production would
not be annually consumed. An even smaller part of his
production would be used, if he invested the whole of his
capital. A continuous expansion of production in the
branches of industry which use these machines is required in
order to keep his capital employed and merely to reproduce
it annually |. (An
even greater expansion is required if he himself
accumulates.)

Thus even the mere reproduction of the capital
invested in this sphere requires continuous accumulation
in the remaining spheres of production. But because of
this, one of the elements of continuous accumulation is
always available on the market. Here, in one sphere of
production—even if only the existing capital is
reproduced in this sphere—exists a continuous supply
of commodities for accumulation, for new, additional
industrial consumption in other spheres.

As regards the £ 5,000 profit or surplus-value
which is to be transformed into capital, for instance by the
weaver, there are two Possibilities—always assuming
that he finds available on the market the
labour which he must buy with part of the £ 5,000,
i.e., £ 1,000 in order to transform the £ 5,000
into capital according to the conditions prevailing in his
sphere of production. This part [of the capitalised
surplus-value] is transformed into variable capital and is
laid out in wages. But in order to employ this labour,
he requires yarn, additional auxiliary materials and
additional machinery <unless the working-day is
prolonged. In that case the machinery is merely used
up faster, its reproduction period is curtailed, but at the
same time more surplus-value is produced; and though the
value of the machine has to be distributed over the
commodities produced during a shorter period far more
commodities are being produced, so that despite this more
rapid depreciation of the machine, a smaller portion of
machine value enters into the value or price of the
individual commodity. In this case, no new
capital has to be laid out directly in machinery. It
is only necessary to replace the value of the machinery a
little more rapidly. But additional capital
must be laid out for auxiliary materials.> Either the
weaver finds these, his conditions of production, on the
market: then the purchase of these commodities only differs
from that of other commodities by the fact that he buys
commodities for industrial consumption instead of for
individual consumption. Or he does not find
these conditions of production on the market: then he must
order them (as for instance machines of a new design), just
as he has to order articles for his private consumption
which are not readily available on the market. If the
raw material (flax) were only produced to order <as, for
instance, indigo, jute etc. are produced by the Indian Ryots
to orders and with advances from English merchants>, then
the linen weaver could not accumulate in his own business
during that year. On the other hand, assuming, that
the spinner converts the £ 5,000 into capital and that
the weaver does not accumulate, then the spun yarn—
although all the conditions for its production were in
supply on the market—will be unsaleable and the
£ 5,000 have in fact been transformed into yarn but
not into capital.

(Credit, which does not concern us further here,
is the means whereby accumulated capital is not just used in
that sphere in which it is created, but wherever it has the
best chance of being turned to good account. Every
capitalist will however prefer to invest his accumulation as
far as possible in his own sphere of production. If he
invests it in another, then he becomes a moneyed capitalist
and instead of profit he draws only interest— unless
he goes in for speculative transactions. We are,
however, concerned with average accumulation here and only
[assume] for the sake of illustration that it is invested in
a particular sphere.)

If, on the other hand, the flax-grower had expanded his
production, that is to say, had accumulated, and the spinner
and weaver and machine-builder, etc. had not done so, then
he would have superfluous flax in store and would probably
produce less in the following year.

<At present we are leaving individual consumption
completely out of account and are only considering the
mutual relations between producers. If these relations
exist, then in the first place the producers constitute a
market for the capitals which they must replace for one
another. The newly employed, or more fully employed
workers constitute a market for some of the means of
subsistence; and since the surplus-value increases in the
following year, the capitalists can consume an increasing
part of their revenue, to a certain extent therefore they
also constitute a market for one another. Even so, a
large part of the annual product may still remain
unsaleable.>

The question has now to be formulated thus: assuming
general accumulation, in other words, assuming that
capital is accumulated to some extent in all branches of
production—this is in fact a condition of capitalist
production and is just as much the urge of the capitalist as
a capitalist, as the urge of the hoarder is the piling up of
money (it is also a necessity if capitalist production is to
go ahead)—what are the conditions of this
general accumulation, what does it amount to? Or,
since the linen weaver may be taken to represent the
capitalist in general, what are the conditions in
which he can uninterruptedly reconvert the £ 5,000
surplus-value into capital and steadily continue the process
of accumulation year in, year out? The accumulation of
the £ 5,000 means nothing but the transformation of
this money, this amount of value, into capital. The
conditions for the accumulation of capital are thus the very
same as those for its original production or for
reproduction in general.

These conditions, however, were: that labour was bought
with one part of the money, and with the other,
commodities—raw material, machinery, etc.—which
could be consumed industrially by this labour.
<Some commodities can only be consumed industrially,
such as machinery, raw material, semi-finished goods;
others, such as houses, horses, wheat (from which brandy or
starch etc. is made), can be consumed industrially or
individually.> These commodities can only be
purchased, if they are available on the | market as
commodities—in the intermediate stage when production
is completed and consumption has not as yet begun, in the
hands of the seller, in the stage of circulation—or if
they can be made to order (produced to order, as is the case
with the construction of new factories etc.).
Commodities were available—this was presupposed in the
production and reproduction of capital—as a result of
the division of labour carried out in capitalist production
on a social scale (distribution of labour and capital
between the different spheres of production); as a result of
parallel production and reproduction which takes
place simultaneously over the whole field. This
was the condition of the market, of the production
and the reproduction of capital. The greater the
capital, the more developed the productivity of labour and
the scale of capitalist production in general, the
greater is also the volume of commodities found on the
market, in circulation, in transition between production and
consumption (individual and industrial), and the greater
the certainty that each particular capital will find its
conditions for reproduction readily available on the
market. This is all the more the case, since it is in
the nature of capitalist production that: 1. each particular
capital operates on a scale which is not determined by
individual demand (orders etc., private needs), but by the
endeavour to realise as much labour and therefore as much
surplus-labour as possible and to produce the largest
possible quantity of commodities with a given capital;
2. each individual capital strives to capture the largest
possible share of the market and to supplant its competitors
and exclude them from the market—competition of
capitals.

<The greater the development of the means of
communication, the more can the stocks on the market be
reduced.

“There will, indeed, where production
and consumption are comparatively great, naturally be, at
any given moment, a comparatively great surplus in
the intermediate state, in the market, on its way from
having been produced to the hands of the consumer; unless
indeed the quickness with which things are sold off should
have increased so as to counteract what would else have been
the consequence of the increased production.” (An
Inquiry into those Principles, respecting the Nature of
Demand and the Necessity of Consumption, lately advocated by
Mr. Malthus, London, 1821, pp. 6-7.)>

The accumulation of new capital can therefore proceed
only under the same conditions as the reproduction of
already existing capital.

<We disregard here the case in which more capital is
accumulated than can be invested in production, and for
example lies fallow in the form of money at the bank.
This results in loans abroad, etc., in short speculative
investments. Nor do we consider the case in which it
is impossible to sell the mass of commodities produced,
crises etc. This belongs into the section on
competition. Here we examine only the forms of capital
in the various phases of its process, assuming throughout,
that the commodities are sold at their value.>

The weaver can reconvert the £ 5,000 surplus-value
into capital, if besides labour for £1,000 he finds
yarn etc. ready on the market or is able to obtain it to
order; this presupposes the production of a
surplus-product consisting of commodities which enter
into his constant capital, particularly of those which
require a longer period of production and whose volume
cannot be increased rapidly, or cannot be increased at all
during the course of the year, such as raw material, for
example flax.

<What comes into play here is the merchants’ capital,
which keeps warehouses stocked with goods to meet growing
individual and industrial consumption; but this is only a
form of intermediary agency, hence does not belong
here, but into the consideration of the competition of
capitals.>

Just as the production and reproduction of existing
capital in one sphere presupposes parallel
production and reproduction in other spheres, so
accumulation or the formation of additional capital in one
branch of production presupposes simultaneous or
parallel creation of additional products in other
branches of production. Thus the scale of production
in all spheres which supply constant capital must grow
simultaneously (in accordance with the average
participation—determined by the demand—of each
particular sphere in the general growth of production) and
all spheres which do not produce finished products for
individual consumption, supply constant capital. Of
the greatest importance, is the increase in machinery
(tools), raw material, and auxiliary material, for,
if these preconditions are present, all other industries
into which they enter, whether they produce semifinished or
finished goods, only need to set in motion more labour.

It seems therefore, that for accumulation to take place,
continuous surplus production in all spheres is
necessary.

This will have to be more closely defined.

Then there is the second essential question:

The [part of] the surplus-value [or] in this case
the part of profit (including rent; if the landlord
wants to accumulate, to transform rent into capital, it is
always the industrial capitalist who gets hold of the
surplus-value; this applies even when the worker transforms
a portion of his revenue into capital), which is reconverted
into capital, consists only of labour newly added
during | the past
year. The question is, whether this new capital is
entirely expended on wages, i.e., exchanged only against new
labour.

The following speaks for this: All value is originally
derived from labour. All constant capital is
originally just as much the product of labour as is variable
capital. And here we seem to encounter again the
direct genesis of capital from labour.

An argument against it is: Can one suppose that the
formation of additional capital takes place under worse
conditions of production than the reproduction of the old
capital? Does a reversion to a lower level of
production occur? This would have to be the case if
the new value [were] spent only on immediate labour, which,
without fixed capital etc., would thus also first
have to produce this fixed capital, just as originally,
labour had first to create its constant capital. This
is sheer nonsense. But this is the assumption made
by Ricardo, etc. This needs to be examined more
closely.

The first question is this:

Can the capitalist transform a part of the surplus-value
into capital by employing it directly as capital
instead of selling the surplus-value, or rather the
surplus-product in which it is expressed? An
affirmative answer to this question would already imply that
the whole of the surplus-value to be transformed into
capital is not transformed into variable capital, or
is not laid out in wages.

With that part of the agricultural produce which consists
of corn or livestock, this is clear from the outset.
Some of the corn which belongs to that part of the harvest
representing the surplus-product or the surplus-value of the
farmer (similarly some of the livestock), instead of being
sold, can at once serve again as means of production, as
seed or draught animals. The same applies to that part
of the manure produced on the land itself, which at the same
time exists as commodity on the market, that is to say, can
be sold. This part of the surplus-product which falls
to the share of the farmer as surplus-value, as profit, can
be at once transformed by him into means of production
within his own branch of production, it is thus
directly converted into capital. This part is
not expended on wages; it is not transformed into variable
capital. It is withdrawn from individual consumption
without being consumed productively in the sense used
by Smith and Ricardo. It is consumed
industrially, but as raw material, not as means of
subsistence either of productive or of unproductive
workers. Corn, however, serves not only as means of
subsistence for productive worker etc., but also as
auxiliary material for livestock, as raw material for
spirits, starch etc. Livestock (for fattening or
draught animals) in turn serves not only as means of
subsistence, but its fur, hide, fat, bones, horns
etc. supply raw materials for a large number of industries,
and it also provides motive power, partly for agriculture
itself and partly for the transport industry.

In all industries, in which the period of
reproduction extends over more than a year, as is the
case with a major part of livestock, timber etc., but whose
products at the same time have to be continuously
reproduced, thus requiring the application of a certain
amount of labour, accumulation and reproduction coincide in
so far as the newly-added labour, which includes not
only paid but also unpaid labour, must be accumulated in
kind, until the product is ready for sale. (We are not
speaking here of the accumulation of the profit which
according to the general rate of profit is added [to the
capital] each year—this is not real
accumulation, but only a method of accounting. We are
concerned here with the accumulation of the total labour
which is repeated in the course of several years, during
which not only paid, but also unpaid labour is accumulated
in kind and at once reconverted into capital. The
accumulation of profit is in such cases however independent
of the quantity of newly-added labour.)

The position is the same with commercial crops
(whether they provide raw materials or auxiliary
materials). Their seeds and that part of them which
can be used again as manure etc., represent a portion of the
total product. Even if this were unsaleable, it
would not alter the fact that as soon as it becomes a means
of production again, it forms a part of the total value and
as | such constitutes
constant capital for new production.

This settles one major point—the question of raw
materials and means of subsistence (food), in so far as they
are actually agricultural products. Here therefore,
accumulation coincides directly with reproduction on
a larger scale, so that a part of the surplus-product serves
again as a means of production in its own sphere, without
being exchanged for wages or other commodities.

The second important question relates to
machinery. Not the machines which produce
commodities, but the machines which produce machines, the
constant capital of the machine producing
industry. Given this machinery, the extractive
industries require nothing but labour in order to provide
the raw material, iron etc. for the production of containers
and machines. And with the latter are produced the
machines for working up the raw materials themselves.
The difficulty here is not to get entangled in a vicious
circle of presuppositions. For, in order to produce
more machinery, more material is required (iron etc., coal
etc.) and in order to produce this, more machinery is
required. Whether we assume that industrialists who
build machine-building machines and industrialists who
manufacture machines (with the machine-building machines)
are in one and the same category, does not alter the
situation. This much is clear: One part of the
surplus-product is embodied in machine-building machines (at
least it is up to the manufacturers of machines to see that
this happens). These need not be sold but can re-enter
the new production in kind, as constant capital. This
is therefore a second category of surplus-product which
enters directly (or through exchange within the same sphere
of production) as constant capital into the new production
(accumulation), without having gone through the process of
first being transformed into variable capital.

The question whether a part of the surplus-value
can be directly transformed into constant capital, resolves,
in the first place, into the question whether a part of the
surplus-product, in which the surplus-value is
expressed, can directly re-enter its own sphere of
production as a means of production, without first having
been alienated.

The general law is as follows:

Where a part of the product, and therefore also of the
surplus-product (i.e., the use-value in which the
surplus-value is expressed) can re-enter as a means of
production—as instrument of labour or material of
labour—into the sphere of production from which it
came, directly, without an intermediary phase, accumulation
within this sphere of production can and must take place in
such a way that a part of the surplus-product, instead of
being sold, is as a means of production re-incorporated into
the reproduction process directly (or through exchange with
other specialists in the same sphere of production who are
similarly accumulating), so that accumulation and
reproduction on a larger scale coincide here
directly. They must coincide everywhere, but
not in this direct manner.

This also applies to a part of the auxiliary
materials. For example to the coal produced in a
year. A part of the surplus-product can itself be used
to produce more coal and can therefore be used up again
directly by its producer, without any intermediary phase, as
constant capital for production on a larger scale.

In industrial areas there are machine-builders who build
whole factories for the manufacturers. Let us assume
one-tenth is surplus-product or unpaid labour. Whether
this tenth, the surplus-product, consists of factory
buildings which are built for a third party and are sold to
them, or of factory buildings which the producer builds for
himself—sells to himself—clearly makes no
difference. The only thing that matters here is
whether the kind of use-value in which the
surplus-labour is expressed, can re-enter as means of
production into the sphere of production | of the capitalist to whom the
surplus-product belongs. This is yet another example
of how important is the analysis of use-value for the
determination of economic phenomena.

Here, therefore, we already have a considerable portion
of the surplus-product, and therefore of the surplus-value,
which can and must be transformed directly into constant
capital, in order to be accumulated as capital
and without which no accumulation of capital can take place
at all.

Secondly, we have seen that where capitalist
production is developed, that is, where the productivity of
labour, the constant capital and particularly that part of
constant capital which consists of fixed capital are
developed, the mere reproduction of fixed capital in all
spheres and the parallel reproduction of the existing
capital which produces fixed capital, forms an accumulation
fund, that is to say, provides machinery, i.e., constant
capital, for production on an extended scale.

Thirdly: There remains the question: Can a part of
the surplus-product be re-transformed into capital
(that is constant capital) through an (intermediary)
exchange between the producer, for example of machinery,
implements of labour etc. and the producer of raw material,
iron, coal, metals, timber etc., that is, through the
exchange of various components of constant capital?
If, for example, the manufacturer of iron, coal, timber,
etc., buys machinery or tools from the machine-builder and
the machine-builder buys metal, timber, coal etc. from the
primary producer, then they replace or form new constant
capital through this exchange of the reciprocal component
parts of their constant capital. The question here is:
to what extent is the surplus-product converted in
this way?

### [5. The Transformation of Capitalised Surplus-Value into Constant and Variable Capital]

We saw earlier, that in the simple reproduction of the
advanced capital, the portion of the constant capital
which is used up in the reproduction of constant
capital is replaced either directly in kind or through
exchange between the producers of constant capital—an
exchange of capital against capital and not of revenue
against revenue or revenue against capital. Moreover,
the constant capital which is used up or consumed
industrially in the production of consumable
goods—commodities which enter into individual
consumption—is replaced by new products of the same
kind, which are the result of newly-added labour, and
therefore resolve into revenue (wages and profit).
Accordingly, therefore, in the spheres which produce
consumable goods, the portion of the total product, which is
equal to the portion of their value which replaces their
constant capital, represents the revenue of the producers of
constant capital; while, on the other hand, in the spheres
which produce constant capital, the part of the total
product which represents newly-added labour and therefore
forms the revenue of the producers of this constant capital,
represents the constant capital (replacement capital) of the
producers of the means of subsistence. This
presupposes, therefore, that the producers of constant
capital exchange their surplus-product (which means here,
the excess of their product over that part of it which is
equal to their constant capital) against means of
subsistence, and consume its value individually. This
surplus-product, however, consists of:

1. wages (or the reproduced fund for wages), and
this portion must continue to be allocated (by the
capitalist) for paying out wages, that is, for individual
consumption (and assuming a minimum wage, the worker too can
only convert the wages he receives, into means of
subsistence);

2. the profit of the capitalist (including
rent). If this portion is large enough, it can be
consumed partly individually and partly industrially, And in
this latter case, an exchange of products takes place
between the producers of constant capital; this is, however,
no longer an exchange of the portion of their products
representing their constant capital which has to be mutually
replaced between them, but is an exchange of a part of their
surplus-product, revenue (newly-added labour) which
is directly transformed into constant capital, thus
increasing the amount of constant capital and expanding the
scale of reproduction.

In this case, too, therefore a part of the existing
surplus-product, that is, of the labour which has been newly
added during the year, is transformed directly into constant
capital, without first having been converted into variable
capital. This demonstrates again that the industrial
consumption of the surplus-product—or
accumulation—is by no means identical with the
conversion of the entire surplus-product into wages paid to
productive workers.

It is quite possible that the manufacturer of machines
sells (part of) his commodity to the producer, say, of
cloth. The latter pays him in money. With this
money he purchases iron, coal etc. instead of means of
subsistence. But when one considers the process as a
whole, it is evident that the producers of means of
subsistence cannot purchase any replacement machinery or
replacement raw materials, unless the producers of the
replacements of constant capital buy their means of
subsistence from them, in other words, unless this
circulation is fundamentally an exchange between means of
subsistence and constant capital. The separation of
the acts of buying and selling can of course cause
considerable disturbances and complications in this
compensatory process.

| If a country cannot
itself produce the amount of machinery required for the
accumulation of capital, then it buys it from abroad.
The same happens if it cannot itself produce a sufficient
quantity of means of subsistence (for wages) and the raw
material. As soon as international trade intervenes,
it becomes quite obvious that a part of the surplus-product
of a country—in so far as it is intended for
accumulation—is not transformed into wages, but
directly into constant capital. But then there may
remain the notion that over there, in the foreign country,
the money thus laid out is spent entirely on wages. We
have seen that, even leaving foreign trade out of account,
this is not so and cannot be so.

The proportion in which the surplus-product is divided
between variable and constant capital, depends on the
average composition of capital, and the more developed
capitalist production is, the smaller, relatively,
will be the part which is directly laid out in wages.
The idea that, because the surplus-product is solely the
product of the labour newly added during the year, it can
therefore only be converted into variable capital, i.e.,
only be laid out in wages, corresponds altogether to the
false conception that because the product is only the
result, or the materialisation, of labour, its value is
resolved only into revenue—wages, profit, and
rent—the false conception of Smith and Ricardo.

A large part of constant capital, namely, the fixed
capital, may enter directly into the process of the
production of means of subsistence, raw materials etc., or
it may serve either to shorten the circulation process, like
railways, roads, navigation, telegraphs etc, or to store and
accumulate stocks of commodities like docks, warehouses
etc., alternatively it may increase the yield only after a
long period of reproduction, as for instance levelling
operations, drainage etc. The direct consequences for
the reproduction of the means of subsistence etc. will be
very different according to whether a greater or smaller
part of the surplus-product is converted into one of these
types of fixed capital.

### [6. Crises (Introductory Remarks)]

If expanded production of constant capital is
assumed—that is greater production than is required
for the replacement of the former capital and therefore also
for the production of the former quantity of means of
subsistence—expanded production or accumulation in the
spheres using the machinery, raw materials etc. encounters
no further difficulties. If sufficient additional
labour is available, they [the manufacturers] will find on
the market all the means for the formation of new capital,
for the transformation of their additional money into new
capital.

But the whole process of accumulation in the first place
resolves itself into production on an expanding
scale, which on the one hand corresponds to the natural
growth of the population, and on the other hand, forms an
inherent basis for the phenomena which appear during
crises. The criterion of this expansion of
production is capital itself, the existing level of
the conditions of production and the unlimited desire of the
capitalists to enrich themselves and to enlarge their
capital, but by no means consumption, which from the
outset is inhibited, since the majority of the population,
the working people, can only expand their consumption within
very narrow limits, whereas the demand for labour, although
it grows absolutely, decreases relatively, to
the same extent as capitalism develops. Moreover, all
equalisations are accidental and although the
proportion of capital employed in individual spheres is
equalised by a continuous process, the continuity of this
process itself equally presupposes the constant
disproportion which it has continuously, often violently, to
even out.

Here we need only consider the forms which capital passes
through in the various stages of its development. The
real conditions within which the actual process of
production takes place are therefore not analysed. It
is assumed throughout, that the commodity is sold at its
value. We do not examine the competition of capitals,
nor the credit system, nor the actual composition of
society, which by no means consists only of two classes,
workers and industrial capitalists, and where therefore
consumers and producers are not identical categories.
The first category, that of the consumers (whose revenues
are in part not primary, but secondary, derived from profit
and wages), is much broader than the second category
[producers], and therefore the way in which they spend their
revenue, and the very size of the revenue give rise to very
considerable modifications in the economy and particularly
in the circulation and reproduction process of
capital. Nevertheless, just as the examination of
money— both in so far as it represents a form
altogether different from the natural form of commodities,
and also in its form as means of payment—has shown
that it contained the possibility of crises; the examination
of the general nature of capital, even without going further
into the actual relations which all constitute prerequisites
for the real process of production, reveals this still more
clearly.

| The conception (which
really belongs to [James] Mill), adopted by Ricardo from the
tedious Say (and to which we shall return when we discuss
that miserable individual), that overproduction is
not possible or at least that no general glut of the
market is possible, is based on the proposition that
products are exchanged against products, or as
Mill put it, on the “metaphysical equilibrium of
sellers and buyers”, and this led to [the
conclusion] that demand is determined only by production, or
also that demand and supply are identical. The same
proposition exists also in the form, which Ricardo liked
particularly, that any amount of capital can be employed
productively in any country.

“M. Say,” writes Ricardo in
Chapter XXI (“Effects of Accumulation on
Profits and Interest”), “has…most
satisfactorily shewn, that there is no amount of capital
which may not be employed in a country, because demand is
only limited by production. No man produces,
but with a view to consume or sell, and he
never sells, but with an intention to purchase some
other commodity, which may be immediately useful to him,
or which may contribute to future production. By
producing, then, he necessarily becomes either the consumer
of his own goods, or the purchaser and consumer of the goods
of some other person. It is not to be supposed that he
should, for any length of time, be ill-informed of the
commodities which he can most advantageously produce, to
attain the object which he has in view, namely, the
possession of other goods; and, therefore, it is not
probable that he will continually” (the point
in question here is not eternal life) “produce a
commodity for which there is no demand.” ([David
Ricardo, On the Principles of Political Economy, and
Taxation, London, 1821,] pp. 339-40.)

Ricardo, who always strives to be consistent, discovers
that his authority, Say, is playing a trick on him
here. He makes the following comment in a footnote to
this passage:

“Is the following quite consistent
with M. Say’s principle? “The more disposable
capitals are abundant in proportion to the extent of
employment for them, the more will the rate of interest on
loans of capital fall.’ (Say, Vol. II, p. 108.)
If capital to any extent can be employed by a country, how
can it be said to be abundant, compared with the extent of
employment for it?” ([Ricardo], l.c., p. 340,
note.)

Since Ricardo cites Say, we shall criticise Say’s
theories later, when we deal with this humbug himself.

Meanwhile we just note here: In reproduction, just as in
the accumulation of capital, it is not only a question of
replacing the same quantity of use-values of which
capital consists, on the former scale or on an enlarged
scale (in the case of accumulation), but of replacing the
value of the capital advanced along with the usual
rate of profit (surplus-value). If, therefore, through
any circumstance or combination of circumstances, the
market-prices of the commodities (of all or most of them, it
makes no difference) fall far below their cost-prices, then
reproduction of capital is curtailed as far as
possible. Accumulation, however, stagnates even
more. Surplus-value amassed in the form of money (gold
or notes) could only be transformed into capital at a
loss. It therefore lies idle as a hoard in the banks
or in the form of credit money, which in essence makes no
difference at all. The same hold up could occur for
the opposite reasons, if the real prerequisites of
reproduction were missing (for instance if grain became more
expensive or because not enough constant capital had been
accumulated in kind). There occurs a stoppage in
reproduction, and thus in the flow of circulation.
Purchase and sale get bogged down and unemployed capital
appears in the form of idle money. The same phenomenon
(and this usually precedes crises) can appear when
additional capital is produced at a very rapid rate and its
reconversion into productive capital increases the demand
for all the elements of the latter to such an extent that
actual production cannot keep pace with it; this brings
about a rise in the prices of all commodities, which enter
into the formation of capital. In this case the rate
of interest falls sharply, however much the profit may rise
and this fall in the rate of interest then leads to the most
risky speculative ventures. The interruption of the
reproduction process leads to the decrease in variable
capital, to a fall in wages and in the quantity of labour
employed. This in turn reacts anew on prices and leads
to their further fall.

It must never be forgotten, that in capitalist production
what matters is not the immediate use-value but the
exchange-value and, in particular, the expansion of
surplus-value. This is the driving motive of
capitalist production, and it is a pretty conception
that—in order to reason away the contradictions of
capitalist production—abstracts from its very basis
and depicts it as a production aiming at the direct
satisfaction of the consumption of the producers.

Further: since the circulation process of capital is not
completed in one day but extends over a fairly long period
until the capital returns to its original form, since this
period coincides with the period within which market-prices
| equalise with
cost-prices, and great upheavals and changes take place in
the market in the course of this period, since great
changes take place in the productivity of labour and
therefore also in the real value of commodities, it
is quite clear, that between the starting-point, the
prerequisite capital, and the time of its return at the end
of one of these periods, great catastrophes must occur and
elements of crisis must have gathered and develop, and these
cannot in any way be dismissed by the pitiful proposition
that products exchange for products. The
comparison of value in one period with the value of
the same commodities in a later period is no scholastic
illusion, as Mr. Bailey maintains, but rather forms the
fundamental principle of the circulation process of
capital.

When speaking of the destruction of capital
through crises, one must distinguish between two
factors.

In so far as the reproduction process is checked and the
labour-process is restricted or in some instances is
completely stopped, real capital is destroyed.
Machinery which is not used is not capital. Labour
which is not exploited is equivalent to lost
production. Raw material which lies unused is no
capital. Buildings (also newly built machinery) which
are either unused or remain unfinished, commodities which
rot in warehouses— all this is destruction of
capital. All this means that the process of
reproduction is checked and that the existing means
of production are not really used as means of production,
are not put into operation. Thus their use-value and
their exchange-value go to the devil.

Secondly, however, the destruction of capital
through crises means the depreciation of values which
prevents them from later renewing their reproduction process
as capital on the same scale. This is the ruinous
effect of the fall in the prices of commodities. It
does not cause the destruction of any use-values. What
one loses, the other gains. Values used as capital are
prevented from acting again as capital in the hands
of the same person. The old capitalists go
bankrupt. If the value of the commodities from whose
sale a capitalist reproduces his capital was equal to
£ 12,000, of which say £ 2,000 were profit, and
their price falls to £ 6,000, then the capitalist can
neither meet his contracted obligations nor, even if he had
none, could he, with the £ 6,000 restart his business
on the former scale, for the commodity prices have risen
once more to the level of their cost-prices. In this
way, £ 6,000 has been destroyed, although the buyer of
these commodities, because he has acquired them at half
their cost-price, can go ahead very well once business
livens up again, and may even have made a profit. A
large part of the nominal capital of the society, i.e., of
the exchange-value of the existing capital, is once
for all destroyed, although this very destruction, since it
does not affect the use-value, may very much expedite the
new reproduction. This is also the period during which
moneyed interest enriches itself at the cost of industrial
interest. As regards the fall in the purely nominal
capital, State bonds, shares etc.—in so far as it does
not lead to the bankruptcy of the state or of the share
company, or to the complete stoppage of reproduction through
undermining the credit of the industrial capitalists who
hold such securities—it amounts only to the transfer
of wealth from one hand to another and will, on the whole,
act favourably upon reproduction, since the parvenus into
whose hands these stocks or shares fall cheaply, are mostly
more enterprising than their former owners.

### [7. Absurd Denial of the Over-production of Commodities, Accompanied by a Recognition of the Over-abundance of Capital]

To the best of his knowledge, Ricardo is always
consistent. For him, therefore, the statement that no
over-production (of commodities) is possible, is
synonymous with the statement that no plethora or
over-abundance of capital is possible.*

“There cannot, then, be accumulated
in a country any amount of capital which cannot be employed
productively, until wages rise so high in consequence of the
rise of necessaries, and so little consequently remains for
the profits of stock, that the motive for accumulation
ceases” ( [Ricardo], l.c., p. 340). “It
follows then … that there is no limit to
demand—no limit to the employment of capital while it
yields any profit, and that however abundant capital may
become, there is no other adequate reason for a fall
of profit but a rise of wages, and further it may be
added, that the only adequate and permanent cause for the
rise of wages is the increasing difficulty of providing food
and necessaries | for the
increasing number of workmen” (l.c., pp. 347-48).

What then would Ricardo have said to the stupidity of his
successors, who deny over-production in one form (as a
general glut of commodities in the market) and who, not only
admit its existence in another form, as over-production of
capital, plethora of capital, over-abundance of capital, but
actually turn it into an essential point in their
doctrine?

Not a single responsible economist of the post-Ricardian
period denies the plethora of capital. On the
contrary, all of them regard it as the cause of crises (in
so far as they do not explain the latter by factors relating
to credit). Therefore, they all admit
over—production in one form but deny its existence in
another. The only remaining question thus is: what is
the relation between these two forms of over-production,
i.e., between the form in which it is denied and the form in
which it is asserted?

Ricardo himself did not actually know anything of crises,
of general crises of the world market, arising out of the
production process itself. He could explain that the
crises which occurred between 1800 and 1815, were caused by
the rise in the price of corn due to poor harvests, by the
devaluation of paper currency, the depreciation of colonial
products etc., because, in consequence of the continental
blockade, the market was forcibly contracted for political
and not economic reasons. He was also able to explain
the crises after 1815, partly by a bad year and a shortage
of corn, and partly by the fall in corn prices, because
those causes which, according to his own theory, had forced
up the price of corn during the war when England was cut off
from the continent, had ceased to operate; partly by the
transition from war to peace which brought about
“sudden changes in the channels of trade” [l.c.,
p. 307). (See Chapter XIX—“On Sudden
Changes in the Channels of Trade”—of his
Principles.)

Later historical phenomena, especially the almost regular
periodicity of crises on the world market, no longer
permitted Ricardo’s successors to deny the facts or to
interpret them as accidental. Instead—apart from
those who explain everything by credit, but then have to
admit that they themselves are forced to presuppose the
over-abundance of capital—they invented the nice
distinction between over-abundance of capital and
overproduction. Against the latter, they arm
themselves with the phrases and good reasons used by Ricardo
and Adam Smith, while by means of the over-abundance of
capital they attempt to explain phenomena that they are
otherwise unable to explain. Wilson, for example;
explains certain crises by the overabundance of fixed
capital, while he explains others by the overabundance of
circulating capital. The over-abundance of capital
itself is affirmed by the best economists (such as
Fullarton), and has already become a matter of course to
such an extent, that it can even be found in the learned
Roscher’s compendium as a self-evident fact.

The question is, therefore, what is the over-abundance of
capital and how does it differ from over-production?

(In all fairness however, it must be said, that other
economists, such as Ure, Corbet etc., declare
over-production to be the usual condition in large-scale
industry, so far as the home country is concerned and
that it thus only leads to crises under certain
circumstances, in which the foreign market also
contracts.)

According to the same economists, capital is equivalent
to money or commodities. Over-production of capital is
thus overproduction of money or of commodities. And
yet these two phenomena are supposed to have nothing in
common with each other, Even the over-production of money
[is of] no [avail], since money for them is a commodity, so
that the entire phenomenon resolves into one of
over-production of commodities which they admit under one
name and deny under another. Moreover, the statement
that there is over-production of fixed capital or of
circulating capital, is based on the fact that commodities
are here no longer considered in this simple form, but in
their designation as capital. This, however, is an
admission that in capitalist | production and its
phenomena—e.g., over-production—it is a question
not only of the simple relationship in which the product
appears, is designated, as commodity, but of its
designation within the social framework, it thereby becomes
something more than, and also different from, a
commodity.

Altogether, the phrase over-abundance of capital
instead of over-production of commodities in so far
as it is not merely a prevaricating expression, or
unscrupulous thoughtlessness, which admits the existence and
necessity of a particular phenomenon when it is called A,
but denies it as soon as it is called B, in fact therefore
showing scruples and doubts only about the name of
the phenomenon and not the phenomenon itself; or in so far
as it is not merely an attempt to avoid the difficulty of
explaining the phenomenon, by denying it in one form (under
one name) in which it contradicts existing prejudices and
admitting it in a form only in which it becomes
meaningless—apart from these aspects, the transition
from the phrase “over-production of
commodities” to the phrase
“over-abundance of capital” is indeed an
advance. In what does this consist? In
[expressing the fact], that the producers confront one
another not purely as owners of commodities, but as
capitalists.

### [8. Ricardo’s Denial of General Over-production. Possibility of a Crisis Inherent in the Inner Contradictions of Commodity and Money]

A few more passages from Ricardo:

“One would be led to think.., that
Adam Smith concluded we were under some
necessity” (this is indeed the case) “of
producing a surplus of corn, woollen goods, and
hardware, and that the capital which produced them could not
be otherwise employed. It is, however, always a matter
of choice in what way a capital shall be employed, and
therefore there can never, for any length of time, be
a surplus of any commodity; for if there were, it would fall
below its natural price, and capital would be removed to
some more profitable employment” (l.c., pp. 341-42,
note).

“Productions are always bought by
productions, or by services; money is only the medium by
which the exchange is effected.”

(That is to say, money is merely a means of circulation,
and exchange-value itself is merely a fleeting aspect of the
exchange of product against product—which is
wrong.)

“Too much of a particular commodity
may be produced, of which there may be such a glut in the
market, as not to repay the capital expended on it; but
this cannot be the case with […] all
commodities” (l.c., pp. 341-42).

“Whether these increased
productions, and consequent demand which they occasion,
shall or shall not lower profits, depends solely on the rise
of wages; and the rise of wages, excepting for a limited
period, on the facility of producing the food and
necessaries of the labourer” (l.c., p. 343).

“When merchants engage their capitals
in foreign trade, or in the carrying trade, it is always
from choice, and never from necessity: it is because in that
trade their profits will be somewhat greater than in the
home trade” (l.c., p. 344).

So far as crises are concerned, all those writers who
describe the real movement of prices, or all experts, who
write in the actual situation of a crisis, have been right
in ignoring the allegedly theoretical twaddle and in
contenting themselves with the idea that what may be true in
abstract theory—namely, that no gluts of the market
and so forth are possible—is, nevertheless, wrong in
practice. The constant recurrence of crises has in
fact reduced the rigmarole of Say and others to a
phraseology which is now only used in times of prosperity
but is cast aside in times of crises.

| In the crises of the
world market, the contradictions and antagonisms of
bourgeois production are strikingly revealed. Instead
of investigating the nature of the conflicting elements
which erupt in the catastrophe, the apologists content
themselves with denying the catastrophe itself and
insisting, in the face of their regular and periodic
recurrence, that if production were carried on according to
the textbooks, crises would never occur. Thus the
apologetics consist in the falsification of the simplest
economic relations, and particularly in clinging to the
concept of unity in the face of contradiction.

If, for example, purchase and sale—or the
metamorphosis of commodities—represent the unity of
two processes, or rather the movement of one process through
two opposite phases, and thus essentially the unity of the
two phases, the movement is essentially just as much the
separation of these two phases and their becoming
independent of each other. Since, however, they belong
together, the independence of the two correlated aspects can
only show itself forcibly, as a destructive
process. It is just the crisis in which they
assert their unity, the unity of the different
aspects. The independence which these two linked and
complimentary phases assume in relation to each other is
forcibly destroyed. Thus the crisis manifests the
unity of the two phases that have become independent of each
other. There would be no crisis without this inner
unity of factors that are apparently indifferent to each
other. But no, says the apologetic economist.
Because there is this unity, there can be no
crises. Which in turn means nothing but that the unity
of contradictory factors excludes contradiction.

In order to prove that capitalist production cannot lead
to general crises, all its conditions and distinct forms,
all its principles and specific features—in short
capitalist production itself—are denied.
In fact it is demonstrated that if the capitalist mode of
production had not developed in a specific way and become a
unique form of social production, but were a mode of
production dating back to the most rudimentary stages, then
its peculiar contradictions and conflicts and hence also
their eruption in crises would not exist.

Following Say, Ricardo writes:
“Productions are always bought by productions, or by
services; money is only the medium by which the exchange is
effected” (l.c., p. 341).

Here, therefore, firstly commodity, in which the
contradiction between exchange-value and use-value exists,
becomes mere product (use-value) and therefore the exchange
of commodities is transformed into mere barter of products,
of simple use-values. This is a return not only to the
time before capitalist production, but even to the time
before there was simple commodity production; and the most
complicated phenomenon of capitalist production—the
world market crisis—is flatly denied, by denying the
first condition of capitalist production, namely, that the
product must be a commodity and therefore express itself as
money and undergo the process of metamorphosis.
Instead of speaking of wage-labour, the term
“services” is used. This word again omits
the specific characteristic of wage-labour and of its
use—namely, that it increases the value of the
commodities against which it is exchanged, that it creates
surplus-value—and in doing so, it disregards the
specific relationship through which money and commodities
are transformed into capital.
“Service” is labour seen only as
use-value (which is a side issue in capitalist
production) just as the term “productions” fails
to express the essence of commodity and its inherent
contradiction. It is quite consistent that
money is then regarded merely as an intermediary in
the exchange of products, and not as an essential and
necessary form of existence of the commodity which must
manifest itself as exchange-value, as general social
labour. Since the transformation of the commodity into
mere use-value (product) obliterates the essence of | exchange-value, it is just as
easy to deny, or rather it is necessary to deny, that
money is an essential aspect of the commodity and
that in the process of metamorphosis it is
independent of the original form of the
commodity.

Crises are thus reasoned out of existence here by
forgetting or denying the first elements of capitalist
production: the existence of the product as a commodity, the
duplication of the commodity in commodity and money, the
consequent separation which takes place in the exchange of
commodities and finally the relation of money or commodities
to wage-labour.

Incidentally, those economists are no better, who (like
John Stuart Mill) want to explain the crises by these simple
possibilities of crisis contained in the
metamorphosis of commodities—such as the separation
between purchase and sale. These factors which explain
the possibility of crises, by no means explain their actual
occurrence. They do not explain why the phases
of the process come into such conflict that their inner
unity can only assert itself through a crisis, through a
violent process. This separation appears in the
crisis; it is the elementary form of the crisis. To
explain the crisis on the basis of this, its
elementary form, is to explain the existence of the crisis
by describing its most abstract form, that is to say, to
explain the crisis by the crisis.

Ricardo says: “No man produces, but
with a view to consume or sell, and he never sells,
but with an intention to purchase some other
commodity, which may be immediately useful to him, or which
may contribute to future production. By
producing, then, he necessarily becomes either the consumer
of his own goods, or the purchaser and consumer of the goods
of some person. It is not to be supposed that be
should, for any length of time, be ill-informed of
the commodities which he can most advantageously produce, to
attain the object which he has in view, namely, the
possession of other goods; and, therefore, it
is not probable that he will continually produce a
commodity for which there is no demand” [l.c.,
pp. 339-40].

This is the childish babble of a Say, but it is not
worthy of Ricardo. In the first place, no capitalist
produces in order to consume his product. And when
speaking of capitalist production, it is right to say that:
“no man produces with a view to consume his own
product”, even if he uses portions of his product for
industrial consumption. But here the point in question
is private consumption. Previously it was forgotten
that the product is a commodity. Now even the social
division of labour is forgotten. In a situation where
men produce for themselves, there are indeed no crises, but
neither is there capitalist production. Nor have we
ever heard that the ancients, with their slave production
ever knew crises, although individual producers among the
ancients too, did go bankrupt. The first part of the
alternative is nonsense. The second as well. A
man who has produced, does not have the choice of selling or
not selling. He must sell. In the crisis
there arises the very situation in which he cannot sell or
can only sell below the cost-price or must even sell at a
positive loss. What difference does it make,
therefore, to him or to us that he has produced in order to
sell? The very question we want to solve is what has
thwarted this good intention of his?

Further:

he “never sells, but with an
intention to purchase some other commodity, which may
be immediately useful to him, or which may contribute to
future production” (l.c., p. 339).

What a cosy description of bourgeois conditions!
Ricardo even forgets that a person may sell in order
to pay, and that these forced sales play a very
significant role in the crises. The capitalist’s
immediate object in selling, is to turn his commodity, or
rather his commodity capital, back into money
capital, and thereby to realise his profit.
Consumption—revenue—is by no means the guiding
motive in this process, although it is for the person who
only sells commodities in order to transform them
into means of subsistence. But this is not capitalist
production, in which revenue appears as the result and not
as the determining purpose. Everyone sells
first of all in order to sell, that is to say, in order to
transform commodities into money.

| During the crisis, a
man may be very pleased, if he has sold his
commodities without immediately thinking of a
purchase. On the other hand, if the value that has
been realised is again to be used as capital, it must go
through the process of reproduction, that is, it must be
exchanged for labour and commodities. But the crisis
is precisely the phase of disturbance and interruption of
the process of reproduction. And this disturbance
cannot be explained by the fact that it does not occur in
those times when there is no crisis. There is no doubt
that no one “will continually produce a commodity for
which there is no demand” (l.c., p. 340), but no one
is talking about such an absurd hypothesis. Nor has it
anything to do with the problem. The immediate purpose
of capitalist production is not “the possession of
other goods”, but the appropriation of value, of
money, of abstract wealth.

Ricardo’s statements here are also based on James Mills’s
proposition on the “metaphysical equilibrium of
purchases and sales”, which I examined
previously—an equilibrium which sees only the
unity, but not the separation in the processes of purchase
and sale, Hence also Ricardo’s assertion (following James
Mill):

“Too much of a particular
commodity may be produced, of which there may be such a glut
in the market, as not to repay the capital expended on it;
but this cannot be the case with respect to all
commodities” (l.c., pp. 341-42).

Money is not only “the medium by which the exchange
is effected” (l.c., p. 341), but at the same time the
medium by which the exchange of product with product is
divided into two acts, which are independent of each other,
and separate in time and space. With Ricardo, however,
this false conception of money is due to the fact that he
concentrates exclusively on the quantitative
determination of exchange-value, namely, that it is
equal to a definite quantity of labour-time, forgetting on
the other hand the qualitative characteristic, that
individual labour must present itself as abstract,
general social labour only through its alienation.*

That only particular commodities, and not
all kinds of commodities, can form “a glut in
the market” and that therefore over-production can
always only be partial, is a poor way out. In the
first place, if we consider only the nature of the
commodity, there is nothing to prevent all
commodities from being superabundant on the market, and
therefore all falling below their price. We are here
only concerned with the factor of crisis. That is all
commodities, apart from money [may be
superabundant]. [The proposition] the commodity
must be converted into money, only means that: all
commodities must do so. And just as the difficulty of
undergoing this metamorphosis exists for an individual
commodity, so it can exist for all commodities. The
general nature of the metamorphosis of
commodities—which includes the separation of purchase
and sale just as it does their unity—instead of
excluding the possibility of a general glut, on the
contrary, contains the possibility of a general glut.

Ricardo’s and similar types of reasoning are moreover
based not only on the relation of purchase and sale,
but also on that of demand and supply, which we have
to examine only when considering the competition of
capitals. As Mill says purchase is sale etc.,
therefore demand is supply and supply demand. But they
also fall apart and can become independent of each
other. At a given moment, the supply of all
commodities can be greater than the demand for all
commodities, since the demand for the general
commodity, money, exchange-value, is greater than the
demand for all particular commodities, in other words the
motive to turn the commodity into money, to realise its
exchange-value, prevails over the motive to transform the
commodity again into use-value.

If the relation of demand and supply is taken in a wider
and more concrete sense, then it comprises the relation of
production and consumption as well. Here
again, the unity of these two phases, which does
exist and which forcibly asserts itself during the crisis,
must be seen as opposed to the separation and
antagonism of these two phases, separation and
antagonism which exist just as much, and are moreover
typical of bourgeois production.

With regard to the contradiction between partial and
universal over-production, in so far as the existence of the
former is affirmed in order to evade the latter, the
following observation may be made:

Firstly: Crises are usually preceded by a general
inflation in prices of all articles of capitalist
production. All of them therefore participate in the
subsequent crash and at their former prices they cause a
glut in the market. The market can absorb a larger
volume of commodities at falling prices, at prices which
have fallen below their cost-prices, than it could absorb at
their former prices. The excess of commodities is
always relative; in other words it is an excess at
particular prices. The prices at which the commodities
are then absorbed are ruinous for the producer or
merchant.

| Secondly:

For a crisis (and therefore also for over-production) to
be general, it suffices for it to affect the principal
commercial goods.

### [9. Ricardo’s Wrong Conception of the Relation Between Production and Consumption under the Conditions of Capitalism]

Let us take a closer look at how Ricardo seeks to deny
the possibility of a general glut in the market:

“Too much of a particular commodity
may be produced, of which there may be such a glut in the
market, as not to repay the capital expended on it; but this
cannot be the case with respect to all commodities; the
demand for corn is limited by the mouths which are to eat
it, for shoes and coats by the persons who are to wear them;
but though a community, or a part of a community, may have
as much corn, and as many hats and shoes, as it is able or
may wish to consume, the same cannot be said of every
commodity produced by nature or by art. Some would
consume more wine, if they had the ability to procure
it. Others having enough of wine, would wish to
increase the quantity or improve the quality of their
furniture. Others might wish to ornament their
grounds, or to enlarge their houses. The wish to do
all or some of these is implanted in every man’s breast;
nothing is required but the means, and nothing can afford
the means, but an increase of production” (l.c.,
pp. 341-42).

Could there be a more childish argument? It runs
like this: more of a particular commodity may be produced
than can be consumed of it; but this cannot apply to
all commodities at the same time. Because the
needs, which the commodities satisfy, have no limits and all
these needs are not satisfied at the same time. On the
contrary. The fulfilment of one need makes another, so
to speak, latent. Thus nothing is required, but the
means to satisfy these wants, and these means can only be
provided through an increase in production. Hence no
general overproduction is possible.

What is the purpose of all this? In periods of
over-production, a large part of the nation (especially the
working class) is less well provided than ever with corn,
shoes etc., not to speak of wine and furniture. If
over-production could only occur when all the members of a
nation had satisfied even their most urgent needs, there
could never, in the history of bourgeois society up to now,
have been a state of general over-production or even of
partial over-production. When, for instance, the
market is glutted by shoes or calicoes or wines or colonial
products, does this perhaps mean that four-sixths of the
nation have more than satisfied their needs in shoes,
calicoes etc.? What after all has over-production to
do with absolute needs? It is only concerned with
demand that is backed by ability to pay. It is not a
question of absolute over-production—over-production
as such in relation to the absolute need or the desire to
possess commodities. In this sense there is neither
partial nor general over-production; and the one is not
opposed to the other.

But—Ricardo will say—when there are a lot of
people who want shoes and calicoes, why do they not obtain
the means to acquire them, by producing something which will
enable them to buy shoes and calicoes? Would it not be
even simpler to say: Why do they not produce shoes and
calicoes for themselves? An even stranger aspect of
over-production is that the workers, the actual producers of
the very commodities which glut the market, are in need of
these commodities. It cannot be said here that they
should produce things in order to obtain them, for they have
produced them and yet they have not got them. Nor can
it be said that a particular commodity gluts the market,
because no one is in want of it. If, therefore, it is
even impossible to explain that partial
over-production arises because the demand for the
commodities that glut the market has been more than
satisfied, it is quite impossible to explain away
universal over-production by declaring that needs,
unsatisfied needs, exist for many of the commodities which
are on the market.

Let us keep to the example of the weaver of calico.
So long as reproduction continued uninterruptedly—and
therefore also the phase of this reproduction in which the
product existing as a saleable commodity, the calico, was
reconverted into money, at its value—so long, shall we
say, the workers who produced the calico, also consumed a
part of it, and with the expansion of reproduction, that is
to say, with accumulation, they were consuming more of it,
or also more workers were employed in the production of
calico, who also consumed part of it.

### [10. Crisis, Which Was a Contingency, Becomes a Certainty. The Crisis as the Manifestation of All the Contradictions of Bourgeois Economy]

Now before we proceed further, the following must be
said:

The possibility of crisis, which became apparent
in the simple metamorphosis of the commodity, is once
more demonstrated, and further developed, by the disjunction
between the (direct) process of production and the process
of circulation. As soon as these processes do not
merge smoothly into one another | but become independent of one
another, the crisis is there.

The possibility of crisis is indicated in the
metamorphosis of the commodity like this:

Firstly, the commodity which actually exists as
use-value, and nominally, in its price, as exchange-value,
must be transformed into money. C-M. If this
difficulty, the sale, is solved then the purchase, M-C,
presents no difficulty, since money is directly exchangeable
for everything else. The use-value of the commodity,
the usefulness of the labour contained in it, must be
assumed from the start, otherwise it is no commodity at
all. It is further assumed that the individual value
of the commodity is equal to its social value, that is to
say, that the labour-time materialised in it is equal to the
socially necessary labour-time for the production of
this commodity. The possibility of a crisis, in so far
as it shows itself in the simple form of metamorphosis, thus
only arises from the fact that the differences in
form—the phases—which it passes through in the
course of its progress, are in the first place necessarily
complimentary and secondly, despite this intrinsic and
necessary correlation, they are distinct parts and forms of
the process, independent of each other diverging in time and
space, separable and separated from each other. The
possibility of crisis therefore lies solely in the
separation of sale from purchase. It is thus only in
the form of commodity that the commodity has to pass through
this difficulty here. As soon as it assumes the form
of money it has got over this difficulty. Subsequently
however this too resolves into the separation of sale and
purchase. If the commodity could not be withdrawn from
circulation in the form of money or its retransformation
into commodity could not be postponed—as with direct
barter—if purchase and sale coincided, then the
possibility of crisis would, under the assumptions
made, disappear. For it is assumed that the commodity
represents use-value for other owners of
commodities. In the form of direct barter, the
commodity is not exchangeable only if it has no use-value or
when there are no other use-values on the other side which
can be exchanged for it; therefore, only under these two
conditions: either if one side has produced useless
things or if the other side has nothing useful to
exchange as an equivalent for the first use-value. In
both cases, however, no exchange whatsoever would take
place. But in so far as exchange did take
place, its phases would not be separated. The
buyer would be seller and the seller buyer. The
critical stage, which arises from the form of the
exchange—in so far as it is circulation—would
therefore cease to exist, and if we say that the simple form
of metamorphosis comprises the possibility of crisis, we
only say that in this form itself lies the possibility of
the rupture and separation of essentially complimentary
phases.

But this applies also to the content. In direct
barter, the bulk of production is intended by the producer
to satisfy his own needs, or, where the division of labour
is more developed, to satisfy the needs of his fellow
producers, needs that are known to him. What is
exchanged as a commodity is the surplus and it is
unimportant whether this surplus is exchanged or not.
In commodity production the conversion of the product
into money, the sale, is a conditio sine qua
non. Direct production for personal needs does not
take place. Crisis results from the impossibility to
sell. The difficulty of transforming the
commodity—the particular product of individual
labour—into its opposite, money, i.e., abstract
general social labour, lies in the fact that money is
not the particular product of individual labour, and that
the person who has effected a sale, who therefore has
commodities in the form of money, is not compelled to buy
again at once, to transform the money again into a
particular product of individual labour. In barter
this contradiction does not exist: no one can be a seller
without being a buyer or a buyer without being a
seller. The difficulty of the seller—on the
assumption that his commodity has use-value—only stems
from the ease with which the buyer can defer the
retransformation of money into commodity. The
difficulty of converting the commodity into money, of
selling it, only arises from the fact that the commodity
must be turned into money but the money need not be
immediately turned into commodity, and therefore sale
and purchase can be separated. We have said
that this form contains the possibility of
crisis, that is to say, the possibility that elements
which are correlated, which are inseparable, are separated
and consequently are forcibly reunited, their coherence is
violently asserted against their mutual independence.
| Crisis is nothing
but the forcible assertion of the unity of phases of the
production process which have become independent of each
other.

The general, abstract possibility of crisis denotes no
more than the most abstract form of crisis, without
content, without a compelling motivating factor. Sale
and purchase may fall apart. They thus represent
potential crisis and their coincidence always remains
a critical factor for the commodity. The transition
from one to the other may, however, proceed smoothly, The
most abstract form of crisis (and therefore the
formal possibility of crisis) is thus the
metamorphosis of the commodity itself; the
contradiction of exchange-value and use-value, and
furthermore of money and commodity, comprised within the
unity of the commodity, exists in metamorphosis only as an
involved movement. The factors which turn this
possibility of crisis into [an actual] crisis are not
contained in this form itself; it only implies that the
framework for a crisis exists.

And in a consideration of the bourgeois economy, that is
the important thing. The world trade crises must be
regarded as the real concentration and forcible adjustment
of all the contradictions of bourgeois economy. The
individual factors, which are condensed in these crises,
must therefore emerge and must be described in each sphere
of the bourgeois economy and the further we advance in our
examination of the latter, the more aspects of this conflict
must be traced on the one hand, and on the other hand it
must be shown that its more abstract forms are recurring and
are contained in the more concrete forms.

It can therefore be said that the crisis in its first
form is the metamorphosis of the commodity itself, the
falling asunder of purchase and sale.

The crisis in its second form is the function of money as
a means of payment, in which money has two different
functions and figures in two different phases, divided from
each other in time. Both these forms are as yet quite
abstract, although the second is more concrete than the
first.

To begin with therefore, in considering the
reproduction process of capital (which coincides with
its circulation) it is necessary to prove that the above
forms are simply repeated, or rather, that only here they
receive a content, a basis on which to manifest
themselves.

Let us look at the movement of capital from the moment in
which it leaves the production process as a commodity in
order once again to emerge from it as a commodity. If
we abstract here from all the other factors determining its
content, then the total commodity capital and each
individual commodity of which it is made up, must go through
the process C—M—C, the metamorphosis of the
commodity. The general possibility of crisis, which is
contained in this form—the falling apart of purchase
and sale—is thus contained in the movement of capital,
in so far as the latter is also commodity and nothing
but commodity. From the interconnection of the
metamorphoses of commodities it follows, moreover, that one
commodity is transformed into money because another is
retransformed from the form of money into commodity.
Furthermore, the separation of purchase and sale appears
here in such a way that the transformation of one capital
from the form commodity into the form money, must correspond
to the retransformation of the other capital from the form
money into the form commodity. The first metamorphosis
of one capital must correspond to the second metamorphosis
of the other; one capital leaves the production process as
the other capital returns into the production process.
This intertwining and coalescence of the processes of
reproduction or circulation of different capitals is on the
one hand necessitated by the division of labour, on the
other hand it is accidental; and thus the definition of the
content of crisis is already fuller.

Secondly, however, with regard to the possibility of
crisis arising from the form of money as means of
payment, it appears that capital may provide a much more
concrete basis for turning this possibility into
reality. For example, the weaver must pay for the
whole of the constant capital whose elements have been
produced by the spinner, the flax-grower, the
machine-builder, the iron and timber manufacturer, the
producer of coal etc. In so far as these latter
produce constant capital that only enters into the
production of constant capital, without entering into the
cloth, the final commodity, they replace each other’s means
of production through the exchange of capital.
Supposing the | weaver now
sells the cloth for £ 1,000 to the merchant but
in return for a bill of exchange so that money figures as
means of payment. The weaver for his part hands
over the bill of exchange to the banker, to whom he
may thus be repaying a debt or, on the other hand, the
banker may negotiate the bill for him. The flax-grower
has sold to the spinner in return for a bill of exchange,
the spinner to the weaver, ditto the machine manufacturer to
the weaver, ditto the iron and timber manufacturer to the
machine manufacturer, ditto the coal producer to the
spinner, weaver, machine manufacturer, iron and timber
supplier. Besides, the iron, coal, timber and flax
producers have paid one another with bills of
exchange. Now if the merchant does not pay, then the
weaver cannot pay his bill of exchange to the banker.

The flax-grower has drawn on the spinner, the machine
manufacturer on the weaver and the spinner. The
spinner cannot pay because the weaver cannot pay, neither of
them pay the machine manufacturer, and the latter does not
pay the iron, timber or coal supplier. And all of
these in turn, as they cannot realise the value of their
commodities, cannot replace that portion of value which is
to replace their constant capital. Thus the general
crisis comes into being. This is nothing other than
the possibility of crisis described when dealing with
money as a means of payment; but here—in capitalist
production—we can already see the connection between
the mutual claims and obligations, the sales and purchases,
through which the possibility can develop into
actuality.

In any case: If purchase and sale do not get
bogged down, and therefore do not require forcible
adjustment—and, on the other hand, money as means of
payment functions in such a way that claims are mutually
settled, and thus the contradiction inherent in money as a
means of payment is not realised—if therefore neither
of these two abstract forms of crisis become real, no crisis
exists. No crisis can exist unless sale and purchase
are separated from one another and come into conflict, or
the contradictions contained in money as a means of payment
actually come into play; crisis, therefore, cannot exist
without manifesting itself at the same time in its simple
form, as the contradiction between sale and purchase and the
contradiction of money as a means-of payment. But
these are merely forms, general possibilities of
crisis, and hence also forms, abstract forms, of actual
crisis. In them, the nature of crisis appears in its
simplest forms, and, in so far as this form is itself the
simplest content of crisis, in its simplest content.
But the content is not yet substantiated.
Simple circulation of money and even the circulation of
money as a means of payment—and both come into being
long before capitalist production, while there are no
crises—are possible and actually take place without
crises. These forms alone, therefore, do not explain
why their crucial aspect becomes prominent and why the
potential contradiction contained in them becomes a real
contradiction.

This shows how insipid the economists are who, when they
are no longer able to explain away the phenomenon of
overproduction and crises, are content to say that these
forms contain the possibility of crises, that it is
therefore accidental whether or not crises occur and
consequently their occurrence is itself merely a matter
of chance.

The contradictions inherent in the circulation of
commodities, which are further developed in the circulation
of money—and thus, also, the possibilities of
crisis—reproduce themselves, automatically, in
capital, since developed circulation of commodities and of
money, in fact, only takes place on the basis of
capital.

But now the further development of the potential crisis
has to be traced—the real crisis can only be educed
from the real movement of capitalist production, competition
and credit—in so far as crisis arises out of the
special aspects of capital which are peculiar to it
as capital, and not merely comprised in its existence as
commodity and money.

| The mere (direct)
production process of capital in itself, cannot add
anything new in this context. In order to exist at
all, its conditions are presupposed. The first section
dealing with capital—the direct process of
production—does not contribute any new element of
crisis. Although it does contain such an
element, because the production process implies
appropriation and hence production of surplus-value.
But this cannot be shown when dealing with the production
process itself, for the latter is not concerned with the
realisation either of the reproduced value or of the
surplus-value.

This can only emerge in the circulation process
which is in itself also a process of
reproduction.

Furthermore it is necessary to describe the circulation
or reproduction process before dealing with the
already existing capital—capital and
profit—since we have to explain, not only how
capital produces, but also how capital is produced.
But the actual movement starts from the existing
capital—i.e., the actual movement denotes developed
capitalist production, which starts from and presupposes its
own basis. The process of reproduction and the
predisposition to crisis which is further developed in it,
are therefore only partially described under this heading
and require further elaboration in the chapter on
“Capital and Profit”.

The circulation process as a whole or the reproduction
process of capital as a whole is the unity of its production
phase and its circulation phase, so that it comprises both
these processes or phases. Therein lies a further
developed possibility or abstract form of crisis. The
economists who deny crises consequently assert only the
unity of these two phases. If they were only separate,
without being a unity, then their unity could not be
established by force and there could be no crisis. If
they were only a unity without being separate, then no
violent separation would be possible implying a
crisis. Crisis is the forcible establishment of unity
between elements that have become independent and the
enforced separation from one another of elements which are
essentially one. |

### [11. On the Forms of Crisis]

||770a| Supplement to page
716.

Therefore:

1. The general possibility of crisis is
given in the process of metamorphosis of capital
itself, and in two ways: in so far as money functions as
means of circulation, [the possibility of crisis lies
in] the separation of purchase and sale; and in so
far as money functions as means of payment, it has
two different aspects, it acts as measure of value
and as realisation of value. These two aspects
[may] become separated. If in the interval
between them the value has changed, if the commodity at the
moment of its sale is not worth what it was
worth at the moment when money was acting as a
measure of value and therefore as a measure of the
reciprocal obligations, then the obligation cannot be met
from the proceeds of the sale of the commodity, and
therefore the whole series of transactions which
retrogressively depend on this one transaction, cannot be
settled. If even for only a limited period of
time the commodity cannot be sold then, although its
value has not altered, money cannot function as
means of payment, since it must function as such in a
definite given period of time. But as the same
sum of money acts for a whole series of reciprocal
transactions and obligations here, inability to pay
occurs not only at one, but at many points, hence a
crisis arises.

These are the formal possibilities of
crisis. The form mentioned first is possible without
the latter—that is to say, crises are possible without
credit, without money functioning as a means of
payment. But the second form is not possible
without the first— that is to say, without the
separation between purchase and sale. But in the
latter case, the crisis occurs not only because the
commodity is unsaleable, but because it is not saleable
within a particular period of time, and the crisis
arises and derives its character not only from the
unsaleability of the commodity, but from the
non-fulfilment of a whole series of payments which
depend on the sale of this particular commodity within this
particular period of time. This is the
characteristic form of money crises.

If the crisis appears, therefore, because purchase
and sale become separated, it becomes a money crisis,
as ‘soon as money has developed as means of
payment, and this second form of crisis follows
as a matter of course, when the first occurs.
In investigating why the general possibility of
crisis turns into a real crisis, in investigating
the conditions of crisis, it is therefore quite
superfluous to concern oneself with the forms of
crisis which arise out of the development of money as
means of payment. This is precisely why
economists like to suggest that this obvious form is
the cause of crises. (In so far as the
development of money as means of payment is linked with the
development of credit and of excess credit the causes
of the latter have to be examined, but this is not yet the
place to do it.)

2. In so far as crises arise from changes in
prices and revolutions in prices, which do not coincide
with changes in the values of commodities, they
naturally cannot be investigated during the examination of
capital in general, in which the prices of commodities are
assumed to be identical with the values of
commodities.

3. The general possibility of crisis is the
formal metamorphosis of capital itself, the
separation, in time and space, of purchase and sale.
But this is never the cause of the crisis. For
it is nothing but the most general form of crisis,
i.e., the crisis itself in its most generalised
expression. But it cannot be said that the
abstract form of crisis is the cause of
crisis. If one asks what its cause is, one wants
to know why its abstract form, the form of its
possibility, turns from possibility into
actuality.

4. The general conditions of crises, in so
far as they are independent of price fluctuations
(whether these are linked with the credit system or not) as
distinct from fluctuations in value, must be explicable from
the general conditions of capitalist production. |770a||

| (A crisis can
arise: 1, in the course of the reconversion [of
money] into productive capital; 2. through
changes in the value of the elements of productive
capital, particularly of raw material, for example
when there is a decrease in the quantity of cotton
harvested. Its value will thus rise. We
are not as yet concerned with prices here but with
values.) |

||770a| First
Phase. The reconversion of money into
capital. A definite level of production or
reproduction is assumed. Fixed capital can be
regarded here as given, as remaining unchanged and not
entering into the process of the creation of
value. Since the reproduction of raw material is
not dependent solely on the labour employed on it, but on
the productivity of this labour which is bound up with
natural conditions, it is possible for the volume,
||XIV-771a| the amount
of the product of the same quantity of labour, to
fall (as a result of bad harvests). The
value of the raw material therefore rises; its
volume decreases, in other words the
proportions in which the money has to be reconverted
into the various component parts of capital in order
to continue production on the former scale, are upset.
More must be expended on raw material, less remains
for labour, and it is not possible to absorb the same
quantity of labour as before. Firstly this is
physically impossible, because of the deficiency in
raw material. Secondly, it is impossible
because a greater portion of the value of the product
has to be converted into raw material, thus leaving less for
conversion into variable capital. Reproduction
cannot be repeated on the same scale. A part of
fixed capital stands idle and a part of the workers
is thrown out on the streets. The rate of
profit falls because the value of constant capital has
risen as against that of variable capital and less variable
capital is employed. The fixed charges—interest,
rent—which were based on the anticipation of a
constant rate of profit and exploitation of labour,
remain the same and in part cannot be paid.
Hence crisis. Crisis of labour and crisis of
capital. This is therefore a disturbance in the
reproduction process due to the increase in the value of
that part of constant capital which has to be replaced out
of the value of the product. Moreover, although the
rate of profit is decreasing, there is a rise in
the price of the product. If this product enters
into other spheres of production as a means of production,
the rise in its price will result in the same disturbance in
reproduction in these spheres. If it enters
into general consumption as a means of subsistence, it
either enters also into the consumption of the
workers or not. If it does so, then its
effects will be the same as those of a disturbance in
variable capital, of which we shall speak
later. But in so far as it enters into general
consumption it may result (if its consumption is not
reduced) in a diminished demand for other products
and consequently prevent their reconversion into
money at their value, thus disturbing the other
aspect of their reproduction— not the
reconversion of money into productive capital but the
reconversion of commodities into money. In any
case, the volume of profits and the volume of
wages is reduced in this branch of production thereby
reducing a part of the necessary returns from the
sale of commodities from other branches of production.

Such a shortage of raw material may,
however, occur not only because of the influence of
harvests or of the natural productivity of the
labour which supplies the raw material. For if an
excessive portion of the surplus-value, of the additional
capital, is laid out in machinery etc, in a particular
branch of production, then, although the raw material would
have been sufficient for the old level of production,
it will be insufficient for the new. This
therefore arises from the disproportionate conversion
of additional capital into its various elements. It is
a case of over-production of fixed capital and gives
rise to exactly the same phenomena as occur in the first
case. (See the previous page.) |XIV-771a||

||XIV-861a| […][a]

Or they [the crises] are due to an over-production of
fixed capital and therefore a relative under-production
of circulating capital.

Since fixed capital, like circulating, consists of
commodities, it is quite ridiculous that the same economists
who admit the over-production of fixed capital, deny
the over-production of commodities.

5. Crises arising from disturbances in
the first phase of reproduction: that is to say,
interrupted conversion of commodities into money or
interruption of sale. In the case of crises of
the first sort [which result from the rise in the price of
raw materials] the crisis arises from interruptions in the
flowing back of the elements of productive
capital. |XIV-861a||

### [12. Contradictions Between Production and Consumption under Conditions of Capitalism. Over-production of the Principal Consumer Goods Becomes General Over-production]

||XIII-716| Before embarking
on an investigation of the new forms of crisis, we shall
resume our consideration of Ricardo and the above
example. |

| So long as the owner
of the weaving-mill reproduces and accumulates, his workers,
too, purchase a part of his product, they spend a part of
their wages on calico. Because he produces, they have
the means to purchase a part of his product and thus to some
extent give him the means to sell it. The worker can
only buy—he can represent a demand only
for—commodities which enter into individual
consumption, for he does not himself turn his labour to
account nor does he himself possess the means to do
so—the instruments of labour and materials of
labour. This already, therefore, excludes the majority
of producers, the workers themselves, as consumers, buyers
[of many commodities], where capitalist production
prevails. They buy no raw material and no instruments
of labour; they buy only means of subsistence, commodities
which enter directly into individual consumption.
Hence nothing is more ridiculous than to speak of the
identity of producers and consumers, since for an
extraordinarily large number of branches of
production—all those that do not supply articles for
direct consumption—the mass of those who participate
in production are entirely excluded from the purchase
of their own products. They are never direct
consumers or buyers of this large part of their own
products, although they pay a portion of the value of these
products in the articles of consumption that they buy.
This also shows the ambiguity of the word consumer and how
wrong it is to identify it with the word buyer. As
regards industrial consumption, it is precisely the workers
who consume machinery and raw material, using them up in the
labour-process. But they do not use them up for
themselves and they are therefore not buyers of
them. Machinery and raw material are for them neither
use-values nor commodities, but objective conditions of a
process of which they themselves are the subjective
conditions.

| It may, however, be
said that their’ employer represents them in the
purchase of means of production and raw materials. But
he represents them under different conditions from those in
which they would represent themselves on the market.
He must sell a quantity of commodities which represents
surplus-value, unpaid labour. They [the workers] would
only have to sell the quantity of commodities which would
reproduce the value advanced in production—the value
of the means of production, the raw materials and the
wages. He therefore requires a wider market than they
would require. It depends, moreover, on him and not on
them, whether he considers the conditions of the market
sufficiently favourable to begin reproduction.

They are therefore producers without being
consumers—even when no interruption of the
reproduction process takes place—in relation to all
articles which have to be consumed not individually but
industrially.

Thus nothing is more absurd as a means of denying crises,
than the assertion that the consumers (buyers) and producers
(sellers) are identical in capitalist production. They
are entirely distinct categories. In so far as the
reproduction process takes place, this identity can be
asserted only for one out of 3,000 producers, namely, the
capitalist. On the other hand, it is equally wrong to
say that the consumers are producers. The landlord
does not produce (rent), and yet he consumes. The same
applies to all monied interests.

The apologetic phrases used to deny crises are important
in so far as they always prove the opposite of what they are
meant to prove. In order to deny crises, they assert
unity where there is conflict and contradiction. They
are therefore important in so far as one can say they prove
that there would be no crises if the contradictions which
they have erased in their imagination, did not exist in
fact. But in reality crises exist because these
contradictions exist. Every reason which they put
forward against crisis is an exorcised contradiction, and,
therefore, a real contradiction, which can cause
crises. The desire to convince oneself of the
non-existence of contradictions, is at the same time the
expression of a pious wish that the contradictions, which
are really present, should not exist.

What the workers in fact produce, is surplus-value.
So long as they produce it, they are able to consume.
As soon as they cease [to produce it], their consumption
ceases, because their production ceases. But that they
are able to consume is by no means due to their having
produced an equivalent for their consumption. On the
contrary, as soon as they produce merely such an equivalent,
their consumption ceases, they have no equivalent to
consume. Their work is either stopped or curtailed, or
at all events their wages are reduced. In the latter
case—if the level of production remains the
same—they do not consume an equivalent of what they
produce. But they lack these means not because they do
not produce enough, but because they receive too little of
their product for themselves.

By reducing these relations simply to those of consumer
and producer, one leaves out of account that the
wage-labourer who produces and the capitalist who produces
are two producers of a completely different kind, quite
apart from the fact that some consumers do not produce at
all. Once again, a contradiction is denied, by
abstracting from a contradiction which really exists in
production. The mere relationship of wage-labourer and
capitalist implies:

1. that the majority of the producers (the workers)
are nonconsumers (non-buyers) of a very large part of their
product, namely, of the means of production and the raw
material;

2. that the majority of the producers, the workers,
can consume an equivalent for their product only so long as
they produce more than this equivalent, that is, so long as
they produce surplus-value or surplus-product. They
must always be over-producers, produce over and above
their needs, in order to be able to be consumers or buyers
within the | limits of
their needs.

As regards this class of producers, the unity between
production and consumption is, at any rate prima
facie, false.

When Ricardo says that the only limit to demand is
production itself, and that this is limited by capital, then
this means, in fact, when stripped of false assumptions,
nothing more than that capitalist production finds its
measure only in capital; in this context, however, the term
capital also includes the labour-power which is incorporated
in (bought by) capital as one of its conditions of
production. The question is whether capital as such is
also the limit for consumption. At any rate, it is so
in a negative sense, that is, more cannot be consumed than
is produced. But the question is, whether this applies
in a positive sense too, whether—on the basis of
capitalist production—as much can and must be consumed
as is produced. Ricardo’s proposition, when correctly
analysed, says the very opposite of what it is meant to
say—namely, that production takes place without regard
to the existing limits to consumption, but is limited only
by capital itself. And this is indeed characteristic
of this mode of production.

Thus according to the assumption, the market is glutted,
for instance with cotton cloth, so that part of it remains
unsold or all of it, or it can only be sold well below its
price. (For the time being, we shall call it
value, because while we are considering circulation
or the reproduction process, we are still concerned with
value and not yet with cost-price, even less with
market-price.)

It goes without saying that, in the whole of this
observation. it is not denied that too much may be
produced in individual spheres and therefore too
little in others; partial crises can thus arise from
disproportionate production (proportionate production
is, however, always only the result of disproportionate
production on the basis of competition) and a general form
of this disproportionate production may be over-production
of fixed capital, or on the other hand, over-production of
circulating capital.*
Just as it is a condition for the sale of commodities at
their value, that they contain only the socially necessary
labour-time, so it is for an entire sphere of production of
capital, that only the necessary part of the total
labour-time of society is used in the particular sphere,
only the labour-time which is required for the satisfaction
of social need (demand). If more is used, then, even
if each individual commodity only contains the necessary
labour-time, the total contains more than the socially
necessary labour-time; in the same way, although the
individual commodity has use-value, the total sum of
commodities loses some of its use-value under the conditions
assumed.

However, we are not speaking of crisis here in so far as
it arises from disproportionate production, that is to say,
the disproportion in the distribution of social labour
between the individual spheres of production. This can
only be dealt with in connection with the competition of
capitals. In that context it has already been stated
that the rise or fall of market-value which is caused by
this disproportion, results in the withdrawal of capital
from one branch of production and its transfer to another,
the migration of capital from one branch of production to
another. This equalisation itself however already
implies as a precondition the opposite of equalisation and
may therefore comprise crisis; the crisis itself may
be a form of equalisation. Ricardo etc. admit this
form of crisis.

When considering the production process we saw that the
whole aim of capitalist production is appropriation of the
greatest possible amount of surplus-labour, in other words,
the realisation of the greatest possible amount of immediate
labour-time with the given capital, be it through the
prolongation of the labour-day or the reduction of the
necessary labour-time, through the development of the
productive power of labour by means of cooperation, division
of labour, machinery etc., in short, large-scale production,
i.e., mass production. It is thus in the nature of
capitalist production, to produce without regard to the
limits of the market.

During the examination of reproduction, it is, in the
first place, assumed that the method of production remains
the same and it remains the same, moreover, for a period
while production expands. The volume of commodities
produced is increased in this case, because more capital is
employed and not because capital is employed more
productively. But the mere quantitative increase in
| capital at the same time
implies that its productive power grows. If its
quantitative increase is the result of the development of
productive power, then the latter in turn develops on the
assumption of a broader, extended capitalist basis.
Reciprocal interaction takes place in this case.
Reproduction on an extended basis, accumulation, even if
originally it appears only as a quantitative expansion of
production—the use of more capital under the same
conditions of production—at a certain point,
therefore, always represents also a qualitative expansion in
the form of greater productivity of the conditions under
which reproduction is carried out. Consequently the
volume of products increases not only in simple proportion
to the growth of capital in expanded
reproduction—accumulation.

Now let us return to our example of calico.

The stagnation in the market, which is glutted with
cotton cloth, hampers the reproduction process of the
weaver. This disturbance first affects his
workers. Thus they are now to a smaller extent, or not
at all, consumers of his commodity—cotton
cloth—and of other commodities which entered into
their consumption. It is true, that they need cotton
cloth, but they cannot buy it because they have not the
means, and they have not the means because they cannot
continue to produce and they cannot continue to produce
because too much has been produced, too much cotton cloth is
already on the market. Neither Ricardo’s advice
“to increase their production”, nor his
alternative “to produce something else” can help
them. They now form a part of the temporary surplus
population, of the surplus production of workers, in this
case of cotton producers, because there is a surplus
production of cotton fabrics on the market.

But apart from the workers who are directly employed by
the capital invested in cotton weaving, a large number of
other producers are hit by this interruption in the
reproduction process of cotton: spinners, cotton-growers,
engineers (producers of spindles, looms etc.), iron and coal
producers and so on. Reproduction in all these spheres
would also be impeded because the reproduction of cotton
cloth is a condition for their own reproduction. This
would happen even if they had not over-produced in
their own spheres, that is to say, had not produced beyond
the limit set and justified by the cotton industry when it
was working smoothly. All these industries have this
in common, that their revenue (wages and profit, in so far
as the latter is consumed as revenue and not accumulated) is
not consumed by them in their own product but in the product
of other spheres, which produce articles of consumption,
calico among others. Thus the consumption of and the
demand for calico fall just because there is too much of it
on the market. But this also applies to all other
commodities on which, as articles of consumption, the
revenue of these indirect producers of cotton is
spent. Their means for buying calico and other
articles of consumption shrink, contract, because there is
too much calico on the market. This also affects other
commodities (articles of consumption). They are now,
all of a sudden, relatively over-produced, because
the means with which to buy them and therefore the demand
for them, have contracted. Even if there has been no
over-production in these spheres, now they are
over-producing.

If over-production has taken place not only in cotton,
but also in linen, silk and woollen fabrics, then it can be
understood how over-production in these few, but leading
articles, calls forth a more or less general
(relative) over-production on the whole market.
On the one hand there is a superabundance of all the means
of reproduction and a superabundance of all kinds of unsold
commodities on the market. On the other hand bankrupt
capitalists and destitute, starving workers.

This however is a two-edged argument. If it is
easily understood how over-production of some leading
articles of consumption must bring in its wake the
phenomenon of a more or less general over-production, it is
by no means clear how over-production of these articles can
arise. For the phenomenon of general over-production
is derived from the interdependence not only of the workers
directly employed in these industries, but of all branches
of industries which produce the elements of their products,
the various stages of their constant capital. In the
latter branches of industry, over-production is an
effect. But whence does it come in the former?
For the latter [branches of industry] continue to produce so
long as the former go on producing, and along with this
continued production, a general growth in revenue, and
therefore in their own consumption, seems assured.

### [13. The Expansion of the Market Does Not Keep in Step with the Expansion of Production. The Ricardian Conception That an Unlimited Expansion of Consumption and of the Internal Market Is Possible]

| If one were to answer
the question by pointing out that the constantly expanding
production <it expands annually for two reasons; firstly
because the capital invested in production is continually
growing; secondly because the capital is constantly used
more productively; in the course of reproduction and
accumulation, small improvements are continuously building
up, which eventually alter the whole level of
production. There is a piling up of improvements, a
cumulative development of productive powers.> requires
a constantly expanding market and that production expands
more rapidly than the market, then one would merely have
used different terms to express the phenomenon which has to
be explained—concrete terms instead of abstract
terms. The market expands more slowly than production;
or in the cycle through which capital passes during its
reproduction—a cycle in which it is not simply
reproduced but reproduced on an extended scale, in which it
describes not a circle but a spiral—there comes a
moment at which the market manifests itself as too narrow
for production. This occurs at the end of the
cycle. But it merely means: the market is
glutted. Over-production is manifest. If the
expansion of the market had kept pace with the expansion of
production there would be no glut of the market, no
over-production.

However, the mere admission that the market must expand
with production, is, on the other hand, again an admission
of the possibility of over-production, for the market is
limited externally in the geographical sense, the internal
market is limited as compared with a market that is both
internal and external, the latter in turn is limited as
compared with the world market, which however is, in turn,
limited at each moment of time, [though] in itself capable
of expansion. The admission that the market must
expand if there is to be no over-production, is therefore
also an admission that there can be over-production.
For it is then possible—since market and production
are two independent factors—that the expansion of one
does not correspond with the expansion of the other;
that the limits of the market are not extended rapidly
enough for production, or that new markets— new
extensions of the market—may be rapidly outpaced by
production, so that the expanded market becomes just as much
a barrier as the narrower market was formerly.

Ricardo is therefore consistent in denying the necessity
of an expansion of the market simultaneously with the
expansion of production and growth of capital. All the
available capital in a country can also be advantageously
employed in that country. Hence he polemises against
Adam Smith, who on the one hand put forward his
(Ricardo’s) view and, with his usual rational instinct,
contradicted it as well. Adam Smith did not yet know
the phenomenon of over-production, and crises resulting from
over-production. What he knew were only credit and
money crises, which automatically appear, along with the
credit and banking system. In fact he sees in the
accumulation of capital an unqualified increase in the
general wealth and well-being of the nation. On the
other hand, he regards the mere fact that the internal
market develops into an external, colonial and world market,
as proof of a so-to-speak relative (potential)
over-production in the internal market. It is worth
quoting Ricardo’s polemic against him at this point:

“When merchants engage their capitals
in foreign trade, or in the carrying trade, it is always
from choice, and never from necessity: it is because
in that trade their profits will be somewhat greater than in
the home trade.

“Adam Smith has justly observed
‘that the desire of food is limited in every
man by the narrow capacity of the human
stomach’,”

<Adam Smith is very much mistaken here, for he
excludes the luxury products of agriculture>

“ ‘but the desire of the
conveniences and ornaments of building, dress, equipage, and
household furniture, seems to have no limit or certain
boundary.”

“Nature” (Ricardo
continues) “then has necessarily limited the amount
of capital which can at any […] time be
profitably engaged in agriculture,”

<Is that why there are nations which export
agricultural products? As if it were impossible,
despite nature, to sink all possible capital into
agriculture in order to produce, in England for example,
melons, figs, grapes etc., flowers etc., and birds and game
etc. (See, for example, the capital that the Romans
put into artificial fish culture alone.) And as if the
raw materials of industry were not produced by means of
agricultural capital.>

“but she has placed no
limits” (as if nature had anything to do
with the matter) “to the amount of capital that
may be employed in procuring ‘the conveniences and
ornaments’ of life. To procure these
gratifications in the greatest abundance is the
object in view, and it is only because foreign trade, or
the carrying trade, will accomplish it better, that men
engage in them in preference to manufacturing the
commodities required, or a substitute for them, at
home. If, however, from peculiar circumstances, we
were precluded from engaging capital in foreign trade, or in
the carrying trade, we should, though with less advantage,
employ it at home; and while there is no limit
to the desire of ‘conveniences, ornaments of building,
dress, equipage, | and
household furniture,’ there can be no limit to the
capital that may be employed in procuring them, except
that which bounds our power to maintain the workmen who
are to produce them.

“Adam Smith, however, speaks of the
carrying trade as one, not of choice, but of necessity; as
if the capital engaged in it would be inert if not so
employed, as if the capital in the home trade
could overflow, if not confined to a limited
amount. He says, ‘when the capital stock of any
country is increased to such a degree, that it cannot be
all employed in supplying the consumption, and
supporting the productive labour of that particular
country’,” <this passage is printed in
italics by Ricardo himself> “ ‘the surplus
part of it naturally disgorges itself into the carrying
trade, and is employed in performing the same offices to
other countries’.

“But could not this portion of the
productive labour of Great Britain be employed in preparing
some other sort of goods, with which something more in
demand at home might be purchased? And if it could
not, might we not employ this productive labour, though with
less advantage, in making those goods in demand at home, or
at least some substitute for them? If we wanted
velvets, might we not attempt to make velvets; and if we
could not succeed, might we not make more cloth, or some
other object desirable to us?

“We manufacture commodities, and with
them buy goods abroad, because we can obtain a greater
quantity” <the qualitative difference does not
exist!> “than we could make at home. Deprive
us of this trade, and we immediately manufacture again for
ourselves. But this opinion of Adam Smith is at
variance with all his general doctrines on this
subject.” <Ricardo now cites Smith:> “ If
a foreign country can supply us with a commodity cheaper
than we ourselves can make it, better buy it of them with
same part of the produce of our own industry, employed in a
way in which we have some advantage. The general
industry of the country being always in proportion to the
capital which employs it’,” <in very
different proportion> (this sentence too is emphasised by
Ricardo) “ ‘will not thereby be diminished, but
only left to find out the way in which it can be employed
with the greatest advantage.’

“Again. ‘Those,
therefore, who have the command of more food than they
themselves can consume, are always willing to exchange
the surplus, or, what is the same thing, the price of
it, for gratifications of another kind. What is over
and above satisfying the limited desire, is given for the
amusement of those desires which cannot be satisfied, but
seem to be altogether endless. The poor, in order
to obtain food, exert themselves to gratify those fancies of
the rich; and to obtain it more certainly, they vie with one
another in the cheapness and perfection of their work.
The number of workmen increases with the increasing quantity
of food, or with the growing improvement and cultivation of
the lands; and as the nature of their business admits of the
utmost subdivisions of labours, the quantity of materials
which they can work up increases in a much greater
proportion than their numbers. Hence arises a demand
for every sort of material which human invention can employ,
either usefully or ornamentally, in building, dress,
equipage, or household furniture; for the fossils and
minerals contained in the bowels of the earth, the precious
metals, and the precious stones.’

“It follows then from these
admissions, that there is no limit to demand—
no limit to the employment of capital while it yields any
profit, and that however abundant capital may
become, there is no other adequate reason for a fall of
profit but a rise of wages, and further it may be added,
that the only adequate and permanent cause for the rise of
wages is the increasing difficulty of providing food and
necessaries for the increasing number of workmen”
(l.c., pp. 344-48).

### [14. The Contradiction Between the Impetuous Development of the Productive Powers and the Limitations of Consumption Leads to Over-production. The Theory of the Impossibility of General Over-production Is Essentially Apologetic in Tendency]

The word over-production in itself leads to
error. So long as the most urgent needs of a large
part of society are not satisfied, or only the most
immediate needs are satisfied, there can of course be
absolutely no talk of an over-production of
products— in the sense that the amount of products
is excessive in relation to the need for them. On the
contrary, it must be said that on the basis of capitalist
production, there is constant under-production in
this sense. The limits to production are set by the
profit of the capitalist and in no way by the needs of the
producers. But over-production of products and
over-production of commodities are two entirely
different things. If Ricardo thinks that the
commodity form makes no difference to the product,
and furthermore, that commodity circulation differs
only formally from barter, that in this context the
exchange-value is only a fleeting form of the exchange of
things, and that money is therefore merely a formal means of
circulation—then this in fact is in line with his
presupposition that the bourgeois mode of production is the
absolute mode of production, hence it is a mode of
production without any definite specific characteristics,
its distinctive traits are merely formal. He cannot
therefore admit that the bourgeois mode of production
contains within itself a barrier to the free development of
the productive forces, a barrier which comes to the surface
in crises and, in particular, in
over-production—the basic phenomenon in
crises.

| Ricardo saw from the
passages of Adam Smith, which he quotes, approves, and
therefore also repeats, that the limitless
“desire” for all kinds of use-values is always
satisfied on the basis of a state of affairs in which the
mass of producers remains more or less restricted to
necessities—”food” and other
“necessaries”—that consequently this great
majority of producers remains more or less excluded from the
consumption of wealth— in so far as wealth goes beyond
the bounds of the necessary means of subsistence.

This was indeed also the case, and to an even higher
degree, in the ancient mode of production which depended on
slavery. But the ancients never thought of
transforming the surplus-product into capital. Or at
least only to a very limited extent. (The fact that
the hoarding of treasure in the narrow sense was widespread
among them shows how much surplus-product lay completely
idle.) They used a large part of the surplus-product
for unproductive expenditure on art, religious works and
public works. Still less was their production directed
to the release and development of the material productive
forces—division of labour, machinery, the application
of the powers of nature and science to private
production. In fact, by and large, they never went
beyond handicraft labour. The wealth which they
produced for private consumption was therefore relatively
small and only appears great because it was amassed in the
hands of a few persons, who, incidentally, did not know what
to do with it. Although, therefore, there was no
over-production among the ancients, there was
over-consumption by the rich, which in the final
periods of Rome and Greece turned into mad
extravagance. The few trading peoples among them lived
partly at the expense of all these essentially poor
nations. It is the unconditional development of the
productive forces and therefore mass production on the basis
of a mass of producers who are confined within the bounds of
the necessary means of subsistence on the one hand and, on
the other, the barrier set up by the capitalists’ profit,
which [forms] the basis of modern over-production.

All the objections which Ricardo and others raise against
overproduction etc. rest on the fact that they regard
bourgeois production either as a mode of production in which
no distinction exists between purchase and sale—direct
barter—or as social production, implying that
society, as if according to a plan, distributes its means of
production and productive forces in the degree and measure
which is required for the fulfilment of the various social
needs, so that each sphere of production receives the
quota of social capital required to satisfy the
corresponding need. This fiction arises entirely from
the inability to grasp the specific form of bourgeois
production and this inability in turn arises from the
obsession that bourgeois production is production as such,
just like a man who believes in a particular religion and
sees it as the religion, and everything outside of it
only as false religions.

On the contrary, the question that has to be answered is:
since, on the basis of capitalist production, everyone works
for himself and a particular labour must at the same time
appear as its opposite, as abstract general labour and in
this form as social labour—how is it possible to
achieve the necessary balance and interdependence of the
various spheres of production, their dimensions and the
proportions between them, except through the constant
neutralisation of a constant disharmony? This is
admitted by those who speak of adjustments through
competition, for these adjustments always presuppose that
there is something to adjust, and therefore that harmony is
always only a result of the movement which neutralises the
existing disharmony.

That is why Ricardo admits that a glut of certain
commodities is possible. What is supposed to be
impossible is only a simultaneous general glut of the
market. The possibility of overproduction in any
particular sphere of production is therefore not
denied. It is the simultaneity of this
phenomenon for all spheres of production which is
said to be impossible and therefore makes impossible
[general] over-production and thus a general glut of the
market, (This expression must always be taken cum grano
salis, since in times of general over-production, the
over-production in some spheres is always only the
result, the consequence, of over-production in
the leading articles of commerce; [it is] always only
relative, i.e., over-production because
over-production exists in other spheres.)

Apologetics turns this into its very opposite.
[There is only] over-production in the leading articles of
commerce, in which alone, active over-production shows
itself—these are on the whole articles which can only
be produced on a mass scale and by factory methods (also in
agriculture), because over-production exists in those
articles in which relative or passive overproduction
manifests itself. According to this, over-production
only exists because over-production is not universal.
The relativity of over-production—that actual
over-production in a few spheres calls forth over-production
in others—is expressed in this way: There is no
universal over-production, because if overproduction
were universal, all spheres of production would retain the
same relation to one another; therefore universal
overproduction is proportional production which excludes
over-production. And this is supposed to be an
argument against universal over-production. | For, since universal
over-production in the absolute sense would not be
over-production but only a greater than usual development of
the productive forces in all spheres of production, it is
alleged that actual over-production, which is
precisely not this non-existent, self-abrogating
overproduction, does not exist—although it only
exists because it is not this.

If this miserable sophistry is more closely examined, it
amounts to this: Suppose, that there is over-production in
iron, cotton goods, linen, silk, woollen cloth etc.; then it
cannot be said, for example, that too little coal has been
produced and that this is the reason for the above
over-production. For that over-production of iron
etc. involves an exactly similar over-production of coal,
as, say, the over-production of woven cloth does of
yarn. <Over-production of yarn as compared with
cloth, iron as compared with machinery, etc. could
occur. This would always be a relative over-production
of constant capital.> There cannot, therefore, be any
question of the under-production of those articles whose
over-production is implied because they enter as an element,
raw material, auxiliary material or means of production,
into those articles (the “particular commodity of
which too much may be produced, of which there may be such a
glut in the market, as not to repay the capital expended on
it” [l.c., pp. 341-42], whose positive over-production
is precisely the fact to be explained. Rather, it is a
question of other articles which belong directly to [other]
spheres of production and [can] neither [be] subsumed under
the leading articles of commerce which, according to the
assumption, have been over-produced, nor be attributed to
spheres in which, because they supply the intermediate
product for the leading articles of commerce, production
must have reached at least the same level as in the final
phases of the product—although there is nothing to
prevent production in those spheres from having gone even
further ahead thus causing an over-production within the
over-production. For example, although sufficient coal
must have been produced in order to keep going all those
industries into which coal enters as necessary condition of
production, and therefore the over-production of coal
is implied in the over-production of iron, yarn
etc. (even if coal was produced only in proportion to the
production of iron and yarn [etc.]), it is also
possible that more coal was produced than was required even
for the over-production of iron, yarn etc. This is not
only possible, but very probable. For the
production of coal and yarn and of all other spheres of
production which produce only the conditions or earlier
phases of a product to be completed in another sphere, is
governed not by the immediate demand, by the immediate
production or reproduction, but by the degree, measure,
proportion in which these are expanding. And it is
self-evident that in this calculation, the target may well
be overshot. Thus not enough has been produced of
other articles such as, for example, pianos, precious stones
etc., they have been under-produced. <There
are, however, also cases where the over-production of
non-leading articles is not the result of overproduction,
but where, on the contrary, under-production is the
cause of over-production, as for instance when there has
been a failure in the grain crop or the cotton crop.>

The absurdity of this statement becomes particularly
marked if it is applied to the international scene, as it
has been by Say and others after him. For instance,
that England has not over-produced but Italy has
under-produced. There would have been no
over-production, if in the first place Italy had enough
capital to replace the English capital exported to Italy in
the form of commodities; and secondly if Italy had invested
this capital in such a way that it produced those particular
articles which are required by English capital—partly
in order to replace itself and partly in order to replace
the revenue yielded by it. Thus the fact of the
actually existing over-production in England—in
relation to the actual production in
Italy—would not have existed, but only the fact of
imaginary under-production in Italy; imaginary
because it | presupposes a
capital in Italy and a development of the productive forces
that do not exist there, and secondly because it makes the
equally utopian assumption, that this capital which does
not exist in Italy, has been employed in exactly the
way required to make English supply and Italian demand,
English and Italian production, complementary to each
other. In other words, this means nothing but: there
would be no overproduction, if demand and supply
corresponded to each other, if the capital were distributed
in such proportions in all spheres of production, that the
production of one article involved the consumption of the
other, and thus its own consumption. There would be no
over-production, if there were no over-production.
Since, however, capitalist production can allow itself free
rein only in certain spheres, under certain conditions,
there could be no capitalist production at all if it had to
develop simultaneously and evenly in all
spheres. Because absolute over-production takes place
in certain spheres, relative over-production occurs also in
the spheres where there has been no over-production.

This explanation of over-production in one field by
underproduction in another field therefore means merely that
if production were proportionate, there would be no
over-production. The same could be said if demand and
supply corresponded to each other, or if all spheres
provided equal opportunities for capitalist production and
its expansion—division of labour, machinery, export to
distant markets etc., mass production, i.e., if all
countries which traded with one another possessed the same
capacity for production (and indeed for different and
complementary production). Thus over-production takes
place because all these pious wishes are not
fulfilled. Or, in even more abstract form: There would
be no over-production in one place, if overproduction took
place to the same extent everywhere. But there is not
enough capital to over-produce so universally, and therefore
there is partial over-production.

Let us examine this fantasy more closely:

It is admitted that there can be over-production in
each particular industry. The only circumstance
which could prevent over production in all industries
simultaneously is, according to the assertions made, the
fact that commodity exchanges against commodity—i.e.,
recourse is taken to the supposed conditions of
barter. But this loop-hole is blocked by the very fact
that trade [under capitalist conditions] is not barter, and
that therefore the seller of a commodity is not necessarily
at the same time the buyer of another. This whole
subterfuge then rests on abstracting from money and
from the fact that we are not concerned with the exchange of
products, but with the circulation of commodities, an
essential part of which is the separation of purchase and
sale.

<The circulation of capital contains within itself
the possibilities of interruptions. In the
reconversion of money into its conditions of production, for
example, it is not only a question of transforming money
into the same use-values (in kind), but for the repetition
of the reproduction process [it is] essential that these
use-values can again be obtained at their old value (at a
lower value would of course be even better). A very
significant part of these elements of reproduction, which
consists of raw materials, can however rise in price for two
reasons. Firstly, if the instruments of
production increase more rapidly than the amount of raw
materials that can be provided at the given time.
Secondly, as a result of the variable character of
the harvests. That is why weather conditions, as Tooke
rightly observes, play such an important part in modern
industry. (The same applies to the means of
subsistence in relation to wages.) The reconversion of
money into commodity can thus come up against difficulties
and can create the possibilities of crisis, just as well as
can the conversion of commodity into money. When one
examines simple circulation—not the circulation of
capital—these difficulties do not arise.>
(There are, besides, a large number of other factors,
conditions, possibilities of crises, which can only be
examined when considering the concrete conditions,
particularly the competition of capitals and credit.)

| The
over-production of commodities is denied but the
over-production of capital is admitted. Capital
itself however consists of commodities or, in so far as it
consists of money, it must be reconverted into commodities
of one kind or another, in order to be able to function as
capital. What then does overproduction of
capital mean? Over-production of value destined to
produce surplus-value or, if one considers the material
content, over-production of commodities destined for
reproduction—that is, reproduction on too large a
scale, which is the same as over-production pure and
simple.

Defined more closely, this means nothing more than that
too much has been produced for the purpose of
enrichment, or that too great a part of the product
is intended not for consumption as revenue, but for
making more money (for accumulation): not to satisfy the
personal needs of its owner, but to give him money, abstract
social riches and capital, more power over the labour of
others, i.e., to increase this power. This is what one
side says. (Ricardo denies it.) And the other
side, how does it explain the over-production of
commodities? By saying that production is not
sufficiently diversified, that certain articles of
consumption have not been produced in sufficiently large
quantities. That it is not a matter of industrial
consumption is obvious, for the manufacturer who
over-produces linen, thereby necessarily increases his
demand for yarn, machinery, labour etc. It is
therefore a question of personal consumption. Too much
linen has been produced, but perhaps too few oranges.
Previously the existence of money was denied, in order to
show [that there was no] separation between sale and
purchase. Here the existence of capital is denied, in
order to transform the capitalists into people who carry out
the simple operation C—M—C and who produce for
individual consumption and not as capitalists with
the aim of enrichment, i.e., the reconversion of part of the
surplus-value into capital. But the statement that
there is too much capital, after all means merely
that too little is consumed as revenue, and that more
cannot be consumed in the given conditions.
(Sismondi.) Why does the producer of linen
demand from the producer of corn, that he should consume
more linen, or the latter demand that the linen manufacturer
should consume more corn? Why does the man who
produces linen not himself convert a larger part of his
revenue (surplus-value) into linen and the farmer into
corn? So far as each individual is concerned, it will
be admitted that his desire for capitalisation (apart from
the limits of his needs) prevents him from doing this.
But for all of them collectively, this is not admitted.

(We are entirely leaving out of account here that element
of crises which arises from the fact that commodities are
reproduced more cheaply than they were produced. Hence
the depreciation of the commodities on the market.)

In world market crises, all the contradictions of
bourgeois production erupt collectively; in particular
crises (particular in their content and in extent)
the eruptions are only sporadical, isolated and
one-sided.

Over-production is specifically conditioned by the
general law of the production of capital: to produce to the
limit set by the productive forces, that is to say, to
exploit the maximum amount of labour with the given amount
of capital, without any consideration for the actual limits
of the market or the needs backed by the ability to pay; and
this is carried out through continuous expansion of
reproduction and accumulation, and therefore constant
reconversion of revenue into capital, while | on the other hand, the mass of
the producers remain tied to the average level of needs, and
must remain tied to it according to the nature of capitalist
production.

### [15. Ricardo’s Views on the Different Types of Accumulation of Capital and on the Economic Consequences of Accumulation]

In Chapter VIII, “On Taxes”, Ricardo
says:

“When the annual productions of a
country more than replace its annual consumption, it is said
to increase its capital; when its annual consumption is not
at least replaced by its annual production, it is said to
diminish its capital. Capital may therefore be
increased by an increased production, or by a diminished
unproductive consumption” (l.c., pp. 162-63).

By “unproductive consumption” Ricardo means
here, as he says in the note on p. 163, consumption by
unproductive workers, “…by those who do not
reproduce another value”. By increase in the
annual production, therefore, is meant increase in the
annual industrial consumption. This can be increased
by the direct expansion of it, while non-industrial
consumption remains constant or even grows, or by reducing
non-industrial consumption.

‘When we say,” writes Ricardo in the same
note, “that revenue is saved, and added to capital,
what we mean is, that the portion of revenue, so said to be
added to capital, is consumed by productive instead of
unproductive labourers” [l.c., p. 163, note].

I have shown that the conversion of revenue into capital
is by no means synonymous with the conversion of revenue
into variable capital or with its expenditure on
wages. Ricardo however thinks so. In the same
note he says:

“If the price of labour should rise
so high, that notwithstanding the increase of capital, no
more could be employed, I should say that such increase of
capital would be still unproductively consumed”
[l.c., p. 163, note].

It is therefore not the consumption of revenue by
productive workers, which makes this consumption
“productive”, but its consumption by workers who
produce surplus-value. According to this, capital
increases only when it commands more labour.

Chapter VII “On Foreign Trade”.

“There are two ways in which
capital may be accumulated: it may be saved either in
consequence of increased revenue, or of diminished
consumption. If my profits are raised from
£ 1,000 to £ 1,200 while my expenditure
continues the same, I accumulate annually £ 200
more than I did before, If I save £ 200 out of my
expenditure, while my profits continue the same, the
same effect will be produced; £ 200 per annum will be
added to my capital” (l.c., p. 135).

“If, by the introduction of
machinery, the generality of the commodities on which
revenue was expended fell 20 per cent in value, I should
be enabled to save as effectually as if my revenue had been
raised 20 per cent; but in one case the rate of
profits is stationary, in the other it is raised 20 per
cent.—If, by the introduction of cheap foreign goods,
I can save 20 per cent from my expenditure, the effect will
be precisely the same as if machinery had lowered the
expense of their production, but profits would not be
raised” (l.c., p. 136).

(That is to say, they would not be raised if the cheaper
goods entered neither into the variable nor the constant
capital.)

Thus with the same expenditure of revenue
accumulation is the result of the rise in the rate of profit
<but accumulation depends not only on the rate of profit
but on the amount of profit>; with a constant rate of
profit accumulation is the result of decreasing
expenditure, which is however assumed by Ricardo to occur
because of the reduced price (whether this is brought about
by machinery or foreign trade) of “commodities on
which revenue was expended”.

Chapter XX “Value and Riches, their Distinctive
Properties”.

“The wealth” (Ricardo takes
this to mean use-values) “of a country may be
increased in two ways: it may be increased by employing a
greater portion of revenue in the maintenance of
productive labour,—which will not only add to the
quantity, but to the value of the mass of
commodities; or it may be increased, without employing
any additional quantity of labour, by making the same
quantity more productive,—which will add to the
abundance, but not to the value of commodities.

“In the first case, a country would
not only become rich, but the value of its riches would
increase. It would become rich by parsimony; by
diminishing its expenditure on objects of luxury and
enjoyment; and employing those savings in
reproduction.

| “In the second
case, there will not necessarily be either any diminished
expenditure on luxuries and enjoyments, or any
increased quantity of productive labour employed, but
with the same labour more would be produced; wealth
would increase, but not value. Of these two modes of
increasing wealth, the last must be preferred, since it
produces the same effect without the privation and
diminution of enjoyments, which can never fail to accompany
the first mode. Capital is that part of the wealth
of a country which is employed with a view to future
production, and may be increased in the same manner as
wealth. An additional capital will be
equally efficacious in the production of future wealth,
whether it be obtained from improvements in skill and
machinery, or from using more revenue
reproductively; for wealth always depends on the
quantity of commodities produced, without any regard to the
facility with which the instruments employed in production
may have been procured. A certain quantity of clothes
and provisions will maintain and employ the same number of
men, and will therefore procure the same quantity of work to
be done, whether they be produced by the labour of 100 or
200 men; but they will be of twice the value if 200 have
been employed on their production” (l.c.,
pp. 327-28).

Ricardo’s first proposition was:

Accumulation grows, if the rate of profit rises, while
expenditure remains the same

or when the rate of profit remains the same, if
expenditure (in terms of value) decreases, because the
commodities on which the revenue is expended become
cheaper.

Now he puts forward another antithetical proposition.

Accumulation grows, capital is accumulated in amount and
value, if a larger part of the revenue is withdrawn from
individual consumption and directed to industrial
consumption, if more productive labour is set in motion with
the portion of revenue thus saved. In this case
accumulation is brought about by parsimony.

Or expenditure remains the same, and no additional
productive labour is employed; but the same labour produces
more, its productive power is raised. The elements
which make up the productive capital, raw materials,
machinery etc. <previously it was the commodities upon
which revenue is expended; now it is the commodities
employed as means of production> are produced with the
same labour in greater quantities, better and therefore
cheaper. In this case, accumulation depends neither on
a rising rate of profit, nor on a greater portion of revenue
being converted into capital as a result of parsimony, nor
on a smaller portion of the revenue being spent
unproductively as a result of a reduction in the price of
those commodities on which revenue is expended. It
depends here on labour becoming more productive in the
spheres of production which produce the elements of capital
itself, thus lowering the price of the commodities which
enter into the production process as raw materials,
instruments etc.

If the productive power of labour has been increased
through greater production of fixed capital in proportion to
variable capital, then not only the amount, but also the
value of reproduction will rise, since a part of the
value of the fixed capital enters into the annual
reproduction. This can occur simultaneously with the
growth of the population and with an increase in the number
of workers employed, although the number of workers steadily
declines relatively, in proportion to the constant
capital which they set in motion. There is therefore a
growth, not only of wealth, but of value, and a larger
quantity of living labour is set in motion, although the
labour has become more productive and the quantity of labour
in proportion to the quantity of commodities produced, has
decreased. Finally, variable and constant capital can
grow in equal degree with the natural, annual increase in
population while the productivity of labour remains the
same. In this case, too, capital will accumulate in
volume and in value. These last points are all
disregarded by Ricardo.

In the same chapter Ricardo says:

“The labour of a million men in
manufactures, will always produce the same value, but will
not always produce the same riches”.

(This is quite wrong. The value of the product of a
million men does not depend solely on their labour but also
on the value of the capital with which they work; it will
thus vary considerably, according to the amount of the
already produced productive forces with which they
work.)

“By the invention of machinery, by
improvements in skill, by a better division of labour, or by
the discovery of new markets, where more advantageous
exchanges may be made, a million of men may produce double,
or treble the amount of riches, of ‘necessaries,
conveniences, and amusements,’ in one state of
society, that they could produce in another, but they will
not on that account add any thing to value”

(they certainly will, since their past | labour enters into the new
reproduction to a much greater extent),

“for every thing rises or falls in
value, in proportion to the facility or difficulty of
producing it, or, in other words, in proportion to the
quantity of labour employed on its production.”

(Each individual commodity may become cheaper but the
value of the increased total mass of commodities [will]
rise.)

“Suppose with a given capital the
labour of a certain number of men produced 1,000 pair of
stockings, and that by inventions in machinery, the same
number of men can produce 2,000 pair, or that they can
continue to produce 1,000 pair, and can produce besides[b] 500 hats; then the
value of the 2,000 pair of stockings or of the 1,000 pair of
stockings, and 500 hats, will be neither more nor less than
that of the 1,000 pair of stockings before the introduction
of machinery; for they will be the produce of the same
quantity of labour.”

(N.B. provided the newly introduced machinery costs
nothing.)

“But the value of the general mass
of commodities will nevertheless be diminished; for,
although the value of the increased quantity produced, in
consequence of the improvement, will be the same exactly as
the value would have been of the less quantity that would
have been produced, had no improvement taken place, an
effect is also produced on the portion of goods still
unconsumed, which were manufactured previously to the
improvement; the value of those goods will be reduced,
inasmuch as they must fall to the level, quantity for
quantity, of the goods produced under all the advantages of
the improvement: and the society will, notwithstanding the
increased quantity of commodities, notwithstanding its
augmented riches, and its augmented means of enjoyment,
have a less amount of value. By constantly
increasing the facility of production, we constantly
diminish the value of some of the commodities before
produced, though by the same means we not only add to
the national riches, but also to the power of future
production” (l.c., pp. 320-22).

Ricardo says here that the continuous development of the
productive forces diminishes the value of the commodities
produced under less favourable conditions, whether they are
still on the market, or functioning as capital in the
production process. But, although the value of one
part of the commodities will be reduced, it does not by any
means follow from this that “the value of the general
mass of commodities will […] be
diminished”. This would be the only effect if,
firstly, the value of the machinery and commodities that
have been newly added as a result of the improvements, is
smaller than the loss in value suffered by previously
existing goods of the same kind; secondly, if one leaves out
of account the fact that with the development of the
productive forces, the number of spheres of production is
also steadily increasing, thus creating possibilities for
capital investment which previously did not exist at
all. Production not only becomes cheaper in the course
of the development, but it is also diversified.

Chapter IX, “Taxes on Raw
Produce”.

“With respect to the third objection
against taxes on raw produce, namely, that the raising
wages, and lowering profits, is a discouragement to
accumulation, and acts in the same way as a natural poverty
of soil; I have endeavoured to shew in another part of this
work that savings may be as effectually made from
expenditure as from production; from a reduction in the
value of commodities, as from a rise in the rate of
profits. By increasing my profits from £
1,000 to £ 1,200, whilst prices continue the
same, my power of increasing my capital by savings is
increased, but it is not increased so much as it would be if
my profits continued as before, whilst commodities
were so lowered in price, that £ 800 would procure[c] me as much as £
1,000 purchased before” (l.c., pp. 183-84).

The total value of the product (or rather that part of
the product which is divided between capitalist and worker)
can decrease, without causing a fall in the net income, in
terms of the mass of value it represents. (It may even
rise proportionally.) This is dealt with in

Chapter XXXII, “Mr. Malthus’s Opinions on
Rent”.

“The whole argument however of
Mr. Malthus, is built on an infirm basis: it supposes,
because the gross income of the country is
diminished, that, therefore, the net income must also be
diminished, in the same proportion. It has been one of
the objects of his work to shew, that with every fall in the
real value of necessaries, the wages of labour would fall,
and that the profits of stock would rise—in other
words, that of any given annual value a less portion would
be paid to the labouring class, and a larger portion to
those whose funds employed this class. Suppose the
value of the commodities produced in a particular
manufacture to be £ 1,000, and to be divided between
the master and his labourers, in the proportion of £
800 to labourers, and £ 200 to the master; | if the value of these
commodities should fall to £ 900, and £100 be
saved from the wages of labour, in consequence of the fall
of necessaries, the net income of the masters would be in no
degree impaired, and, therefore, he could with just as much
facility pay the same amount of taxes, after, as before the
reduction of price” (l.c., pp. 511-12).

Chapter V, “On Wages”.

“Notwithstanding the tendency of
wages to conform to their natural rate, their market rate
may, in an improving society, for an indefinite period, be
constantly above it; for no sooner may the impulse, which an
increased capital gives to a new demand for labour be
obeyed, than another increase of capital may produce the
same effect; and thus, if the increase of capital be gradual
and constant, the demand for labour may give a continued
stimulus to an increase of people” (l.c., p. 88).

From the capitalist standpoint, everything is seen upside
down. The number of the labouring population and the
degree of the productivity of labour determine both the
reproduction of capital and the reproduction of the
population. Here, on the contrary, it appears that
capital determines [the size] of the population.

Chapter IX, “Taxes on Raw
Produce”.

“An accumulation of capital naturally
produces an increased competition among the employers of
labour, and a consequent rise in its price” (l.c.,
p. 178).

This depends on the proportion in which the various
component parts of capital grow as a result of
accumulation. Capital can be accumulated and the
demand for labour can decrease absolutely or relatively.

According to Ricardo’s theory of rent, the rate of profit
has a tendency to fall, as a result of the accumulation of
capital and the growth of the population, because the
necessary means of subsistence rise in value, or agriculture
becomes less productive. Consequently accumulation has
the tendency to check accumulation, and the law of the
falling rate of profit—since agriculture becomes
relatively less productive as industry develops—hangs
ominously over bourgeois production. On the other
hand, Adam Smith regarded the falling rate of profit with
satisfaction. Holland is his model. It compels
most capitalists, except the largest ones, to employ their
capital in industry, instead of living on interest and is
thus a spur to production. The dread of this
pernicious tendency assumes tragic-comic forms among
Ricardo’s disciples.

Let us here compare the passages in which Ricardo refers
to this subject:

Chapter V, “On Wages”.

“In different stages of society, the
accumulation of capital, or of the means of employing
labour, is more or less rapid, and must in all cases
depend on the productive powers of labour. The
productive powers of labour are generally greatest when
there is an abundance of fertile land: at such periods
accumulation is often so rapid, that labourers cannot be
supplied with the same rapidity as capital” (l.c.,
p. 92).

“It has been calculated, that under
favourable circumstances population may be doubled in
twenty-five years; but under the same favourable
circum-stances, the whole capital of a country might
possibly be doubled in a shorter period. In that case,
wages during the whole period would have a
tendency to rise, because the demand for labour
would increase still faster than the supply.

“In new settlements, where the arts
and knowledge of countries far advanced in refinement are
introduced, it is probable that capital has a tendency to
increase faster than mankind: and if the deficiency of
labourers were not supplied by more populous countries, this
tendency would very much raise the price of labour. In
proportion as these countries become populous, and land of a
worse quality is taken into cultivation, the tendency to an
increase of capital diminishes; for the surplus produce
remaining, after satisfying the wants of the existing
population, must necessarily be in proportion to the
facility of production, viz., to the smaller number of
persons employed in production. Although, then, it
is probable, that under the most favourable circumstances,
the power of production is still greater than that of
population, it will not long continue so; for the land being
limited in quantity, and differing in quality, with every
increased portion of capital employed on it, there will be a
decreased rate of production, whilst the power of
population continues always the same” (l.c.,
pp. 92-93).

(The latter statement is a parson’s fabrication.
The power of population decreases with the power of
production.)

First it should be noted here that Ricardo admits that
“the accumulation of capital … must in all
cases depend on the productive powers of labour”,
labour therefore is primary and not capital.

Further, according to Ricardo, it would appear that in
countries which have been settled for a long time and are
industrially developed, more people are engaged in
agriculture than are in the colonies—while in fact it
is the other way about. In proportion to the output
| , England, for example,
uses fewer agricultural labourers than any other country,
new or old, although a larger section of the
non-agricultural population participates indirectly in
agricultural production. But even this is by no means
equal to the proportion of the population directly engaged
in agriculture in the less developed countries.
Supposing even that in England grain is dearer, and the
costs of production are higher. More capital is
employed. More past labour, even though less living
labour is used in agricultural production. But the
reproduction of this capital, although its value is
reproduced in the product, costs less labour because of the
already existing technical basis of production.

Chapter VI, “On Profits”.

First, however, a few observations. [The amount of]
surplus-value, as we saw, depends not only on the rate of
surplus-value but on the number of workers simultaneously
employed, that is to say, on the size of the variable
capital.

Accumulation for its part is not directly determined by
the rate of surplus-value, but by the ratio of
surplus-value to the total capital outlay, that is, by the
rate of profit, and even more by the total amount of
profit. This, as we have seen, is for the total
capital of society identical with the aggregate amount of
surplus-value, but for individual capitals employed in the
different branches of production, it may differ considerably
from the amount of surplus-value produced by them. If
we consider the accumulation of capital as a whole, then
profit equals surplus-value and the rate of profit equals
surplus-value divided by capital or rather surplus-value
reckoned on a capital of £100.

If the rate of profit (per cent) is given, then the total
amount of profit depends on the size of the capital
advanced, and therefore accumulation too in so far as it is
determined by profit.

If the total sum of capital is given then the total
amount of profit depends on the rate of profit.

A small capital with a higher rate of profit may
therefore yield more profit than a larger capital with a
lower rate of profit.

Let us suppose:

1

Capital

Rate of Profit

Total Profit

£

per cent

£

100

10

10

100×2 = 200

10/2 or 5

10

100×3 = 300

10/2 or 5

15

100×11/2 = 150

5

71/2

2

100

10

10

2×100 = 200

10/(21/2) = 4

8

21/2×100 = 250

4

10

3×100 = 300

4

12

3

500

10

50

5,000

1

50

3,000

1

30

10,000

1

100

If the multiplier of the capital and the divisor of the
rate of profit are the same, that is to say, if the size of
the capital increases in the same proportion as the rate of
profit falls, then the total profit remains unchanged.
100 at 10 per cent amounts to 10, and 2×100 at
10/2 or 5 per cent also amounts to
10. In other words, the amount of profit remains
unchanged if the rate of profit falls in the same proportion
in which capital accumulates (grows).

If the rate of profit falls more rapidly than the capital
grows, then the amount of profit decreases. 500 at 10
per cent yields a total profit of 50. But six times as
much, 6×500 or 3,000 at 10/10
per cent or 1 per cent yields only 30.

Finally, if capital grows faster than the rate of profit
falls, the amount of profit increases in spite of the
falling rate of profit. Thus 100 at 10 per cent profit
yields a profit of 10. But 300 (3×100) at 4 per
cent (i.e., where the rate of profit has fallen by 60 per
cent) yields a total profit of 12.

Now to the passages from Ricardo:

Chapter VI, “On Profits”.

“The natural tendency of profits
then is to fall; for, in the progress of society and
wealth, the additional quantity of food required is obtained
by the sacrifice of more and more labour. This
tendency, this gravitation as it were of profits, is
happily checked at repeated intervals by the
improvements in machinery, connected with the production of
necessaries, as well as by discoveries in the science of
agriculture which enable us to relinquish a portion of
labour before required, and | therefore to lower the price
of the prime necessary of the labourer. The rise in
the price of necessaries and in the wages of labour is
however limited; for as soon as wages should be equal
… to £ 720, the whole receipts of the farmer,
there must be an end of accumulation; for no capital can
then yield any profit whatever, and no additional
labour can be demanded, and consequently population
will have reached its highest point. Long indeed
before this period the very low rate of profits will have
arrested all accumulation, and almost the whole produce
of the country, after paying the labourers, will be the
property of the owners of land and the receivers of tithes
and taxes” (l.c., pp. 120-21).

This, as Ricardo sees it, is the bourgeois
“Twilight of the Gods”—the Day of
Judgement.

“Long before this state of prices was
become permanent, there would be no motive for
accumulation; for no one accumulates but with a view to make
his accumulation productive, and […] consequently
such a state of prices never could take place. The
farmer and manufacturer can no more live without profit,
than the labourer without wages. Their motive for
accumulation will diminish with every diminution of
profit, and will cease altogether when their profits
are so low as not to afford them on adequate
compensation for their trouble, and the risk which
they must necessarily encounter in employing their capital
productively” (l.c., p. 123).

“I must again observe, that the rate
of profits would fall much more rapidly … for the
value of the produce being what I have stated it under the
circumstances supposed, the value of the farmer’s stock
would be greatly increased from its necessarily consisting
of many of the commodities which had risen in value.
Before corn could rise from £ 4 to £ 12, his
capital would probably be doubled in exchangeable value,
and be worth £ 6,000 instead of £ 3,000.
If then his profit were £ 180, or 6 per cent on his
original capital, profits would not at that time be really
at a higher rate than 3 per cent; for £ 6,000
at 3 per cent gives £ 180; and on those terms
only could a new farmer with £ 6 000
money in his pocket enter into the farming
business” (l.c., p. 124).

“We should also expect that, however
the rate of the profits of stock might diminish in
consequence of the accumulation of capital on the land,
and the rise of wages, yet that the aggregate amount of
profits would increase.

Thus supposing that: with repeated accumulations of
£ 100,000, the rate of profit should fall from 20 to
19, to 18, to 17 per cent, a constantly diminishing rate, we
should expect that the whole amount of profits received by
those successive owners of capital would be always
progressive; that it would be greater when the capital was
£ 200,000, than when £ 100,000, still greater
when £ 300,000; and so on, increasing, though at a
diminishing rate, with every increase of capital.
This progression however is only true for a certain
time: thus 19 per cent on £ 200,000 is more than
20 on £ 100,000; again 18 per cent on £ 300,000
is more than 19 per cent on £ 200,000; but after
capital has accumulated to a large amount, and profits have
fallen, the further accumulation diminishes the aggregate
of profits. Thus suppose the accumulation
‘should be £ 1,000,000, and the profits 7 per
cent the whole amount of profits will be £ 70,000; now
if an addition of £ 100,000 capital be made to the
million, and profits should fall to 6 per cent, £
66,000 or a diminution of £ 4,000 will be received by
the owners of stock, although the whole amount of stock will
be increased from £ 1,000,000 to £
1,100,000.

“There can, however, be no
accumulation of capital, so long as stock yields any profit
at all, without its yielding not only an increase of
produce, but an increase of value. By employing
£ 100,000 additional capital, no part of the former
capital will be rendered less productive. The produce
of the land and labour of the country must increase, and its
value will be raised, not only by the value of the addition
which is made to the former quantity of productions but by
the new value which is given to the whole produce of the
land, by the increased difficulty of producing the last
portion of it. When the accumulation of capital,
however, becomes very great, notwithstanding this increased
value, it will be so distributed that a less value than
before will be appropriated to profits, while that which is
devoted to rent and wages will be increased” (l.c.,
pp. 124-26).

“Although a greater value is
produced, a greater proportion of what remains of that
value, after paying rent, is consumed by the producers, and
it is this, and this alone, which regulates profits.
Whilst the land yields abundantly, wages may temporarily
rise, and the producers may consume more than their
accustomed proportion; but the stimulus which will thus be
given to population, will speedily reduce the labourers
to their usual consumption. But when poor lands
are taken into cultivation, or when more capital and labour
are expended on the old land, with a less return of produce,
the effect must be permanent” (l.c., p. 127).

| “The effects
then of accumulation will be different in different
countries, and will depend chiefly on the fertility of the
land. However extensive a country may be where the
land is of a poor quality, and where the importation of food
is prohibited, the most moderate accumulations of capital
will be attended with great reductions in the rate of
profit, and a rapid rise in rent; and on the contrary a
small but fertile country, particularly if it freely permits
the importation of food, may accumulate a large stock of
capital without any great diminution in the rate of profits,
or any great increase in the rent of land” (l.c.,
pp. 128-29).

[It can] also [happen] as a result of taxation
that “sufficient surplus produce may not be
left to stimulate the exertions of those who usually augment
by their savings the capital of the State” (Chapter
XII on “Land-Tax”, p. 206).

<Chapter XXI, “Effects of Accumulation on
Profits and Interest”,> “There is only
one case, and that will be temporary, in which the
accumulation of capital with a low price of food may be
attended with a fall of profits; and that is, when the
funds for the maintenance of labour increase much more
rapidly than population;—wages will then be high,
and profits low. If every man were to forego the use
of luxuries, and be intent only on accumulation, a quantity
of necessaries might be produced, for which there could not
be any immediate consumption. Of commodities so
limited in number, there might undoubtedly be a universal
glut, and consequently there might neither be demand for
an additional quantity of such commodities, nor profits on
the employment of more capital. If men ceased to
consume, they would cease to produce” (l.c.,
p. 343).

Thus Ricardo on accumulation and the law of the falling
rate of profit.

* A distinction must
be made here. When Adam Smith explains the fall in the
rate of profit from an over-abundance of capital, an
accumulation of capital, he is speaking of a
permanent effect and this is wrong. As against
this, the transitory over-abundance of capital,
over-production and crises are something different.
Permanent crises do not exist.

* | (That Ricardo (regards) money
merely as means of circulation is synonymous with his
regarding exchange-value as a merely transient form,
and altogether as something purely formal in bourgeois or
capitalist production, which is consequently for him not a
specific definite mode of production, but simply the
mode of production.) |

[a] In the
manuscript, the upper left-hand corner of this page has been
torn away. Consequently, out of the first nine lines
of the text, only the right ends of six lines have been
preserved. This does not make it possible to reproduce
the complete text here, but it does permit us to surmise
that Marx speaks here of crises which arise “out of
[the] revolution in the value of the variable
capital”. The “increased price of the
necessary means of subsistence” caused, for
example, by a poor harvest, leads to a rise in costs for
those workers who “are set in motion by variable
capital”. “At the same time, this
rise” causes a fall in the demand for “all
other commodities that do not enter into the
consumption” of the workers. It is therefore
impossible “to sell the commodities at their value;
the first phase in their reproduction”, the
transformation of the commodity into money is
interrupted. The increased price of the means of
subsistence thus leads to “crisis in other
branches” of production.

The two last lines of the damaged part of the page seem
to summarise this train of thought, by saying that crises
can arise as a result of increased prices of raw materials,
“whether these raw materials enter as raw materials
into constant capital or as means of subsistence” into
the consumption of the workers.—Ed.

* | (When spinning-machines were
invented, there was over-production of yarn in relation to
weaving. This disproportion disappeared when
mechanical looms were introduced into weaving.) |

[b] In the
manuscript: “besides produce”.—Ed.

[c] In the
manuscript: “produce”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XVIII] Ricardo’s Miscellanea. John Barton

### [A.] Gross and Net Income

Net income, as opposed to
gross income (which is equal to the total product or the
value of the total product), is the form in which the
Physiocrats originally conceived surplus-value. They
consider rent to be its sole form, since they think of
industrial profit as merely a kind of wage; later economists
who blur the concept of profit by calling it wages for the
superintendence of labour, ought to agree with them.

Net revenue is therefore in fact the excess of the
product (or the excess of its value) over that part of it
which replaces the capital outlay, comprising both constant
and variable capital. It thus consists simply of profit
and rent, the latter, in turn, is only a separate portion of
the profit, a portion accruing to a class other than the
capitalist class.

The direct purpose of capitalist production is not the
production of commodities, but of surplus-value or profit
(in its developed form), the aim is not the product, but the
surplus-product. Labour itself, from this standpoint, is
only productive in so far as it creates profit or
surplus-product for capital. If the worker does not
create profit, his labour is unproductive. The mass of
productive labour employed is only of interest to capital in
so far as through it—or in proportion to it—the
mass of surplus-labour grows. Only to this extent is
what we called necessary labour-time, necessary. In so
far as it does not have this result, it is superfluous and
to be supressed.

It is the constant aim of capitalist production to
produce a maximum of surplus-value or surplus-product with
the minimum capital outlay; and to
the extent that this result is not achieved by overworking
the workers, it is a tendency of capital to seek to produce
a given product with the least possible
expenditure—economy of power and expense. It is
therefore the economic tendency of capital which teaches
humanity to husband its strength and to achieve its
productive aim with the least possible expenditure of
means.

In this conception, the workers themselves appear as that
which they are in capitalist production—mere means of
production, not an end in themselves and not the aim of
production.

Net income is not determined by the value of the total
product, but by the excess of the value of the total product
over the value of the capital outlay, or by the size of the
surplus-product in relation to the total product.
Provided this surplus grows the aim of capitalist production has been
achieved even if the value decreases | or, if
along with the value, the total quantity of the product also
decreases.

Ricardo expressed these tendencies consistently and
ruthlessly.
Hence much howling against him on the part of
the philanthropic philistines.

In considering net income, Ricardo again commits the
error of resolving the total product into revenue, wages,
profits and rent, and disregarding the constant capital
which has to be replaced.
But we will leave this out of
account here.

Chapter XXXII “Mr. Malthus’s Opinions on
Rent”.

“It is of importance to distinguish clearly between
gross revenue and net revenue, for it is from the net
revenue of a society that all taxes must be paid.
Suppose
that all the commodities in the country, all the corn, raw
produce, manufactured goods, etc, which could be brought to
market in the course of the year, were of the value of 20
millions, and that in order to obtain this value, the labour
of a certain number of men was necessary, and that the
absolute necessaries of these labourers required an
expenditure of 10 millions.
I should say that the gross
revenue of such society was 20 millions, and its net revenue
10 millions.
It does not follow from this supposition, that
the labourers should receive only 10 millions for their
labour; they might receive 12, 14, or 15 millions, and in
that case they would have 2, 4, or 5 millions of the net
income.
The rest would be divided between landlords and
capitalists; but the whole net income would not exceed 10
millions.
Suppose such a society paid 2 millions in taxes,
its net income would be reduced to 8 millions” (l.c.,
pp. 512–13.)

[And in Chapter XXVI Ricardo says :]

“What would be the advantage
resulting to a country from […] a great quantity of
productive labour, if, whether it employed that quantity or
a smaller, its net rent and profits together would be the
same. The whole produce of
the land and labour of every country is divided into three
portions: of these, one portion is devoted to wages, another
to profits, and the other to rent.”

⟨This is wrong because the portion devoted to
replacing the capital (wages excluded) employed in
production has been forgotten.⟩

“It is from the two last portions only, that any
deductions can be made for taxes, or for saving; the
former, if moderate, constituting always the necessary
expenses of production” [l.c., p. 416].

⟨Ricardo himself makes the following comment on this
passage in a note on page 416:

“Perhaps this is expressed too strongly, as more is
generally allotted to the labourer under the name of wages,
than the absolutely necessary expenses of production.
In
that case a part of the net produce of the country is
received by the labourer, and may be saved or expended by
him; or it may enable him to contribute to the defence of
the country” [l.c., p. 416].⟩

“To an individual with a capital of £ 20,000,
whose profits were £ 2,000 per annum, it would be a
matter quite indifferent whether his capital would employ a
hundred or a thousand men, whether the commodity produced,
sold for £10,000, or for £ 20,000, provided, in all
cases, his profits were not diminished below £
2,000.
Is not the real interest of the nation similar?
Provided its net real income, its rent and profits be the
same, it is of no importance whether the nation consists of
ten or of twelve millions of inhabitants.
Its power of
supporting fleets and armies, and all species of
unproductive labour, must be in proportion to its net, and
not in proportion to its gross income.
If five millions of
men could produce as much food and clothing as was necessary
for ten millions, food and clothing for five millions would
be the net revenue.
Would it be of any advantage to the
country, that to produce this same net revenue, seven
millions of men should be required, that is to say, that
seven millions should be employed to produce food and
clothing sufficient for twelve millions?
The food and
clothing of five millions would be still the net
revenue.
The employing a greater number of men would enable
us neither to add a man to our army and navy, nor to
contribute one guinea more in taxes” (l.c.,
pp. 416–17).

To gain a better understanding of Ricardo’s views, the
following passages must also be considered.

“There is this advantage always resulting from a
relatively low price of corn,—that the division of the
actual production is more likely to increase the fund for
the maintenance of labour, inasmuch as more will be
allotted, under the name of profit, to the productive class,
a[a] less under the name rent, to the
unproductive class” (l.c., p. 317).

Productive class here refers only to the
industrial capitalists.

“Rent is a creation of value …
but not a creation of wealth. If the price of corn,
from the difficulty of producing any portion of it,
should rise from £4 to £5 per
quarter, a million of quarters will be of the value of £
5,000,000 instead of £ 4,000,000, … the society
altogether will be possessed of greater value, and in that
sense rent is a creation of value. But this value is
so far nominal, that it adds nothing to the wealth, that is
to say, the necessaries, conveniences, and enjoyments of the
society. We should have precisely the same quantity,
and no more of commodities, and the same million quarters of
corn as before; but the effect of its being rated at £ 5
per quarter, instead of £ 4, would be to transfer a
portion of the value of the corn and commodities from
their former possessors to the landlords. Rent
then is a creation of value, but not a creation of wealth;
it adds nothing to the resources of a country”
(l.c., pp. 485–86).

| Supposing that through the import of foreign corn
the price of corn falls so that rent is decreased by 1
million.
Ricardo says that as a result the money incomes of
the capitalists will increase, and then continues:

“But it may be said, that the capitalist’s income
will not be increased; that the million deducted from the
landlord’s rent, will be paid in additional wages to
labourers!
Be it so; … the situation of the
society will be improved, and they can [b] bear the same money
burthens with greater facility than before; it will only
prove what is still more desirable, that the situation of
another class, and by far the most important class in
society, is the one which is chiefly benefited by the
new distribution.
All that they receive more than 9
millions, forms part of the net income of the
country, and it cannot be expended without adding to its
revenue, its happiness, or its power.
Distribute then the
net income as you please.
Give a little more to one class,
and a little less to another, yet you do not thereby
diminish it; a greater amount of commodities will be still
produced with the same labour, although the amount of the
gross money value of such commodities will be diminished;
but the net money income of the country, that fund from
which taxes are paid and enjoyments procured, would be much
more adequate, than before, to maintain the actual
population, to afford it enjoyments and luxuries, and to
support any given amount of taxation” (l.c.,
pp. 515–16).

### [B.] Machinery [Ricardo and Barton on the Influence of Machines on the Conditions of the Working Class]

### [1. Ricardo’s Views]

### [a) Ricardo’s Original Surmise Regarding the Displacement of Sections of the Workers by Machines]

Chapter I (Section V) “On Value”.

“Suppose … a machine which
could in any particular trade be employed to do the work of
one hundred men for a year, and that it would last only for
one year. Suppose too, the machine to cost £ 5,000,
and the wages annually paid to one
hundred men to be £ 5,000, it is evident that it would be
a matter of indifference to the manufacturer whether he
bought the machine or employed the men. But suppose
labour to rise, and consequently the wages of one hundred
men for a year to amount to £ 5,500, it is obvious that
the manufacturer would now no longer hesitate, it would be
for his interest to buy the machine and get his work done
for £ 5,000. But will not the machine rise in price,
will not that also be worth £ 5,500 in consequence of the
rise of labour? It would rise in price if there were
no stock employed on its construction, and no profits to be
paid to the maker of it. If for example, the machine
were the produce of the labour of one hundred men, working
one year upon it with wages of £ 50 each, and its price
were consequently £5,000; should those wages rise to £
55, its price would be £ 5,500, but this cannot be the
case; less than one hundred men are employed or it could not
be sold for £5,000, for out of the £ 5,000 must be
paid the profits of stock which employed the men.
Suppose then that only eighty-five men were employed at an
expense of £ 50 each, or £ 4,250 per annum, and that
the £ 750 which the sale of the machine would produce
over and above the wages advanced to the men, constituted
the profits of the engineer’s stock. When wages rose 10
per cent he would be obliged to employ an additional
capital of £ 425 and would therefore employ £
4,675 instead of £ 4,250, on which capital he would only
get a profit of £ 325 if he continued to sell his machine
for £ 5,000; but this is precisely the case of all
manufacturers and capitalists; the rise of wages affects
them all. If therefore the maker of the machine should
raise the price of it in consequence of a rise of wages, an
unusual quantity of capital would be employed in the
construction of such machines, till their price afforded
only the common rate of profits. We see then that
machines would not rise in price, in consequence of a rise
of wages.

“The manufacturer, however, who in a general rise
of wages, can have recourse to a machine which shall not
increase the charge of production on his commodity, would
enjoy peculiar advantages if he could continue to charge the
same price for his goods; but he, as we have already seen,
would be obliged to lower the price of his commodities, or
capital would flow to his trade till his profits had sunk to
the general level.
Thus then is the public benefited by
machinery: these mute agents are always the produce of much
less labour than that which they displace, even when they
are of the same money value” (l.c.,
pp. 38–40).

This point is quite right.
At the same time it provides
the answer to those who believe that the workers displaced
by machines find employment in machine manufacture
itself.
This view, incidentally, belongs to an epoch in
which the engineering workshop was still based entirely on
the division of labour, and machines were not as yet
employed on the production of machines.

Suppose the annual wage of one man to be £50, then
that of 100 is £5,000. If these 100 men are replaced
by a machine which costs, similarly, £5,000, then this
machine must be the product of the labour of less than 100
men. For besides paid labour it contains unpaid labour
which forms the profit of the machine
manufacturer. If it were the product of 100 men, then it
would contain only paid labour. If the rate of profit
were 10 per cent then approximately £4,545 of the
£5,000 would represent the capital advanced and
approximately £ 455 the profit. At [a wage of] £
50, £ 4,545 would only represent 90 9/10 men.

| But the capital of £4,545 by no means
represents only variable capital (capital laid out directly
in wages).
It represents also raw materials and the wear
and tear of the fixed capital employed by the machine
manufacturer.
The machine costing £5,000, which replaces
100 men whose wages come to £5,000, thus represents the
product of far fewer than 90 men.
Moreover, the machine can
only be employed profitably, if it ⟨at least that portion
of it which enters annually with interest into the product,
i.e., into its value⟩ is the (annual) product of far
fewer men than it replaces.

Every rise in wages increases the variable capital that
has to be laid out, although the value of the
product—since this is equal to the variable
capital plus the surplus-labour—remains the same, for
the number of workers which the variable capital sets in
motion remains the same.

### [b) Ricardo on the Influence of Improvements in Production on the Value of Commodities. False Theory of the Availability of the Wages Fund for the Workers Who Have Been Dismissed]

Chapter XX “Value and Riches, their
Distinctive[c]
Properties.

Natural agents add nothing to the value of
commodities, on the contrary, [they reduce it].
But by doing so they add to the surplus-value, which
alone interests the capitalists.

“In contradiction to the opinion of Adam Smith,
M. Say, in the fourth chapter, speaks of the value which is
given to commodities by natural agents, such as the
sun, the air, the pressure of the atmosphere, etc., which
are sometimes substituted for the labour of man, and
sometimes concur with him in producing.
But these natural
agents, though they add greatly to value in use,
never add exchangeable value, of which M. Say is speaking,
to a commodity: as soon as by the aid of
machinery, or by the knowledge of natural philosophy,
you oblige natural agents to do the work which was before
done by man, the exchangeable value of such work falls
accordingly” (l.c., pp. 335–36).

The machine costs [labour].
Natural agents as such cost nothing. They cannot,
therefore, add any value to the product; rather they
diminish its value in so far as they replace capital or
labour, immediate or accumulated labour. In as much as
natural philosophy teaches how to replace human labour by
natural agents, without the aid of machinery or only with
the same machinery as before (perhaps even more cheaply, as
with the steam boiler, many chemical processes etc.), it
costs the capitalist, and society as well, nothing and
cheapens commodities absolutely.

Ricardo continues the above-quoted passage thus:

“If ten men turned a corn mill, and it be
discovered that by the assistance of wind, or of water, the
labour of these ten men may be spared, the flour which is
the produce partly of the work performed by the mill, would
immediately fall in value, in proportion to the quantity of
labour saved; and the society would be richer by the
commodities which the labour of the ten men could produce,
the funds destined for their maintenance being in no degree
impaired” (l.c., p. 336).

Society would in the first place be richer by the
diminished price of flour.
It would either consume more
flour or spend the money formerly destined for flour
upon some other commodity, either existing, or called into
life, because a new fund for consumption had become
available.

Of this part of the revenue, formerly spent on flour and
now, consequent upon the diminished price of flour, set free
for some other application, it may be said that it was
“destined”—by virtue of the whole
economy of the society—for a certain thing, and that
it is now freed from that “destiny”.
It is the same as if new capital had been accumulated.
And in this way, the application of machinery and natural agents frees
capital and enables previously “latent needs” to
be satisfied.

On the other hand, it is wrong to speak of “the
funds destined for the maintenance” of the ten
men thrown out of employment by the new discovery. For
the first fund which is saved or created through the
discovery is that part of the revenue which society
previously paid for flour and which it now saves as a result
of the diminished price of flour. The second fund which
is saved, however, is that which the miller previously paid
for the ten men now displaced. This “fund”
indeed, as Ricardo notes, is in no degree impaired by the
discovery and the displacement of the ten men. But the
fund has no natural connection with the ten men. They
may become paupers, starve etc.
One thing only is certain, that ten men of the new
generation who should take the place of these ten men in
order to turn the mill, must now be absorbed in other
employment; and so the relative population has increased
(independently of the average increase of population) in
that the mill is now driven [by a natural agent] and the ten
men who would otherwise have had to turn it are employed in
producing some other commodity. The invention of
machinery and the employment of natural agents thus set free
capital and men (workers) and create together with freed
capital freed hands (free hands, as Steuart calls them),
whether | [for] newly
created spheres of production or [for] the old ones which
are expanded and operated on a larger scale.

The miller with his freed capital will build new mills or
will lend out his capital if he cannot use it himself as a
capitalist.

On no account, however, is there a fund
“destined” for the ten men displaced.
We
shall return to this absurd assumption: namely that, if the
introduction of machines (or natural agents) does not (as is
partly the case in agriculture, when horses take the place
of men or stock-raising takes the place of corn growing)
reduce the quantity of means of subsistence which can be
laid out in wages, the fund which has thus been set free
must necessarily be laid out as variable capital (as if
there was no possibility of exporting means of subsistence,
or spending them on unproductive workers, or [as if] wages
in certain spheres could not rise etc.) and must even be
paid out to the displaced labourers.
Machinery always
creates a relative surplus population, a reserve army of
workers, which greatly increases the power of capital.

In the note on page 335, Ricardo also makes the following
observation directed against Say:

“Though Adam Smith, who defined riches to consist
in the abundance of necessaries, convenience and enjoyments
of human life, would have allowed that machines and
natural agents might very greatly add to the riches of a
country, he would not have allowed that they add any
thing to the value of those riches” [l.c.,
p. 335, note].

Natural agents, indeed, add nothing to value, so
long as there are no circumstances in which they give
occasion for the creation of rent. But machines
invariably add their own value to the already
existing value and firstly, in so far as their existence
facilitates the further transformation of circulating into
fixed capital, and makes it possible to carry on this
transformation on an ever growing
scale, they increase not only wealth but also the
value which is added by past labour to the product of
the annual labour; secondly, since machines make possible
the absolute growth of population and with it the growth of
the mass of the annual labour, they increase the value of
the annual product in this second way. |

### [c) Ricardo’s Scientific Honesty, Which Led Him to Revise His Views on the Question of Machinery. Certain False Assumptions Are Retained in Ricardo’s New Formulation of the Question]

| Chapter XXXI “On Machinery”.

This section, which Ricardo added to his third edition,
bears witness to his honesty which so essentially
distinguishes him from the vulgar economists.

“It is more incumbent on me to declare my opinions
on this question” ⟨viz. “the influence of
machinery on the interests of the different classes of
society”⟩, “because they have, on further
reflection, undergone a considerable change; and although I
am not aware that I have ever published any thing respecting
machinery which it is necessary for me to retract, yet I
have in other ways” ⟨as a Member of Parliament⟩
“given my support to doctrines which I now think
erroneous; it, therefore, becomes a duty in me to submit my
present views to examination, with my reasons for
entertaining them” (l.c., p. 466).

“Ever since I first turned my attention to
questions of political economy, I have been of opinion, that
such an application of machinery to any branch of
production, as should have the effect of saving labour, was
a general good, accompanied only with that portion of
inconvenience which in most cases attends the removal of
capital and labour from one employment to
another.”

⟨This inconvenience is great enough for the worker,
if, as in modern production, it is perpetual.⟩

“It appeared to me, that provided the
landlords had the same money rents, they would be benefited
by the reduction in the prices of some of the commodities on
which those rents were expended, and which reduction of
price could not fail to be the consequence of the employment
of machinery. The capitalist, I thought, was eventually
benefited precisely in the same manner. He, indeed, who
made the discovery of the machine, or who first usefully
applied it, would enjoy an additional advantage, by making
great profits for a time; but, in proportion as the machine
came into general use, the price of the commodity produced,
would, from the effects of competition, sink to its cost of
production, when the capitalist would get the same money
profits as before, and he would only participate in the
general advantage, | as a
consumer, by being enabled, with the same money revenue, to
command an additional quantity of comforts and
enjoyments. The class of labourers also, I
thought, was equally benefited by the use of
machinery, as they would have the means of buying more
commodities with the same money wages, and I thought that no
reduction of wages would take place, because the capitalist would have the power of demanding
and employing the same quantity of labour as before,
although he might be under the necessity of employing it in
the production of a new, or at any rate of a different
commodity. If, by improved machinery, with the
employment of the same quantity of labour, the quantity of
stockings could be quadrupled, and the demand for stockings
were only doubled, some labourers would necessarily be
discharged from the stocking trade; but as the
capital which employed them was still in
being, and as it was the interest of those who had it
to employ it productively, it appeared to me that it
would be employed on the production of some other commodity,
useful to the society, for which there could not fail to be
a demand… As, then, it appeared to me that
there would be the same demand for labour as before,
and that wages would be no lower, I thought that the
labouring class would, equally with the other classes,
participate in the advantage, from the general cheapness of
commodities arising from the use of machinery.

“These were my opinions, and they continue
unaltered, as far as regards the landlord and the
capitalist; but I am convinced, that the substitution of
machinery for human labour, is often very injurious to
… the class of labourers” (l.c.,
pp. 466–68).

In the first place, Ricardo starts from the false
assumption that machinery is always introduced into spheres
of production in which the capitalist mode of production
already exists.
But the mechanised loom originally replaced
the hand-loom weaver, the spinning jenny the hand spinner,
the mowing, threshing and sowing machines often the small
peasant who himself cultivated his plot of land, etc.
In
this case, not only is the labourer displaced, but his
instrument of production too ceases to be capital (in the
Ricardian sense).
This entire or complete devaluation of the
old capital also takes place when machinery revolutionises
manufacture previously based on the simple division of
labour.
It is ridiculous to say in this case that the
“old capital” continues to make the same demand
for labour as before.

The “capital” which was employed by the
hand-loom weaver, hand spinner etc. has ceased to exist.

But suppose, for the sake of simplicity, that the
machinery is introduced ⟨there is, of course, no question
here of the employment of machinery in new branches
of industry⟩ only into spheres where capitalist
production (manufacture) is already [dominant] or it may be
introduced into the workshop already based on machinery,
thus increasing the mechanisation of the labour processes or
bringing into use improved machinery, which makes it
possible either to dismiss a section of the workers
previously employed or to produce a greater product while
employing the same number of workers as before.
The
latter is of course the most favourable case.

In order to reduce confusion, we
must distinguish here between 1. the funds of the capitalist
who employs machinery and dismisses workers; 2. the funds of
society, that is, of the consumers of the commodities
produced by this capitalist.

ad 1. So far as the capitalist who introduces the
machinery is concerned, it is wrong and absurd to say that
he can lay out the same amount of capital in wages as
before.
(Even if he borrows, it is still equally wrong, not
for him, but for society.) One part of his capital he will
convert into machinery and other forms of fixed capital,
another part into auxiliary materials which he did not need
before, and a larger part into raw materials, if we assume
that he produces more commodities with fewer workers, thus
requiring more raw material.
The proportion of variable
capital—that is to say, of capital laid out in
wages—to constant capital has decreased in his branch
of business.
And this reduction in the proportion will
be permanent (indeed, the decrease in variable capital
relatively to constant will even continue at a faster
rate as a result of the productive power of labour
developing along with accumulation), even if his business on
the new scale of production expands to such an extent that
he can re-employ the total number of dismissed workers, and
employ even more workers than before.
⟨The demand for
labour in his business will grow with the accumulation of
his capital, but to a much smaller degree than his capital
accumulates, and his capital will in absolute terms never
again require the same amount of labour as before.
The
immediate result, however, will be that a section of the
workers is thrown on to the street.⟩

But it may be said that indirectly the demand for workers
will remain the same, for more workers will be required for
the construction of machines. But Ricardo himself has
already shown that machinery never costs as much labour as
the labour which it displaces. It is possible for the
hours of labour in the machine workshops to be lengthened
for some time | and that,
in the first instance, not a man more may be employed in
them. Raw material—cotton for example—can
come from America and China and it makes no difference
whatsoever to the Englishmen who have been thrown out of
work, whether the demand for Negroes or coolies grows.
But even assuming that the raw materials are supplied within
the country, more women and children will be employed in
agriculture, more horses etc., and perhaps more of one
product and less of another will be
produced. But there will be no demand for the dismissed
workers, for in agriculture, too, the same process which
creates a constant relative surplus population is taking
place.

Prima facie it is not likely that the introduction
of machinery will set free any of the capital of the
manufacturer when he makes his first investment.
It merely
provides a new type of investment for his capital, its
immediate result, according to the assumption, is the
dismissal of workers and the conversion of part of the
variable capital into constant capital.

ad 2.
So far as the general public is concerned,
in the first place, revenue is set free as a result
of the lowering in price of the commodity produced by means
of the machine; capital—directly—only in
so far as the manufactured article enters into constant
capital as an element of production.
⟨If it entered into
the average consumption of the worker, it would, according
to Ricardo, bring in its wake a reduction in real
wages also in the other branches of industry.⟩ A part of
the revenue thus set free, will be consumed in the same
article, either because the reduction in price makes it
accessible to new classes of consumers (in this case,
incidentally, it is not displaced revenue that is expended
on the article), or because the old consumers consume more
of the cheaper article, for instance four pairs of cotton
stockings instead of one pair.
Another part of the revenue
thus set free may serve to expand the industry into which
the machinery has been introduced, or it may be used in the
formation of a new industry producing a different commodity,
or it may serve to expand a sphere of production which
already existed before.
For whatever purpose the revenue
thus set free and reconverted into capital is used, it will
in the first place hardly be sufficient to absorb that part
of the increased population which each year streams into
each branch of production, and which is now debarred from
entering the old industry.
It is, however, also possible for
a portion of the freed revenue to be exchanged against
foreign products or to be consumed by unproductive
workers.
But by no means does a necessary
connection exist between the revenue that has been set free
and the workers that have been set free of revenue.

The absurd fundamental notion, however, which underlies
Ricardo’s view, is the following:

The capital of the manufacturer who introduces machinery
is not set free. It is merely utilised in a
different manner, namely, in such a manner that it is
not, as before, transformed into
wages for the workers who are discharged. A part of the
variable capital is converted into constant capital.
Even if some of it were set free, it would be absorbed by
spheres in which the discharged labourers could not
work and where, at the most, those who replace them
could find refuge.

By expanding old spheres of production or opening up new
ones the revenue set free—in so far as it is not
offset by greater consumption of the cheaper article or is
not exchanged against foreign means of
subsistence—only gives the necessary opening (if it
does so!) for that part of the annual population increase
that is for the time being debarred from the old trade into
which the machinery has been introduced.

But the absurdity which lies concealed at the root of
Ricardo’s notions, is this:

The means of subsistence which were previously consumed
by the workers now discharged, remain after all in existence
and are still on the market.
The workers, on the other hand,
are also available on the market.
Thus there are, on the one
hand, means of subsistence (and therefore means of payment)
for workers, i.e., potential variable capital, and on the
other, unemployed workers.
Hence the fund is there to set
them in motion.
Consequently they will find employment.

Is it possible that even such an economist as Ricardo can
babble such hair-raising nonsense?

According to this, no human being who is capable of work
and willing, could ever starve in bourgeois society, when
there are means of subsistence on the market, at the
disposal of the society, to pay him for any work whatever.
These means of subsistence, in the first place, do not by
any means confront those workers as capital.

Assume that 100,000 workers have suddenly been thrown out
on the streets by machinery. Then in the first place
there is no doubt whatsoever | that the agricultural products
on the market, which on the average suffice for the whole
year and which were previously consumed by these workers,
are still on the market as before. If there were no
demand for them—and if, at the same time, they were
not exportable— what would happen? As the supply
relative to the demand would have grown, they would fall in
price, and as a result of this fall in price, their
consumption would rise, even if the 100,000 workers were
starving to death. The price need not even fall. Perhaps less of these means of
subsistence is imported or more of them exported.

Ricardo imagines quixotically that the entire bourgeois
social mechanism is arranged so nicely that if, for
instance, ten men are discharged from their work, the means
of subsistence of these workers—now set
free—must definitely be consumed in one way or another
by the identical ten men and that otherwise they could not
be sold; as if a mass of semi-employed or completely
unemployed were not for ever crawling around at the bottom
of this society—and as if the capital existing in the
form of means of subsistence were a fixed amount.

If the market-price of corn fell due to the decreasing
demand, then the capital available in the shape of corn
would be diminished (in terms of money) and would
exchange for a smaller portion of the society’s money
revenue, in so far as it is not exportable.
And this applies
even more to manufactures.
During the many years in which
the hand-loom weavers were slowly dying of hunger, the
production and export of English cotton cloth increased
enormously.
At the same time (1838–1841) the prices of
provisions rose.
And the weavers had only rags in which to
clothe themselves and not enough food to keep body and soul
together.
The constant artificial production of a surplus
population, which disappears only in times of feverish
prosperity, is one of the necessary conditions of production
of modern industry.
There is nothing to prevent a part of
the money capital lying idle and without employment and the
prices of the means of subsistence falling because of
relative surplus production while at the same time workers
who have been displaced by machinery, are starving.

It is true that in the long run the labour that has been
released together with the portion of revenue or capital
that has been released, will find an opening in a new sphere
of production or in the expansion of the old one, but this
is of more benefit to those who succeed the displaced
men than to the displaced men themselves.
New
ramifications of more or less unproductive branches of
labour are continually being formed and in these revenue is
directly expended.
Then there is the formation of fixed
capital (railways etc.) and the labour connected with
superintendence which this opens up; the manufacture of
luxuries etc., foreign trade, which increasingly diversifies
the articles on which revenue is spent.

From his absurd standpoint, Ricardo therefore assumes
that the introduction of machinery
harms the workers only when it diminishes the gross product
(and therefore gross revenue), a case which may occur, it is
true, in large-scale agriculture, with the introduction of
horses which consume corn in place of the workers, with the
transition from corn-growing to sheep-raising etc.; but it
is quite preposterous [to extend this case] to industry
proper, whose ability to sell its gross product is by no
means restricted by the internal market. (Incidentally,
while one section of the workers starves, another section
may be better fed and clothed, as may also the unproductive
workers and the middle strata between worker and
capitalist.)

It is wrong, in itself, to say that the increase (or the
quantity) of articles entering into revenue as such, forms a
fund for the workers or forms capital for them.
A portion of
these articles is consumed by unproductive workers or
non-workers, another portion may be transformed by means of
foreign trade, from its coarse form, the form in which it
serves as wages, into a form in which it enters into the
revenue of the wealthy, or in which it serves as an element
of production of constant capital.
Finally, a portion will
be consumed by the discharged workers themselves in the
workhouse, or in prison, or as alms, or as stolen goods, or
as payment for the prostitution of their daughters.

In the following pages I shall briefly compare the
passages in which Ricardo develops this nonsense.
As he says
himself, he received the impetus for it from Barton’s
work, which must therefore be examined, after citing those
passages.

| It is self-evident, that in order to employ a
certain number of workers each year, a certain quantity of
food and other necessary means of subsistence must be
produced annually.
In large-scale agriculture, stock-raising
etc, it is possible for the net income (profit and rent) to
be increased while the gross income is reduced, that is to
say, while the quantity of necessaries intended for the
maintenance of the workers is reduced.
But that is not the
question here.
The quantity of articles entering into
consumption or, to use Ricardo’s expression, the quantity of
articles of which the gross revenue consists, can be
increased, without a consequent increase in that portion of
this quantity which is transformed into variable
capital.
This may even decrease.
In this case more is
consumed as revenue by capitalists, landlords and their
retainers, the unproductive classes, the state, the middle
strata (merchants) etc.

What lies behind the view taken by
Ricardo (and Barton) is that he originally set out from the
assumption that every accumulation of capital is equivalent
to an increase in variable capital, that the demand for
labour therefore increases directly, in the same proportion,
as capital is accumulated. But this is wrong, since with
the accumulation of capital a change takes place in its
organic composition and the constant part of the capital
grows at a faster rate than the variable. This does not,
however, prevent revenue from constantly growing, in value
and in quantity. But it does not result in a
proportionately larger part of the total product being laid
out in wages. Those classes and sub-classes who do not
live directly from their labour become more numerous and
live better than before, and the number of unproductive
workers increases as well.

Since, in the first place, it has nothing to do with the
question, we will not concern ourselves with the
revenue of the capitalist who transforms a part of
his variable capital into machinery (and who therefore also
puts more into raw material relatively to the amount of
labour employed in all those spheres of production where raw
material is an element of the process of creating
value). His revenue and that part of his capital which
has actually gone into the production process exist, at
first, in the form of products or rather
commodities which he produces himself, for example
yarn if he is a spinner. After the introduction of
machinery he transforms one part of these
commodities—or the money for which he sells
them—into machinery, auxiliary materials and raw
materials whereas, previously, he paid it out as wages to
the workers, thus transforming it indirectly into means of
subsistence for the workers. With some exceptions in
agriculture, he will produce more of these commodities than
before, although his discharged workers have ceased
to consume, and therefore to buy his own articles, though
they did so before. More of these commodities will now
be present on the market, although for the workers thrown on
the street, they have ceased to exist [as objects of
consumption] or have ceased to exist in their previous
quantity. Thus, so far as his own product is concerned,
in the first place, even if it enters into the consumption
of the workers, its increased production in no way
contradicts the fact that a part of it has ceased to exist
as capital for the workers. A larger part of it (of the
total product) on the other hand must now replace that
portion of the constant capital which resolves into
machinery, auxiliary materials and
raw materials, that is to say, it must be exchanged against
more of these ingredients of reproduction than formerly.
If the increase in commodities through machinery and the
decrease in a previously existing demand (namely in the
demand of the workers that have been discharged) for the
commodities produced by this machinery were contradictory,
then in most cases, no machinery could in fact be
introduced. The mass of commodities produced and the
portion of these commodities which is reconverted into
wages, therefore, have no definite relationship or necessary
connection, when we consider the capital of which a part is
transformed into machinery instead of into wage labour.

So far as society in general is concerned, the
replacement of its revenue or rather the extension of the
limits of its revenue takes place first of all on account of
the articles whose price has been lowered by the
introduction of machinery. This revenue may continue
to be spent as revenue, and if a considerable part of it is
transformed into capital, the increased
population—apart from the artificially created surplus
population—is already there to absorb that part of the
revenue which is transformed into variable capital.

Prima facie, therefore, what this comes to is
only: the production of all other articles, particularly in
the spheres which produce articles entering into the
consumption of the workers—despite the discharging of
the hundred men etc.—continues on the same scale as
before; quite certainly at the moment when the workers are
discharged. In so far, therefore, as the dismissed
workers represented a demand for these articles, the demand
has decreased, although the supply has remained the
same. If the reduced demand is not made good, the price
will fall (or instead of a fall in price a larger stock may
remain on the market for the following year). If the
article is not produced for export, too, and if the decrease
in demand were to persist, then reproduction would decrease,
but it does not follow that the capital employed in this
sphere | must necessarily
decrease. Perhaps more meat or commercial crops or
luxury foods are produced [and] less wheat or more oats for
horses etc. or fewer fustian jackets and more bourgeois
frock-coats. But none of these consequences need
necessarily materialise, if, for instance, as a result of
the cheapening of cotton goods, the employed workers are
able to spend more on food etc. The same quantity of
commodities and even more of them—including those consumed by the workers—can be
produced, although less capital, a smaller portion of the
total product, is transformed into variable capital, that is
laid out in wages.

Neither is it the case that part of the capital of the
producers of these articles has been set free.
At worst the
demand for their commodities would have decreased, and the
reproduction of their capital impeded by the reduced price
of their commodities.
Hence their own revenue would
immediately decrease, as it would with any fall in the
prices of commodities.
But it cannot be said that any
particular part of their commodities had previously
confronted the discharged workers as capital and was now
“set free” along with the workers.
What
confronted the workers as capital, was a part of the
commodity now being produced with machinery; this part came
to them in the form of money and was exchanged by them for
other commodities (means of subsistence), which did not face
them as capital, but confronted their money as
commodities.
This is therefore an entirely different
relationship.
The farmer and any other producer whose
commodity they bought with their wages, did not confront
them as capitalist and did not employ them as workers.

They have only ceased to be buyers for him, which
may possibly—if not counterbalanced by other
circumstances—bring about a temporary depreciation in
his capital, but does not set free any capital for the
discharged workers.
The capital that employed them “is
still in being”, but no longer in a form in which it
resolves into wages, or only indirectly and to a smaller
extent.

Otherwise anyone who through some bad luck ceased to have
money, would inevitably set free sufficient capital for his
own employment.

### [d) Ricardo’s Correct Determination of Some of the Consequences of the Introduction of Machines for the Working Class. Apologetic Notions in the Ricardian Explanation of the Problem]

By gross revenue Ricardo means that part of the
product which replaces wages and surplus-value (profits and
rent); by net revenue he means the surplus-product, [which]
equals the surplus-value. He forgets here, as throughout
his work, that a portion of the gross
product must replace the value of the machinery and raw
material, in short, the value of the constant capital.

* * *

Ricardo’s subsequent treatment is of interest, partly
because of some of the observations he makes in passing,
partly because, mutatis mutandis, it is of practical
importance for large-scale agriculture, particularly
sheep-rearing, and shows the limitations of capitalist
production.
Not only is its determining purpose not
production for the producers (workmen), but its exclusive
aim is net revenue (profit and rent), even if this is
achieved at the cost of the volume of production—at
the cost of the volume of commodities produced.

“My mistake arose from the supposition, that
whenever the net income of a society increased, its
gross income would also increase; I now, however, see
reason to be satisfied that the one fund, from which
landlords and capitalists derive their revenue, may
increase, while the other, that upon which the
labouring class mainly depend, may diminish, and
therefore it follows, if I am right, that the same
cause which may increase the net revenue of the country,
may at the same time render the population redundant,
and deteriorate the condition of the labourer” (l.c.,
p. 469).

First it is noteworthy that Ricardo here admits that
causes which further the wealth of the capitalists and
landlords “may…render the population
redundant…” so that redundant population or
over-population is presented here as the result of the
process of enrichment itself, and of the development of
productive forces which conditions this process.

So far as the fund is concerned, out of which the
capitalists and landlords draw their revenue and on the
other hand the fund from which the workers draw theirs, to
begin with, it is the total product which forms this common
fund. A large part of the products which enter into the
consumption of the capitalists and landlords, does not enter
into the consumption of the workers. On the other hand,
almost all, in fact more or less all, products which enter
into the consumption of the workers also enter into that of
the landlords and capitalists, their retainers and
hangers-on, including dogs and cats. One cannot suppose
that there are two essentially distinct fixed funds in
existence. The important point is, what relative portion
each of these groups draws from the common fund. The aim
of capitalist production is to obtain as large an amount of
surplus-product or surplus-value as
possible with a given amount of wealth. This aim is
achieved by constant capital growing more rapidly in
proportion to variable capital or by setting in motion the
greatest possible |
constant capital with the least possible variable
capital. In much more general terms than Ricardo
conceives here, the same cause effects an increase in the
fund out of which capitalists and landlords draw their
revenue, by a decrease in the fund out of which the workers
draw theirs.

It does not follow from this that the fund from which the
workers draw their revenue is diminished absolutely;
only that it is diminished relatively, in proportion
to their total output.
And that is the only important factor
in the determination of the portion which they appropriate
out of the wealth they themselves created.

“A capitalist we will suppose employs a capital of
the value of £ 20,000 and that he carries on the joint
business of a farmer, and a manufacturer of necessaries.
We
will further suppose, that £ 7,000 of this capital is
invested in fixed capital, viz. in buildings, implements,
etc., etc., and that the remaining £ 13,000 is employed
as circulating capital in the support of labour.
Let us
suppose, too, that profits are 10 per cent, and consequently
that the capitalist’s capital is every year put into its
original state of efficiency, and yields a profit of £
2,000.

“Each year the capitalist begins his operations, by
having food and necessaries in his possession of the value
of £ 13,000, all of which he sells in the course of the
year to his own workmen for that sum of money, and, during
the same period, he pays them the like amount of money for
wages: at the end of the year they replace in his
possession food and necessaries of the value of £ 15,000,
£ 2,000 of which he consumes himself, or disposes of as
may best suit his pleasure and gratification.”

⟨The nature of surplus-value is very palpably
expressed here.
The passage is on pp. 469–70.⟩

“As far as these products are concerned, the
gross produce for that year is £ 15,000, and the
net produce £ 2,000.
Suppose now, that the following year
the capitalist employs half his men in constructing a
machine, and the other half in producing food and
necessaries as usual.
During that year he would pay the sum
of £ 13,000 in wages as usual, and would sell food and
necessaries to the same amount to his workmen; but what
would be the case the following year?

“While the machine was being made,
only one-half of the usual quantity of food and necessaries
would be obtained, and they would be only one-half the value
of the quantity which was produced before. The machine
would be worth £ 7,500, and the food and necessaries £
7,500, and, therefore, the capital of the capitalist would
be as great as before for he would have besides these two
values, his fixed capital worth £ 7,000, making in the
whole £ 20,000 capital, and £ 2,000 profit. After
deducting this latter sum for his own expenses, he would
have a no greater circulating capital than £ 5,500 with
which to carry on his subsequent
operations; and, therefore, his means of employing labour,
would be reduced in the proportion of £ 13,000 to £
5,500, and, consequently, all the labour which was before
employed by £ 7,500, would become redundant”
[l.c., pp. 469–71].

{This would, however, also be the case if by means of the
machine which costs £7,500, exactly the same quantity of
products were produced as previously with a variable capital
of £13,000. Suppose the wear and tear of the machine
were equal to one-tenth in one year, that is to £750,
then the value of the product—previously
£15,000—would now be £8,250. (Apart from the
wear and tear of the original fixed capital of £7,000,
whose replacement Ricardo does not mention at all.) Of these
£8,250, £2,000 would be profit, as previously out of
the £15,000. The lower price would be advantageous to
the farmer in so far as he himself consumes food and
necessaries as revenue. It would also be advantageous to
him in so far as it enables him to reduce the wages of the
workers he employs thus releasing a portion of his variable
capital. It is this portion, which to a certain degree
could employ new labour, but only because the real
wage of the workers who have been retained had
fallen. A small number of those who have been discharged
could thus—at the cost of those who had been
retained—be re-employed. The fact however that the
product would be just as great as before, would not help the
dismissed workers. If the wage remained the same, no
part of the variable capital would be released. The fact
that the product of £8,250 represents the same amount of
necessaries and food as previously £15,000 does not cause
its value to rise. The farmer would have to sell it for
£8,250, partly in order to replace the wear and tear of
his machinery and partly in order to replace his variable
capital. In so far as this lowering of the price of food
and necessaries did not bring about a fall in wages in
general, or a fall in the ingredients entering into the
reproduction of the constant capital, the revenue of society
would have expanded only in so far as it is expended on food
and necessaries. A section of the unproductive and
productive workers etc. would live better. That is
all. (They could also save, but that is always action in
the future). The discharged workers would remain on the
street, although the physical possibility of their
maintenance existed just as much as before. Moreover,
the same capital would be employed in the reproduction
process as before. But a part
of the product (whose value had fallen), which
previously existed as capital has now become
revenue.}

“The reduced quantity of labour which the
capitalist can employ, must, indeed, with the
assistance of the machine, and after deductions for its
repairs, produce a value equal to £ 7,500, it must
replace the circulating capital with a profit of £ 2,000
on the whole capital; but if this be done, | if the net
income be not diminished, of what importance is it to the
capitalist, whether the gross income be of the value of £
3,000, of £ 10,000, or of £ 15,000?”

⟨This is perfectly correct.
The gross income is of
absolutely no importance to the capitalist.
The only thing
which is of interest to him is the net income.⟩

“In this case, then, although the net
produce will not be diminished in value, although its power
of purchasing commodities may be greatly increased, the
gross produce will have fallen from a value of £ 15,000
to a value of £ 7,500, and as the power of supporting
a population, and employing labour, depends always on the
gross produce of a nation, and not on its net
produce” [l.c., p. 471]

⟨Hence Adam Smith’s partiality for gross produce, a
partiality to which Ricardo objects.
See Chapter XXVI “On Gross and Net Revenue”, which Ricardo
opens with the words:

“Adam Smith constantly magnifies the advantages
which a country derives from a large gross, rather than a
large net income” (l.c., p. 415)⟩

“…there will necessarily be a diminution
in the demand for labour, population will become
redundant, and the situation of the labouring classes
will be that of distress and poverty” [l.c.,
p. 471].

⟨Labour therefore becomes redundant, because
the demand for labour diminishes, and that demand diminishes
in consequence of the development in the productive powers
of labour.⟩

“As, however, the power of saving from revenue
to add to capital, must depend on the efficiency of the net
revenue, to satisfy the wants of the capitalist, it
could not fail to follow from the reduction in the price
of commodities consequent on the introduction of
machinery, that with the same wants” (but
his wants grow larger) “he would have increased
means of saving,—increased facility of transferring
revenue into capital” (l.c., pp. 471–72).

⟨According to this, first one part of capital is
transformed into revenue, transferred to revenue—not
in terms of value, but as regards the use-value, the
material elements of which the capital consists—in
order later, to transfer a part of the revenue back into
capital. For example, when £13,000 was laid out in
variable capital a part of the product amounting to £7,500, entered into the consumption of the
workers whom the farmer employed, and this part of the
product formed part of his capital. Following upon the
introduction of machinery, for example, according to our
supposition, the same amount of product is produced as
previously, but its value does not amount to £15,000, as
previously, but only to £8,250; and a larger part of this
cheaper product enters into the revenue of the farmer or the
revenue of the buyers of food and necessaries. They now
consume a part of the product as revenue which was
previously consumed industrially, as capital, by the farmer,
although his labourers (since dismissed) consumed it as
revenue as well. As a result of this growth in
revenue—which has come about because a part of the
product which was previously consumed as capital is now
consumed as revenue—new capital is formed and revenue
is reconverted into capital.⟩

“But with every increase of capital he would employ
more labourers;”

⟨this in any case not in proportion to the
increased capital, not to the whole extent of that
increase.
Perhaps he would buy more horses, or guano, or new
implements⟩

“and, therefore, a portion of the people thrown
out of work in the first instance, would be subsequently
employed; and if the increased production, in consequence of
the employment of the machine, was so great as to afford, in
the shape of net produce, as great a quantity of food and
necessaries as existed before in the form of gross
produce, there would be the same ability to employ
the whole population, and, therefore, there would not
necessarily” ⟨but possibly and probably!⟩
“be any redundancy of people” (l.c.,
pp. 469–72).

In the last lines, Ricardo thus says what I observed
above.
In order that revenue is transformed in this way into
capital, capital is first transformed into revenue.
Or, as
Ricardo puts it: First the net produce is increased at the
expense of the gross produce in order then to reconvert a
part of the net produce into gross produce.
Produce is
produce.
Net or gross makes no difference (although this
antithesis may also mean that the excess over and above
the outlay increases, that therefore the net produce
grows although the total product, i.e., the gross produce,
diminishes).
The produce only becomes net or gross,
according to the determinate form which it assumes in the
process of production.

“All I wish to prove, is, that the
discovery and use of machinery may be attended with a
diminution of gross produce; and whenever that is the case,
it will be injurious to the labouring class, as some of
their number will be thrown out of
employment, and population will become redundant,
compared with the funds which are to employ it”
(l.c., p. 472).

But the same may, and in most instances | will, be
the case, even if the gross produce remains the same or
increases; but that part of it which was formerly used as
variable capital, is now consumed as revenue.

It is superfluous for us to go into Ricardo’s absurd
example of the clothier who reduces his production because
of the introduction of machinery (pp. 472–74).

“If these views be correct, it follows,

“1st. That the
discovery, and useful application of machinery, always
leads to the increase of the net produce of
the country, although it may not, and will not, after an
inconsiderable interval, increase the value of that
net produce” (l.c., p. 474).

It will always increase that value whenever it diminishes
the value of labour.

“2dly.
That an increase of the net produce
of a country is compatible with a diminution of the gross
produce, and that the motives for employing machinery are
always sufficient to insure its employment, if it will
increase the net produce, although it may, and frequently
must, diminish both the quantity of the gross produce, and
its value.

“3dly, That the opinion entertained by the
labouring class, that the employment of machinery is
frequently detrimental to their interests, is not founded on
prejudice and error, but is conformable to the correct
principles of political economy.

“4thly.
That if the improved means of
production, in consequence of the use of machinery, should
increase the net produce of a country in a degree so great
as not to diminish the gross produce, (I mean always
quantity of commodities and not value,) then the situation
of all classes will be improved.
The landlord and capitalist
will benefit, not by an increase of rent and profit, but by
the advantages resulting from the expenditure of the same
rent, and profit, on commodities, very considerably reduced
in value”

⟨this sentence contradicts the whole of Ricardo’s
doctrine, according to which the lowering in the price of
necessaries, and therefore of wages, raises profits, whereas
machinery, which permits more to be extracted from the same
land with less labour, must lower rent⟩,

“while the situation of the labouring classes will
also be considerably improved; 1st, from the increased
demand for menial servants;”

⟨this is indeed a fine result of machinery, that a
considerable section of the female and male labouring class
is turned into servants;⟩

“2dly, from the stimulus to savings
from revenue, which such an abundant net produce will
afford; and 3dly, from the low price of all articles of consumption on which their wages will be
expended” ⟨and in consequence of this low price
their wages will be reduced⟩ (l.c.,
pp. 474–75).

The entire apologetic bourgeois presentation of machinery
does not deny,

1.
That machinery—sometimes here, sometimes there,
but continually—makes a part of the population
redundant, throws a section of the labouring population on
the street.
It creates a surplus population, thus leading to
lower wages in certain spheres of production, here or there,
not because the population grows more rapidly than the means
of subsistence, but because the rapid growth in the means of
subsistence, due to machinery, enables more machinery to be
introduced and therefore reduces the immediate
demand for labour.
This comes about not because the
social fund diminishes, but because of the growth of this
fund, the part of it which is spent in wages falls
relatively.

2.
Even less do these apologetics deny the subjugation of
the workers who operate the machines and the wretchedness of
the manual workers or craftsmen who are displaced by
machinery and perish.

What they assert—and partly rightly—is
[firstly] that due to machinery and the development
of the productivity of labour in general the net revenue
(profit and rent) grows to such an extent, that the
bourgeois needs more menial servants than before;
whereas previously he had to lay out more of his product in
productive labour, he can now lay out more in unproductive
labour, [so that] servants and other workers living on the
unproductive class increase in number.
This progressive
transformation of a section of the workers into servants is
a fine prospect.
For the worker it is equally consoling that
because of the growth in the net product, more spheres are
opened up for unproductive workers, who live on his product
and whose interest in his exploitation coincides more or
less with that of the directly exploiting classes.

Secondly, that because of the spur given to
accumulation, on the new basis requiring less living labour
in proportion to past labour, the workers who were dismissed
and pauperised, or at least that part of the population
increase | which replaces
them, are either absorbed in the expanding engineering-works
themselves, or in branches of production which machinery has
made necessary and brought into being, or in new fields of
employment opened by the new capital, and satisfying new
wants. This then is another
wonderful prospect: the labouring class has to bear all the
“temporary inconveniences”—unemployment,
displacement of labour and capital—but wage-labour
is nevertheless not to be abolished, on the contrary it will
be reproduced on an ever growing scale, growing absolutely,
even though decreasing relatively to the growing total
capital which employs it.

Thirdly: that consumption becomes more
refined due to machinery.
The reduced price of the
immediate necessities of life allows the scope of luxury
production to be extended.
Thus the third fine prospect
opens before the workers : in order to win their means of
subsistence, the same amount of them as before, the same
number of labourers will enable the higher classes to
extend, refine, and diversify the circle of their
enjoyments, and thus to widen the economic, social, and
political gulf separating them from their betters.
Fine
prospects, these, for the labourer, and very desirable
results of the development of the productive powers of his
labour.

Furthermore, Ricardo then shows that it [is in] the
interest of the labouring classes,

“that as much of the revenue as possible should be
diverted from expenditure on luxuries, to be expended in the
support of[d] menial
servants” (l.c., p. 476).
For whether I [purchase]
furniture or keep menial servants, I thereby present a
demand for a definite amount of commodities and set in
motion approximately the same amount of productive labour in
one case as in the other; but in the latter case, I add [a
new demand] “to the former demand for labourers, and
this addition would take place only because I chose this
mode of expending my revenue’ (l.c., p. 476).

The same applies to the maintenance of large fleets and
armies.

“Whether it” (the revenue) “was
expended in the one way or in the other, there would be
the same quantity of labour employed in production;
for the food and clothing of the soldier and sailor would
require the same amount of industry to produce it as the
more luxurious commodities; but in the case of the war,
there would be the additional demand for men as soldiers and
sailors; and, consequently, a war which is supported out of
the revenue, and not from the capital of a country, is
favourable to the increase of population” (l.c.,
p. 477).

“There is one other case that should
be noticed of the possibility of an increase in the
amount of the net revenue of a country, and even of
its gross revenue, with a diminution of demand for
labour, and that is, when the labour of horses is
substituted for that of man. If I employed one hundred
men on my farm, and if I found that the food bestowed on
fifty of those men, could be diverted
to the support of horses, and afford me a greater return of
raw produce, after allowing for the interest of the capital
which the purchase of the horses would absorb, it would be
advantageous to me to substitute the horses for the men, and
I should accordingly do so; but this would not be for the
interest of the men, and unless the income I obtained, was
so much increased as to enable me to employ the men as well
as the horses, it is evident that the population would
become redundant, and the labourer’s condition would
sink in the general scale. It is evident he could not,
under any circumstances, be employed in agriculture;”
(why not? if the field of agriculture were enlarged?)
“but if the produce of the land were increased by the
substitution of horses for men, he might be employed in
manufactures, or as a menial servant” (l.c.,
pp. 477–78).

There are two tendencies which constantly cut across one
another; [firstly,] to employ as little labour as possible,
in order to produce the same or a greater quantity of
commodities, in order to produce the same or a greater net
produce, surplus-value, net revenue; secondly, to employ the
largest possible number of workers (although as few as
possible in proportion to the quantity of commodities
produced by them) , because— at a given level of
productivity—the mass of surplus-value and of
surplus-product grows with the amount of labour
employed.
The one tendency throws the labourers on to the
streets and makes a part of the population redundant, the
other absorbs them again and extends wage-slavery
absolutely, so that the lot of the worker is always
fluctuating but he never escapes from it.
The worker,
therefore, justifiably regards the development of the
productive power of his own labour as hostile to himself;
the capitalist, on the other hand, always treats him as an
element to be eliminated from production.
These are the
contradictions with which Ricardo struggles in this
chapter.
What he forgets to emphasise | is the
constantly growing number of the middle classes, those who
stand between the workman on the one hand and the capitalist
and landlord on the other.
The middle classes maintain
themselves to an ever increasing extent directly out of
revenue, they are a burden weighing heavily on the working
base and increase the social security and power of the upper
ten thousand.

According to the bourgeoisie the perpetuation of
wage-slavery through the application of machinery is a
“vindication” of the latter.

“I have before observed, too, that
the increase of net incomes, estimated in commodities,
which is always the consequence of improved machinery,
will lead to new savings and accumulations. These
savings, it must be remembered, are annual, and
must soon create a fund, much greater than the gross revenue, originally lost by the
discovery of the machine, when the demand for labour
will be as great as before, and the situation of the people
will be still further improved by the increased savings
which the increased net revenue will still enable them to
make” (l.c., p. 480).

First gross revenue declines and net revenue
increases.
Then a portion of the increased net revenue is
transformed into capital again and hence into gross
revenue.
Thus the workman must constantly enlarge the power
of capital, and then, after very serious disturbances,
obtain permission to repeat the process on a larger
scale.

“With every increase of capital and population,
food will generally rise, on account of its being more
difficult to produce” (l.c., pp. 478–79).

It then goes straight on:

“The consequence of a rise of food will be a rise
of wages, and every rise of wages will have a tendency to
determine the saved capital in a greater proportion than
before to the employment of machinery.
Machinery and labour
are in constant competition, and the former can frequently
not be employed until labour*
rises” (l.c., p. 479).

The machine is thus a means to prevent a rise of
labour.

“To elucidate the principle, I have been supposing,
that improved machinery is suddenly discovered, and
extensively used; but the truth is, that these discoveries
are gradual, and rather operate in determining the
employment of the capital which is saved and accumulated,
than in diverting capital from its actual
employment” (l.c., p. 478).

The truth is, that it is not so much the displaced labour
as, rather, the new supply of labour—the part of the
growing population which was to replace it—for which,
as a result of new accumulation, new fields of employment
are opened.

“In America and many other countries, where the
food of man is easily provided, there is not nearly such
great temptation to employ machinery” ⟨nowhere is
it used on such a massive scale and also, so to speak, for
domestic needs as in America⟩ “as in England, where
food is high, and costs much labour for its
production” [l.c., p. 479].

{How little the employment of machinery is dependent on
the price of food is shown precisely by America, which
employs relatively much more machinery than England, where
there is always a redundant population. The use of
machinery may, however, depend on the relative
scarcity of labour as, for instance, in America, where a
comparatively small population is spread over immense tracts
of land. Thus we read in the
Standard of September 19, 1862, in an article on the
Exhibition:

“‘Man is a machine-making
animal’… if we consider the American as a
representative man, the definition is … perfect.
It is one of the cardinal points of an American’s system to
do nothing with his hands that he can do by a machine.
From rocking a cradle to making a coffin, from milking a cow
to clearing a forest, from sewing on a button to voting for
President, almost, he had a machine for everything. He
has invented a machine for saving the trouble of masticating
food… The exceeding scarcity of labour and
its consequent high value” ⟨despite the low value
of food⟩, “as well as a certain innate
‘cuteness’ have stimulated this inventive
spirit… The machines produced in America are,
generally speaking, inferior in value to those made in
England … they are rather, as a whole, makeshifts
to save labour than inventions to accomplish former
impossibilities”, ⟨And the steam ships?⟩
… [at the Exhibition] “in the United States
department […] is Emery’s cotton gin. For
many a year after the introduction of cotton to America the
crop was very small; because not only was the demand rather
limited, but the difficulty of cleaning the crop by manual
labour rendered it anything but remunerative. When Eli
Whitney, however, invented the saw cotton-gin | there was an immediate
increase in the breadth planted, and that increase has
up to the present time gone on almost in an arithmetical[e] progression. In
fact, it is not too much to say that Whitney made the cotton
trade. With modifications more or less important and
useful his gin has remained in use ever since; and until the
invention of the present improvement and addition Whitney’s
original gin was quite as good as the most of its would-be
supplanters. By the present machine, which bears the
name of Messrs. Emery of […] Albany, N.Y., we
have no doubt that Whitney’s gin, on which it is based, will
be almost entirely supplanted. It is simple and more
efficacious; it delivers the cotton not only cleaner, but in
sheets like wadding, and thus the layers as they leave the
machine are at once fit for the cotton press and the bale
… In [the] American Court proper there is little else
than machinery […] The cow-milker … a
belt-shifter … a hemp carding and spinning
machine, which at one operation reels the cliver direct
from the bale … machines[f] […] for the manufacture of
paper-bags, which it cuts from the sheet, pastes, folds,
and perfects at the rate of 300 a minute …
Hawes’s clothes-wringer, which by two indiarubber rollers
presses from clothes the water, leaving them almost dry,
[…] saves time, but does not injure the texture
… bookbinder’s machinery … machines
for making shoes. It is well known that the uppers
have been for a long time made up by machinery in this
country, but here are machines for putting on the sole,
others for cutting the sole to shape, and others again for
trimming the heels… A stone-breaking
machine is very powerful and ingenious, and no doubt
will come extensively into use for ballasting roads and
crushing ores… A system of marine signals
by Mr. W. H. Ward of Auburn, New York… Reaping
and mowing machines are an American invention coming
into very general favour in England. […]
McCormick’s” [machine is] “the best …
Hansbrow’s California Prize Medal Force Pump, is in
simplicity and efficiency the best […] in the
Exhibition … it will throw
more water with the same power than any pump in the
world… Sewing machines…”}

“The same cause that raises labour, does not raise
the value of machines, and, therefore, with every
augmentation of capital, a greater proportion of it is
employed on machinery.
The demand for labour will continue
to increase with an increase of capital, but not in
proportion to its increase; the ratio will necessarily be a
diminishing ratio” ([David Ricardo, On the
Principles of Political Economy, and Taxation, third
edition, London, 1821,] p. 479).

In the last sentence Ricardo expresses the correct law of
growth of capital, although his reasoning is very
one-sided.
He adds a note to this, from which it is evident
that he follows Barton here, whose work we will
therefore examine briefly.

But first one more comment.
When Ricardo discussed
revenue expended either on menial servants or luxuries, he
wrote:

“In both cases the net revenue would
be the same, and so would be the gross revenue, but the
former would be realised in different
commodities” (l.c., p. 476).

Similarly the gross produce, in terms of value, may be
the same, but it may “be realised”—and
this would strongly affect the workmen—” in
different commodities” according to whether it had
to replace more variable or constant capital.

### [2. Barton’s Views]

### [a) Barton’s Thesis that Accumulation of Capital Causes a Relative Decrease in the Demand for Labour. Barton’s and Ricardo’s Lack of Understanding of the Inner Connection Between This Phenomenon and the Domination of Capital over Labour]

Barton’s work is called:

John Barton.
Observations on the Circumstances which
Influence the Condition of the Labouring Classes of
Society, London, 1817.

Let us first gather together the small number of
theoretical propositions to be found in Barton’s work.

“The demand for labour depends on
the increasing of circulating, and not of fixed
capital. Were it true that the proportion between
these two sorts of capital is the same at all times, and in
all countries, then, indeed, it follows that the
number of labourers employed is in proportion to the
wealth of the State. But such a position has not the
semblance of probability. As arts are cultivated, and
civilization is extended, fixed capital bears a larger
and larger proportion to circulating capital. The
amount of fixed capital employed in
the production of a piece of British muslin is at least a
hundred, probably a thousand times greater than that
employed in the production of a similar piece of Indian
muslin. And the |
proportion of circulating capital employed is a hundred or a
thousand times less. It is easy to conceive that, under
certain circumstances, the whole of the annual savings of an
industrious people might be added to fixed capital, in which
case they would have no effect in increasing the demand for
labour” (l.c., pp. 16–17).

⟨Ricardo comments on this passage in a note on page
480 of his work:

“It is not easy, I think, to conceive that under
any circumstances, an increase of capital should not be
followed by an increased demand for labour; the most that
can be said is, that the demand will be in a diminishing
ratio.
Mr. Barton, in the above publication, has, I
think, taken a correct view of some of the effects of
an increasing amount of fixed capital on the condition of
the labouring classes.
His Essay contains much valuable
information.”⟩

To Barton’s above proposition we must add the following
one:

“Fixed capital […] when once formed,
ceases to affect the demand for labour,” (incorrect,
since it necessitates reproduction, even if only at
intervals and gradually) “but during its formation it
gives employment to just as many hands as an equal amount
would employ, either of circulating capital, or of
revenue” (l.c., p. 56).

And:

“The demand for labour […] depends
absolutely on the joint amount of revenue and circulating
capital” (l.c., pp. 34–35).

Indisputably, Barton has very great merit.

Adam Smith believes that the demand for labour grows in
direct proportion to capital accumulation.
Malthus derives
surplus population from capital not being accumulated (that
is, reproduced on a growing scale) as rapidly as the
population.
Barton was the first to point out that the
different organic component parts of capital do not grow
evenly with accumulation and development of the productive
forces, that on the contrary in the process of this growth,
that part of capital which resolves into wages decreases in
proportion to that part (he calls it fixed capital) which in
relation to its size, alters the demand for labour only to a
very small degree.
He is therefore the first to put forward
the important proposition “that the number of
labourers employed is” not “in proportion
to the wealth of the state”, that relatively more
workers are employed in an industrially undeveloped country
than in one which is industrially developed.

In the third edition of his Principles, Chapter
XXXI “On Machinery”, Ricardo—having
followed exactly in Smith’s footsteps
in his earlier editions—now takes up Barton’s
correction on this point, and moreover, in the same
one-sided formulation in which Barton gives it.
The only point in which he makes an advance—and this
is important—is that, unlike Barton, he not only says
that the demand for labour does not grow
proportionally with the development of machinery, but
that the machines themselves “render the population
redundant” [l.c., p. 469], i.e., create surplus
population. But he wrongly limits this effect to the
case in which the net produce is increased at the cost of
the gross produce. This only occurs in agriculture, but
he also transfers it into industry. Essentially’
however, the whole of the absurd theory of population was
thus overthrown, in particular also the claptrap of the
vulgar economists, that the workers must strive to keep
their multiplication below the standard of the accumulation
of capital. The opposite follows from Barton’s and
Ricardo’s presentation, namely that to keep down the
labouring population, thus diminishing the supply of labour,
and, consequently, raising its price, would only
accelerate the application of machinery, the
conversion of circulating into fixed capital, and, hence,
make the population artificially “redundant”;
redundancy exists, generally, not in regard to the quantity
of the means of subsistence, but the means of employment,
the actual demand for labour.

| Barton’s error or
deficiency lies in his conceiving the organic
differentiation or composition of capital only in the form
in which it appears in the circulation
process—as fixed and circulating capital—a
difference which the Physiocrats had already discovered,
which Adam Smith had developed further and which became a
prepossession among the economists who succeeded him; a
prepossession in so far as they see only this
difference—which was handed ‘down to
them—in the organic composition of capital. This
difference, which arises out of the process of circulation,
has a considerable effect on the reproduction of wealth in
general, and therefore also on that part of it which forms
the wages fund. But that is not decisive here. The
difference between fixed capital such as machinery,
buildings, breeding cattle etc. and circulating capital,
does not directly lie in their relation to wages, but
in their mode of circulation and reproduction.

The direct relation of the different component
parts of capital to living labour is not connected with the
phenomena of the circulation
process. It does not arise from the latter, but from the
immediate process of production, and its [expression]
is the relation of constant to variable
capital, whose difference is based only on their
relationship to living labour.

Thus Barton says for example: The demand for labour does
not depend on fixed capital, but only on circulating
capital.
But a part of circulating capital, raw
material and auxiliary materials, is not
exchanged against living labour, any more than is
machinery.
In all branches of industry in which raw material
enters as an element into the process of the creation of
value— in so far as we consider only that portion of
the fixed capital which enters into the commodity—it
forms the most important part of that portion of
capital which is not laid out in wages.
Another part of the
circulating capital, namely of the commodity capital,
consists of articles of consumption which enter into the
revenue of the non-productive class (i.e., [not of] the
working class).
The growth of these two parts of
circulating capital therefore does not influence the
demand for labour any more than does that of fixed
capital.
Furthermore, the part of the circulating capital
which resolves into raw materials and auxiliary materials
increases in the same or even greater proportion as that
part of capital which is fixed in machinery etc.

On the basis of the distinction made by Barton,
Ramsay goes further.
He improves on Barton but
retains his method of approach.
Indeed he reduces the
distinction to constant and variable capital, but continues
to call constant capital fixed capital, although he
includes raw materials etc., and [calls] variable capital
circulating capital, although he excludes from it all
circulating capital which is not directly laid out in
wages.
More on this later, when we come to Ramsay.
It does,
however, show the intrinsic necessity of the progress.

Once the distinction between constant capital and
variable capital has been grasped, a distinction which
arises simply out of the immediate process of production,
out of the relationship of the different component parts of
capital to living labour, it also becomes evident that in
itself it has nothing to do with the absolute amount of the
consumption goods produced, although plenty with the way in
which these are realised. The way, however, of realising
the gross revenue in different commodities is not, as
Ricardo has it, and Barton intimates it, the cause,
but the effect of the immanent laws of capitalistic
production, leading to a diminishing
proportion, compared with the total amount of produce, of
that part of it which forms the fund for the reproduction of
the labouring class. If a large part of the capital
consists of machinery, raw materials, auxiliary materials
etc., then a smaller portion of the working class as a whole
will be employed in the reproduction of the means of
subsistence | which enter
into the consumption of the workers. This relative
diminution in the reproduction of variable capital, however,
is not the reason for the relative decrease in the demand
for labour, but on the contrary, its effect. Similarly:
A larger section of the workers employed in the production
of articles of consumption which enter into revenue in
general, will produce articles of consumption that are
consumed by— are exchanged against the revenue
of—capitalists, landlords and their retainers (state,
church etc.), [and a smaller) section [will produce]
articles destined for the revenue of the workers. But
this again is effect, not cause. A change in the social
relation of workers and capitalists, a revolution in the
conditions governing capitalist production, would change
this at once. The revenue would be “realised in
different commodities”, to use an expression of
Ricardo’s.

There is nothing in the, so-to-speak, physical conditions
of production which forces the above to take place.
The workmen, if they were dominant, if they were allowed to
produce for themselves, would very soon, and without great
exertion, bring the capital (to use a phrase of the vulgar
economists) up to the standard of their needs. The
very great difference is whether the available means of
production confront the workers as capital and can therefore
be employed by them only in so far as it is necessary
for the increased production of surplus-value and
surplus-produce for their employers, in other words whether
the means of production employ the workers, or
whether the workers, as subjects, employ the means of
production—in the accusative case—in order to
produce wealth for themselves. It is of course assumed
here that capitalist production has already developed the
productive forces of labour in general to a sufficiently
high level for this revolution to take place.

⟨Take for example 1862 (the present autumn). The
plight ‘of the Lancashire unemployed labourers; on the
other hand, “the difficulty of finding employment for
money” on the London money
market, this has almost made necessary the formation of
fraudulent companies, since it [is] difficult to obtain two
per cent for money. According to Ricardo’s theory
“some new field of employment ought to have been
opened up,” for on the one hand there is capital in
London, and on the other, unemployed workers in
Manchester.⟩

### [b) Barton’s Views on the Movement of Wages and the Growth of Population]

Barton explains further, that the accumulation of capital
increases the demand for labour only very slowly, unless the
population has grown to such an extent previously,
that the rate of wages is low.

“The proportion which the wages of
labour at any particular[g] time bear to the whole
produce of […] labour
[…] determine the appropriation” of
capital “in one way” (as fixed capital)
“or the other” (circulating capital) ([John
Barton, Observations on the Circumstances Which Influence
the Condition of the Labouring Class of Society, London,
1817], p. 17).

“For if […] the rate of wages
should decline, while the price of goods remained the same,
or if goods should rise, while wages remained the same, the
profit of the employer would increase, and he would be
induced to hire more hands. If on the other hand,
wages should rise in proportion to commodities” [the]
“master[h]’ […] would […] keep as few hands
as possible.— He would aim at performing every thing
by machinery” (l.c., pp. 17–18).

“We have good evidence that
population advanced much more slowly under a gradual rise of
wages during the earlier part of the last century, than
during the latter part of the same century while the real
price of labour fell rapidly” (l. c., p. 25).

“A rise of wages, of itself, then,
never increases the labouring population;—a fall of
wages may sometimes increase it very rapidly. Suppose
that” the Englishman’s demands should sink to the
level of the Irishman’s. Then the manufacturer would
engage more [workers][i] “in proportion to the
diminished expense of maintenance” (l.c., p. 26).

“It is the difficulty of finding
employment, much more than the insufficiency of the
rate of wages, which discourages marriage” (l.c.,
p. 27).

“It is admitted that every increase
of wealth has a tendency to create a fresh demand for
labour; but as labour, of all commodities, requires the
greatest length of time for its production”

⟨for the same reason, the rate of wages can remain
below the average for long periods, because of all
commodities, labour is the most
difficult to withdraw from the market and thus to bring down
to the level of the actual demand⟩

“so, of all commodities | it is the most raised
[…] by a given increase of demand; and as every rise
of wages produces a tenfold reduction of profits; it is
evident that the accumulation of capital can operate only
in an inconsiderable degree in adding to the effectual
demand for labour, unless preceded by such an
increase of population as shall have the effect of keeping
down the rate of wages” (l. c., p. 28).

Barton puts forward various propositions here:

First: It is not the rise of wages in itself which
increases the labouring population, but a fall in wages may
very easily and rapidly make it rise. Proof: First
half of the eighteenth century, gradual rise in wages, slow
movement in population; in the second half of the eighteenth
century, on the other hand, sharp fall in real wages, rapid
increase in the labouring population. Reason: It is
not the insufficient rate of wages which prevents marriages,
but the difficulty of finding employment.

Secondly: The facility of finding employment
stands, however, in inverse ratio to the rate of
wages. For capital is transformed into circulating or
fixed capital, that is to say, capital which employs labour
or capital which does not employ it, in inverse proportion
to the high or low level of wages. If wages are low,
then the demand for labour is great because it is then
profitable for the employer to use much labour, and he can
employ more with the same circulating capital.
If wages are high, then the manufacturer employs as few
workers as possible and seeks to do everything with the aid
of machines.

Thirdly: The accumulation of capital by itself
raises the demand for labour only slowly, because each
increase in this demand, if [labour is] scarce, causes [the
wages] of labour to rise rapidly and brings about a fall of
profit which is ten times greater than the rise in
wages. Accumulation can have a rapid effect on the
demand for labour only if accumulation was preceded by a
large increase in the labouring population, and wages
are therefore very low so that even a rise of wages still
leaves them low because the demand mainly absorbs unemployed
workers rather than competing for those fully employed.

This is all, cum grano salis, correct so far as
fully developed capitalist production is concerned. But it
does not explain this development itself.

And even Barton’s historical proof therefore contradicts
that which it is supposed to prove.

During the first half of the
eighteenth century, wages rose gradually, the population
grew slowly and [there was] no machinery; moreover, compared
with the following half of the century, little other fixed
capital [was employed].

During the second half of the eighteenth century,
however, wages fell continuously, population grew
amazingly—and [so did] machinery. But it was
precisely the machinery which on the one hand made the
existing population superfluous, thus reducing wages, and on
the other hand, as a result of the rapid development of the
world market, absorbed the population again, made it
redundant once more and then absorbed it again; while at the
same time, it speeded up the accumulation of capital to an
extraordinary extent, and increased the amount of
variable capital, although variable capital fell relatively,
both compared with the total value of the product and also
compared with the number of workers it employed. In
the first half of the eighteenth century, however,
large-scale industry did not as vet exist, but only
manufacture based on the division of labour.
The principal component part of capital was still variable
capital laid out in wages. The productivity of labour
developed slowly, compared with the second half of the
century. The demand for labour, and therefore also
wages, rose almost proportionately to the accumulation of
capital. England was as vet essentially an
agricultural nation and a very extensive cottage
industry—spinning and weaving—which was carried
on by the agricultural population, continued to exist, and
even to expand. A numerous proletariat could not as
yet come into being, any more than there could exist
industrial millionaires at the time. In the first half
of the eighteenth century, variable capital was relatively
dominant; in the second, fixed capital; but the latter
requires a large mass of human material. Its
introduction on a large scale must be preceded by an
increase of population. The whole course of things,
however, contradicts Barton’s presentation, in as much as it
is evident that a general change in the method of production
took place. The laws which correspond to large-scale
industry are not identical with those corresponding to
manufacture |. The
latter constitutes merely a phase of development leading to
the former.

But in this context some of Barton’s historical
data—comparing the development in England during the
first half and the second half of the eighteenth
century—are of interest,
partly because they show the movement of wages, and
partly because they show the movement in corn prices.

“… wages […] increased
from the middle of the seventeenth, till near the middle of
the eighteenth century, for the price of corn declined
within that space of time not less than 35 per cent”
[l.c., p. 25]. “The following statement will
shew what proportion the wages of husbandry
[…] have borne[j] to the price of corn […]
during the last seventy years.

Periods
Weekly

pay
Wheat per

quarter
Wages in pints

of wheat

1742 to 1752
6s. 0d.
30s. 0d.
102

1761 to 1770
7s. 6d.
42s. 6d.
90

1780 to 1790
8s. 0d.
51s. 2d.
80

1795 to 1799
9s. 0d.
70s. 8d.
65

1800 to 1808
11s. 0d.
86s. 8d.
60

(l.c., pp. 25–26)

‘From a table of the number of Bills for the
inclosing of land passed in each session since the
revolution, given in the Lord’s Report on the Poor
Laws” (1816?), “it appears that in sixty-six
years from 1688 to 1754, that number was 123; in the
sixty-nine[k] years
from 1754 to 1813 it was 3,315.— The progress of
cultivation was then about twenty-five times more rapid
during the last period than the former. But during the
first sixty-six years more and more corn was grown
continually for exportation; whereas, during the greater
part of the last sixty-nine years, we not only consumed all
that we had formerly sent abroad, but likewise imported an
increasing, and at last a very large quantity, for our own
consumption … the increase of population in the
former period, as compared with the latter, was still slower
than the progress of cultivation might appear to
indicate” (l. c., pp. 11–12).

“In the year 1688, the population of
England and Wales was computed by Gregory King, from the
number of houses, at five millions and a half.” The
population in “1780 is put down by Mr. Malthus at
7,700,000. In ninety-two years then it had increased
2,200,000—in the succeeding thirty years it increased
something more than 2,700,000. But of the first
increase […] there is every probability, that the far
greater part took place from 1750 to 1780” (l. c.,
p. 13).

Barton calculates from good sources that

“the number of inhabitants in
1750” [was] “5,946,000, making an increase since
the revolution of 446,000, or 7,200 per annum” (l.c.,
p. 14).

“At the lowest
estimate then […] the progress of population of late
years has been ten times more rapid than a century ago.
Yet it is impossible to believe, that the accumulation of
capital has been ten times greater” (l. c.,
p. 14).

It is not a question of how great a quantity of means of
subsistence is produced annually, but how large a portion of
living labour enters into the annual production of fixed and
circulating capital. This determines the size of the
variable capital in relation to constant.

Barton explains the remarkable increase in population
which took place almost all over Europe during the last 50
to 60 years, from the increased productivity of the American
mines, since this abundance of precious metals raised
commodity prices more than wages, thus in fact, lowering the
latter and causing the rate of profit to rise (l.c.,
pp. 29–35). |XIII-752||

Footnotes

[a] In the
manuscript: “and”.—Ed.

[b] In the
manuscript: “they will be able” instead of
“they can”.—Ed.

[c] In the
manuscript: “different.”—Ed.

[d] In the
manuscript: “on”, instead of: “in the
support of ”.—Ed.

* He means “wages”.

[e] In the
manuscript: “geometrical”.—Ed.

[f] In the
manuscript: “A machine”.—Ed.

[g] In the
manuscript: “given”.—Ed.

[h] In the
manuscript: “manufacturers”.—Ed.

[i] Marx gives
this part of the quotation in his own words, summarising the
idea expressed by Barton.—Ed.

[j] In the
manuscript: “been”.—Ed.

[k] Although
Barton says 69 years in fact the period from 1754 to 1813
comprises only 59 years.—Ed.

Theories of Surplus Value, Marx 1861-3

### Addenda

### [1. Early Formulation of the Thesis That the Supply of Agricultural Products Always Corresponds to Demand. Rodbertus and the Practicians among the Economists of the Eighteenth Century]

||XII-580b| The proposition
that corn produces its own demand etc.[a] “casually” advanced by
Adam Smith, later repeated by Malthus with
considerable pomposity in his theory of rent and partly used
as the basis of his theory of population, is very
concisely expressed in the following passage:

“Corn […] is scarce or
not scarce in proportion to the consumption of it. If
there are more m o u t h s, there will be more
corn, because there will be more hands to till
the earth; and if there is more corn, there will be
more mouths, because plenty will bring
people…“ ([John Arbuthnot], An
Inquiry into the Connection Between the Present Price of
Provisions, and the Size of Farms, etc. By a
Farmer, London, 1773, p. 125).

Hence

“the culture of the earth cannot be
over-done” (l.c., p. 62).

Rodbertus’s fantasy that seeds etc. do not enter
as an item of capital (into the farmer’s calculations],[b] is refuted by the
hundreds of treatises, some written by farmers themselves,
that appeared in the eighteenth century (particularly since
the 60s of that century). But on the contrary, it
would be correct to say that rent is an item of
expenditure for the farmer. He[c] reckons rent among the costs of
production (and it does belong to his costs of
production).

“If … the price of corn
is nearly what it ought to be, which can only be determined
by the proportion that the value of land bears to the
value of money” (l.c., p. 132).

As soon as capital takes possession of agriculture, the
farming-capitalist himself regards rent only as a deduction
from profit and the whole of surplus-value is for him
essentially profit:

“The old method of calculating the
profits of the farmer [was] by the three
rents” (the métayage system). “In
the infancy of agriculture, it was a conscientious and
equal partition of property; such as is now practised in the
less enlightened parts of the world … the one finds
land and capital, the other knowledge and labour: but on a
well-cultivated and good soil, the rent is now the least
object: it is the sum which a man can sink in stock,
and in the annual expense of his labour, on which be
is to reckon the interest of his money, or income”
(l.c., p. 34). |XII-580b||

### [2. Nathaniel Forster on the Hostility Between Landowners and Traders]

||XIII-670a| “The
landed and trading interests are eternally
jarring, and jealous of each other’s advantages”
([Nathaniel Forster], An Enquiry into the Causes of the
Present High Price of Provisions, London, 1767, p. 22,
note). |XIII-670a||

### [3. Hopkins’s Views on the Relationship Between Rent and Profit]

||XIII-669b| Hopkins
(passage to be looked up)[d] naively [describes] rent of
land as the original form of surplus-value, and profit
as derived from this.

He writes:

“When the…producers were both
agriculturists and manufacturers, the landowner received, as
rent of land, a value of £ 10. Suppose this
rent to have been paid one half in raw produce, and the
other half in manufactures;— on the division of
the producers into the two classes of agriculturists and
manufacturers” this could be continued.
“In practice, however, it would be found more
convenient for the cultivators of the land, to pay the
rent, and to charge it on their produce, when exchanging
it against the produce of the labour of the manufacturers;
so as to divide the payment into equitable proportions
between the two classes, and to leave wages and profits
equal in each department” (Thomas Hopkins,
Economical Enquiries relative to the Laws which Regulate
Rent, Profit, etc. London, 1822, p. 26). |XIII-669b||

### [4. Carey, Malthus and James Deacon Hume on Improvements in Agriculture]

||XI-490a|
“It will be observed that we consider the owner and
farmer always as one and the same
person… Such it is in the United
States.” (H. C. Carey, The Past, the Present, and
the Future, Philadelphia, 1848, p. 97, note).

“Man […] is always going from
a poor soil to better, and then returning on his footsteps
to the original poor one, and turning up the marl or the
lime; and so on, in continuous succession … and
[…] at each step in this course, he is making a
better machine[e]
… (l.c., pp. 128-29). “Capital may be
invested in agriculture with more advantage than in
engines, because the last are only of equal,
whereas the other is of superior, power” (l.c.,
p. 129). “The gain from a steam-engine[f]” (which
transforms the wool into cloth, etc.) “is the
wages of […] labour, minus the loss by
deterioration of the machine. Labour applied to
fashioning the earth produces wages, plus the gain by
improvement of the machine” (l.c., p. 129).
Hence “a piece of land that yields £ 100 per
annum will sell” dearer than a steam-engine which
produces just as much per annum (l.c., p. 130).
“The buyer of the first knows that it will pay his
wages and interest, plus the increase of its value by
use. The buyer of the other knows it will give him
wages and interest, minus the diminution in its value by use
[…] The one buys a machine that improves by
use. The other, one that deteriorates with use
[…] The one is a machine upon which new capital and
labour may be expended with constantly increasing return;
while upon the other no such expenditure can be made”
(l.c., p. 131).

Even those improvements in agriculture which bring about
reduced costs of production and eventually a fall in prices,
but which first—so long as prices have not yet
fallen—[call forth] a temporary rise of agricultural
profit, almost never fail,

to increase rent ultimately. The increased
capital, which is employed in consequence of the
opportunity of making great temporary profits, can seldom
or ever be entirely removed from the land, at the expiration
of the current leases; and, on the renewal of these
leases, the landlord feels the benefit of it in the
increase of his rents” (Thomas Robert Malthus,
An Inquiry into the Nature and Progress of Rent,
London, 1815, p. 26).

“If until the prevalence of the late
high prices, arable land in general bore but little
rent, chiefly by reason of the acknowledged necessity
of frequent fallows; the rents must be again reduced, to
admit of a return to the same system” (James Deacon
Hume, Thoughts on the Corn-Laws, London, 1815,
p. 72). |XI-490a||

### [5. Hodgskin and Anderson on the Growth of Productivity in Agricultural Labour]

||XIII-670a| “A
diminishing surface suffices to supply man with food as
population multiplies” ([Thomas] Hodgskin
(anonymously), The Natural and Artificial Right of
Property Contrasted…, London, 1832, p. 69).

Similar ideas were expressed by Anderson even
earlier.[g] |XIII-670a||

### [6. Decrease in the Rate of Profit]

||XIII-670a| Calculated on
the total capital the [rate of] profit of the larger
capital, which employs more constant capital (machinery, raw
material) and relatively less living labour, will be lower
than that of the smaller [amount of] profit yielded by the
smaller capital employing more living labour in proportion
to the total capital. The [relative] decrease in
variable capital and the relative increase in constant
capital, although both parts are growing, is only another
expression for the increased productivity of
labour. |XIII-670a||

[a] See this volume,
p. 354 et seqq.—Ed.

[b] See this volume,
pp. 45-55.—Ed.

[c] Arbuthnot, the
author of the anonymous pamphlet.—Ed.

[d] See this
volume, p. 55 and Note 20.—Ed.

[e] The reference is
to the land which has been worked and
improved.—Ed.

[f] Carey wrote:
“from its use”.—Ed.

[g] See this volume,
pp. 144-45.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XIX] Thomas Robert Malthus

||XIII-753| The writings of Malthus
which have to be considered here are:

1) The Measure of Value Stated and Illustrated
etc., London, 1823.

2) Definitions in Political Economy etc., London,
1827 (as well as the same work published by John
Cazenove in London in 1853 with Cazenove’s “Notes
and Supplementary Remarks”).

3) Principles of Political Economy
etc., second ed., London, 1836 (first [edition] 1820 or
thereabout, to be looked up).

4) Also to be taken into consideration the following work
by a Malthusian (i.e., a Malthusian in contrast to the
Ricardians)—Outlines of Political Economy etc.,
London, 1832.

### [1. Malthus’s Confusion of the Categories Commodity and Capital]

In his Observations on the Effects of the Corn Laws
etc. (1814) Malthus still says the following about
Adam Smith:

“Adam Smith[a] was evidently led
into this train of argument from his habit of considering
labour” (that is, the value of labour)
“as the standard measure of value and corn as
the measure of labour… And that[b] neither labour nor
any other commodity can be an accurate measure of real value
in exchange, is now considered as one of the most
incontrovertible doctrines of political economy; and indeed
follows, […] from the very definition of value in
exchange” [pp. 11-12].

But in his Principles of Political Economy (1820),
Malthus borrows this “standard measure of value”
from Smith to use it

against Ricardo, though Smith himself never used it when
he was really analysing his subject matter. Malthus
himself, in his book on the Corn Laws already
referred to, adopted Smith’s other definition concerning the
determination of value by the quantity of capital
(accumulated labour) and (immediate) labour necessary for
the production of an article.

One cannot fail to recognise that both Malthus’s
Principles and the two other works mentioned, which
were intended to amplify certain aspects of the
Principles, were largely inspired by envy at the
success of Ricardo’s book and were an attempt by Malthus to
regain the leading position which he had attained by skilful
plagiarism before Ricardo’s book appeared. In
addition, Ricardo’s definition of value, though somewhat
abstract in its presentation, was directed against the
interests of the landlords and their retainers, which
Malthus represented even more directly than those of the
industrial bourgeoisie. At the same time, it cannot be
denied that Malthus presented a certain theoretical,
speculative interest. Nevertheless his opposition to
Ricardo—and the form this opposition assumed—was
possible only because Ricardo had got entangled in all kinds
of inconsistencies.

The points of departure for Malthus’s attack are, on the
one hand, the origin of surplus-value and [on the other] the
way in which Ricardo conceives the equalisation of
cost-prices in different spheres of the employment of
capital as a modification of the law of value itself [as
well as] his continual confusion of profit with
surplus-value (direct identification of one with the
other). Malthus does not unravel these contradictions
and quid pro quos but accepts them from Ricardo in
order to be able to overthrow the Ricardian law of value,
etc., by using this confusion and to draw conclusions
acceptable to his protectors.

The real contribution made by Malthus in his three books
is that he places the main emphasis on the unequal
exchange between capital and wage-labour, whereas Ricardo
does not actually explain how the exchange of commodities
according to the law of value (according to the labour-time
embodied in the commodities) gives rise to the unequal
exchange between capital and living labour, between a
definite amount of accumulated labour and a definite amount
of immediate labour, and therefore in fact leaves the origin
of surplus-value obscure (since he makes capital exchange
immediately for labour and not for labour power).
| Cazenove, one of
the few later disciples

of Malthus, realises this and says in his preface to
Definitions etc., mentioned above:

Interchange of commodities and Distribution
(wages, rent and profit) must be kept distinct from each
other … the Laws of Distribution are not altogether
dependent upon those relating to Interchange[c] ([T. R. Malthus, Definitions in
Political Economy, ed. by John Cazenove, London, 1853, ]
Preface, pp. vi and vii).

Here this can only mean that the relation of wages to
profit, the exchange of capital and wage-labour, of
accumulated labour and immediate labour, do not
directly coincide with the law of the interchange of
commodities.

If one considers the utilisation of money or
commodities as capital—that is, not their value but
their capitalist utilisation— it is clear that
surplus-value is nothing but the surplus of labour
(the unpaid labour) which is commanded by capital, i.e.,
which the commodity or money commands over and above the
quantity of labour it itself contains. In addition to
the quantity of labour it itself contains (equal to the sum
of labour contained in the elements of production of which
it is made up, plus the immediate labour which is added to
them), it buys a surplus of labour which it does not itself
embody. This surplus constitutes the surplus-value;
its size determines the rate of expansion of capital.
And this surplus quantity of living labour for which it is
exchanged is the source of profit. Profit (or rather
surplus-value) does not result from the exchange of an
amount of materialised labour for an equivalent amount of
living labour, but from the portion of living labour which
is appropriated in this exchange without an equivalent
payment in return, that is, from unpaid labour which capital
appropriates in this pseudo-exchange. If one
disregards how this process is mediated—and Malthus is
all the more justified in disregarding it as the
intermediate link is not mentioned by Ricardo—if one
considers only the factual content and the result of this
process, then production of surplus-value, profit,
transformation of money or commodities into capital, arises
not from the fact that commodities are exchanged according
to the law of value, namely, in proportion to the amount of
labour-time which they cost, but rather conversely, from the
fact that commodities or money (i.e., materialised labour)
are

exchanged for more living labour than is embodied
or worked up in them.

Malthus’s sole contribution in the books mentioned is the
emphasis he places on this point, which emerges all the less
sharply in Ricardo as Ricardo always presupposes the
finished product which is divided between the capitalist and
the worker without considering exchange, the intermediate
process which leads to this division. However, this
contribution is cancelled out by the fact that he confuses
the utilisation of money or the commodity as capital,
and hence its value in the specific function of
capital, with the value of the commodity as such;
consequently he falls back in his exposition, as we shall
see, on the fatuous conceptions of the Monetary System, on
profit upon expropriation, and gets completely entangled in
the most hopeless confusion. Thus Malthus, instead of
advancing beyond Ricardo, seeks to drag political economy
back to where it was before Ricardo, even to where it was
before Adam Smith and the Physiocrats.

“…in the same country, and at
the same time, the exchangeable value of those commodities
which can be resolved into labour and profits alone, would
be accurately measured by the quantity of labour which would
result from adding to the accumulated and immediate labour
actually worked up in them the[d] varying amount of the profits on all
the advances estimated in labour. But this must
necessarily be the same as the quantity of labour which they
will command” ([T. R. Malthus,] The Measure of
Value Stated and Illustrated, London, 1823,
pp. 15-16).

“… the labour which a
commodity would command”[e] [is] “a standard measure of
value” (op. cit., p. 61).

“… I had nowhere seen it
stated” (that is, before his own book The Measure
of Value appeared), “that the ordinary quantity
of labour which a commodity will command must represent
and measure the quantity of labour worked up in it,
with the addition of profits” ([T. R. Malthus,]
Definitions in Political Economy etc., London, 1827,
p. 196).

Mr. Malthus wants to include “profit”
directly in the definition of value, so that it
follows immediately from this definition, which is not the
case with Ricardo. This shows that he felt where the
difficulty lay.

Besides, it is particularly absurd that he declares the
value of the commodity and its
realisation as capital to be identical. When
commodities or money (in brief, materialised labour) are

exchanged as capital against living labour, they are
always exchanged against a | greater quantity of labour
than they contain. And if one compares the commodity
before this exchange on the one hand, with the product
resulting from this exchange with living labour on the
other, one finds that the commodity has been exchanged for
its own value (equivalent) plus a surplus over and above its
own value—the surplus-value. But it is therefore
absurd to say that the value of a commodity is equal to its
value plus a surplus over and above this value. If the
commodity, as a commodity, is exchanged for other
commodities and not as capital against living labour, then,
insofar as it is exchanged for an equivalent, it is
exchanged for the same quantity of materialised labour as is
embodied in it.

The only notable thing is therefore that according to
Malthus the profit exists already in the value of the
commodity and that it is clear to him that the commodity
always commands more labour than it embodies.

“…it is precisely because the
labour which a commodity will ordinarily command measures
the labour actually worked up in it with the addition of
profits, that it is justifiable to consider it”
(labour) “as a measure of value. If then the
ordinary value of a commodity be considered as
determined by the natural and necessary conditions of its
supply, it is certain that the labour which it will
ordinarily command is alone the measure of these
conditions”([T. R. Malthus,] Definitions in
Political Economy, London, 1827, p. 214).

“Elementary costs of
Production. An expression exactly equivalent to
the conditions […] of the supply”
(Definitions in Political Economy, ed. by John
Cazenove, London, 1853, p.14).

“Measure of the Conditions of
[…] the Supply […]. The quantity
of labour for which the commodity will exchange, when it is
in its natural and ordinary state” (loc. cit.,
p. 14).

“… the quantity of labour
which a commodity commands represents exactly the quantity
of labour worked up in it, with the profits upon the
advances, and does therefore really represent and measure
those natural and necessary conditions of the supply, those
elementary costs of production which determine
value…” (op. cit., p. 125).

“… the demand for a commodity,
though not proportioned to the quantity of any other
commodity which the purchaser is willing and able to give
for it, is really proportioned to the quantity of
labour which he will give for it; and for this reason:
the quantity of labour which a commodity will ordinarily
command, represents exactly the effectual demand for it;
because it represents exactly that quantity of labour and
profits united necessary to effect its supply; while
the actual quantity of labour which a commodity will
command when it differs from the ordinary quantity,
represents the excess or defect of demand arising from
temporary causes” (op. cit., p. 135).

Malthus is right in this also. The conditions of
supply, i.e., of the production or rather the
reproduction of a commodity on

the basis of capitalist production, are that it or its
value (the money into which it is transformed) is exchanged
in the process of its production or reproduction for more
labour than is embodied in it, for it is only produced in
order to realise a profit.

For example, a cotton manufacturer sells his
calico. The condition for the supply of new calico is
that he exchanges the money—the exchange-value of the
calico—for more labour in the process of the
reproduction of the calico than was embodied in it or than
is represented by the money. For the cotton
manufacturer produces calico as a capitalist. What he
wants to produce is not calico, but profit. The
production of calico is only a means for the production of
profit. But what follows from this? The calico
he produces contains more labour-time, more labour than was
contained in the calico advanced. This surplus
labour-time, this surplus-value, is also represented by a
surplus product, i.e., more calico than was exchanged
for labour. Therefore one part of the product does not
replace the calico exchanged for labour, but constitutes
surplus product which belongs to the manufacturer. Or,
if we consider the whole product, each yard of calico
contains an aliquot part, or its value contains an aliquot
part, for which no equivalent is paid; this represents
unpaid labour. If the manufacturer sells a yard
of calico at its value, that is, if he exchanges it for
money or for commodities which contain an equal amount of
labour-time, he realises a sum of money, or receives a
quantity of commodities which cost him nothing. For he
sells the calico not for the labour-time for which he has
paid, but for the labour-time embodied in the calico, and he
did not pay for part of this labour-time. | He receives, for example,
labour-time equal to 12 shillings, but he only paid 8
shillings of this amount. When he sells it at its
value, he sells it for 12 shillings, and thus gains 4
shillings.

### [2. Malthus’s Vulgarised View of Surplus-Value]

As far as the buyer is concerned, the assumption is that,
under all circumstances, he pays nothing but the
value of the calico. This means that he gives a sum of
money which contains as much labour-time [as] there is in
the calico. Three cases are possible. The buyer
is a capitalist. The money (i.e., the value of the
commodity) with which he pays, also contains a portion of
unpaid labour. Thus, if one person sells unpaid
labour, the other person buys with unpaid labour. Both
realise unpaid labour—One
as seller, the other as buyer. Or,
the buyer is an independent producer. In this case he
receives equivalent for equivalent. Whether the labour
which the seller sells him in the shape of commodities is
paid for or not, does not concern him. He receives as
much materialised labour as he gives. Or, finally, he
is a wage-worker. In this case also, like every other
buyer—provided the commodities are sold at their
value—he receives an equivalent for his money in the
shape of commodities. He receives as much materialised
labour in commodities as he gives in money. But for
the money which constitutes his wages he has given more
labour than is embodied in the money. He has replaced
the labour contained in it along with surplus labour which
he gives gratis. He paid for the money above its
value, and therefore also pays for the equivalent of the
money, the calico, etc., above its value. The cost for
him as purchaser is thus greater than it is for the seller
of any commodity although he receives an equivalent of the
money in the commodity; but in the money he did not receive
an equivalent of his labour; on the contrary, he gave more
than the equivalent in labour. Thus the worker is the
only one who pays for all commodities above their value even
when he buys them at their value, because he buys money, the
universal equivalent, above its value for labour.
Consequently, no gain accrues to those who sell commodities
to the worker. The worker does not pay the seller any
more than any other buyer, he pays the value of
labour. In fact, the capitalist who sells the
commodity produced by the worker back to him, realises a
profit on this sale, but only the same profit as he realises
on every other buyer. His profit—as far as this
worker is concerned—arises not from his having sold
the worker the commodity above its value, but from
his having previously bought it from the worker, as a matter
of fact in the production process, below its
value.

Now Mr. Malthus, who transformed the utilisation of
commodities as capital into the value of commodities, quite
consistently transforms all buyers into wage-workers, in
other words he makes them all exchange with the capitalist
not commodities, but immediate labour, and makes them all
give back to the capitalist more labour than the commodities
contain, while conversely, the capitalist’s profit
results from selling all the labour contained in the
commodities when he has paid for only a portion of
the labour contained in them. Therefore, whereas the
difficulty with Ricardo [arises from] the fact that the
law

of commodity exchange does not directly explain the
exchange between capital and wage-labour, but rather seems
to contradict it, Malthus solves the difficulty by
transforming the purchase (exchange) of commodities into an
exchange between capital and wage-labour. What Malthus
does not understand is the difference between the total sum
of labour contained in a particular commodity and the sum of
paid labour which is contained in it. It is precisely
this difference which constitutes the source of
profit. Further, Malthus inevitably arrives at the
point of deriving profit from the fact that the seller sells
his commodity not only above the amount it costs
him (and the capitalist does this), but above what
it costs; he thus reverts to the vulgarised
conception of profit upon expropriation and derives
surplus-value from the fact that the seller sells the
commodity above its value (i.e., for more labour-time
than is contained in it). What he thus gains as a
seller of a commodity, he loses as a buyer of another and it
is absolutely impossible to discover what profit is to be
made in reality from such a general nominal price
increase. | It is in
particular difficult to understand how society as a whole
can enrich itself in this way, how a real surplus-value or
surplus product can thus arise. An absurd, stupid
idea.

Relying on some propositions of Adam Smith—who, as
we have seen, naïvely expresses all sorts of
contradictory elements and thus becomes the source, the
starting-point, of diametrically opposed
conceptions—Mr. Malthus attempts in a confused way,
though on the basis of a correct surmise, and of the
realisation of the existence of an unsolved difficulty, to
counterpose a new theory to that of Ricardo and thus to
maintain a “front rank” position. The
transition from this attempt to the nonsensical, vulgarised
conceptions proceeds in the following way.

If we consider the utilisation of a commodity as
capital—that is, in its exchange for living,
productive labour—we see that it
commands—besides the labour-time it itself contains,
i.e., besides the equivalent reproduced by the
worker—surplus labour-time, which is the source of
profit. Now if we transfer this utilisation of the
commodity to its value, then each purchaser of a
commodity must act as if he were a worker, that is, in
buying it, besides the quantity of labour contained in the
commodity, he must give for it a surplus quantity of
labour. But since other purchasers, apart from the
workers, are not related to commodities as
workers <even when the worker appears as a mere purchaser,

the old, original difference persists indirectly,
as we have seen>, it must be assumed that although they
do not directly give more labour than is contained in the
commodities, they give a value which contains more labour,
and this amounts to the same thing. It is by means of
this [quantity] of “surplus labour, or, what amounts
to the same thing, the value of more labour”, that the
transition is made. In fact, it comes to this: the
value of a commodity consists of the value paid for it by
the purchaser, and this value is equal to the equivalent
(the value) of the commodity plus a surplus over and above
this value, surplus-value. Thus we have the vulgarised
view that profit consists in a commodity being sold more
dearly than it was bought. The purchaser buys it
for more labour or for more materialised labour than it
costs the seller.

But if the purchaser is himself a capitalist, a seller of
commodities, and his money, his means of purchase,
represents only goods which have been sold, then it follows
that both have sold their goods too dearly and are
consequently swindling each other, moreover they are
swindling each other to the same extent, provided they both
merely secure the average rate of profit. Where are the
buyers to come from who will pay the capitalist the quantity
of labour equal to that contained in his commodity plus his
profit? For example, the commodity costs the seller 10
shillings. He sells it for 12 shillings. He thus
commands labour not to the value of 10s. only, but of
2s. more.
But the buyer also sells his commodity, which cost
l0s., for 12s. So that each loses as a buyer what he gained
as a seller.
The only exception is the working class.
For
since the price of the product is increased beyond its cost,
they can only buy back a part of that product, and thus
another part of the product, or the price of another part of
the product, constitutes profit for the capitalist.
But as
profit arises precisely from the fact that the workers can
only buy back part of the product, the capitalist (the
capitalist class) can never realise his profit as a result
of demand from the workers, he cannot realise it by
exchanging the whole product against the workers’ wage, but
rather by exchanging the whole of the workers’ wage
against only part of the product.
Additional demand and
additional buyers apart from the workers themselves are
therefore necessary, otherwise there could not be any
profit.
Where do they come from?
If they themselves are
capitalists, sellers, then the mutual swindling within the
capitalist class mentioned earlier occurs, since they
mutually

raise the nominal prices of their commodities and each
gains as a seller what he loses as a buyer. What is
required therefore are buyers who are not
sellers, so that the capitalist can realise his profit
and sell his commodities “at their value”.
Hence the necessity for landlords, pensioners, sinecurists,
priests, etc., not to forget their menial servants and
retainers. How these “purchasers” come
into possession of their means of purchase | , how they must first take
part of the product from the capitalists without giving any
equivalent in order to buy back less than an equivalent with
the means thus obtained, Mr. Malthus does not explain.
At any rate, what follows from this is his plea for the
greatest possible increase in the unproductive classes in
order that the sellers may find a market, a demand for the
goods they supply. And so it turns out further that
the author of the pamphlet on population preaches continuous
over-consumption and the maximum possible appropriation of
the annual product by idlers, as a condition of
production. In addition to the plea arising inevitably
out of this theory, comes the argument that capital
represents the drive for abstract wealth, the drive to
expand its value, which can only be put into effect by
means of a class of buyers representing the drive to
spend, to consume, to squander, namely, the unproductive
classes, who are buyers without being sellers.

### [3. The Row Between the Supporters of Malthus and Ricardo in the Twenties of the 19th Century. Common Features in Their Attitude to the Working Class]

There developed on this basis a fine old row between the
Malthusians and the Ricardians in the 20s (from 1820 to 1830
was in general the great metaphysical period in English
political economy). Like the Malthusians, the Ricardians
deem it necessary that the worker should not himself
appropriate his product, but that part of it should go to
the capitalist, in order that the worker should have an
incentive for production, and that the development of
wealth should thus be ensured. But they rage against
the view of the Malthusians that landlords, state and church
sinecurists and a whole lot of idle retainers must first lay
hold—without any equivalent—of a part of the
capitalist’s product (just as the capitalist does in respect
of the workers) therewith to buy their own goods from the
capitalist with a profit for the latter, although this is
exactly what the Ricardians

affirm with regard to the workers. In order that
accumulation may increase and with it the demand for labour,
the worker must relinquish as much of his product as
possible gratis to the capitalist, so that the latter can
transform the net revenue, which has been increased in this
way, back again into capital. The same sort [of
argument is used by] the Malthusians. As much as
possible should be taken away gratis from the industrial
capitalists in the form of rent, taxes, etc., to enable them
to sell what remains to their involuntary
“shareholders” at a profit. The worker
must not be allowed to appropriate his own product,
otherwise he would lose the incentive to work, say the
Ricardians along with the Malthusians. The industrial
capitalist [the Malthusians say] must relinquish a portion
of his product to the classes which only
consume—fruges consumere nati[f]—in order that these in turn
may exchange it again, on unfavourable terms, with the
capitalist. Otherwise the capitalist would lose the
incentive for production, which consists precisely in the
fact that he makes a big profit, that he sells his goods far
above their value. We shall return to this comic
struggle later.

### [4. Malthus’s One-sided Interpretation of Smith’s Theory of Value. His Use of Smith’s Mistaken Theses in His Polemic Against Ricardo]

First of all, some evidence showing that Malthus arrives
at a very common conception:

“Whatever may be the number of
intermediate acts of barter which may take place in regard
to commodities—whether the producers send them to
China, or sell them in the place where they are produced:
the question as to an adequate market for them, depends
exclusively upon whether the producers can replace their
capitals with ordinary profits, so as to enable them
successfully to go on with their business. But what are
their capitals? They are, as Adam Smith states, the
tools to work with, the materials to work upon, and the
means of commanding the necessary quantity of labour”
[Definitions in Political Economy, ed. by Cazenove,
London, 1853, p. 70].

(And this, he affirms, is all the labour worked up in the
commodity. Profit is a surplus over and above the
labour expended in the production of the commodity. In
fact, therefore, a nominal surcharge over and above the cost
of the commodity.) And in order that there may remain no
doubt about his meaning,

he quotes Colonel Torrens’s On the Production of
Wealth (Chap. VI, p. 349) approvingly as confirming his
own views:

“… effectual demand consists
in the power and inclination, on the part of
consumers” <the antithesis of buyers and
sellers becomes that of consumers and producers>, | “to give for
commodities, either by immediate or circuitous barter, some
greater proportion of all ingredients of capital than their
production costs” ([R. Torrens, An Essay on the
Production of Wealth… London, 1821, p. 349,
quoted by T. R. Malthus:] loc. cit., pp. 70-71).

And Mr. Cazenove himself, the publisher of, apologist for
and commentator on the Malthusian Definitions,
says:

“Profit does not depend on the
proportion in which commodities are exchanged with each
other”

<for if commodity exchange between capitalists alone
were taken into account, the Malthusian theory, insofar as
it does not speak of exchange with workers, who have
no other commodity apart from their labour to
exchange with the capitalist, would appear nonsensical
[since profit would be] merely a reciprocal surcharge, a
nominal surcharge on the prices of their
commodities. Commodity exchange must therefore be
disregarded and people who produce no commodities
must exchange money>

“… (seeing that the same
proportion may be maintained under every variety of profit)
but upon the proportion which goes to wages, or is
required to cover the prime cost, and which is in all cases
determined by the degree in which the sacrifice made by
the purchaser (or the labour’s worth which he
gives) in order to acquire a commodity, exceeds that
made by the producer, in order to bring it to
market” (op. cit., p. 46).

In order to achieve these wonderful results, Malthus has
to make some very great theoretical preparations. First of
all, seizing on that side of Adam Smith’s theory according
to which the value of a commodity is equal to the quantity
of labour which it commands, or by which it is commanded, or
against which it exchanges, he must cast aside all the
objections raised by Adam Smith himself, by his followers
and also by Malthus, to the effect that the value of
a commodity—value [in general]— can be the
measure of value.

The Measure of Value Stated and Illustrated
(London, 1823) is a real example of feeble-minded thought,
which winds its way in a casuistical and self-stupefying
manner through its own inner confusion, and whose difficult,
clumsy style leaves

the unprejudiced and incompetent reader with the
impression that the difficulty of making sense out of the
confusion does not lie in the contradiction between
confusion and clarity, but in a lack of understanding on the
part of the reader.

Malthus has first of all to obliterate Ricardo’s
differentiation between “value of labour” and
“quantity of labour” and to reduce Smith’s
juxtaposition of the two to the one false aspect.

“… any given quantity of
labour must be of the same value as the wages
which command it, or for which it actually exchanges”
(The Measure of Value Stated and Illustrated, London,
1823, p. 5).

The purpose of this phrase is to equate the expressions
“quantity of labour” and “value
of labour”.

This phrase itself is a mere tautology, an absurd
truism. Since wages or that “for which
it” (i.e., a quantity of labour)
“exchanges” constitute the value of this
quantity of labour, it is tautologous to say: the
value of a certain quantity of labour is equal to the
wages or to the amount of money or commodities for which
this labour exchanges. In other words, this means
nothing more than: the exchange-value of a definite quantity
of labour is equal to its exchange-value—otherwise
called wages. But (apart from the fact that it is not
labour, but labour-power, which exchanges directly for
wages; it is this confusion that makes the nonsense
possible) it by no means follows from this that a definite
quantity of labour is equal to the quantity of labour
embodied in the wages, or in the money or the goods which
represent the wages. If a labourer works for 12 hours
and receives the product of 6 hours labour as wages, then
the product of the 6 hours constitutes the value of
12 hours labour (because the wages [represent] the
exchangeable commodity for [12 hours labour]). It does
not follow from this that 6 hours of labour are equal to 12
hours, or that the commodities in which 6 hours of labour
are embodied [are] equal to the commodities in which 12
hours of labour are embodied. It does not follow that
the value of wages is equal to the value of the product in
which the labour is embodied. It follows only that the
value of labour (because it is measured by the value of the
labour-power, not by the labour carried out), the | value of a given quantity of
labour contains less labour than it buys; that,
consequently, the value of the commodities in which
this purchased labour is embodied, is very different from
the value of the commodities

with which this given quantity of labour was purchased,
or by which it was commanded.

Mr. Malthus draws the opposite conclusion. Since
the value of a given quantity of labour is equal to
its value, it follows, according to him, that the value in
which this quantity of labour is embodied is equal to the
value of the wages. It follows further from this that
the immediate labour (that is, disregarding the means of
production) which is absorbed by and contained in a
commodity, creates no greater value than that which is paid
for it; [that it] only reproduces the value of the
wages. The necessary consequence ensuing from this is
that profit cannot be explained if the value of commodities
is determined by the amount of labour embodied in them, but
must rather be explained in some other way; provided the
profit a commodity realises is to be included in the value
of that commodity. For the labour worked up in a
commodity consists 1) of the labour contained in the
machinery, etc., used, which consequently reappears in the
value of the product; 2) of the labour contained in the raw
material used up. The amount of labour contained in
these two elements before the new commodity is produced is
obviously not increased merely because they become
production elements of a new commodity. There remains
therefore 3), the labour embodied in the wages which is
exchanged for living labour. However, according to
Malthus, this latter is not greater than the materialised
labour against which it is exchanged. Hence, a
commodity contains no portion of unpaid labour but only
labour which replaces an equivalent. Hence it follows
that if the value of a commodity were determined by the
amount of labour embodied in it, it would yield no
profit. If it does yield a profit, then this profit is
a surplus in the price over and above the labour
embodied in the commodity. Therefore, in order to be
sold at its value (which includes the profit), a commodity
must command a quantity of labour equal to the quantity of
labour worked up in itself plus a surplus of labour
representing the profit realised in the sale of the
commodity.

### [5. Smith’s Thesis of the Invariable Value of Labour as Interpreted by Malthus]

Moreover, in order to make labour, not the
quantity of labour required for production, but labour as a
commodity, serve as a measure of value, Malthus asserts

“…the constant value of
labour(The measure of Value, p.29, note).

<There is nothing original in this; it is a mere
paraphrase and further elaboration of a passage of Adam
Smith’s (l. I, ch. V, [Recherches sur la nature et
les causes de la richesse des nations,] éd. Garnier,
t, I, [Paris, 1802,] pp. 65-66).

“Equal quantities of labour, at all
times and places, may be said to be of equal value to the
labourer. In his ordinary state of health, strength, and
spirits; in the ordinary degree of his skill and dexterity,
he must always lay down the same portion of his ease, his
liberty, and his happiness. The price which he pays
must always be the same, whatever may be the quantity of
goods which he receives in return for it. Of these,
indeed, it may sometimes purchase a greater and sometimes a
smaller quantity; but it is their value which varies, not
that of the labour which purchases them. At all times
and places, that is dear which it is difficult to
come at, or which it costs much labour to acquire; and that
cheap which is to be had easily, or with very little
labour. Labour alone, therefore, never varying in its
own value, is alone the ultimate and real standard by which
the value of all commodities can at all times and places be
estimated and compared.”> [Wealth of
Nations, Vol. I, p. 36.][g]

<Further, Malthus’s discovery—of which he is
very proud and which he claims he was the first to
make—namely, that value is equal to the quantity of
labour embodied in a commodity plus a quantity of labour
which represents the profit; [this discovery] seems likewise
to be quite simply a combination of two sentences from
Smith. (Malthus never escapes plagiarism.)

“The real value of all the different
component parts of price, it must be observed, is measured
by the quantity of labour which they can, each of them,
purchase or command. Labour measures the value, not only of
that part of the price which resolves itself into
labour, but of that which resolves itself into
rent, and of that which resolves itself into
profit” ( [Wealth of Nations, O.U.P.,
p. 55; Garnier,] t. I, l. I, ch. VI, p. 100).>

| Malthus writes in
this context:

“In the former case of[h] the demand for labour,
it appeared that the greater earnings of the labourer were
occasioned,[i] not by a
rise in the value of labour but by a fall in the value of
the produce for which the labour was exchanged. And in the
[…] case of an abundance of labour […] the
small earnings of the labourer were occasioned by a rise in
the value of the produce, and not by a fall in the value of
[…] labour” (The Measure of Value,
[London, 1823,] p. 35) (cf. pp. 33-35).

Bailey ridicules most excellently Malthus’s proof
that the value of labour is constant (Malthus’s
further demonstration, not that of Smith; [and] in general
the sentence [about] the invariable value of labour):

“In the same way any article might be
proved to be of invariable value; for instance, 10 yards of
cloth. For whether we gave £5 or £10 for the 10 yards,
the sum given would always be equal in value to the cloth
for which it was paid, or, in other words, of invariable
value in relation to cloth. But that which is given
for a thing of invariable value, must itself be invariable,
whence the 10 yards of cloth must be of invariable value
… it is just the same kind of futility to call wages
invariable in value, because though variable in quantity
they command the same portion of labour, as to call the
sum given for a hat, of invariable value, because,
although sometimes more and sometimes less, it always
purchases the hat” ([Samuel Bailey,] A Critical
Dissertation on the Nature, Measures, and Causes of
Value… , London, 1825, pp. 145-47).

In the same work, Bailey bitingly derides the insipid,
impressive-sounding tables with which Malthus
“illustrates” his measure of value.

In his Definitions in Political Economy (London,
1827), in which Malthus gives full vent to his annoyance
over Bailey’s sarcasm, he seeks, amongst other things, to
prove the invariable value of labour, as follows:

“… there is one[j] large class of
commodities, such as raw products, which in the progress of
society tends to rise[k] as compared with labour […]
such as[l]
manufactured articles, […] fall; it may not be far
from […] truth to say, that […] the average
mass of commodities which a given quantity of labour will
command in the same country, during the course of some
centuries, may not very essentially vary”
(Definitions in Political Economy…
London, 1827, p. 206).

Malthus’s proof that a rise in the money price of labour
must lead to an all-round rise in the money price of
commodities is of just the same quality as his proof of the
invariable value of labour:

“… if the money wages of
labour universally rise, the value of money proportionally
falls; and when the value of money falls … the prices
of goods always rise” (op. cit., p. 34).

It has to be proved that, when the value of money
compared with labour falls, then the value of all
commodities compared

with money rises, or that the value of money, not
estimated in labour, but in the other commodities,
falls. And Malthus proves this by presupposing it.

### [6. Malthus’s Use of the Ricardian Theses of the Modification of the Law of Value in His Struggle Against the Labour Theory of Value]

Malthus bases his polemic against Ricardo’s
definition of value entirely on the principles advanced by
Ricardo himself, to the effect that variations[m] in the exchangeable
values of commodities, independent of the labour worked up
in them, are produced by the different composition of
capital as resulting from the process of
circulation—different proportions of circulating and
fixed capital, different degrees of durability in the fixed
capitals employed, different returns of circulating
capitals. In short, on Ricardo’s confusing cost-price with
value and regarding the equalisation of cost-prices, which
are independent of the mass of labour employed in the
particular spheres of production, as modifications of value
itself, thereby throwing the whole principle
overboard. Malthus seizes on these contradictions in
the determination of value by
labour-time—contradictions that were first discovered
and emphasised by Ricardo himself— not in order to
solve them but in order to relapse into quite meaningless
conceptions and to pass off the mere formulation of
contradictory phenomena, their expression in speech, as
their solution. We shall see the same method employed
during the decline of the Ricardian school, i.e., by [James]
Mill and McCulloch, who, in order to reason the
contradictory phenomena out of existence, seek to bring them
into direct conformity with the general law by gabble, by
scholastic and absurd definitions and distinctions, with the
result, by the way, that the foundation itself vanishes.

The passages in which Malthus uses the material provided
by Ricardo against the law of value, and turns it against
him, are the following:

“It is observed by Adam Smith that
corn is an annual crop, butchers’ meat a crop which requires
four or five years to grow; and consequently, if we compare
two quantities of corn and beef which are of equal
exchangeable value, it is certain that a difference of three
or four additional years profit

at fifteen per cent upon the capital employed in the
production of the beef would, exclusively of any other
considerations, make up in value for a much smaller quantity
of labour, | and thus we
might have two commodities of the same exchangeable value,
while the accumulated and immediate labour of the one was
forty or fifty per cent less than that of the other. This is
an event of daily occurrence in reference to a vast mass of
the most important commodities in the country; and if
profits were to fall from fifteen per cent to eight per
cent, the value of beef compared with corn would fall above
twenty per cent” (The Measure of Value,
pp. 10-11).

Since capital consists of commodities, and a large
proportion of the commodities which enter into it or
constitute it have a price (or exchange-value in the
ordinary sense) which consists neither of accumulated nor of
immediate labour, but—insofar as we are discussing
only this particular commodity—of a purely nominal
increase in the value caused by the addition of the average
profit, Malthus says:

“… labour is not the only
element worked up in capital” (Definitions
etc., ed. by John Cazenove, p. 29).

“… what are the costs of
production? … the quantity of labour in kind
required to be worked up in the commodity, and in the
tools and materials consumed in its production with such
on additional quantity as is equivalent to the ordinary
profits upon the advances for the time that they have been
advanced” (op. cit., pp. 74-75).

“On the same grounds Mr. Mill is
quite incorrect, in calling capital hoarded labour. It
may, perhaps, be called hoarded labour and profits;
but certainly not hoarded labour alone, unless we determine
to call profits labour” (op. cit., pp. 60-61).

“To say that the values of
commodities are regulated or determined by the quantity of
Labour and Capital necessary to produce them, is essentially
false. To say that they are regulated by the quantity of
Labour and Profits necessary to produce them, is
essentially true” (op. cit., p. 129).

In this connection Cazenove adds a note on
p. 130:

“The expression Labour and Profits is
liable to this objection, that the two are not correlative
terms,—labour being an agent and profits a result; the
one a cause, the other a consequence. On this account Mr.
Senior has substituted for it the expression Labour
and Abstinence… It must be acknowledged,
indeed, that it is not the abstinence, but the use of
the capital productively, which is the cause of
profits” (according to Senior: “He who converts
his revenue into capital, abstains from the enjoyment
which its expenditure would afford him”).

Marvellous explanation. The value of the commodity
consists of the labour contained in it plus profit; [i.e.]
of the labour contained in it and the labour not contained
in it, but which must be paid for.

Malthus continues his polemic against Ricardo:

Ricardo’s “proposition, that as the value of wages
rises profits proportionably fall, cannot be true, except[n] on the assumption
that commodities, which have the same quantity of labour
worked up in them, are always of the same value, an
assumption which probably will not be found to be true[o] in one case out of
five hundred; and […] from that […] necessary
state of things, which,[p] in the progress of civilisation and
improvement, tends continually to increase the quantity of
fixed capital employed, and to render more various and
unequal the times of the returns of the circulating
capital” (Definitions etc., pp. 31-32).

(The same point is made on pp. 53-54 in Cazenove’s
edition where Malthus actually says:

“…that[q] natural […] state of things,
falsifies Ricardo’s measure of value because this state
“… in the progress of civilisation and
improvement, tends continually to increase the quantity of
fixed capital employed, and to render more various and
unequal the times of the returns of the circulating
capital”.)

“Mr. Ricardo […] himself
admits of considerable exceptions to his rule; but if we
examine the classes which come under his exceptions, that
is, where the quantities of fixed capital employed are
different and of different degrees of duration, and where
the periods of the returns of the circulating capital
employed are not the same, we shall find that they are so
numerous, that the rule may be considered as the exception,
and the exceptions the rule” (op. cit., p. 50).

### [7. Malthus’s Vulgarised Definition of Value. His View of Profit as Something Added to the Price. His Polemic Against Ricardo’s Conception of the Relative Wages of Labour]

In accordance with what has been said above, Malthus also
declared value to be:

“The estimation in which a commodity
is held, founded upon its cost to the purchaser or
the sacrifice which he must make in order to acquire
it, which sacrifice is measured by the quantity of labour
that he gives in exchange for it, or what comes to the some
thing, by the labour which it will command”
(op. cit., pp. 8-9).

Cazenove also emphasises as a difference between Malthus
and Ricardo:

“Mr. Ricardo has, with Adam Smith, adopted labour as
the true standard of cost; but he has applied it to
producing cost only… it is equally
applicable as a measure of cost to the
purchaser…” (op. cit., pp. 56-57).

In other words: the value of a commodity is equal to the
sum of money which the purchaser must pay, and this sum is
best estimated in terms of the amount of ordinary labour
which can be bought with it.* But what determines the sum of money
is, naturally, not explained. It is the quite ordinary
idea of the matter that is prevalent in everyday life.
A mere triviality expressed in high-flown language. In
other words, it means nothing more than that
cost-price and value are identical, a
confusion which, in the case of Adam Smith, and still more
in the case of Ricardo, contradicts their real analysis, but
which Malthus elevates into a law. It is the
conception of value held by the philistine who, being a
captive of competition, only knows the outward appearance of
value. What then determines the cost-price? The
capital outlay plus profit. And what determines
profit? Where do the funds for the profit come from,
where does the surplus product in which the surplus-value
manifests itself come from? If it is simply a matter
of a nominal increase of the money price, then nothing is
easier than to increase the value of commodities. And
what determines the value of the capital outlay? The
value of the labour contained in it, says
Malthus. And what determines this? The
value of the commodities on which the wages are
spent. And the value of these commodities? The
value of the labour plus profit. And so we keep going
round and round in a circle. Granting that the worker
is in fact paid the value of his labour, that is, that the
commodities (or sum of money) which constitute his wages are
equal to the value of the commodities (or sum of money) in
which his labour is realised, so that if he receives 100
thaler in wages he also adds only 100 thaler of value to the
raw material, etc.—in short, to the capital
outlay—then profit can only arise from a surcharge
added by the seller over and above the real value of
the commodity. All sellers do this. Thus,
insofar as capitalists engage in exchange amongst
themselves, nobody gains from this surcharge, and least of
all is a surplus fund thus produced from which they can draw
their revenue. Only the capitalists whose commodities
are consumed by the working class will make a real and not
an imaginary profit, by selling commodities back again to
the workers at a higher price than they paid the workers
for

them. The commodities for which they paid the
workers 100 thaler will be sold back again to them for 110
thaler. That means that they will only sell
10/11 of the product back to the
workers and retain 1/11 for
themselves. But what else does that mean but that the
worker who, for example, works for 11 hours, gets paid for
only 10 hours; that he is given the product of only 10
hours, while the capitalist receives one hour or the product
of one hour without giving any equivalent. And what
does it mean but that profit—as far as the working
class is concerned—is made by their working for the
capitalists for nothing part of the time, that
therefore “the quantity of labour” does
not come to the same as “the value of
labour”. The other capitalists however would
only he making an imaginary profit, since they would not
have this expedient.

How little Malthus understood Ricardo’s first
propositions, how completely he failed to comprehend that a
profit is possible in other ways than by means of a
surcharge is shown conclusively by the following
passage:

“Allowing that the first commodities,
if completed and brought into use immediately, might be the
result of pure labour, and that their value would therefore
be determined by the quantity of that labour; yet it is
quite impossible that such commodities should be employed
as capital to assist in the production of other
commodities, without the capitalist being deprived of the
use of his advances for a certain period, and requiring a
remuneration in the shape of profits.

In the early periods of society, on account of the
comparative scarcity of these advances of labour, this
remuneration would be high, and would affect the value of
such commodities to a considerable degree, owing to the high
rate of profits. In the more advanced stages of
society, the value of capital and commodities is largely
affected by profits, on account of the greatly increased
quantity of fixed capital employed, and the greater length
of time for which much of the circulating capital is
advanced before the capitalist is repaid by the
returns. In both cases, the rate at which
commodities exchange with each other, is essentially
affected by the varying amount of profits”
(Definitions etc., ed. by Cazenove, p. 60).

The concept of relative wages is one of Ricardo’s
greatest contributions. It consists in this—that
the value of the wages (and consequently of the
profit) depends absolutely on the proportion of that
part of the working-day during which the worker works for
himself (producing or reproducing his wage) to that part
of his time which belongs to the capitalist. This is
important economically, in fact it is only another way of
expressing the real theory of surplus-value. It is
important further in

regard to the social relationship between the two | classes. Malthus smells
a rat and is therefore constrained to protest.

“No writer that I have met with,
anterior to Mr. Ricardo, ever used the term wages, or
real wages, as implying proportions.”

(Ricardo speaks of the value of wages, which is
indeed also presented as the part of the product accruing to
the worker.)

Profits, indeed, imply proportions; and the
rate of profits has always justly been estimated by a
percentage upon the value of the advances.“

<What Malthus understands by value of advances
is very hard, and for him even impossible, to say.
According to him, the value of a commodity is equal to the
advances contained in it plus profit. Since the
advances, apart from the immediate labour, also consist of
commodities, the value of the advances is equal to the
advances in them plus profit. Profit thus equals
profit upon the advances plus profit. And so on, ad
infinitum.>

“But wages had uniformly been
considered as rising or falling, not according to any
proportion which they might bear to the whole produce
obtained by a certain quantity of labour, but by the greater
or smaller quantity of any particular produce received by
the labourer, or by the greater or smaller power which such
produce would convey, of commanding the necessaries and
conveniences of life” (Definitions etc.,
London, 1827, pp. 29-30).

Since the production of exchange-value—the
increase of exchange-value—is the immediate aim of
capitalist production, it is important [to know] how to
measure it. Since the value of the capital advanced is
expressed in money (real money or money of account), the
rate of increase is measured by the amount of capital
itself, and a capital (a sum of money) of a certain
size—100—is taken as a standard.

“Profits of stock,”[r] says Malthus,
“… consist of the difference between the value
of the capital advanced, and the value of the commodity when
sold or used” (op. cit., pp. 240-41).

### [8. Malthus on Productive Labour and Accumulation]

### [a)] Productive and Unproductive Labour

“… Revenue […] is
expended with a view to immediate support and enjoyment, and
[…] capital […] is expended with a view to
profit” (op. cit., p. 86).

A labourer and a menial servant are “two
instruments […] used for purposes distinctly
different, one to assist in obtaining wealth, the other to
assist in consuming it” (op. cit., p. 94).

The following is a good definition
of the productive labourer.

The productive labourer directly “increases[s] his master’s
wealth” (Principles of Political Economy, [second
ed., London, 1836], p. 47, note).

In addition the following passage should be noted.

“The only productive consumption,
properly so called, is the consumption or[t] destruction of wealth by
capitalists with a view to reproduction… The
workman whom the capitalist employs certainly consumes that
part of his wages which he does not save, as revenue, with a
view to subsistence and enjoyment; and not as capital, with
a view to production. He is a productive consumer
to the person who employs him and to the state, but
not, strictly speaking to himself” (Definitions,
ed. by Cazenove, p. 30).

### [b)] Accumulation

“No political economist of the
present day can by saving mean mere hoarding; and
beyond this contracted and inefficient proceeding, no use of
the term in reference to the national wealth can well be
imagined, but that which must arise from a different
application of what is saved, founded upon a real
distinction between the different kinds of labour maintained
by it” (Principles of Political Economy,
[London, 1836,] pp. 38-39).

“Accumulation of
Capital. The employment of a portion of revenue as
capital. Capital may therefore increase without an
increase of stock or wealth” (Definitions,
ed. by Cazenove, p. 11).

“Prudential habits with regard to
marriage carried to a considerable extent, among the
labouring classes of a country mainly depending upon
manufactures and commerce, might injure it”
(Principles of Political Economy, [London, 1836,]
p. 215).

This from the preacher of checks against
over-population.

“It is the want of necessaries
which mainly stimulates the labouring classes to produce
luxuries; and were this stimulus removed or greatly
weakened, so that the necessaries of life could be obtained
with very little labour, instead of more time being devoted
to the production of conveniences, there is every reason to
think that less time would be so devoted” (op. cit.,
p. 334).

Most important for the exponent of the over-population
theory, however, is this passage:

“… from the nature of a
population, an increase of labourers cannot be brought into
the market, in consequence of a particular demand, till
after the lapse of sixteen or eighteen years, and the
conversion of revenue into capital by saving, may take place
much more rapidly; a country is always liable to
an increase in the quantity of the funds for the
maintenance of labour faster than the increase of
population” (op. cit., pp. 319-20).

| Cazenove
rightly remarks:

“When capital is employed in
advancing to the workman his wages, it adds nothing to
the funds for the maintenance of labour, but simply
consists in the application of a certain portion of
[…] funds already in existence, to[u] the purposes of production”
(Definitions, ed. by Cazenove, p. 22, note).

### [9.] Constant and Variable Capital [According to Malthus]

“Accumulated
labour”. (It should really be called
materialised labour, objectified labour.) “The[v] labour worked up in
the raw materials and tools applied to the production of
other commodities” (op. cit., p. 13).

In speaking of the labour worked up in commodities
“… the labour worked up in the capital
necessary to their production were[w] designated by the term
accumulated labour, as contra-distinguished from the
immediate labour employed by the last
capitalist” (op. cit., pp. 28-29).

It is indeed very important to make this
distinction. In Malthus, however, it leads to
nothing.

He does make an attempt to reduce the surplus-value or at
least its rate (which, by the way, he always confuses with
profit and rate of profit) to its relation to variable
capital, that part of capital which is expended on
immediate labour. This attempt, however, is
childish and could not be otherwise in view of his
conception of value. In his Principles of Political
Economy [second ed,], he says:

Supposing that the capital is expended only on wages,
[if] “… a hundred pounds [is] expended in
immediate labour, […] the returns come in at the end
of the year […] £110, £120, or £130, it is evident
that in each case the profits will be determined by the
proportion of the value of the whole produce which is
required to pay the labour employed. If the value
of the produce in [the] market be £110, the proportion
required to pay the labourers will be[x] 10/11 of the
value of the produce, and profits will be ten per
cent. If the value of the produce be £120, the
proportion required to pay the labour employed will bed
10/12, and profits will be twenty per
cent. If […] £130, the proportion required to
pay the labour advanced will be 10/13,
and profits will be thirty per cent.” [Principles
of Political Economy, London, 1836, p. 267.] Supposing
that “… the advances of the capitalist do not
consist of labour alone […] the capitalist
[…] expects an equal profit upon all the parts of
the capital which he advances. Let us suppose that
a certain portion of the value of his advances, one-fourth
for instance, consists of the wages of immediate labour,
and[y] three-fourths
consist of accumulated

labour and profits, with any additions which may arise
from rents, taxes or[z] other outgoings […] it will
be[aa] strictly true
that the profits of the capitalist will vary with the
varying value of this one-fourth of the[bb] produce compared with the quantity
of labour employed […] a farmer[cc] employs in the cultivation
[…]£2,000, £1,500 of which […] in seed, keep
of horses, wear and tear of his fixed capital, interest upon
his fixed and circulating capitals, rents, tithes, taxes,
etc. and £500 upon immediate labour, and […] the
returns […] at the end of the year are worth[dd] £2,400 […]
the farmer’s profit will be £400, or twenty per cent.[ee] And it is
equally obvious that if we took one-fourth of the value
of the produce, namely £600, and compared it with the amount
paid in the wages of immediate labour, the result would shew
exactly the same rate of profits” (loc. cit.,
pp. 267-68).

Here Malthus lapses into Lord Dundrearyism. What he
wants to do (he has an inkling that surplus-value, hence
profit, has a definite relation to variable capital, the
portion of capital expended on wages) is to show that
“profits” are “determined by the
proportion of the value of the whole produce which is
required to pay the labour employed” [loc. cit.,
p. 267]. He begins correctly insofar as he assumes
that the whole of the capital consists of variable capital,
capital expended on wages. In this case, profit and
surplus-value are in fact identical. But even in this
case he confines himself to a very silly reflection.
If the capital expended equals 100 and the profit is 10 per
cent, the value of the product is, accordingly, 110 and the
profit is 1/10 of the capital expended
(hence 10 per cent if calculated on the capital), and
1/11 of the value of the total
product, in the value of which its own value is
included. Thus profit constitutes
1/11 of the value of the total product
and the capital expended forms 10/11
of this value. In relation to the total, 10 per cent
profit can be so expressed that the part of the value of the
total product which is not made up of profit amounts to
10/11 of the total product; or, a
product of 110 which includes 10 per cent profit consists of
10/11 outlay, on which the profit is
made. This brilliant mathematical effort amuses him so
much that he repeats the same calculation using a profit of
20 per cent, 30 per cent, etc. But so far we have
merely a tautology. The profit is a percentage on the
capital expended, the value of the total Product

includes the value of the profit and the capital
expended | is the value of
the total product minus the value of the profit. Thus
110-10=100. And 100 is 10/11 of
110. But let us proceed.

Let us assume a capital consisting not merely of variable
but also of constant capital. “… the
capitalist […] expects an equal profit upon all the
parts of the capital which he advances.” This however
contradicts the proposition advanced above that profit (it
should be called surplus-value) is determined by the
proportion of the capital expended on wages. But never
mind. Malthus is not the man to contradict either the
“expectations” or the notions of “the
capitalists”. But now comes his tour de
force. Assume a capital of £2,000, three-quarters
of which, or £1,500, is constant capital, one-quarter, or
£500, is variable capital. The profit amounts to 20
per cent. Thus the profit equals £400 and the value of
the product is £2,000 plus £400 =£2,400. But what
about Mr. Malthus’s calculation? If one takes a
quarter of the total product, it amounts to 600; a quarter
of the capital expended is equal to 500, which is equal to
the portion expended on wages; and 100, a quarter of the
profit, which equals that part of the profit falling to this
amount of wages. And this is supposed to prove that
“the profits of the capitalist will vary with the
varying value of this one-fourth of the[ff] produce compared with the quantity
of labour employed”. It proves nothing more than
that a profit of a given percentage, e.g. of 20 per cent, on
a given capital—say of £4,000— yields a profit
of 20 per cent on each aliquot part of the capital, that is
a tautology, But it proves absolutely nothing about a
definite, special, distinguishing relationship of
this profit to the part of the capital expended on
wages. If, instead of [1/4]
taken by Mr. Malthus, I take 1/24 of
the total product, i.e., 100 (out of 2,400), then this 100
contains 20 per cent profit, or 1/6 of
it is profit. The capital would be [£] 83
1/3 and the profit [£1 16
2/3. If the 83
1/3 were equal, for instance, to a
horse which was employed in production, then it could be
demonstrated according to Malthus’s recipe that the profit
would vary with the varying value of the horse or the 28
4/5 part of the total product.

Such are the wretched things Mr. Malthus comes out with
when he stands on his own feet and cannot plagiarise
Townsend,

Anderson or anyone else. What is really remarkable
and pertinent (apart from what is characteristic of the man)
is the inkling that surplus-value must be calculated on the
part of capital expended on wages.

<Given a definite rate of profit, the gross
profit, the amount of profit, always depends on the size
of the capital advanced. Accumulation, however, is
then determined by the part of this amount which is
reconverted into capital. But this part, since it is
equal to the gross profit minus the revenue consumed by the
capitalist, will depend not only on the value of the total
profit, but on the cheapness of the commodities which the
capitalist can buy with it; partly on the cheapness of the
commodities which he consumes and which he pays for out of
his revenue, partly on the cheapness of the commodities
which enter into his constant capital. Wages here are
assumed as given—since the rate of profit is likewise
assumed as given.>

[10.] Malthus’s Theory of Value [Supplementary
Remarks]

The value of labour is supposed not to vary (derived from
Adam Smith) but only the value of the commodities I acquire
for it. Wages are, say, two shillings a day in one
case, one shilling in another. In the first case, the
capitalist pays out twice as many shillings for the same
labour-time as in the second. But in the second case,
the worker performs twice as much labour for the same
product as in the first, since in the second case he works a
whole day for one shilling and in the first case only half a
day. Mr. Malthus believes that the capitalist pays
sometimes more shillings, sometimes less, for the same
labour. He does not see that the worker,
correspondingly, performs either less or more labour for a
given amount of produce.

“… giving more produce for a
given quantity of labour, or getting more labour for a given
quantity of produce, are one and the same thing in
his”(Malthus’s) “‘view’; in stead of
being, as one would have supposed, just the contrary”
(Observations on Certain Verbal Disputes in Political
Economy, Particularly Relating to Value, and to Demand and
Supply, London, 1821, p. 52).

It is stated very correctly in the same work
(Observations on Certain Verbal Disputes etc.) that
labour as a measure of value, in the sense in which Malthus
borrows it from Adam Smith, would be just as good a measure
of value as any other commodity and that it would not be so
good a measure as money in fact is.

Here it would be in general a question only of a measure
of value in the sense in which money is a measure of
value.

| In general, it is
never the measure of value (in the sense of money)
which makes commodities commensurable (see Part I of my
book, p. 45).

“On the contrary, it is only the
commensurability of commodities as materialised labour-time
which converts gold into money.”

Commodities as values constitute one substance,
they are mere representations of the same
substance—social labour. The measure of
value (money) presupposes them as values and refers
solely to the expression and size of this value. The
measure of value of commodities always refers to the
transformation of value into price and already presumes the
value.

The passage in the Observations alluded to reads
as follows:

Mr. Malthus says: “‘In the same place,
and at the same time, the different quantities of
day-labour, which different commodities can command, will be
exactly in proportion to their relative values in
exchange’, and vice versa. If this is true of
labour, it is just as true of anything else”
(op. cit., p. 49). “Money does very well as a
measure at the same time and place… But
it”(Malthus’s proposition) “seems not to
be true of labour. Labour is not a measure even at the
same time and place. Take a portion of corn, such as
is at the same time and place said to be of equal value with
a given diamond; will the corn and the diamond, paid in
specie, command equal portions of labour? It may be
said […] No; but the diamond will buy money,
which will command an equal portion of labour … the
test is of no use, for it cannot be applied without being
rectified by the application of the other test, which
it professed to supersede. We can only infer, that the
corn and the diamond will command equal quantities of
labour, because they are of equal value, in
money. But we were told to infer that two things were
of equal value, because they would command equal quantities
of labour” (loc. cit., pp. 49-50).

[11.] Over-Production, “Unproductive
Consumers”, etc.

Malthus’s theory of value gives rise to the whole
doctrine of the necessity for continually rising
unproductive consumption which this exponent of
over-population (because of shortage of food) preaches so
energetically. The value of a commodity is equal to
the value of the materials, machinery, etc., advanced plus
the quantity of direct labour which the commodity contains;
this, according to Malthus, is equal to the value of
the wages contained in the commodity, plus a profit
increment on these advances according to the general rate of
profit. This nominal price increment represents the
profit and is a condition

of supply, and therefore of the reproduction of the
commodity. These elements constitute the price for
the purchaser as distinct from the price for the
producer, and the price for the purchaser is the real
value of the commodity. The question now
arises—how is this price to be realised? Who is
to pay it? And from what funds is it to be paid?

In dealing with Malthus we must make a distinction (which
he has neglected to make). One section of capitalists
produce goods which are directly consumed by the
workers; another section produce either goods which are
only indirectly consumed by them, insofar, for
example, as they are part of the capital required for the
production of necessaries, as raw materials, machinery,
etc., or commodities which are not consumed by the
workers at all, entering only into the revenue of the
non-workers.

Let us first of all consider the capitalists who produce
the articles which are consumed by the workers. These
capitalists are not only buyers of labour, but also sellers
of their own products to the workers. If the quantity
of labour contributed by the worker is valued at 100 thaler
the capitalist pays him 100 thaler. And this
[according to Malthus] is the only value added to the raw
material, etc., by the labour which the capitalist has
bought. Thus the worker receives the value of his
labour and only gives the capitalist an equivalent of that
value in return. But although the worker nominally
receives the value, he actually receives a smaller quantity
of commodities than he has produced. In fact, he
receives back only a part of his labour materialised in the
product. Let us assume for the sake of
simplicity—as Malthus does quite frequently—that
capital consists only of capital laid out in wages. If
100 thaler are advanced to the worker in order to produce
commodities, and these 100 thaler are the value of
the labour purchased and the sole value which it adds to the
product—then the capitalist sells these commodities
for 110 thaler, and the worker, with his 100 thaler, can buy
back only 10/11 of the product;
1/11 remains in the hands of the
capitalist, to the value of 10 thaler, or the amount of
surplus product in which this surplus-value of 10 thaler is
embodied. If the capitalist sells the product for 120,
then the worker receives only 10/12 of
the product and the capitalist 2/12 of
the product and its value. If he sells it for 130 (30
per cent), then the worker [receives] only
10/13 and the capitalist
3/13 of the product. If he sells
it at 50 per cent profit, i.e., for 150, the worker

receives 2/3 and the | capitalist
1/3 of the product. The higher
the price at which the capitalist sells, the lower the share
of the worker, and the higher his own share in the value of
the product and therefore also in the quantity of the
product. And the less the worker can buy back of the
value or of the product with the value of his labour.
It makes no difference to the situation if, in addition to
variable capital, constant capital is also advanced, for
example, if, in addition to the 100 thaler wages, there is
another 100 for raw materials, etc. In this case, if
the rate of profit is 10, then the capitalist sells the
goods for 220 instead of for 210 (namely, 100 constant
capital and 120 the product of [direct] labour).

<Sismondi’s Nouveaux Principes etc. first
published in 1819.>

Here, as regards the class of capitalists A, who
produce articles which are directly consumed by the
workers—necessaries, we have a case where as a result
of the nominal surcharge—the normal profit increment
added to the price of the advances—a surplus fund is
in fact created for the capitalist, since, in this
roundabout way, he gives back to the worker only a part of
his product while appropriating a part for himself.
But this result follows not because he sells the entire
product to the worker at the increased value, but precisely
because the increase in the value of the product makes the
worker unable to buy back the whole product with his wages,
and allows him to buy back only part of it.
Consequently, it is clear that demand by the workers can
never suffice for the realisation of the surplus of the
purchase price over and above the cost-price, i.e., the
realisation of the profit and the “value” of the
commodity. On the contrary, a profit fund only exists
because the worker is unable to buy back his whole product
with his wages, and his demand, therefore, does not
correspond to the supply. Thus capitalist A has in
hand a certain quantity of products of a certain value, 20
thaler in the present case, which he does not require for
the replacement of the capital, and which he can now partly
spend as revenue, and partly use for accumulation.
N.B. The extent to which he has such a fund in hand
depends on the value of the surcharge he adds over and above
the cost-price and which determines the proportions in which
he and the worker share the total product.

Let us now turn to the class of capitalists B, who
supply raw materials, machinery, etc., in short constant
capital, to class A. The capitalists of class B can
sell only to class A, for they cannot sell their
products back to the workers who have nothing

to do with capital (raw material, machinery, etc.), or to
the capitalists who produce luxury goods (all goods which
are not necessaries and which are not commonly used by the
labouring class), or to the capitalists who produce the
constant capital required for the production of luxury
goods.

Now we have seen that, in the capital advanced by A, 100
is included as constant capital. If the rate of profit
is 10 per cent, the manufacturer of this constant capital
has produced it at a cost-price of 90
10/11, but sells it for 100 (90
10/11 : 9
1/11 = 100:10). Thus he makes his
profit by imposing a surcharge on class A. And thereby
he receives from their product of 220, his 100 instead of
only 90 10/11, with which, we will
assume, he buys immediate labour. B does not by any
means make his profit from his workers whose product, valued
at 90 10/11, he cannot sell back to
them for 100, because they do not buy his goods at
all. Nevertheless, they are in the same position as
the workers of A. For 90 10/11
they receive a quantity of goods which has only nominally a
value of 90 10/11, for every part of
A’s product is made uniformly dearer, or each part of its
value represents a smaller part of the product because of
the profit surcharge.

(This surcharging can only be carried out up to a certain
point, for the worker must receive enough goods to be able
to live and to reproduce his labour-power. If
capitalist A were to add a surcharge of 100 per cent and to
sell commodities which cost 200 for 400, the worker would be
able to buy back only a quarter of the product (if he
receives 100). And if he needed half of the product in
order to live, the capitalist would have to pay him
200. Thus he would retain only 100 (100 go to constant
capital and 200 to wages). It would therefore be the
same as if he sold the commodity for 300, etc.)

B makes his profit fund not (directly) through his
workers, but through his sales to A. A’s product not
only serves to realise his profit, but constitutes his own
profit fund. It is clear that A cannot realise the
profit he makes on his workers by selling to B, and that B
cannot provide sufficient demand for his product (enabling
him to sell it at its value) any more than his own workers
can. On the contrary, a retroaction takes place
here. | The more he
raises the profit surcharge, the greater, in relation to his
workers, is the portion of the total product which he
appropriates and of which he deprives B.

Capitalist B adds a surcharge of the same size as
A. B pays his workers 90 10/11
thaler as he did before, although they get

less goods for this sum. But if A takes 20 per cent
instead of 10 per cent, he [B] likewise takes 20 per cent
instead of 10 per cent and sells for 109
1/11 instead of 100. As a
result, this part of the outlay increases for A.

A and B may even be considered as a single class.
(B belongs to A’s expenditure and the more A has to pay to B
from the total product, the less remains for him.) Out of
the capital of 290 10/11, B owns 90
10/11 and A 200. Between them
they expend 290 10/11 and make a
profit of 29 1/11. B can never
buy back from A to the tune of more than 100 and this
includes his profit of 9 1/11.
As stated, both of them together have a revenue of 29
1/11.

As far as classes C and D are concerned, C being
the capitalists who produce the constant capital necessary
for the production of luxuries, and D being those who
directly produce the luxuries, in the first place it is
clear that the immediate demand for C is only formed by
D. D is the purchaser of C. And C can only
realise profit if he sells his goods to D too dearly by
means of a nominal surcharge over and above the
cost-price. D must pay C more than is necessary for C
to replace all the constituent parts [of the cost-price] of
his commodities. D for his part makes a profit
surcharge partly on the advances made by C and partly on the
capital expended directly on wages by D. From the
profits which C makes out of D, he can buy some of the
commodities made by D, although he cannot expend all his
profit in this way, for he also needs necessaries for
himself, and not only for workers for whom he exchanges the
capital realised from D. In the first place, the
realisation of the commodities by C depends directly on
their sale to D; secondly, after that sale is effected, the
value of the commodities sold by D cannot be realised as a
result of the demand arising from C’s profit, any more than
the total value of A’s commodities can be realised as a
result of the demand coming from B. For the profit
made by C is made out of D, and if C spends it again on
commodities made by D instead of on others, his demand can
still never be greater than the profit he makes out of
D. It must always be much smaller than D’s capital,
than his total demand, and it never constitutes a source of
profit for D (the most he can do is a little swindling of C
by means of the surcharge on the goods he sells back to him)
for C’s profit comes straight out of D’s pocket.

Further it is clear that, insofar as the
capitalists—whether of class C or of D—mutually
sell each other goods within each

class, nobody gains anything or realises a profit
thereby. A certain capitalist, M, sells to N for 110
thaler goods which cost only 100, but N does the same to
M. After the exchange as before, each of them owns a
quantity of goods the cost-price of which is 100. For
110 thaler each receives goods which cost only 100.
The surcharge gives him no greater command over the goods of
the other seller than it gives the other over his. And
as far as value is concerned, it would be the same as if
every M and N were to give himself the pleasure of baptising
his commodities 110 instead of 100 without exchanging them
at all.

It is clear further that [according to Malthus] the
nominal surplus-value in D (for C is included in it) does
not constitute real surplus product. The fact that the
worker receives less necessaries for 100 thaler because of
the surcharge imposed by A can, at first, be a matter of
indifference to D. He has to expend 100 as he did
before in order to employ a certain number of workers.
He pays the workers the value of their labour and they add
nothing more to the product, they only give him an
equivalent. He can obtain a surplus over and above
this equivalent only by selling to a third person and by
selling his commodity above the cost-price.

In reality, the product of a mirror manufacturer [D]
contains both surplus-value and surplus product just as that
of the farmer. For his product contains unpaid labour
(surplus-value) and this unpaid labour is embodied in the
product just as much as is the paid labour. It is
embodied in surplus product. One part of the mirrors
costs him nothing although it has value, because labour is
embodied in it in exactly the same way as in that part of
the mirrors which replaces the capital advanced. This
surplus-value exists as surplus product before the
sale of the mirrors and is not [brought into being] only
through this sale. If, on the contrary, the worker by
his immediate labour had only provided an equivalent for the
accumulated labour which he received in the form of wages,
then neither | the surplus
product nor the surplus-value corresponding to it would
exist. But according to Malthus, who declares that the
worker only gives back an equivalent, things are
different.

It is clear that class D (including C) cannot
artificially create for itself a surplus fund in the same
way as class A, namely, [by ] selling their commodities back
to the workers at a higher price than the workers were paid
for producing them, thus appropriating part of the total
product after replacing the capital

expended. For the workers are not buyers of the
goods made by D. No more can the surplus fund of this
class [arise] from the sale of commodities or their mutual
exchanges among the different capitalists of this
class. It can be achieved only by the sale of their
product to class A and to class B. [Because] the
capitalists of class D sell commodities worth 100 thaler for
110, capitalist A can buy only 10/11
of their product for 100 thaler and they retain
1/11 of their output, which they can
either consume themselves or exchange for commodities
produced by other members of their own class D.

[According to Malthus] things happen in the following way
to all capitalists who do not themselves directly produce
necessaries and therefore do not sell back to the workers
the major, or at least a significant, portion of their
products.

Let us say that their constant capital is 100. If
the capitalist pays another 100 in wages, he is paying the
workers the value of their labour. To this 100 the
workers add a value of 100, and the total value (the
cost-price) of the product is therefore 200. Where
then does the profit come from? If the average rate of
profit is 10 per cent, then the capitalist sells goods worth
200 for 220. If he really sells them for 220, then it
is clear that 200 is sufficient for their
reproduction—100 for raw materials, etc., 100 for
wages, and he pockets 20, which he can dispose of as revenue
or use to accumulate capital.

But to whom does he sell the commodities at 10 per cent
above their “production value”, which, according
to Malthus, is different from the “market value”
or real value, so that profit, in fact, is equal to the
difference between production value and sale value, equal to
sale value minus production value? These capitalists
cannot realise any profit through exchange or sale amongst
themselves. If A sells B for 220 commodities worth
200, then B plays the same trick on A. The fact that
these goods change hands does not alter either their value
or their quantity. The quantity of goods which
belonged formerly to A is now in the possession of B, and
vice versa. The fact that what was previously 100 is
now called 110, makes no difference. The purchasing
power either of A or of B has in no way altered.

But, according to the hypothesis, these capitalists
cannot sell their goods to the workers.

They must, therefore, sell them to the capitalists who
produce necessaries. These, indeed, have a real
surplus fund at their disposal resulting from their exchange
with the workers.

The creation of a nominal surplus-value has, in fact,
placed surplus product in their possession. And this
is the only surplus fund which has existed up to now.
The other capitalists can only acquire a surplus fund by
selling their goods above their production value to those
capitalists who possess a surplus fund.

As for the capitalists who produce the constant capital
required for the production of necessaries, we have already
seen that the producer of necessaries must perforce buy from
them. These purchases enter into his production
costs. The higher his profit, the dearer are the
advances to which the same rate of profit is added. If
he sells at 20 per cent instead of at 10 per cent, then the
producer of his constant capital likewise adds 20 per cent
instead of 10 per cent. And instead of demanding 100
for 90 10/11, he demands 109
1/11 or, in round figures, 110, so
that the value of the product is now 210, 20 per cent of
which is 42, so that the value of the whole product is
252. Out of this the worker receives 100. The
capitalist now receives more than 1/11
of the total product as profit, whereas previously he
received only 1/11 when he sold the
product for 220. The total amount of the product has
remained the same, but the portion at the disposal of the
capitalist has increased both in value and in quantity.

As for those capitalists who produce neither necessaries
nor the capital required for their production, their profit
[can] only be made by sales to the first two classes of
capitalists. If the latter take 20 per cent, then the
other capitalists will take [the same].

[Exchange by] the first class of capitalists and exchange
between the two classes of capitalists are, however, two
very different things. [As a result of exchange] with
the workers, the first class has established a real surplus
fund of necessaries (surplus product) which [as an
increment] of capital is in their hands to dispose of, so
that they can accumulate part of it and [spend] part of it
[as revenue] either on necessaries or on luxuries.
Surplus-value here, in fact, [represents] ||XIV-771| surplus labour and surplus
product, although this is achieved [according to Malthus] by
the clumsy, roundabout method of a surcharge on
prices. Let us assume that the value of the product of
the workers producing necessaries is, in fact, only equal to
100. Since, however, 10/11 of
this is sufficient to pay the wages, it follows that the
capitalist only needs to spend 90
10/11, upon which he makes a profit of
9 1/11. But if he pays the
workers

100 thaler and sells them the product for 110, under
the illusion that value of labour and quantity of labour are
identical, he still retains 1/11 of
the product as he did previously. The fact that this
is now worth 10 thaler instead of 9
1/11 represents no gain for him, for
he has now advanced 100 thaler as capital, not 90
10/11.

But as far as the other classes of capitalists are
concerned, they have no real surplus product, nothing in
which surplus labour-time is embodied. They sell the
product of labour worth 100 for 110 and merely by the
addition of a surcharge this capital is supposed to be
transformed into capital plus revenue.

But how stands the case now, as Lord Dundreary would say,
between these two classes of capitalists?

The producers of necessaries sell surplus product valued
at 100 for 110 (because they paid 100 in wages instead of 90
10/11). But they are the only
ones who have surplus product in their possession. If
the other capitalists likewise sell them products valued at
100 for 110, then they do in fact replace their capital and
make a profit. Why? Because necessaries to the
value of 100 suffice for them to pay their workers, they can
therefore keep 10 for themselves. Or rather because
they in fact receive necessaries to the value of 100, but
10/11 of this is sufficient to pay
their workers, since they are in the same position as
capitalists in classes A and B. These, on the other
hand, receive in return only an amount of produce
representing a value of 100. The fact that its nominal
cost is 110 is of no significance to them, for it neither
embodies a greater amount quantitatively, as use-value, than
was produced by the labour-time the 100 thaler contain, nor
can it add 10 [thaler] to a capital of 100. This would
be only possible if the commodities were resold.

Although the capitalists of both classes sell to one
another for 110 commodities worth 100, only in the hands of
the second class has 100 really the significance of
110. In actual fact, the capitalists of the first
class only receive the value of 100 for 110. And they
only sell their surplus product for a higher price because
for the articles on which they spend their revenue they have
to pay more than they are worth. In fact,
however, the surplus-value realised by the capitalists of
the second class is limited only to a share in the surplus
product realised by the first class, for they themselves do
not create any surplus product.

In connection with this increased cost of luxuries, it
occurs just in time to Malthus that accumulation and not
expenditure

is the immediate object of capitalist production.
As a result of this unprofitable trade, in the course of
which the capitalists of class A lose a portion of the
fruits wrung out of the workers , they are compelled to
moderate their demand for luxuries. But if they do so,
and increase their accumulation, then effective demand
falls, the market for the necessaries they produce shrinks,
and this market cannot expand to its full extent on the
basis of the demand on the part of the workers and the
producers of constant capital. This leads to a fall in
the price of necessaries, but it is only through a rise of
these prices, through the nominal surcharge on
them—and in proportion to this surcharge—that
the capitalists of class A are able to extract surplus
product from the workers. If the price were to fall
from 120 to 110, then their surplus product (and their
surplus-value) would fall from 2/12 to
1/11, and consequently the market, the
demand for the commodities offered by the producers of
luxuries, would decline as well, and by a still greater
proportion.

In the course of exchange with the second class, the
first class sells real surplus product after having replaced
its capital. The second class, on the other hand,
merely sells its capital in order to turn its capital into
capital plus revenue by this trade. The whole of
production is thus only kept going (and this is especially
the case with regard to its expansion) by means of
increasing the prices of necessaries; to this,
however, would correspond a price for luxuries in inverse
proportion to the amount of luxuries actually
produced. Class II, which sells for 110 goods of the
value of 100, likewise does not gain by this exchange.
For in actual fact, the 110 which it gets back is also only
worth 100. But this 100 (in necessaries) replaces
capital plus profit, while the other 100 [in luxuries] is
merely called 110. Thus [it would] amount to class I
receiving luxuries to the value of 100. It buys for
110 luxuries to the value of 100. For the other class,
however, 110 is worth 110, because it pays 100 for the
labour (thus replacing its capital) and therefore retains a
surplus of 10.

| It is difficult to
understand how any profit at all can be derived if those who
engage in mutual exchange sell their commodities by
overcharging one another at the same rate and cheating one
another in the same proportion.

This incongruity would be remedied if, in addition to
exchange by one class of capitalists with its workers and
the mutual exchange between the capitalists of the different
classes, there also existed a third class of
purchasers—a deus ex machina—a

class which paid the nominal value of commodities without
itself selling any commodities, without itself playing the
same trick in return; that is a class which transacted one
phase only: M—C, but not M—C—M; [a class]
which bought not in order to get its capital back plus a
profit, but in order to consume the commodities: a class
which bought without selling. In this case the
capitalists would realise a profit not by exchange amongst
themselves but 1) by exchange between them and the workers,
by selling back to them a portion of the total product for
the same amount of money as they paid the workers for the
total product (after deducting the constant capital) and 2)
from the portion of luxuries as well as necessaries sold to
the third sort of purchaser. Since these pay 110 for
100 without selling 100 for 110 in their turn, a profit of
10 per cent would be made in actual fact and not simply
nominally. The profit would be made in dual fashion by
selling as little as possible of the total product back to
the workers and as much as possible to the third class, who
pay ready money, who, without themselves selling, buy in
order to consume.

But buyers who are not at the same time sellers, must be
consumers who are not at the same time producers, that is
unproductive consumers, and it is this class of
unproductive consumers which, according to Malthus, solves
the problem. But these unproductive consumers must, at
the same time, be consumers able to pay, constituting real
demand, and the money they possess and spend annually must,
moreover, suffice to pay not only the production value of
the commodities they buy and consume, but also the nominal
profit surcharge, the surplus-value, the difference between
the market value and the production value. This class
will represent consumption for consumption’s sake in
society, in the same way as the capitalist class represents
production for production’s sake, the one representing
“the passion for expenditure”, the other
“the passion for accumulation” (see
Principles of Political Economy, [second ed.,]
p. 326). The urge for accumulation is kept alive in
the capitalist class by the fact that their returns are
constantly larger than their outlays, and profit is indeed
the stimulus to accumulation. In spite of this
enthusiasm for accumulation, they are not driven to
over-production, or at least, not at all easily, since the
unproductive consumers not only constitute a gigantic
outlet for the products thrown on to the market, but do not
themselves throw any commodities on to the market, and
therefore, no matter

how numerous they may be, they constitute no
competition for the capitalists, but, on the contrary, all
represent demand without supply and thus help to make up for
the preponderance of supply over demand on the part of the
capitalists.

But where do the annual financial resources of this class
come from? There are, in the first place, the
landed proprietors, who collect a great part of the
value of the annual product under the title of rent and
spend the money thus taken from the capitalists in consuming
the goods produced by the capitalists, in the purchase of
which they are cheated. These landed proprietors do
not have to engage in production and do not on the average
do so. It is significant, that insofar as they spend
money on labour, they do not employ productive workers but
menial servants, mere fellow-consumers of their
fortune, who help to keep the prices of necessaries up,
since they buy without helping to increase their supply or
the supply of any other kind of commodity. But these
landed proprietors do not suffice to create “an
adequate demand”. Artificial means must be
resorted to. These consist of heavy taxation,
of a mass of sinecurists in State and Church, of large
armies, pensions, tithes for the priests, an impressive
national debt, and from time to time, expensive wars.
These are the “remedies” (Principles of
Political Economy, [second ed.,] p. 408 et seq.).

The third class, proposed by Malthus as a
“remedy”, the class which buys without selling
and consumes without producing, thus receives first of all
an important part of the value of the annual product
without paying for it and enriches the producers by
the fact that the latter must first of all advance the third
class money gratis for the purchase of their commodities, in
order to draw it back again | by selling the third class
commodities above their value, or by receiving more value in
money than is embodied in the commodities they supply to
this class. And this transaction is repeated every
year.

[12. The Social Essence of Malthus’s Polemic
Against Ricardo. Malthus’s Distortion of Sismondi’s
Views on the Contradictions in Bourgeois Production]

Malthus correctly draws the conclusions from his basic
theory of value. But this theory, for its part, suits
his purpose remarkably well—an apologia for the
existing state of affairs in England, for landlordism,
“State and Church”, pensioners,

tax-gatherers, tenths, national debt, stock-jobbers,
beadles, parsons and menial servants (“national
expenditure”) assailed by the Ricardians as so many
useless and superannuated drawbacks of bourgeois production
and as nuisances. For all that, Ricardo championed
bourgeois production insofar as it [signified] the most
unrestricted development of the social productive forces,
unconcerned for the fate of those who participate in
production, be they capitalists or workers. He
insisted upon the historical justification and
necessity of this stage of development. His very lack
of a historical sense of the past meant that he regarded
everything from the historical standpoint of his time.
Malthus also wishes to see the freest possible development
of capitalist production, however only insofar as the
condition of this development is the poverty of its main
basis, the working classes, but at the same time he wants it
to adapt itself to the “consumption needs” of
the aristocracy and its branches in State and Church, to
serve as the material basis for the antiquated claims of the
representatives of interests inherited from feudalism and
the absolute monarchy. Malthus wants bourgeois
production as long as it is not revolutionary, constitutes
no historical factor of development but merely creates a
broader and more comfortable material basis for the
“old” society.

On the one hand, therefore, [there is] the working class,
which, according to the population principle, is always
redundant in relation to the means of life available to it,
over-population arising from under-production; then [there
is ] the capitalist class, which, as a result of this
population principle, is always able to sell the workers’
own product back to them at such prices that they can only
obtain enough to keep body and soul together; then [there is
] an enormous section of society consisting of parasites and
gluttonous drones, some of them masters and some servants,
who appropriate, partly under the title of rent and partly
under political titles, a considerable mass of wealth gratis
from the capitalists, whose commodities they pay for above
their value with money extracted from these same
capitalists; the capitalist class, driven into production by
the urge for accumulation, the economically unproductive
sections representing prodigality, the mere urge for
consumption. This is moreover [advanced as] the only
way to avoid over-production, which exists alongside
over-population in relation to production. The best
remedy for both [is declared to be] over-consumption by the
classes standing outside production. The

disproportion between the labouring population and
production is eliminated by part of the product being
devoured by non-producers and idlers. The
disproportion arising from over-production by the
capitalists [is eliminated] by means of over-consumption by
the owners of wealth.

We have seen how childishly weak, trivial and meaningless
Malthus is when, basing himself on the weak side of Adam
Smith, he seeks to construct a counter-theory to Ricardo’s
theory, which is based on Adam Smith’s stronger sides.
One can hardly find a more comical exertion of impotence
than Malthus’s book on value. However, as soon as he
comes to practical conclusions and thereby once again enters
the field which he occupies as a kind of economic Abraham a
Santa Clara, he is quite at his ease. For all that, he
does not abandon his innate plagiarism even here. Who
at first glance would believe that Malthus’s Principles
of Political Economy is simply the Malthusianised
translation of Sismondi’s Nouveaux Principes
d’économie politique? But this is the case.
Sismondi’s book appeared in 1819. A year later,
Malthus’s English caricature of it saw the light of
day. Once again, with Sismondi, as previously with
Townsend and Anderson, he found a theoretical basis for one
of his stout economic pamphlets, in the production of which,
incidentally, he also turned to advantage the new theories
learned from Ricardo.

| While Malthus
assailed in Ricardo that tendency of capitalist production
which is revolutionary in relation to the old society, he
took, with unerring parsonical instinct, only that out of
Sismondi which is reactionary in relation to capitalist
production and modern bourgeois society.

I exclude Sismondi from my historical survey here because
a critique of his views belongs to a part of my work dealing
with the real movement of capital (competition and credit)
which I can only tackle after I have finished this book.

Malthus’s adaptation of Sismondi’s views can easily be
seen from the heading of one of the chapters in the
Principles of Political Economy:

“Of the Necessity of a Union of the
Powers of Production with the Means of Distribution, in
order to ensure a continued Increase of Wealth”
([second ed.,] p. 361).

[In this chapter it is stated:]

“… the powers of production
[…] not alone […] secure the creation of a
proportionate degree of wealth. Something else seems
to be necessary in order to call these powers fully into
action. This is an effectual and unchecked

demand for all that is produced. And what
appears to contribute most to the attainment of this object,
is, such a distribution of produce, and such an
adaptation of this produce to the wants of those who are to
consume it, as constantly to increase the exchangeable value
of the whole mass” (Principles of Political
Economy, [second ed.,] p. 361).

Furthermore, written in the same Sismondian manner and
directed against Ricardo:

“… the wealth of a
country depends partly upon the quantity of produce
obtained by its labour, and partly upon such an adaptation
of this quantity to the wants and powers of the existing
population as is calculated to give it value.
Nothing can be more certain than that it is not determined
by either of them alone” (op. cit., p. 301).

“But where wealth and value are
perhaps the most nearly connected, is in the necessity of
the latter to the production of the former (loc. cit.,
p. 301).

This is aimed especially against Ricardo: Chapter XX,
“Value and Riches, Their Distinctive
Properties” [On the Principles of Political Economy,
and Taxation, third ed., London, 1821, p. 320].
There Ricardo says, among other things:

“Value, then, essentially differs
from riches, for value depends not on abundance, but on the
difficulty or facility of production.”

<Value, incidentally, can also increase with
“the facility of production”. Let us
suppose that the number of men in a country rises from one
million to six million. The million men worked 12
hours. The six million have so developed the
productive powers that each of them produces as much again
in 6 hours. In these circumstances, according to
Ricardo’s own views, wealth would have been increased
sixfold and value threefold.>

“ … riches do not depend on
value. A man is rich or poor, according to the
abundance of necessaries and luxuries which he can
command… It is through confounding the ideas of
value and wealth, or riches that it has been asserted, that
by diminishing the quantity of commodities, that is to say
of the necessaries, conveniences, and enjoyments of human
life, riches may be increased. If value were the
measure of riches, this could not be denied, because by
scarcity the value of commodities is raised; but … if
riches consist in necessaries and enjoyments, then they
cannot be increased by a diminution of quantity”
(op. cit., pp. 323-24).

In other words, Ricardo says here: wealth consists of
use-values only. He transforms bourgeois
production into mere production of use-value, a very pretty
view of a mode of production which is dominated by
exchange-value. He regards the specific form of
bourgeois wealth as something merely formal which does not
affect its content. He therefore also denies the
contradictions of bourgeois production which break out in
crises.

Hence his quite false conception of money. Hence,
in considering the production process of capital, he ignores
completely the circulation process, insofar as it includes
the metamorphosis of commodities, the necessity of the
transformation of capital into money. At any rate
nobody has better and more precisely than Ricardo elaborated
the point that bourgeois production is not production of
wealth for the producers (as he repeatedly calls the
workers) and that therefore the production of bourgeois
wealth is something quite different from the production of
“abundance”, of “necessaries and
luxuries” for the men who produce them, as this would
have to be the case if production were only a means for
satisfying the needs of the producers through production
dominated by use-value alone. Nevertheless, the same
Ricardo says:

“If we lived in one of Mr. Owen’s
parallelograms, and enjoyed all our productions in common,
then no one could suffer in consequence of abundance, but
as long as society is constituted as it now is,
abundance will often be injurious to producers, and scarcity
beneficial to them” ([Ricardo], On Protection to
Agriculture, fourth ed., London, 1822, p.21).

| Ricardo regards
bourgeois, or more precisely, capitalist production as the
absolute form of production, whose specific forms of
production relations can therefore never enter into
contradiction with, or enfetter, the aim of
production—abundance—which includes both mass
and variety of use-values, and which in turn implies a
profuse development of man as producer, an all-round
development of his productive capacities. And this is
where he lands in an amusing contradiction: when we are
speaking of value and riches, we should have only society as
a whole in mind. But when we speak of capital and
labour, then it is self-evident that “gross
revenue” only exists in order to create “net
revenue”. In actual fact, what he admires most
about bourgeois production is that its definite forms—
compared with previous forms of production—provide
scope for the boundless development of the productive
forces. When they cease to do this, or when
contradictions appear within which they do this, he denies
the contradictions, or rather, expresses the contradiction
in another form by representing wealth as
such—the mass of use-values in itself—without
regard to the producers, as the ultima Thule.

Sismondi is profoundly conscious of the
contradictions in capitalist production; he is aware that,
on the one hand, its forms—its production
relations—stimulate unrestrained development

of the productive forces and of wealth; and that,
on the other hand, these relations are conditional, that
their contradictions of use-value and exchange-value,
commodity and money, purchase and sale, production and
consumption, capital and wage-labour, etc., assume ever
greater dimensions as productive power develops. He is
particularly aware of the fundamental contradiction: on the
one hand, unrestricted development of the productive forces
and increase of wealth which, at the same time, consists of
commodities and must be turned into cash; on the other hand,
the system is based on the fact that the mass of producers
is restricted to the necessaries. Hence, according to
Sismondi, crises are not accidental, as Ricardo maintains,
but essential outbreaks—occurring on a large scale and
at definite periods—of the immanent
contradictions. He wavers constantly: should the State
curb the productive forces to make them adequate to the
production relations, or should the production relations be
made adequate to the productive forces? He often
retreats into the past, becomes a laudator temporis
acti,[gg] or he
seeks to exorcise the contradictions by a different
adjustment of revenue in relation to capital, or of
distribution in relation to production, not realising that
the relations of distribution are only the relations of
production seen from a different aspect. He forcefully
criticises the contradictions of bourgeois production
but does not understand them, and consequently does
not understand the process whereby they can be
resolved. However, at the bottom of his argument is
indeed the inkling that new forms of the
appropriation of wealth must correspond to productive forces
and the material and social conditions for the production of
wealth which have developed within capitalist society; that
the bourgeois forms are only transitory and contradictory
forms, in which wealth attains only an antithetical
existence and appears everywhere simultaneously as its
opposite. It is wealth which always has poverty as its
prerequisite and only develops by developing poverty as
well.

We have now seen how nicely Malthus appropriates
Sismondi. Malthus’s theory is expressed in an
exaggerated and even more nauseating form in On Political
Economy in connexion with the Moral State and Moral
Prospects of Society, second ed., London, 1832, by
Thomas Chalmers (Professor of Divinity). Here
the parsonic element is more in evidence not only
theoretically

but also practically, since this member of the
Established Church defends it “economically”
with its “loaves and fishes” and the whole
complex of institutions with which this Church stands or
falls.

The passages in Malthus (referred to above) having
reference to the workers are the following:

“… the consumption and demand
occasioned by the workmen employed in productive labour can
never alone furnish a motive to the accumulation and
employment of capital” (Principles of Political
Economy, [London, 1836,] p. 315).

“No farmer will take the trouble of
superintending the labour of ten additional men merely
because his whole produce will then sell in the market at an
advanced price just equal to what he had paid his additional
labourers. There must be something in the previous
state of the demand and supply of the commodity in question,
or in its price, antecedent to and independent of the demand
occasioned by the new labourers, in order to warrant the
employment of an additional number of people in its
production” (op. cit., p. 312).

“The demand created by the productive
labourer himself can never be an adequate demand,
| because it does not go
to the full extent of what he produces. If it did,
there would be no profit, consequently no motive to
employ him. The very existence of a profit upon any
commodity presupposes a demand exterior to that
of the labour which has produced it” (op. cit.,
p. 405, note).

“… as a great increase of
consumption among the working classes must greatly increase
the cost of production, it must lower profits, and diminish
or destroy the motive to accumulate…”
(loc. cit., p. 405).

“It is the want of necessaries
which mainly stimulates the labouring[hh] classes to produce luxuries; and
were this stimulus removed or greatly weakened, so that the
necessaries of life could be obtained with very little
labour, instead of more time being devoted to the production
of conveniences, there is every reason to think that less
time would be so devoted” (op cit., p.334).

Malthus is interested not in concealing the
contradictions of bourgeois production, but on the contrary,
in emphasising them, on the one hand, in order to prove that
the poverty of the working classes is necessary (as it is,
indeed, for this mode of production) and, on the other hand,
to demonstrate to the capitalists the necessity for a
well-fed Church and State hierarchy in order to create an
adequate demand for the commodities they produce. He
thus shows that for “… continued increase[ii] of wealth”
[op. cit., p. 314] neither increase of population nor
accumulation of capital suffices (op. cit., pp. 319-20), nor
“fertility of the soil”

(op. cit., p. 331), nor “labour-saving
inventions”, nor the extension of the “foreign
markets” (op. cit., pp. 352 and 359).

“…both labourers and capital
may be redundant, compared with the means of employing them
profitably” (op. cit., p. 414 [note]).

Thus he emphasises the possibility of general
over-production in opposition to the view of the Ricardians
(inter alia op. cit., p. 326).

The principal propositions dealing with this matter are
the following:

“… demand is always determined
by value, and supply by quantity”
(op. cit., p. 316, note).

Commodities are exchanged not only for commodities but
also for productive labour and personal services and in
relation to them, and also to money, there can be a general
glut of commodities[jj] (loc. cit.).

“… supply must always be
proportioned to quantity, and demand to
value” (Definitions in Political Economy,
ed. by John Cazenove, London, 4853, p. 65 [note]).

“‘It is evident,’ says
James Mill ‘that whatever a man has produced, and does
not wish to keep for his own consumption, is a stock which
he may give in exchange for other commodities. His
will, therefore, to purchase, and his means of purchasing,
in other words, his demand, is […] equal to the
amount of what he has produced, and does not mean to
consume.’… It is quite obvious”
[answers Malthus] “that his means of purchasing other
commodities are not proportioned to the quantity of
his own commodity which he has produced, and wishes to part
with; but to its value in exchange; and unless the
value of a commodity in exchange be proportioned to its
quantity, it cannot be true that the demand and supply of
every individual are always equal to one another”
(loc. cit., pp. 64-65).

“If the demand of every individual
were equal to his supply, in the correct sense of the
expression, it would be a proof that he could always sell
his commodity for the costs of production, including fair
profits; and then even a partial glut would be
impossible. The argument proves too much …
supply must always be proportioned to quantity, and
demand to value “(Definitions in Political
Economy, London, 1827, p. 48, note).

Here, by demand Mill understands the “means of
purchasing” of the person who demands. But
“… his[kk] means of purchasing other
commodities are not proportioned to the quantity of
his own commodity which he has produced, and wishes to part
with; but to its value in exchange; and unless the
value of a commodity in exchange be proportioned to its
quantity, it cannot be true that the demand and supply of
every individual are always equal to one another”
(loc. cit., pp. 48-49).

“It is still further from the
truth”[ll] for
Torrens to say “‘that increased supply is the
one and only cause of increased effectual demand’
[…]. If

it were, how difficult would it be for a society[mm] to recover itself,
under a temporary diminution of food and clothing, But
[…][nn] food
and clothing […] diminished in quantity will rise in
value […] the money-price of the remaining food and
clothing will for a time rise in a greater degree than [in
proportion to] the diminution of its quantity, while the
money-price of labour may remain the same. The
necessary consequence […] the power of setting in
motion a greater quantity of productive industry than
before” (op. cit., pp. 59-60).

All a nation’s commodities may fall compared with money
or labour (op. cit., p.64 et seq.). Thus a general
glut of the market is possible (loc. cit.). Their
prices can all fall below their production costs
(loc. cit.).[oo]

* * *

| For the rest, only
the following passage from Malthus, which deals with the
circulation process, need be noted.

“… if we reckon the value of
the fixed capital employed as a part of the advances, we
must reckon the remaining value of such capital at the end
of the year as a part of the annual returns … in
reality his” (the capitalist’s) “annual
advances consist only of his circulating capital, the
wear and tear of his fixed capital with the interest upon
it, and the interest of that part of his circulating capital
which consists of the money employed in making his annual
payments as they are called for” (Principles of
Political Economy, [second ed., London, 1836,] p.
269).

The sinking fund, i.e., the fund for wear and tear
of the fixed capital, is, in my opinion, at the same time a
fund for accumulation.

[13. Critique of Malthus’s Conception of
“Unproductive Consumers” by Supporters of
Ricardo]

I wish to quote yet a few passages from a Ricardian book
directed against Malthus’s theory. As regards the
attacks from the capitalist point of view which are made in
the book against Malthus’s unproductive consumers in general
and landlords in particular I shall demonstrate elsewhere
that they can be used word for word against the capitalists
from the workers’ standpoint. (This is to be included
in the section “The Relationship Between Capital and
Wage-Labour Presented from an Apologetic
Standpoint”.)

[An anonymous follower of Ricardo writes:]

“Considering, that an increased
employment of capital will not take place unless a rate of
profits equal to the former rate, or greater than it, can be
ensured, and considering, that the mere addition to capital
does not of itself tend to ensure such a rate of profits,
but the reverse, Mr. Malthus, and those who reason in the
same manner as he does, proceed to look out for some source,
independent of and extrinsic to production itself, whose
progressive increase may keep pace with the progressive
increase of capital, and from which continual additional
supplies of the requisite rate of profits may be
derived” (An Inquiry into those Principles,
respecting the Nature of Demand and the Necessity of
Consumption, lately advocated by Mr. Malthus etc.,
London, 1821, pp. 33-34).

According to Malthus, the “unproductive
consumers” are such a source (loc. cit., p. 35).

“Mr. Malthus sometimes talks as if
there were two distinct funds, capital and revenue,
supply and demand, production and consumption, which must
take care to keep pace with each other, and neither outrun
the other. As if, besides the whole mass of
commodities produced, there was required another mass,
fallen from Heaven, I suppose, to purchase them
with… The fund for consumption, such as he
requires, can only be had at the expense of
production” (op. cit., pp. 49-50).

“We are continually puzzled, in
his” (Malthus’s) “speculations, between the
object of increasing production and that of checking
it. When a man is in want of a demand, does
Mr. Malthus recommend him to pay some other person to take
off his goods? Probably not” (op. cit.,
p. 55). Certainly yes.

“The object of selling your goods is
to make a certain amount of money; it never can answer to
part with that amount of money for nothing, to another
person, that he may bring it back to you, and buy your goods
with it: you might as well have just burnt your goods at
once, and you would have been in the same situation”
(op. cit., p. 63).

[He is] right in regard to Malthus. But because it
is one and the same fund—”the whole mass of
commodities produced”— which constitutes the
production fund and the consumption fund, the fund of supply
and the fund of demand, the fund of capital and the fund of
revenue, it does not by any means follow that it is
irrelevant how the total fund is divided between these
various categories.

The anonymous author does not understand what Malthus
means when he speaks of the “demand” of the
workers being “inadequate” for the
capitalist.

“… as to the demand
from labour; that is, either the giving labour in exchange
for goods, or … in exchange[pp] for present complete products, a
future and accruing addition of value… This is
the real demand that it is material to the producers to get
increased” (op. cit., p. 57).

What Malthus means is not the offer of labour
(which our author calls demand from labour) but the
demand for commodities

which the wages the worker receives enable him to make,
the money with which the worker buys commodities on the
market. And Malthus rightly says of this demand that
it can never be adequate to the supply of the
capitalist. Otherwise the worker would be able to buy
back the whole of his product with his wages.

| The same writer
says:

“… the very meaning of an
increased demand by them” (the labourers) “is a
disposition to take less themselves, and leave a larger
share for their employers; and if it be said[qq] that this, by
diminishing consumption, increases glut, I can only answer,
that glut […] is synonymous with high profits”
(op. cit., p. 59).

This is meant to be witty, but in fact it contains the
essential secret of “glut”.

In connection with Malthus’s Essay on Rent, our
author says:

“When Mr. Malthus published his
Essay on Rent, it seems to have been partly with a
view to answer the cry of ‘No Landlords’, which
then ‘stood rubric on the walls’, to stand up in
defence of that class, and to prove that they were not like
monopolists. That rent cannot be abolished,
that its increase is a natural concomitant, in general, of
increasing wealth and numbers, he shewed; but neither did
the vulgar cry of ‘No Landlords’ necessarily
mean that there ought to be no such thing as rent,
but rather that it ought to be equally divided among the
people, according to what was called ‘Spence’s
plan’. But when he proceeds to vindicate
landlords from the odious name of monopolists, from the
observation of Smith, ‘that they love to reap where
they never sowed’, he seems to be fighting for a
name… There is too much the air of an
advocate in all these arguments of his”
(op. cit., pp. 108-09)

[14. The Reactionary Role of Malthus’s Writings
and Their Plagiaristic Character. Malthus’s Apologia
for the Existence of “Upper” and
“Lower” Classes]

Malthus’s book On Population was a lampoon
directed against the French Revolution and the contemporary
ideas of reform in England (Godwin, etc.). It was an
apologia for the poverty of the working classes. The
theory was plagiarised from Townsend and others.

His Essay on Rent was a piece of polemic writing
in support of the landlords against industrial
capital. Its theory was taken from
Anderson.

His Principles of Political Economy was a polemic
work written in the interests of the capitalists against the
workers and in

the interests of the aristocracy, Church, tax-eaters,
toadies, etc., against the capitalists. Its
theory was taken from Adam Smith. Where he
inserts his own inventions, it is pitiable. It is on
Sismondi that he bases himself in further elaborating the
theory. |XIV-778||

* * *

||VIII-345| {Malthus
makes the following remarks, laced with his usual
“profound philosophy’, against any plan to
provide the cottagers of England with cows (in the French
translation of his An Essay on the Principles of
Population, fifth ed., translated by P. Prévost, Genève,
1836, troisième éd., t. IV, pp. 104-05):

“it has been observed that those
cottagers, who keep cows, are more industrious and
more regular in their conduct, than those who do
not… Most of those who keep cows at present
have purchased them with the fruits of their own
industry. It is therefore more just to say that their
industry has given them a cow, than that a cow has given
them their industry” [Malthus, An Essay on the
Principles of Population, fifth ed., Vol. 2, London,
1817, pp. 296-97].

And it is therefore correct that diligence in labour
(together with the exploitation of other people’s labour)
has given cows to the parvenus amongst the bourgeoisie,
while the cows give their sons the taste for idleness.
If one took away from their cows not the ability to give
milk, but to command other people’s unpaid labour, it would
be a very good thing for their taste for labour.

The selfsame “profound philosopher”
remarks:

“But it is evident that all cannot
be in the middle. Superior and inferior parts are
in the nature of things absolutely necessary; and […]
“ (naturally there can be no mean without extremes)
“strikingly beneficial. If no man could hope to
rise, or fear to fall in society; if industry did not bring
with it its reward, and indolence its punishment; we could
not expect to see that animated activity in bettering our
condition, which now forms the master-spring | of public prosperity”
([Malthus, Principles of Population, p. 303,]
Prévost, p. 112).

Thus there must be lower classes in order that the upper
ones may fear to fall and there must be upper classes in
order that the lower ones may hope to rise. In order
that indolence may carry its own punishments the worker must
be poor and the rentier and the landlord, so beloved of
Malthus, must be rich. But what does Malthus mean by
the reward of industry? As we shall see later, he
means that the worker must perform part of his labour
without an equivalent return. A wonderful stimulus,
provided the “reward”

and not hunger were the stimulus. What
it all boils down to is that a worker may hope to exploit
other workers some day.

Rousseau says: “The more monopoly spreads, the
heavier do the chains become for the exploited.”

Malthus, “the profound thinker”, has
different views. His supreme hope, which he himself
describes as more or less utopian, is that the mass of the
middle class should grow and that the proletariat (those who
work) should constitute a constantly declining proportion
(even though it increases absolutely) of the total
population. This in fact is the course taken by
bourgeois society.

“We might even venture,” says
Malthus, “to indulge a hope that at some future period
the processes for abridging human labour, the progress of
which has of late years been so rapid, might ultimately
supply all the wants of the most wealthy society with less
personal effort than at present; and if they did not
diminish the severity of individual exertion” (he
must go on risking just as much as before, and relatively
more and more for others and less and less for himself),
“might, at least, diminish the number of those
employed in severe toil” ([Malthus, Principles of
Population, p. 304,] Prévost, p. 113).} |VIII-346||

[15. Malthus’s Principles Expounded in the
Anonymous “Outlines of Political Economy”]

||XIV-778| A book in which
Malthus’s principles are elaborated is Outlines of
Political Economy; being a Plain and Short View of the Laws
relating to the Production, Distribution, and Consumption of
Wealth etc., London, 1832.

First of all the author[rr] explains the practical reasons
governing the opposition of the Malthusians to the
determination of value by labour-time.

“That labour is the sole source of
wealth seems to be a doctrine as dangerous as it is false,
as it unhappily affords a handle to those who would
represent all property as belonging to the working classes,
and the share which is received by others as a robbery or
fraud upon them” ([John Cazenove, Outlines of
Political Economy, London, 1832, ] p. 22, note).

In the following sentence it emerges more clearly than in
Malthus that the author confuses the value of
commodities with the utilisation of commodities, or
of money as capital. In the latter sense it correctly
expresses the origin of surplus-value.

“The value of capital, the
quantity of labour which it is worth or will command, is
[…] always greater than that which it has cost, and
the difference constitutes the profit or remuneration to its
owner” (op. cit., p. 32).

The following, too, which is taken from Malthus, is
correct as an explanation of why profit is to be reckoned as
part of the production costs of capitalist
production:

“… profit upon the capital
employed” < “unless this profit were
obtained, there would be no adequate motive to produce the
commodity”> “is an essential condition of the
supply, and, as such, constitutes a component part of the
costs of production” (loc. cit., p. 33).

In the following passage we have, on the one hand, the
correct statement that profit directly arises out of the
exchange of capital for labour, and on the other hand, the
Malthusian thesis that profit is made in selling.

“… a man’s profit does not
depend upon his command of the produce of other men’s
labour, but upon his command of Labour itself.”
(Here the correct distinction is made between the exchange
of one commodity for another and the exchange of the
commodity as capital for labour.) “If”(when the
value of money falls) “he | can sell his goods at a higher
price, while his workmen’s wages remain unaltered, he
is clearly benefited by the rise, whether other goods rise
or not. A smaller proportion of what he produces is
sufficient to put that labour into motion, and a larger
proportion consequently remains for himself “ (op.
cit, , pp. 49-50).

The same thing happens when, for example, as a result of
the introduction of new machinery, chemical processes, etc.,
the capitalist produces commodities below their old value
and, either sells them at their old value or, at any rate,
above the individual value to which they have fallen.
It is true that when this happens, the worker does not
directly work a shorter period for himself and a longer one
for the capitalist, but in the reproduction process,
“a smaller proportion of what he produces is
sufficient to put that labour into motion”. In
actual fact, the worker therefore exchanges a greater part
of his immediate labour than previously for his own realised
labour. For example, he continues to receive what he
received previously, £10. But this £10, although it
represents the same amount of labour to society, is no
longer the product of the same amount of labour-time
as previously, but may represent one hour less. So
that, in fact, the worker works longer for the capitalist
and a shorter period for himself. It is as if he
received only £8, which, however, represented the same mass
of use-values as a result of the increased productivity of
his labour.

The author remarks in connection with [James] Mill’s s
arguments regarding the identity of demand and supply,
discussed earlier:

“The supply of each man depends upon
the quantity which he brings to market: his demand
for other things depends upon the value of his
supply. The former is certain; it depends upon
himself: the latter is uncertain; it depends upon
others. The former may remain the same, whilst the
latter may vary. A hundred quarters of corn, which a
man brings to market, may at one time be worth thirty
shillings, and at another time sixty shillings, the
quarter. The quantity or supply is in both
instances the same; but the man’s demand or power of
purchasing other things is twice as great in the latter as
in the former case” (op. cit., pp. 111-12).

About the relationship of labour and machinery, the
author writes the following:

“… when commodities are
multiplied by a more judicious distribution of labour, no
greater amount of demand than before is required in order to
maintain all the labour which was previously
employed;”

(How so? If the distribution of labour is more
judicious, more commodities will be produced by the same
labour; hence the supply will grow, and does its absorption
not require an increased amount of demand? Does Adam
Smith not rightly say that division of labour depends upon
the extent of the market? In actual fact, the
difference as regards demand from outside is the same except
[that demand] on a larger scale [is required] when machinery
is used. But “a more judicious distribution of
labour” may require the same or even a greater number
of labourers than before, while the introduction of
machinery must under all circumstances diminish the
proportion of capital laid out in immediate labour)

“whereas, when machinery is
introduced, if there be not an increased amount of demand,
or a fall in wages or profits, some of the labour will
undoubtedly be thrown out of employment […] let
the case be supposed of a commodity worth £1,200, of which
£1,000 consists of the wages of 100 men, at £10 each, and
£200 of profits, at the rate of 20 per cent. Now, let
it be imagined that the same commodity can be produced by
the labour of 50 men, and a machine which has cost the
labour of 50 men, and which requires the labour of 10 men to
keep it in constant repair; the producer will then be able
to reduce the price of the article to £800, and still
continue to obtain the same remuneration for the use of his
capital […]

The wages of 50 men at £10, are

£500

[The wages] of £10 to keep[ss] [the machine] in repair

£100

Profit 20 per cent

on circulating capital

£500

} £200

[…] on fixed capital

£500

[Total] £800”

(op. cit., pp. 114-15).

<(The “10 men to keep it in […]
repair” represent here the annual wear and tear.
Otherwise the calculation would be wrong, since the labour
of repairing would then have to be added to the original
production costs of the machinery.) Previously the
manufacturer had to lay out £1,000 annually, but the product
was [worth] £1,200. Now he has laid out £500 on
machinery once and for all; he has not therefore to lay out
this sum again in any other way. What he has to lay
out is £100 annually for repairs and £500 in wages (since
there are no raw materials in this example). He has to
lay out only £600 per annum, but he makes a profit of £200
on his total capital just as he did previously. The
amount and rate of profit remain the same as they were
before. But his annual product amounts to only
£800.>

“Those who used to pay £1,200 for the
commodity will now have £400 to spare, which they can lay
out either on something else, or in purchasing more of the
same commodity. If it be laid out in | the produce of
immediate labour, it will give employment to no more than
33.4 men, whereas the number thrown out of employment by the
introduction of the machine will have been 40,
for—

The wages of 33.4 men at £10, are
£334

Profits 20 per cent £66

Total £400”

(loc. cit., pp. 114-16).

<In other words this means: If the £400 is expended on
commodities which are the product of immediate labour and if
the wages per man equal £10, then the commodities which cost
£400 must be the product of less than 40 men. If they
were the product of 40 men, then they would contain only
paid labour. The value of labour (or the
quantity of labour embodied in the wages) would be equal to
the value of the product (the quantity of labour embodied in
the commodity). But the commodities worth £400 contain
unpaid labour, which is precisely what constitutes
the profit. They must therefore be the product of less
than 40 men. If the profit is 20 per cent, then only
5/6 of the product can consist of paid
labour, that is, approximately £334 or 33.4 men at £10 per
man. The other sixth, roughly £66, represents the
unpaid labour. Ricardo himself has shown in exactly
the same way that machinery itself, when its money price is
as high as the price of the immediate labour it displaces,
can never be the product of so much labour.>

“If it” (i.e., the £400)
“be laid out in the purchase of more of the same
commodity, or of any other, where the same species and
quantity of fixed capital were used, it would employ only 30
men, for—

The wages of 25 men at £10 each, are
£250

[The wages of] 5 men [at £10 each] to keep [it] in
repair £50

Profits on £250 circulated and £250 fixed capital £100

£400”

(loc. cit., p. 116).

<That is to say, in the case where machinery is
introduced, the production of commodities costing £800
involves an outlay of £500 on machinery. Thus for the
production of £400 [worth of commodities] only £250 [is
spent on machinery]. Furthermore, 50 workers are
needed to operate machinery worth £500, therefore 25 workers
([their wages] amounting to £250) for machinery worth £250;
further for repair (the maintenance of the machine) 10 men
are needed if the machinery costs £500, consequently 5 men (
[whose wages] come to £50) are needed for machinery costing
£250. Thus [we have] £250 fixed capital and £250
circulating capital—a total of £500, on which there is
a profit of 20 per cent amounting to £100. The product
is therefore [made up of] £300 wages and £100
profit—£400. Thirty workers are employed in
producing the commodities. Here it has been assumed
all along that the capitalist who manufactures the
commodities either borrows capital out of the (£400) savings
which the consumers have deposited at the bank, or
that—apart from the £400 which have been saved from
the revenue of the consumers— he himself possesses
capital. For clearly with a capital of £400 he cannot
lay out £250 on machinery and £300 on wages.>

“When the total sum of £1,200 was
spent on the produce of immediate labour, the division was
£1,000 wages, £200 profits” (100 workers whose wages
come to £1,000). “When it was spent partly in
the one way and partly in the other … the division
was £934 wages and £266 profits” (i.e., 60 workers in
the machine shop and 33.4 immediate labour making a total of
93.4 workers, whose wages come to £934), “and, as in
the third supposition, when the whole sum was spent on the
joint produce of the machine and labour, the division was
£900 wages” (i.e., 90 workers) “and £300
profits” (loc. cit., pp. 114-17 [passim]).

| After the
introduction [of the machine] the capitalist
“certainly cannot employ as much labour as he did
before, without accumulating further capital; but […]
the revenue which is saved by the consumers of the article
after its price has fallen, will, by increasing their
consumption of that or something else, create a demand for
some though not for all the labour which has
been displaced by the machine” (op. cit., p. 119
[note]).

“Mr. McCulloch […] conceives
that the introduction of machines into any employment
necessarily occasions on equal or greater demand for the
disengaged labourers in some other employment,
[…] In order to prove this, he supposes that the
annuity necessary to replace the value of the machine

by the time it is worn out, will every year occasion an
increasing demand for labour. But as the successive
annuities added together up to the end of the term, can only
equal the original cost of the machine, and the interest
upon it during the time it is in operation, in what way it
can ever create a demand for labour, beyond what it would
have done had no machine been employed, it is not easy to
understand” (loc. cit., pp. 119-20 [note]).

The sinking fund itself can, indeed, be used for
accumulation in the interval when the wear and tear of the
machine is shown in the books, but does not actually affect
its work. But in any case, the demand for labour
created in this way is much smaller than if the whole
capital invested in machinery were laid out in wages,
instead of merely the annual wear and tear. MacPeter
is an ass—as always. This passage is only
noteworthy, because it contains the idea that the sinking
fund is itself a fund for accumulation.

[a] In the
manuscript “Doctor Smith” instead of “Adam
Smith”.—Ed.

[b] In the
manuscript “That” instead of “And
that”.—Ed.

[c] Marx here
summarises Cazenove’s remarks.—Ed.

[d] The manuscript
has “worked up in them+the”.-Ed.

[e] The manuscript
has “can command is” instead of “would
command”.-Ed.

[f] Those born to
enjoy the fruits (Horace).—Ed.

[g] This and the
following passage from Adam Smith, which Marx quotes from
Garnier’s French translation, are printed in this volume
according to Adam Smith, Wealth of Nations, Oxford
University Press, London, 1928.— Ed.

[h] In the
manuscript the word “Rises” takes the place of
“In the former case of”.—Ed.

[i] The word
“caused” is used instead of
“occasioned” in the
manuscript.—Ed.

[j] Instead of
“there is one”, the manuscript has
“a”.—Ed.

[k] Instead of
“tends to rise, rises” is used in the
manuscript.—Ed.

[l] Instead of
“such as”, the words “whereas the”
are used in the manuscript.—Ed.

[m] From here the
sentence is written in English in the
manuscript.—Ed.

[n] Instead of
“cannot be true, except”, the manuscript has
“and vice versa, only true”.—Ed.

[o] Instead of
“an assumption which probably will not be found to be
true”, the manuscript has “and this is
true”.—Ed.

[p] Instead of
“… from that … necessary state of
things, which”, the manuscript has “indeed
necessarily, because”.—Ed.

[q] Instead of
“that”, the manuscript has
“The”.—Ed.

* Malthus
presupposes the existence of profit in order
to be able to measure its value by an external
standard. He does not deal with the question of the
origin and intrinsic possibility of profit.

[r] The manuscript
gives “Profit of capital” instead of
“Profits of stock”.— Ed.

[s] The manuscript
gives “augments” instead of
“increases”,—Ed.

[t] The manuscript
has “and”. —Ed.

[u] Instead of
“to”, the manuscript has
“for”.—Ed.

[v] The manuscript
has “Accumulated labour=the”.—Ed.

[w] The manuscript
has “should be” instead of
“were”.—Ed.

[x] Instead of
“required to pay the labour employed will be”,
the manuscript has “for labour”.—Ed.

[y] The manuscript
has “let us suppose 1/4 of the
advances for labour (immediate)” instead of the words
used above.—Ed.

[z] The manuscript
has “and” instead of
“or”.—Ed.

[aa] The
manuscript has “Then” instead of “it will
be”.—Ed.

[bb] The
manuscript has “his” instead of “of
the”.—Ed.

[cc] The
manuscript has “e.g. a farmer”.—Ed.

[dd] The
manuscript has “are” instead of “are
worth”.—Ed.

[ee] The
manuscript has “his profit 400 on 2,000=20 per
cent” instead of “the farmer’s profit will be
£400, or twenty per cent”.—Ed.

[ff] The
manuscript has “his” instead of “of
the”.—Ed.

[gg] Eulogiser of
the past (Horace, Ars poetica).—Ed.

[hh] In the
manuscript “working” instead of
“labouring”.—Ed.

[ii]
“Progress” instead of “increase” in
the manuscript.—Ed.

[jj] Marx
summarises here the contents of a paragraph from Malthus’s
book Principles of Political Economy, London, 1836,
p. 316.—Ed.

[kk] In the
manuscript “these” instead of
“his”.—Ed.

[ll] In the
manuscript “It is wrong” instead of “It is
still further from the truth”.—Ed.

[mm]
“Mankind” instead of “Society” in
the manuscript.—Ed.

[nn] In the
manuscript “when” instead of the omitted
words.—Ed.

[oo] In this
paragraph Marx paraphrases some of the ideas expressed by
Malthus in his book Definitions in Political Economy,
London, 1827, p. 64 et seq.—Ed.

[pp] In the
manuscript “or … the giving in exchange”
instead of “or … in
exchange”.—Ed.

[qq] In the
manuscript “if it is said”.—Ed.

[rr] John
Cazenove.—Ed.

[ss] In the
manuscript “10 men to keep it” instead of
“£10 to keep”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XX] Disintegration of the Ricardian School

### 1. [Robert Torrens]

### [a) Smith and Ricardo on the Relation Between the Average Rate of Profit and the Law of Value]

|Robert Torrens, An Essay on the
Production of Wealth etc., London, 1821.

Observation of competition—the phenomena of
production—shows that capitals of equal size yield an
equal amount of profit on the average, or that, given the
average rate of profit (and the term, average rate of
profit, has no other meaning), the amount of profit depends
on the amount of capital advanced.

Adam Smith has noted this fact. Its
connection with the theory of value which he put forward
caused him no pangs of conscience—especially since in
addition to what one might call his esoteric theory, he
advanced many others, and could recall one or another at his
pleasure. The sole reflection to which this question
gives rise is his polemic against the view which seeks to
resolve profit into “wages of superintendence”,
since, apart from any other circumstance, the work of
superintendence does not increase in the same measure as the
scale of production and, moreover, the value of the capital
advanced can increase, for instance, as a result of the
dearness of raw materials, without a corresponding growth in
the scale of production. He has no immanent law to
determine the average profit or its amount. He
merely says that competition reduces this x.

Ricardo (apart from a few merely chance remarks)
directly identifies profit with surplus-value
everywhere. Hence with him, commodities sell at a
profit not because they are sold above their
value, but because they are sold at their
value. Nevertheless, in considering value
(in Chapter I of the Principles) he is the first to
reflect at all on the relationship between the
determination of the value of commodities and
the phenomenon that capitals of equal size yield equal
profits. They can only do this inasmuch
as the commodities they produce—although they
are not sold at equal prices (one can, however, say that
their output has equal prices provided the value of that
part of constant capital which is not consumed is added to
the product)—yield the same surplus-value, the
same surplus of price over the price of the capital
outlay. Ricardo moreover is the first to draw
attention to the fact that capitals of equal size are by no
means of equal organic composition. The difference in
this composition he defined in the way traditional since
Adam Smith, namely as circulating and fixed capital, that
is, he saw only the differences arising from the process of
circulation.

He certainly does not directly say that it is a prima
facie contradiction of the law of value that capitals of
unequal organic composition, which consequently set unequal
amounts of immediate labour in motion, produce commodities
of the same value and yield the same surplus-value (which he
identifies with profit). On the contrary he begins his
investigation of value by assuming capital and a general
rate of profit. He identifies cost-price with
value from the very outset, and does not see that
from the very start this assumption is a prima facie
contradiction of the law of value. It is only on the
basis of this assumption—which contains the main
contradiction and the real difficulty—that he comes to
a particular case, changes in the level of wages,
their rise or fall. For the rate of profit to remain
uniform the rise or fall in wages, to which corresponds a
fall or rise in profit, must have unequal effects on
capitals of different organic composition. If wages
rise, then profits fall, and also the prices of commodities
in whose production a relatively large amount of fixed
capital is employed. Where the opposite is the case,
the results are likewise opposite. Under these
Circumstances, therefore, the “exchangeable
values” of the various commodities are not
determined by the labour-time required for their respective
production. In other words, this definition of an
equal rate of profit (and Ricardo arrives at it only in
individual cases and in this roundabout way) yielded by
capitals of different organic composition contradicts
the law of value or, as Ricardo says, constitutes an
exception to it, whereupon Malthus rightly remarks
that in the progress of |
industry, the rule becomes the exception and the exception
the rule.[a] The
contradiction itself is not clearly expressed by Ricardo,
namely, not in the form: although one of the commodities
contains
more unpaid labour than the other—for the amount of
unpaid labour depends on the amount of paid labour, that is,
the amount of immediate labour employed provided the rate of
exploitation of the workers is equal—they nevertheless
yield equal values, or the same surplus of unpaid over paid
labour. The contradiction however occurs with him in a
particular form: in certain cases, wages, variations
in wages, affect the cost-price (he says, the exchangeable
values) of commodities.

Equally, differences in the time of turnover of
capital—whether the capital remains in the process of
production (even if not in the labour process) or in
circulation for a longer period, requiring not more work,
but more time for its turnover—these differences have
just as little effect on the equality of profit, and this
again contradicts (is, according to Ricardo, an
exception to) the law of value.

He has therefore presented the problem very
one-sidedly. Had he expressed it in a general way, he
would also have had a general solution.

But his great contribution remains: Ricardo has a notion
that there is a difference between value and cost-price,
and, in certain cases, even though he calls them
exceptions to the law of value, he formulates the
contradiction that capitals of unequal organic composition
(that is, in the last analysis, capitals which do not
exploit the same amount of living labour) yield equal
surplus-value (profit) and—if one disregards the fact
that a portion of the fixed capital enters into the labour
process without entering into the process that creates
value—equal values, commodities of equal value (or
rather [of equal] cost-price, but he confuses
this).

### [b) Torrens’s Confusion in Defining the Value of Labour and the Sources of Profit]

As we have seen,[b]
Malthus uses this [the contradiction described by
Ricardo] in order to deny the validity of the Ricardian law
of value.

At the very beginning of his book, Torrens takes
this discovery of Ricardo as his point of departure, not,
however, to solve the problem, but to present the
“phenomenon” as the law of the phenomenon.

Supposing that capitals of different
degrees of durability are employed: “If a woollen and
a silk manufacturer were each to employ a capital of £2000 and if the former were to
employ £1,500 in durable machines, and £500 in
wages and materials; while the latter employed only
£500 in durable machines, and £1,500 in wages
and materials… Supposing that a tenth of these
fixed capitals is annually consumed, and that the rate of
profit is ten per cent, then, as the results of the woollen
manufacturer’s capital of £2,000, must, to give him
this profit, be £2,200, and as the value of his fixed
capital has been reduced by the progress of production from
£1,500 to £1,350, the goods produced must sell
for £850. And, in like manner, as the fixed
capital of the silk manufacturer is by the process of
production reduced one-tenth, or from £500 to
£450, the silks produced must, in order to yield him
the customary rate of profit upon his whole capital
of £2,000, sell for £1,750 … when
capitals equal in amount, but of different degrees of
durability, are employed, the articles produced, together
with the residue of capital, in one occupation, will be
equal in exchangeable value to the things produced, and the
residue of capital, in another occupation”
([R. Torrens, An Essay on the Production of Wealth,
London, 1821,] pp. 28-29).

Here the phenomenon manifested in competition is merely
mentioned, registered. Similarly a “customary
rate of profit” is presupposed without explaining
how it comes about, or even the feeling that this ought to
be explained.

“Equal capitals, or, in other
words, equal quantities of accumulated labour, will often
put in motion different quantities of immediate labour;
but neither does this furnish any exception to our general
principle” (loc. cit., pp. 29-30),

namely, to the fact that the value of the product plus
the residue of the capital not consumed, yield equal values,
or, what is the same thing, equal profits.

The merit of this passage does not consist in the fact
that Torrens here merely registers the phenomenon once again
without explaining it, but in the fact that he defines the
difference by stating that equal capitals set in motion
unequal quantities of living labour, though he immediately
spoils it by declaring it to be a “special”
case. If the value is equal to the labour worked up,
embodied in a commodity, then it is clear that—if the
commodities are sold at their value—the surplus-value
contained in them can only be equal to the unpaid, or
surplus labour, which they contain. But this surplus
labour—given the same rate of exploitation of the
worker—cannot be equal in the case of capitals which
put in motion different quantities of immediate labour,
whether it is the immediate production process or the period
of circulation which is the cause of this difference.
It is therefore to Torrens’s credit that he expresses
this. What does he conclude from it? That here
| within capitalist
production the law of value suddenly changes. That is,
that the law of value, which
is abstracted from capitalist production, contradicts
capitalist phenomena. And what does he put in its
place? Absolutely nothing but the crude, thoughtless,
verbal expression of the phenomenon which has to be
explained.

“In that early period of
society”

(that is, precisely when exchange-value in general, the
product as commodity, is hardly developed at all, and
consequently when there is no law of value either)

“the total quantity of labour,
accumulated and immediate, expended on production, is
that […] which […] determines the quantity of
one commodity which shall be received for a given quantity
of another. When stock has accumulated,
when capitalists became a class distinct from
labourers, […] when the person who undertakes any
branch of industry, does not perform his own work, but
advances subsistence and materials to others, then it is the
amount of capital, or the quantity of accumulated
labour expended in production, […] which
determines the exchangeable power of commodities”
(op. cit., pp. 33-34).

“As long as [these] two capitals
[are] equal [the law of competition, always tending to
equalise the profits of stock, will keep] their products of
equal […] value, however we may vary the quantity
of immediate labour which they put in motion, or which
their products may require […] if we render
these capitals unequal in amount, [the same law must render]
their products of unequal value, though the total quantity
of labour expended upon each, should be precisely
equal” (op. cit., p. 39).

“… after the separation of
capitalists and labour[ers], it is […] the
amount of capital, or quantity of accumulated labour,
and not as before this separation, the sum of
accumulated and immediate labour, expended on production,
which determines the exchangeable value…”
(loc. cit., pp. 39-40).

Here again, he merely states the phenomenon that capitals
of equal size yield equal profits or that the cost-price of
commodities is equal to the price of the capital advanced
plus the average profit; there is at the same time a hint
that—since equal capitals put in motion different
quantities of immediate labour—this phenomenon
is, prima facie, inconsistent with the determination
of the value of commodities by the amount of labour-time
embodied in them. The remark [made by Torrens] that
this phenomenon of capitalist production only manifests
itself when capital comes into existence—[when] the
classes of capitalists and workers [arise, and] the
objective conditions of labour acquire an independent
existence as capital—is tautology.

But how the separation of the [factors necessary]
for the production of commodities—into capitalists and
workers, capital
and wage-labour—upsets the law of value of
commodities is merely “inferred” from the
uncomprehended phenomenon.

Ricardo sought to prove that, apart from certain
exceptions, the separation between capital and wage-labour
does not change anything in the determination of the value
of commodities. Basing himself on the exceptions noted
by Ricardo, Torrens rejects the law. He reverts to
Adam Smith (against whom the Ricardian demonstration is
directed) according to whom the value of commodities was
determined by the labour-time embodied in them “in
that early period” when men confronted one another
simply as owners and exchangers of goods, but not when
capital and property in land have been evolved. This
means (as I observed in Part I) that the law which applies
to commodities qua commodities, no longer applies to
them once they are regarded as capital or as products of
capital, or as soon as there is, in general, an advance from
the commodity to capital. On the other hand, the
product wholly assumes the form of a commodity only—as
a result of the fact that the entire product has to be
transformed into exchange-value and that also all the
ingredients necessary for its production enter it as
commodities—in other words it wholly becomes a
commodity only with the development and on the basis of
capitalist production. Thus the law of value is
supposed to be valid for a type of production which produces
no commodities (or produces commodities only to a limited
extent) and not to be valid for a type of production which
is based on the product as a commodity. The law
itself, as well as the commodity as the general form of the
product, is abstracted from capitalist production and yet it
is precisely in respect of capitalist production that the
law is held to be invalid.

The proposition regarding the influence of the separation
of “capital and labour” on the determination of
value—apart from the tautology that capital cannot
determine prices so long as it does not as yet
exist—is moreover a quite superficial translation of a
fact manifesting itself on the surface of capitalist
production. So long as each person works himself with
his own tools and sells his product himself <but in reality,
the necessity to sell products on a | social scale never coincides
with production carried on with the producer’s own means of
production>, his costs comprise the cost of both the
tools and the labour he performs. The cost
to the capitalist consists in the capital he
advances—in the sum of values he expends on
production—not in labour, which he does not
perform, and which only costs him
what he pays for it. This is a very good reason for
the capitalists to calculate and distribute the (social)
surplus-value amongst themselves according to the size of
their capital outlay and not according to the quantity of
immediate labour which a given capital puts in motion.
But it does not explain where the surplus-value—which
has to be distributed and is distributed in this
way—comes from.

Torrens adheres to Ricardo insofar as he maintains that
the value of a commodity is determined by the quantity of
labour, but he declares that [it is] only the
“quantity of accumulated labour” expended
upon the production of commodities which determines their
value. Here, however, Torrens lands himself in a fine
mess.

For example, the value of woollen cloth is determined by
the accumulated labour contained in the loom, the
wool, etc., and the wages, which constitute the ingredients
of its production, accumulated labour, which, in this
context, means nothing else but embodied labour,
materialised labour-time. However, once the woollen
cloth is ready and production is over, the immediate labour
expended on the woollen cloth has likewise been transformed
into accumulated or materialised labour. Then why
should the value of the loom and of the wool be determined
by the materialised labour (which is nothing but immediate
labour embodied in an object, in a result, in a useful
thing) they contain, and the value of the woollen cloth not
be so determined? If the woollen cloth in turn becomes
a component part of production in say dyeing or tailoring,
then it is “accumulated labour”, and the value
of the coat is determined by the wages of the workers, their
tools and the woollen cloth, the value of which is
determined by the “accumulated labour” contained
in it. If I regard a commodity as capital, that
means in this context as a condition of production, then its
value resolves itself into immediate labour, which is called
“accumulated labour” because it exists in a
materialised form. On the other hand, if I regard the
same commodity as a commodity, as a product and result of
the [production] process, then it is definitely not
determined by the labour which is accumulated in it, but by
the labour accumulated in its conditions of production.

It is indeed a fine vicious circle to seek to determine
the value of a commodity by the value of the capital, since
the value of the capital is equal to the value of the
commodities of which it is made up.

James Mill is right as against this fellow when he
says:

“Capital is commodities.
If the value of commodities, then, depends upon the value of
capital, it depends upon the value of
commodities…” [James Mill, Elements of
Political Economy, London, 1821, p. 74].

One thing more is to be noted here. Since
[according to Torrens] the value of a commodity is
determined by the value of the capital which produces it,
or, in other words, by the quantity of labour, the labour
accumulated and embodied in this capital, then only two
possibilities ensue.

The commodity contains: first, the value of the fixed
capital used up; second, the value of the raw material or
the quantity of labour contained in the fixed capital and
raw material; third, the quantity of labour which is
materialised in the money or in the commodities which
function as wages.

Now there are two [possibilities]:

The “accumulated” labour contained in the
fixed capital and raw material remains the same after the
process of production as it was before. As far as the
third part of the “accumulated labour” advanced
is concerned, the worker replaces it by his “immediate
labour”, that is, the “immediate labour”
added to the raw material, etc., represents just as much
accumulated labour in the commodity, in the product, as was
contained in the wages. Or it represents more.
If it represents more, the commodity contains more
accumulated labour than the capital advanced did. Then
profit arises precisely out of the surplus of accumulated
labour contained in the commodity over that contained in the
capital advanced. And the value of | the commodity is determined,
as previously, by the quantity of labour (accumulated plus
immediate) contained in it (in the commodity the latter type
of labour likewise constitutes accumulated, and no longer
immediate, labour. It is immediate labour in the
production process, and accumulated labour in the
product).

Or [i.e., in the first case] immediate labour only
represents the quantity [of labour] embodied in the wage, is
only an equivalent of it. (If it were less than this,
the point to be explained would not be why the capitalist
makes a profit but how it comes about that he makes no
loss.) Where does the profit come from in this
case? Where does the surplus-value, i.e., the excess
of the value of the commodity over the value of the
component parts of production, or over that of the capital
outlay, arise? Not in the production process
itself—so that merely its realisation takes
place in the process of exchange, or in the circulation
process—but in the exchange process, in the
circulation process. We thus come back to Malthus and
the crude mercantilist conception of “profit upon
expropriation”. And it is this conception at
which Mr. Torrens consistently arrives, although he is, on
the other hand, sufficiently inconsistent to explain this
payable value not by means of an inexplicable fund
dropped down from the skies, namely, a fund which provides
not only an equivalent for the commodity, but a surplus over
and above this equivalent, and is derived from the means of
the purchaser, who is always able to pay for the commodity
above its value without selling it above its
value—thus reducing the whole thing to thin air.
Torrens, who is not as consistent as Malthus, does not have
recourse to such a fiction, but, on the contrary, asserts
that “effectual demand”—the sum of values
paid for the product—arises from supply alone,
and is therefore likewise a commodity; and thus, since the
two sides are both buyers and sellers, it is impossible to
see how they can mutually cheat one another to the same
extent.

“The effectual demand for any
commodity is always determined, and under any given rate of
profit, is constantly commensurate with the quantity of the
ingredients of capital, or of the things required in its
production, which consumers may be able and willing to offer
in exchange for it” (Torrens, An Essay on the
Production of Wealth, London, 1821, p. 344).

“… increased supply is the
one and only cause of increased effectual demand”
(op. cit., p. 348).

Malthus, who quotes this passage from Torrens, is quite
justified in protesting against it(Definitions in
Political Economy, London, 1827, p. 59).[c]

But the following passages about production costs,
etc., demonstrate that Torrens does indeed arrive at such
absurd conclusions.

“Market price” (Malthus
calls it “purchasing value”) “must always
include the customary rate of profit for the time being;
[but] natural price, consisting of the cost of
production or, in other words, of the capital
expended in raising or fabricating commodities, cannot
include the rate of profit” ([Torrens], op. cit.,
p. 51).

“The farmer […] expends one
hundred quarters of corn in cultivating his fields, and
obtains in return one hundred and twenty quarters. In
this case, twenty quarters, being the excess of produce
above expenditure, constitute the farmer’s profit; but it
would be absurd to call this excess, or profit, a part of
the expenditure”… Likewise “the
master manufacturer […] obtains in return a quantity
of finished work. This finished work must possess a
higher exchangeable value than the materials
etc.” (loc. cit., pp. 51-53).

“Effectual
demand consists in the power and inclination, on the port
of consumers to give for commodities, either by
immediate or circuitous barter, some greater
portion[d] of all
the ingredients of capital than their production
costs” (op. cit., p. 349).

120 quarters of corn are most certainly more than 100
quarters. But—if one merely considers the
use-value and the process it goes through, that is, in
reality, the vegetative or physiological | process, as is the case
here—it would be wrong to say, not indeed, with regard
to the 20 quarters, but with regard to the elements which go
to make them up, that they do not enter into the
production process. If this were so, they could
never emerge from it. In addition to the 100 quarters
of corn—the seeds—various chemical ingredients
supplied by the manure, salts contained in the soil, water,
air, light, are all involved in the process which transforms
100 quarters of corn into 120. The transformation and
absorption of the elements, the ingredients, the
conditions—the expenditure of nature, which
transforms 100 quarters into 120—takes place in the
production process itself and the elements of these
20 quarters enter into this process itself as physiological
“expenditure”, the result of which is the
transformation of 100 quarters into 120.

Regarded merely from the standpoint of use-value, these
20 quarters are not mere profit. The inorganic
components have been merely assimilated by the organic
components and transformed into organic material.
Without the addition of matter—and this is the
physiological expenditure—the 100 qrs. would never
become 120. Thus it can in fact be said even from the
point of view of mere use-value, that is, regarding corn as
corn—what enters into corn in inorganic form, as
expenditure, appears in organic form, as the
actual result, the 20 quarters, i.e., as the surplus
of the corn harvested over the corn sown.

But these considerations, in themselves, have as little
to do with the question of profit, as if one were to say
that lengths of wire which, in the production process, are
stretched to a thousand times the length of the metal from
which they are fabricated, yield a thousandfold
profit since their length has been increased a
thousandfold. In the case of the wire, the length has
been increased, in the case of corn, the quantity. But
neither increase in length nor increase in quantity
constitutes profit, which is
applicable solely to exchange-value, although
exchange-value manifests itself in a surplus product.

As far as exchange-value is concerned, there is no need
to explain further that the value of 90 quarters of corn can
be equal to (or greater than) the value of 100 quarters,
that the value of 100 quarters can be greater than that of
120 quarters, and that of 120 quarters greater than that of
500.

Thus, on the basis of one example which has
nothing to do with profit, with the surplus in the
value of the product over the value of the
capital outlay. Torrens draws conclusions about
profit. And even considered physiologically, as
use-value, his example is wrong since, in actual fact, the
20 quarters of corn which form the surplus product already
exist in one way or another in the production process,
although in a different form.

Finally, Torrens blurts out the brilliant old conception
that profit is profit upon expropriation.

### [c) Torrens and the Conception of Production Costs]

One of Torrens’s merits is that he has at all raised the
controversial question: what are production
costs. Ricardo continually confuses the
value of commodities with their production
costs (insofar as they are equal to the cost-price) and
is consequently astonished that Say, although he
believes that prices are determined by production costs,
draws different conclusions. Malthus, like Ricardo,
asserts that the price of a commodity is determined by the
cost of production, and, like Ricardo, he includes the
profit in the production costs. Nevertheless, he
defines value in a different way, not by the quantity of
labour contained in the commodity, but by the quantity of
labour it can command.

The ambiguities surrounding the concept of production
costs arise from the very nature of capitalist
production.

Firstly: The cost to the capitalist of the
commodity (he produces) is, naturally, what it costs
him. It costs him nothing—that is, he
expends no value upon it—apart from the value of the
capital advanced. If he lays out £100 on
raw materials, machinery, wages, etc., in order to produce
the commodity, it costs him £100, neither more nor
less. Apart from the labour embodied in these
advances, apart from the accumulated labour that is
contained in the capital expended and determines the value
of the commodities expended [in the production process], it
costs him no labour. What the immediate labour
costs him is the wages he pays
for it. Apart from these wages, the immediate
labour costs him nothing, and apart from immediate labour he
advances nothing except the value of the constant
capital.

| It is in this sense
that Torrens understands production costs, and this is the
sense in which every capitalist understands them when he
calculates his profit, whatever its rate may be.

Production costs are here equated with the outlay
of the capitalist, which is equal to the value of the
capital advanced, i.e., to the quantity of the labour
contained in the advanced commodities. Every
economist, including Ricardo, uses this definition of
production costs, whether they are called advances or
expenses, etc. This is what Malthus calls the
producing price as opposed to the purchaser’s
price. The transformation of surplus-value into
profit corresponds to this definition of
expenses.

Secondly: According to the first definition, the
production costs are the price which the capitalist
pays for the manufacture of the commodity during the
process of production, therefore they are what the commodity
costs him. But what the production of a
commodity costs the capitalist and what the
production of the commodity itself costs, are two
entirely different things. The labour (both
materialised and immediate) which the capitalist pays
for the production of the commodity and the labour which is
necessary in order to produce the commodity are
entirely different. Their difference constitutes the
difference between the value advanced and the value earned;
between the purchase price of the commodity for the
capitalist and its selling price (that is, if it is sold at
its value). If this difference did not exist, then
neither money nor commodities would ever be transformed into
capital. The source of profit would disappear together
with the surplus-value. The production costs of the
commodity itself consist of the value of the capital
consumed in the process of its production, that is, the
quantity of materialised labour embodied in the commodity
plus the quantity of immediate labour which is
expended upon it. The total amount of
“materialised” plus “immediate
labour” consumed in it constitutes the production
costs of the commodity itself. The commodity can
only be produced by means of the industrial consumption of
this quantity of materialised and immediate labour.
This is the pre-condition for its emergence out of the
process of production as a product, as a
commodity and even as a use-value. And no
matter how profit and wages may vary, these immanent
production costs of the commodity remain the same so long as
the technological conditions
of the real labour process remain the same, or,
what amounts to the same thing, as long as there is no
variation in the existing development of labour
productivity. In this sense, the production costs
of a commodity are equal to its value. The
living labour expended upon the commodity and the living
labour paid by the capitalist are two different
things. From the outset, therefore, the production
costs of a commodity to the capitalist (his advances) differ
from the production costs of the commodity itself,
its value. The excess of its value (that is, what the
commodity itself costs) over and above the value of the
capital expended (that is, what it costs the capitalist)
constitutes the profit which, therefore, results not from
selling the commodity above its value, but from selling it
above the value of the advances the capitalist made.

The production costs thus defined, the immanent
production costs of the commodity, which are equal to
its value, i.e., to the total amount of labour-time (both
objectified and immediate) required for its production,
remain the fundamental condition for its production and
remain unchangeable so long as the productive power of
labour remains unchanged.

Thirdly. I have however previously shown
that, in each separate branch of production or particular
occupation, the capitalist does not by any means sell his
commodities—which are also the product of a particular
trade, occupation or sphere of production—at the value
contained in them, and that, therefore, the amount of profit
is not identical with the amount of surplus-value, surplus
labour or unpaid labour embodied in the commodities he
sells. On the contrary, he can, on the average, only
realise as much surplus-value in the commodity as devolves
on it as the product of an aliquot part of the social
capital. If the social capital comes to 1,000 and the
capital in a particular |
branch of production amounts to 100, and if the total amount
of surplus-value (hence of the surplus product in which that
surplus-value is embodied) equals 200, that is, 20 per cent,
then the capital of 100 in this particular branch of
production would sell its commodity for 120, whatever the
value of the commodity, whether it is 120, or less or more;
whether, therefore, the unpaid labour contained in his
commodity forms a fifth of the labour expended upon it or
not.

This is the cost-price, and when one speaks of
production costs in the proper sense (in the
economic, capitalist sense), then the term denotes the value
of the capital outlay plus the value of the average
profit.

It is clear that, however much the cost-price of an
individual commodity may diverge from its value, it is
determined by the value of the total product of the
social capital. It is through the equalisation of the
profits of the different capitals that they are connected
with one another as aliquot parts of the aggregate social
capital, and as such aliquot parts they draw dividends out
of the common funds of surplus-value (surplus product), or
surplus labour, or unpaid labour. This does not alter
in any way the value of the commodity; it does not alter the
fact that, whether its cost-price is equal to, or greater or
smaller than, its value, it [the commodity] can never be
produced without its value being produced, that is to
say, without the total amount of materialised and immediate
labour required for its production being expended upon
it. This quantity of labour, not only of paid, but of
unpaid labour, must be expended on it, and nothing in the
general relationship between capital and labour is altered
by the fact that in some spheres of production a part of the
unpaid labour is appropriated by “brother
capitalists” and not by the capitalist who puts the
labour in motion in that particular branch of
industry. Further, it is clear that whatever the
relation between the value and the cost-price of a
commodity, the latter will always change, rise or fall, in
accordance with the changes of value, that is to say, the
quantity of labour required for the production of the
commodity. It is furthermore clear that part of the
profit must always represent surplus-value, unpaid labour,
embodied in the commodity itself, because, on the basis of
capitalist production, every commodity contains more labour
than has been paid by the capitalist putting that labour in
motion. Some part of the profit may consist of labour
not worked up in a commodity produced in the particular
branch of industry, or resulting from the given sphere of
production; but, then, there is some other commodity,
resulting from some other sphere of production, whose
cost-price falls below its value, or in whose cost-price
less unpaid labour is accounted for, paid for, than is
contained in it.

It is clear, therefore, that although the cost-prices of
most commodities must differ from their values, and hence
the “costs of production” of these commodities
must differ from the total quantity of labour contained in
them, nevertheless, those costs of production and those
cost-prices are not only determined by the values of the
commodities and confirm the law of value instead of
contradicting it, but, moreover, that the very existence
of costs of production and cost-prices can be
comprehended only on the basis of value and its laws, and
becomes a meaningless absurdity without that premise.

At the same time one perceives how economists who, on the
one hand, observe the actual phenomena of competition and,
on the other hand, do not understand the relationship
between the law of value and the law of cost-price, resort
to the fiction that capital, not labour, determines the
value of commodities or rather that there is no such thing
as value.

| Profit enters into
the production costs of commodities; it is rightly
included in the “natural price” of commodities
by Adam Smith, because, in conditions of capitalist
production, the commodity—in the long run, on the
average—is not brought to the market if it does not
yield the cost-price, which is equal to the value of the
advances plus the average profit. Or, as Malthus puts
it—although he does not understand the origin of
profit, its real cause—because the profit, and
therefore the cost-price which includes it, is (on the basis
of capitalist production) a condition of the supply
of the commodity. To be produced, to be brought to the
market, the commodity must at least fetch that market price,
that cost-price to the seller, whether its own value be
greater or smaller than that cost-price. It is a
matter of indifference to the capitalist whether his
commodity contains more or less unpaid labour than other
commodities, if into its price enters as much of the general
stock of unpaid labour, or the surplus product in which it
is fixed, as every other equal quantity of capital will draw
from that common stock. In this respect, the
capitalists are “communists”. In
competition, each naturally tries to secure more than the
average profit, which is only possible if others secure
less. It is precisely as a result of this struggle
that the average profit is established.

A part of the surplus-value realised in profit, i.e.,
that part which assumes the form of interest on capital laid
out (whether borrowed or not), appears to the capitalist as
outlay, as production cost which he has as a
capitalist, just as profit in general is the
immediate aim of capitalist production. But in
interest (especially on borrowed capital), this appears also
as the actual precondition of his production.

At the same time, this reveals the significance of the
distinction between the phenomena of production and of
distribution. Profit, a phenomenon of distribution, is
here simultaneously a phenomenon of production, a condition
of production, a necessary constituent
part of the process of production. How
absurd it is, therefore, for John Stuart Mill and others to
conceive bourgeois forms of production as absolute, but the
bourgeois forms of distribution as historically relative,
hence transitory. I shall return to this later.
The form of production is simply the form of distribution
seen from a different point of view. The specific
features—and therefore also the specific
limitation—which set bounds to bourgeois distribution,
enter into bourgeois production itself, as a determining
factor, which overlaps and dominates production. The
fact that bourgeois production is compelled by its own
immanent laws, on the one hand, to develop the productive
forces as if production did not take place on a narrow
restricted social foundation, while, on the other hand, it
can develop these forces only within these narrow limits, is
the deepest and most hidden cause of crises, of the crying
contradictions within which bourgeois production is carried
on and which, even at a cursory glance, reveal it as only a
transitional, historical form.

This is grasped rather crudely but none the less
correctly by Sismondi, for example, as a contradiction
between production for the sake of production and
distribution which makes absolute development of
productivity impossible.

### 2. James Mill [Futile Attempts to Resolve the Contradictions of the Ricardian System]

| James Mill,
Elements of Political Economy, London, 1821 (second
ed., London, 1824).

Mill was the first to present Ricardo’s theory in
systematic form, even though he did it only in rather
abstract outlines. What he tries to achieve is formal,
logical consistency. The disintegration of the
Ricardian school “therefore” begins with
him. With the master what is new and significant
develops vigorously amid the “manure” of
contradictions out of the contradictory phenomena. The
underlying contradictions themselves testify to the richness
of the living foundation from which the theory itself
developed. It is different with the disciple.
His raw material is no longer reality, but the new
theoretical form in which the master had sublimated
it. It is in part the theoretical disagreement of
opponents of the new theory and in part the often
paradoxical relationship of this theory to reality which
drive him to seek to refute his opponents and
explain away reality. In doing so, he entangles
himself in contradictions and with his attempt to solve
these he demonstrates the beginning disintegration of
the theory which he dogmatically espouses. On the
one hand, Mill wants to present bourgeois production as the
absolute form of production and seeks therefore to prove
that its real contradictions are only apparent ones.
On the other hand, [he seeks] to present the Ricardian
theory as the absolute theoretical form of this mode of
production and to disprove the theoretical contradictions,
both the ones pointed out by others and the ones he himself
cannot help seeing. Nevertheless in a way Mill
advances the Ricardian view beyond the bounds reached by
Ricardo. He supports the same historical interests as
Ricardo—those of industrial capital against landed
property—and he draws the practical conclusions
from the theory—that of rent for example—more
ruthlessly, against the institution of landed property which
he would like to see more or less directly transformed into
State property. This conclusion and this side of Mill
do not concern us here.

### [a) Confusion of surplus-value with Profit]

Ricardo’s disciples, just as Ricardo himself, fail to
make a distinction between surplus-value and
profit. Ricardo only becomes aware of the
problem as a result of the different influence which the
variation of wages can exercise on capitals of different
organic composition (and he considers different organic
composition only with regard to the circulation
process). It does not occur to them that, even if one
considers not capitals in different spheres of production
but each capital separately, insofar as it does not
consist exclusively of variable capital, i.e., of capital
laid out in wages only, rate of profit and rate of
surplus-value are different things, that therefore profit
must be a more developed, specifically modified form of
surplus-value. They perceive the difference only
insofar as it concerns equal profits—average rate of
profit—for capitals in different spheres of production
and differently composed of fixed and circulating
ingredients. In this connection Mill only repeats in a
vulgarised form what Ricardo says in Chapter I, “On
Value” [Principles of Political Economy].
The only new consideration which occurs to him in relation
to this question is this:

Mill remarks that “time as such”
(i.e. not labour-time, but simply time) produces
nothing, consequently it does not produce
“value”. How does this fit in with the law
of value according to which capital, because it requires a
longer time for its returns
[to the manufacturer], yields, as Ricardo says, the same
profit as capital which employs more immediate labour but
returns more rapidly? One perceives that Mill deals
here only with a quite individual case which, expressed in
general terms, would read as follows. How does the
cost-price, and the average rate of profit which it
presupposes | (and
therefore also equal value of commodities containing very
unequal quantities of labour), fit in with the fact that
profit is nothing but a part of the labour-time contained in
the commodity, the part which is appropriated by the
capitalist without an equivalent? On the other hand,
in the case of the average rate of profit and cost-price,
criteria which are quite extrinsic and external to the
determination of value are advanced, for example, that the
capitalist whose capital takes longer to make its return
because, as in the case of wine, it must remain longer in
the production process (or, in other cases, longer in the
circulation process) must be compensated for the time in
which he cannot use his capital to produce value. But
how can the time in which no value is produced create
value?

Mill’s passage concerning “time”
reads:

“… time does nothing.[e] How then can it create
value? [f] Time
is a mere abstract term. It is a word, a sound.
And it is the very same logical absurdity, to talk of an
abstract unit measuring value, and of time creating
it” (Elements of Political Economy, second ed.,
London, 1824, p. 99).

In reality, what is involved in the grounds for
compensation between capitals in different spheres of
production is not the production of surplus-value, but its
division between different categories of
capitalists. Viewpoints are here advanced which
have nothing whatever to do with the determination of
value as such. Everything which compels capital in
a particular sphere of production to renounce conditions
which would produce a greater amount of surplus-value
in other spheres, is regarded here as grounds for
compensation. Thus, if more fixed and less
circulating capital is employed, if more constant than
variable capital is employed, if it must remain longer in
the circulation process, and finally, if it must remain
longer in the production process without being subjected to
the labour process—a thing which always happens when
breaks of a technological character occur in the production
process in order to expose the developing product to the
working of natural forces, for example, wine in the
cellar. Compensation ensues in all these cases and
the last mentioned is the one which Mill seizes on, thus
tackling the difficulty in a very circumscribed and isolated
way. A part of the surplus-value produced in other
spheres is transferred to the capitals more unfavourably
placed with regard to the direct exploitation of labour,
simply in accordance with their size (competition brings
about this equalisation so that each separate capital
appears only as an aliquot part of social capital).
The phenomenon is very simple as soon as the relationship of
surplus-value and profit as well as the equalisation of
profit in a general rate of profit is understood. If,
however, it is to be explained directly from the law of
value without any intermediate link, that is, if the profit
which a particular capital yields in a particular branch of
production is to be explained on the basis of the
surplus-value contained in the commodities it produces, in
other words on the basis of the unpaid labour
(consequently also on the basis of the labour directly
expended in the production of the commodities), this is a
much more difficult problem to solve than that of squaring
the circle, which can be solved algebraically. It is
simply an attempt to present that which does not exist as in
fact existing. But it is in this direct form
that Mill seeks to solve the problem. Thus no solution
of the matter is possible here, only a sophistic explaining
away of the difficulty, that is, only
scholasticism. Mill begins this process.
In the case of an unscrupulous blockhead like
McCulloch, this manner assumes a swaggering
shamelessness.

Mill’s solution cannot be better summed up than it is in
the words of Bailey:

“The author[g] […] has made a curious
attempt to resolve the effects of time into
expenditure of labour. ‘If,’ says
he,” (p. 97 of the Elements, second ed., 1824)
“‘the wine which is put in the cellar is
increased in value one-tenth by being kept a year, one-tenth
more of labour may be correctly considered as having
been expended upon it.’… a fact can be
correctly considered as having taken | place only when it really has
taken place. In the instance adduced, no human being,
by the terms of the supposition, has approached the wine, or
spent upon it a moment or a single motion of his
muscles” ([Samuel Bailey,] A Critical Dissertation
on the Nature, Measures, and Causes of Value etc.,
London, 1825, pp. 219-20).

Here the contradiction between the general law and
further developments in the concrete circumstances is to be
resolved not by the discovery of the connecting links but by
directly subordinating and immediately adapting the concrete
to the abstract.

This moreover is to be brought about by a verbal
fiction, by changing the correct names of things.
(These are indeed “verbal disputes”, they are
“verbal”, however, because real contradictions
which are not resolved in a real way, are to be solved by
phrases.) When we come to deal with McCulloch, it will
be seen that this manner, which appears in Mill only in
embryo, did more to undermine the whole foundation of the
Ricardian theory than all the attacks of its opponents.

Mill resorts to this type of argument only when he is
quite unable to find any other expedient. But as a
rule his method is quite different. Where the economic
relation—and therefore also the categories expressing
it—includes contradictions, opposites, and likewise
the unity of the opposites, he emphasises the aspect of the
unity of the contradictions and denies the
contradictions. He transforms the unity of
opposites into the direct identity of opposites.

For example, a commodity conceals the contradiction of
use-value and exchange-value. This contradiction
develops further, presents itself and manifests itself in
the duplication of the commodity into commodity and
money. This duplication appears as a process in the
metamorphosis of commodities in which selling and buying are
different aspects of a single process and each act of this
process simultaneously includes its opposite. In the
first part of this work, I mentioned that Mill disposes of
the contradiction by concentrating only on the unity
of buying and selling; consequently he transforms
circulation into barter, then, however, smuggles categories
borrowed from circulation into [his description of]
barter. See also what I wrote there about Mill’s
theory of money, in which he employs similar
methods.

In James Mill we find the unsatisfactory
divisions—“Production”,
“Distribution”, “Interchange”,
“Consumption”.

### [b) Mill’s Vain Efforts to Bring the Exchange Between Capital and Labour into Harmony with the Law of Value]

Wages:

“Instead, however, of waiting till
the commodity is produced, and […] the value of it is
realised, it has been found to suit much better the
convenience of the labourers to receive their share in
advance. The shape under which it has been found
most convenient for all parties that they should receive it,
is that of wages. When the share of the commodity
which belongs to the labourer has been all received in the
shape of wages, the commodity itself belongs to the
capitalist, he having, in reality, bought the share of
the
labourer and paid for it in advance” ( [James Mill,
Elements of Political Economy, second ed., 1824,
p. 41] Elémens d’économie politique,
traduit de l’anglais par J. T. Parisot, Paris, 1823, pp.
33-34).[h]

It is highly characteristic of Mill that, just as
money for him is an expedient invented for
convenience’ sake, capitalist relations are likewise
invented for the same reason. These specific social
relations of production are invented for
“convenience’” sake. Commodities and money
are transformed into capital because the worker has ceased
to engage in exchange as a commodity producer and commodity
owner; instead of selling commodities he is compelled to
sell his labour itself (to sell directly his labour-power)
as a commodity to the owner of the objective conditions of
labour. This separation is the prerequisite for the
relationship of capital and wage-labour in the same way as
it is the prerequisite for the transformation of money (or
of the commodities by which it is represented) into
capital. Mill presupposes the separation, the
division; he presupposes the relationship of
capitalist and wage-worker, in order to present as a matter
of convenience the situation in which the worker sells no
product, no commodity, but his share of the product
(in the production of which he has no say whatsoever and
which proceeds independently of him) before he has
produced it. | Or,
more precisely, the worker’s share of the product is paid
for—transformed into money—by the capitalist
before the capitalist has disposed of, or realised, the
product in which the worker has a share.

This view is aimed at circumventing the specific
difficulty, along with the specific form of the
relationship. Namely, the difficulty of the Ricardian
system according to which the worker sells his labour
directly (not his labour-power). The [difficulty can
be expressed as follows]: the value of a commodity is
determined by the labour-time required for its production;
how does it happen that this law of value does not hold good
in the greatest of all exchanges, which forms the foundation
of capitalist production, the exchange between capitalist
and labourer? Why is the quantity of materialised
labour received by the worker as wages not equal to the
quantity of immediate labour which he gives in exchange for
his wages? To shift this difficulty, Mill transforms
the labourer into a commodity owner who sells the
capitalist his product, his commodity—since
his share of the product, of the commodity, is
his product, his commodity, in other words, a
value produced by him in the form of a particular
commodity. He resolves the difficulty by transforming
the transaction between capitalist and labourer, which
includes the contradiction between materialised and
immediate labour, into a common transaction between
commodity owners, owners of materialised labour.

Although by resorting to this artifice Mill has indeed
made it impossible for himself to grasp the specific nature,
the specific features, of the proceedings which take place
between capitalist and wage-worker, he has not reduced the
difficulty in any way, but has increased it, because the
peculiarity of the result is now no longer comprehensible in
terms of the peculiarity of the commodity which the worker
sells (and the specific feature of this commodity is that
its use-value is itself a factor of exchange-value, its use
therefore creates a greater exchange-value than it itself
contained).

According to Mill, the worker is a seller of commodities
like any other. For example, he produces 6 yards of
linen. Of these 6, 2 yards are assumed to be equal to
the value of the labour which he has added. He thus
sells 2 yards of linen to the capitalist. Why then
should he not receive the full value of the 2 yards, like
any other seller of 2 yards of linen, since he is now a
seller of linen like any other? The contradiction with
the law of value now expresses itself much more crassly than
before. He does not sell a particular commodity
differing from all other commodities. He sells labour
embodied in a product, that is, a commodity which as such is
not specifically different from any other commodity.
If now the price of a yard [of linen]—that is, the
quantity of money containing the same amount of labour-time
as the yard [of linen]—is 2 shillings, why then does
the worker receive 1 shilling instead of 2? But if the
worker received 2 shillings, the capitalist would not secure
any surplus-value and the whole Ricardian system would
collapse. We would have to return to profit upon
expropriation. The 6 yards would cost the capitalist
12 shillings, i.e., their value, but he would sell them for
13 shillings.

Or linen, and any other commodity, is sold at its value
when the capitalist sells it, but below its value
when the worker sells it. Thus the law of value would
be destroyed by the transaction between worker and
capitalist. And it is precisely in order to avoid this
that Mill resorts to his fictitious argument. He wants
to transform
the relationship between worker and capitalist into
the ordinary one between sellers and buyers of
commodities. But why should not the ordinary law of
value of commodities apply to this transaction? [It
may be said however that] the worker is paid “in
advance”. Consequently this is not after all
the ordinary relationship of buying and selling
commodities. What does this “payment in
advance” mean in this context? The worker who,
for example, is paid weekly, “advances”
his labour and produces the share of the weekly product
which belongs to him—his weekly labour embodied in a
product—(both according to Mill’s assumption and in
practice) before he receives “payment” from the
capitalist. The capitalist “advances” raw
materials and machines, the worker the “labour”,
and as soon as the wages are paid at the end of the week, he
sells a commodity, his commodity, his share of the
total commodity, to the capitalist. But, Mill will
say, the capitalist pays the 2 yards | of linen due to the worker,
i.e., turns them into cash, transforms them into money,
before he himself sells the 6 yards and transforms them into
money. But what if the capitalist is working on
orders, if he sells the goods before he produces them?
Or to express it more generally, what difference does it
make to the worker—in this case the seller of 2 yards
of linen—if the capitalist buys these 2 yards from him
in order to sell them again, and not to consume them?
Of what concern are the buyer’s motives to the seller?
And how can motives, moreover, modify the law of
value? To be consistent, each seller would have to
dispose of his commodities below their value, for he is
disposing of his products to the buyer in the form of a
use-value, whereas the buyer hands over value in the form of
money, the cash form of the product. In this case, the
linen manufacturer would also have to underpay the
yarn merchant and the machine manufacturer and the colliery
owner and so on. For they sell him commodities which
he only intends to transform into money, whereas he pays
them “in advance” the value of the
component parts entering into his commodity not only before
the commodity is sold, but before it is even produced.
The worker provides him with linen, a commodity in a
marketable form, in contrast to other sellers whose
commodities, machinery, raw materials, etc., have to go
through a process before they acquire a saleable form.
It is a pretty kettle of fish for such an inveterate
Ricardian as Mill, according to whom purchase and sale,
supply and demand are identical terms, and money a mere
formality, if the transformation of the commodity into
money—and nothing
else takes place when the 2 yards of linen are sold to
the capitalist—includes the fact that the seller has
to sell the commodity below its value, and the buyer, with
his money, has to buy it above its value.

[Mill’s argument] therefore amounts to the absurdity
that, in this transaction, the buyer buys the commodity in
order to resell it at a profit and that, consequently, the
seller must sell the commodity below its
value—and with this the whole theory of value falls to
the ground. This second attempt by Mill to resolve a
Ricardian contradiction, in fact destroys the whole basis of
the system, especially its great merit that it defines the
relationship between capital and wage-labour as a direct
exchange between hoarded and immediate labour, that is, that
it grasps its specific features.

In order to extricate himself, Mill would have to go
further and to say that it is not merely a question of the
simple transaction of the purchase and sale of commodities;
that, on the contrary, insofar as it involves payment or the
turning into money of the worker’s product, which is equal
to his share of the total product, the relationship between
worker and capitalist is similar to that prevailing between
the lending capitalist or discounting capitalist (the
moneyed capitalist) and the industrial capitalist. It
would be a pretty state of affairs to presuppose
interest-bearing capital—a special form of
capital—in order to deduce the general form of
capital, capital which produces profit; that is, to present
a derived form of surplus-value (which already presupposes
capital) as the cause of the appearance of
surplus-value. In that case, moreover, Mill would have
to be consistent and in place of all the definite laws
concerning wages and the rate of wages elaborated by
Ricardo, he would have to derive them from the rate of
interest, and if he did that it would indeed be impossible
to explain what determines the rate of interest, since,
according to the Ricardians and all other economists worth
naming, the rate of interest is determined by the rate of
profit.

The proposition concerning the “share”
of the worker in his own product is in fact based on this:
If one considers not simply the isolated transaction between
capitalist and worker, but the exchange which takes place
between, both in the course of reproduction, and if one
considers the real content of this process instead of the
form in which it appears, then it is in fact evident that
what the capitalist pays the worker (as well as the part of
capital which confronts the worker as constant capital) is
nothing
but a part of the worker’s product itself and, indeed, a
part which does not have to be transformed into money, but
which has already been sold, has already been transformed
into money, since wages are paid in money, not in
kind. Under slavery, etc., the false appearance
brought about by the previous transformation of the product
into money—insofar as it is expended on
wages—does not arise; it is therefore obvious that
what the slave receives as wages is, in fact, nothing that
the slave-owner “advances” him, but simply the
portion of the realised labour of the slave that returns to
him in the form of means of subsistence. The same
applies to the capitalist. He “advances”
something only in appearance. Since he pays for the
work only after it has been done, he advances or rather
| pays the worker
as wages a part of the product produced by the worker and
already transformed into money. A part of the worker’s
product which the capitalist appropriates, which is
deducted beforehand, returns to the worker in the
form of wages—as an advance on the new product, if you
like.

It is quite unworthy of Mill to cling to this
appearance of the transaction in order to explain the
transaction itself (this sort of thing might suit McCulloch,
Say or Bastiat). The capitalist can advance the worker
nothing except what he has taken previously from the worker,
i.e., what has been advanced to him by other people’s
labour. Malthus himself says that what the capitalist
advances consists not “of cloth” and
“other commodities”, but “of
labour”, that is, precisely of that which he
himself does not perform. He advances the worker’s own
labour to the worker.

However, the whole paraphrase is of no use to Mill, for
it does not help him to avoid resolving the question: how
can the exchange between hoarded and immediate labour (and
this is the way the exchange process between capital and
labour is perceived by Ricardo and by Mill and others after
him) correspond to the law of value, which it contradicts
directly? One can see from the following passage that
it is of no help to Mill:

“What determines the share of
the labourer, or the portion in which the commodity, or
commodity’s worth, is divided between him and the
capitalist. Whatever the share of the labourer, such
is the rate of wages… It is very evident, that
the share of the two parties is the subject of a
bargain between them […] All bargains,
when left in freedom, are determined by competition, and the
terms alter according to the state of supply and
demand” ([Mill, Elements, pp. 41-42;
Parisot,] pp. 34-35).

The worker is paid for his “share” of the
product. This is said in order to transform him into
an ordinary seller of a commodity
(a product) vis-à-vis the capitalist and to
eliminate the specific feature of this relationship.
[According to Mill] the worker’s share of the product is
his product, that is, the share of the product in
which his newly applied labour is realised. But this
is not the case. On the contrary, we now ask which is
his “share” of the product, that is,
which is his product? For the part of
the product which belongs to him is his product,
which he sells. We are now told that his
product and his product are two quite different
things. We must establish, first of all, what his
product (in other words, his share of the product, that is,
the part of the product that belongs to him) is. His
product is thus a mere phrase, since the quantity of value
which he receives from the capitalist is not determined by
his own production. Mill has thus merely removed the
difficulty one step. He has got no farther than he was
at the beginning.

There is a quid pro quo here. Supposing that
the exchange between capital and wage-labour is a continuous
activity—as it is if one does not isolate and consider
one individual act or element of capitalist
production—then the worker receives a part of the
value of his product which he has replaced, plus that part
of the value which he has given the capitalist for
nothing. This is repeated continuously. Thus he
receives in fact continuously a portion of the value of his
own product, a part of, or a share in, the value he has
produced. Whether his wages are high or low is not
determined by his share of the product but, on the contrary,
his share of the product is determined by the amount of his
wages. He actually receives a share of the value of
the product. But the share he receives is determined
by the value of labour, not conversely, the value of
labour-by his share in the product. The value of
labour, that is, the labour-time required by the worker for
his own reproduction, is a definite magnitude; it is
determined by the sale of his labour power to the
capitalist. This virtually determines his share of the
product as well. It does not happen the other way
round, that his share of the product is determined first,
and as a result, the amount or value of his wages.
This is precisely one of Ricardo’s most important and most
emphasised propositions, for otherwise the price of labour
would determine the prices of the commodities it produces,
whereas, according to Ricardo, the price of labour
determines nothing but the rate of profit.

And how does Mill determine the “share” of
the product which the worker receives? By demand and
supply, competition between workers and capitalists.
What Mill says applies to all commodities:

“…It is
very evident, that the share” (read: in the value of
commodities) “of the two Parties” (seller and
buyer) “is the subject of a bargain between | them […] All
bargains, when left in freedom, are determined by
competition, and the terms alter according to the state of
supply and demand” [Mill, Elements, pp. 41-42;
Parisot, pp. 34-35].

Here we have the gist of the matter. [This is said
by] Mill who, as a zealous Ricardian, proves that although
demand and supply can, to be sure, determine the
vacillations of the market price either above or below the
value of the commodity, they cannot determine that
value itself, that these are meaningless words when applied
to the determination of value, for the determination of
demand and supply presupposes the determination of
value. In order to determine the value of labour,
i.e., the value of a commodity, Mill now resorts to
something for which Say had already reproached Ricardo:
determination by demand and supply.

But even more.

Mill does not say which of the two parties represents
supply and which demand—which is of no importance to
the matter here. Still, since the capitalist offers
money and the worker offers something for the money, we will
assume that demand is on the side of the capitalist and
supply on that of the worker. But what then does the
worker “sell”? What does he supply?
His “share” of the product which does not [yet]
exist? But it is just his share in the future product
which has to be determined by competition between him and
the capitalist, by the “demand and supply”
relationship. One of the sides of this
relationship—supply—cannot be something which is
itself the result of the struggle between demand and
supply. What then does the worker offer for
sale? His labour? If this is so, then Mill is
back again at the original difficulty he sought to evade,
the exchange between hoarded and immediate
labour. And when he says that what is happening
here is not the exchange of equivalents, or that the value
of labour the commodity sold, is not measured by “the
labour-time” itself, but by competition, by demand and
supply, then he admits that Ricardo’s theory breaks down,
that his opponents are right, that the determination of the
value of commodities by labour-time is false, because the
value of the most important commodity, labour itself,
contradicts this law of value of commodities. As we
shall see later, Wakefield says this quite
explicitly.

Mill can turn and twist as he will, he cannot extricate
himself from the dilemma. At best, to use his own mode
of expression, competition causes the workers to offer a
definite quantity of labour
for a price which, according to the relation
of demand and supply, is equal to a larger or smaller part
of the product which they will produce with this quantity of
labour. That this price, this sum of
money, which they receive in this way, is equal to a
larger or smaller part of the value of the product to be
manufactured, does not, however, as a matter of course, in
any way prevent a definite amount of living labour
(immediate labour) from being exchanged for a greater or
lesser amount of money (accumulated labour, existing
moreover in the form of exchange-value). It does not
therefore prevent the exchange of unequal quantities of
labour, that is, of less hoarded labour for more immediate
labour. This was precisely the phenomenon that Mill
had to explain and he wished to clear the problem up without
violating the law of value. The phenomenon is not
changed in the slightest, much less explained, by declaring
that the proportion in which the worker exchanges his
immediate labour for money is expressed at the end of
the production process in the ratio of the value paid him to
the value of the product he has produced. The original
unequal exchange between capital and labour thus only
appears in a different form.

How Mill boggles at direct exchange between labour and
capital—which Ricardo takes as his point of departure
without any embarrassment at all—is also shown by the
way he proceeds. Thus he says:

| “Let us begin
by supposing that there is a certain number of capitalists
[…] that there is also a certain number of labourers;
and that the proportion, in which the commodities
produced ore divided between them, has fixed itself at some
particular point.”

“Let us next suppose that the
labourers have increased in number […] without any
increase in the quantity of capital… To
prevent their being left out of employment” the
additional labourers “have but one resource; they must
endeavour to supplant those who have forestalled the
employment; that is, they must offer to work for a
smaller reward. Wages, therefore,
decline. If we suppose … that the quantity of
capital has increased, while the number of labourers remains
the same, the effect will be reversed… if the
ratio which capital and population bear to one another
remains the same, wages will remain the same” ([Mill,
Elements, pp. 42-44 passim; Parisot,] p. 35 et seq.
passim).

What has to be determined is “the proportion in
which they” (capitalists and workers) “divide
the product”. In order to establish this by
competition, Mill assumes that this proportion
“has fixed itself at some particular
point”. In order to establish the
“share” of the worker by means of competition,
he assumes
that it is determined before competition “at
some particular point”. Moreover, in order to
demonstrate how competition alters the division of the
product which is determined “at some particular
point”, he assumes that workers “offer to
work for a smaller reward” when their number grows
more rapidly than the quantity of capital. Thus he
says here outright that what the workers supply consists of
“labour” and that they offer this labour
for a “reward”, i.e., money, a definite
quantity of “hoarded labour”. In order to
avoid direct exchange between labour and capital, direct
sale of labour, he has recourse to the theory of the
“division of the product”. And in order to
explain the proportion in which the product is divided, he
presupposes direct sale of labour for money, so that
this original exchange between capital and labour is later
expressed in the proportion of [the share] the worker
receives of his product, and not that the original exchange
is determined by his share of the product. And
finally, if the number of workers and the amount of capital
remain the same, then the “wage rate” will
remain the same. But what is the wage rate when
demand and supply balance? That is the point which has
to be explained. It is not explained by declaring that
this rate is altered when the equilibrium between
demand and supply is upset. Mill’s tautological
circumlocutions only demonstrate that he feels there is a
snag here in the Ricardian theory which he can only overcome
by abandoning the theory altogether.

Against Malthus, Torrens, and others,
against the determination of the value of commodities by the
value of capital, Mill remarks correctly:

“Capital is commodities.
If the value of commodities, then, depends upon the value of
capital, it depends upon the value of commodities; the value
of commodities depends upon itself” ([James Mill,]
Elements of Political Economy, London, 1821,
p. 74).

<Mill does not gloss over the contradiction between
capital and labour. The rate of profit must be
high so that the social class which is free from immediate
labour may be important; and for that purpose wages must be
relatively low. It is necessary that the mass of the
labourers should not be masters of their
own time and slaves of their own needs, so that human
(social) capacities can develop freely in the classes for
which the working class serves merely as a basis. The
working class represents lack of development in order that
other classes can represent human development. This in
fact is the contradiction in which bourgeois | society develops, as has every
hitherto existing society, and this is declared to be a
necessary law, i.e., the existing state of affairs is
declared to be absolutely reasonable.

“All the blessings which flow from
that grand and distinguishing attribute of our nature, its
progressiveness, the power of advancing continually
from one degree of knowledge, one degree of command over the
means of happiness, to another, seem, in a great measure, to
depend upon the existence of a class of men which have
their time at their commend; that is, who are rich
enough to be freed from all solicitude with respect to the
means of living in a certain state of enjoyment. It is
by this class of men that knowledge is cultivated and
enlarged; it is also by this class that it is diffused; it
is this class of men whose children receive the best
education, and are prepared for all the higher and more
delicate functions of society, as legislators, judges,
administrators, teachers, inventors in all the arts, and
superintendents in all the more important works, by which
the dominion of the human species is extended over the
powers of nature… to enable a considerable
proportion of the community to enjoy the advantages of
leisure, the return to capital must
evidently be large” ([James Mill,
Elements, pp. 64-65, 65-66; Parisot,] pp. 65,
67).>

In addition to the above.

Mill, as a Ricardian, defines labour and capital simply
as different forms of labour.

“… Labour and Capital
[…] the one, immediate labour, … the
other, hoarded labour” ([James Mill,
Elements,] first Engl. ed., London, 1821, p. 75).

In another passage he says:

“… of these two species of
labour, two things are to be observed … they are
not always paid according to the same rate”
([James Mill, Elements, p.100;] Parisot, p.100).

Here he comes to the point. Since what pays for
immediate labour is always hoarded labour, capital, the fact
that it is not paid at the same rate means nothing
more than that more immediate labour is exchanged for less
hoarded labour, and that this is “always”
the case, since otherwise hoarded labour would not be
exchanged as “capital” for immediate labour and
would not
only fail to yield the very high interest desired
by Mill, but would yield none at all. The passage
quoted thus contains the admission (since Mill along with
Ricardo regards the exchange between capital and labour as a
direct exchange of hoarded and immediate labour), that they
are exchanged in unequal proportions, and that in
respect of them the law of value—according to which
equal quantities of labour are exchanged for one
another—breaks down.

### [c) Mill’s Lack of Understanding of the Regulating Role of Industrial Profit]

Mill advances as a basic law what Ricardo actually
assumes in order to develop his theory of rent.

“All other profits … must sink
to the level of agricultural profits” (
[Elements,] second ed., London, 1824, p. 78).

This is fundamentally wrong, since capitalist production
develops first of all in industry, not in agriculture, and
only embraces the latter by degrees, so that it is only as a
result of the advance of capitalist production that
agricultural profits become equalised to industrial profits
and only as a result of this equalisation do the former
influence the latter. Hence it is in the first place
wrong historically. But secondly, once this
equalisation is an accomplished fact—that is,
presupposing a level of development of agriculture in which
capital, in accordance with the rate of profit, flows from
industry to agriculture and vice versa—it is equally
wrong to state that from this point on agricultural
profits become the regulating force, instead of the
influence being reciprocal. Incidentally, in order to
develop the concept of rent, Ricardo himself assumes the
opposite. The price of corn rises; as a result
agricultural profits do not fall (as long as
there are no new supplies either from inferior land or from
additional, less productive investments of
capital)—for the rise in the price of corn more than
compensates the farmer for the loss he incurs by the rise in
wages following on the rise in the price of corn—but
profits fail in industry, where no such compensation
or over-compensation takes place. Consequently the
industrial profit rate falls and capital which yields
this lower rate of profit can therefore be employed on
inferior lands. This would not be the case if the old
profit rate prevailed. Only because the decline of
industrial profits thus reacts on the agricultural profit
yielded by the worse land, does agricultural profit
generally fall, |
and a part of it is detached in the form of rent from the
profit the better land yields. This is the way Ricardo
describes the process, according to which, therefore,
industrial profit regulates profit in agriculture.

If agricultural profits were to rise again as a result of
improvements in agriculture, then industrial profits would
also rise. But this does not by any means exclude the
fact that—as originally the decline in industrial
profit causes a decline in agricultural profit—a
rise in industrial profit may bring about a rise in
agricultural profit. This is always the case when
industrial profit rises independently of the price of
corn and of other agricultural necessaries which enter
into the wages of the workers, that is, when it rises as a
result of the fall in the value of commodities which
constitute constant capital, etc. Rent moreover cannot
possibly be explained if industrial profit does not
regulate agricultural profit. The average rate of
profit in industry is established as a result of
equalisation of the profits of the different capitals and
the consequent transformation of the values into
cost-prices. These cost-prices—the value
of the capital advances plus average profit—are the
prerequisite received by agriculture from industry,
since the equalisation of profits cannot take place in
agriculture owing to landownership. If then the value
of agricultural produce is higher than the cost-price
determined by the industrial average profit would be,
the excess of this value over the cost-price constitutes the
absolute rent. But in order that this excess of value
over cost-price can be measured, the cost-price must
be the primary factor; it must therefore be imposed on
agriculture as a law by industry.

A passage from Mill must be noted:

“That which is productively
consumed is always capital. This is a property of
productive consumption which deserves to be particularly
marked… Whatever is consumed productively
becomes capital” ([James Mill, Elements,
p. 217;] Parisot, pp. 241-42).

### [d)] Demand, supply, Over-Production

“A demand means, the will to
purchase, and the means of
purchasing… The equivalent” (means of
purchasing) “which a man brings is the
instrument of demand. The extent of his demand
is measured by the extent of his equivalent. The
demand and the equivalent are convertible terms,
and one may be substituted for the other…
His” (a man’s) “will, therefore, to
purchase, and his means of purchasing, in
other words his demand, is exactly equal to the amount of
what he has produced and does not mean to consume”
([James Mill, Elements, pp. 224-25;] Parisot,
pp. 252-53).

One sees here how the direct identity of demand and
supply (hence the impossibility of a general glut) is
proved. The product constitutes demand and the extent
of this demand, moreover, is measured by the value of the
product. The same abstract “reasoning”
with which Mill demonstrates that buying and selling are but
identical and do not differ; the same tautological phrases
with which he shows that prices depend on the amount of
money in circulation; the same methods used to prove that
supply and demand (which are only more developed forms of
buyer and seller) must balance each other. The logic
is always the same. If a relationship includes
opposites, it comprises not only opposites but also the
unity of opposites. It is therefore a unity
without opposites. This is Mill’s logic, by which
he eliminates the “contradictions”.

Let us begin with supply. What I supply is
commodities, a unity of use-value and exchange-value,
for example, a definite quantity of iron worth £3
(which is equal to a definite quantity of
labour-time). According to the assumption I am a
manufacturer of iron. I supply a
use-value—iron—and I supply a value, namely, the
value expressed in the price of the iron, that is, in
£3. But there is the following little
difference. A definite quantity of iron is in
reality placed on the market by me. The
value of the iron, on the other hand, exists only as
its price which must first be realised by the buyer
of the iron, who represents, as far as I am concerned, the
demand for iron. The demand of the seller of
iron consists in the demand for the exchange-value of
the iron, which, although it is embodied in the iron, is not
realised. It is possible for the same
exchange-value to be represented by very different
quantities of iron. The supply of use-value and the
supply of value to be realised are thus by no means
identical, since quite different quantities of use-value
| can represent the same
quantity of exchange-value.

The same value—£3—can be represented by
one, three or ten tons of iron. The quantity of iron
(use-value) which I supply and the quantity of value I
supply, are by no means proportionate to one another, since
the latter quantity can remain unchanged no matter how much
the former changes. No matter how large or small the
quantity of iron I supply may be, it is assumed that
I always want to realise the value of the iron, which is
independent of the actual quantity of iron and in
general of its existence as a use-value. The value
supplied (but not yet realised) and the quantity of iron
which is realised, do not correspond to each other. No
grounds exist therefore for assuming that the possibility of
selling a commodity at its value corresponds in any way to
the quantity of the commodity I bring to market. For
the buyer, my commodity exists, above all, as
use-value. He buys it as such. But what he needs
is a definite quantity of iron. His need for iron is
just as little determined by the quantity produced by me as
the value of my iron is commensurate with this quantity.

It is true that the man who buys has in his possession
merely the converted form of a
commodity—money—i.e., the commodity in the form
of exchange-value, and he can act as a buyer only because he
or others have earlier acted as sellers of commodities which
now exist in the form of money. This, however, is no
reason why he should reconvert his money into my commodity
or why his need for my commodity should be determined by the
quantity of it that I have produced. Insofar as he
wants to buy my commodity, he may want either a smaller
quantity than I supply, or the entire quantity, but
below its value. His demand does not have to
correspond to my supply any more than the quantity I supply
and the value at which I supply it are identical.

However, the inquiry into demand and supply does not
belong here.

Insofar as I supply iron, I do not demand iron, but
money. I supply a particular use-value and demand its
value. My supply and demand are therefore as different
as use-value and exchange-value. Insofar as I supply a
value in the iron itself, I demand the realisation
of this value. My supply and demand are thus as
different as something conceptual is from something
real. Further, the quantity I supply and its value
stand in no proportion to each other. The demand for
the quantity of use-value I supply is however measured not
by the value I wish to realise, but by the quantity which
the buyer requires at a definite price.

Yet another passage from Mill:

“But it is evident, that each man
contributes to the general supply the whole of what he has
produced and does not mean to consume. In whatever
shape any part of the annual produce has come into his
hands, if he proposes to consume no part of it himself, he
wishes to dispose of the whole; and the whole, therefore,
becomes matter of supply: if he consumes a part, he wishes
to dispose of all the rest, and all the rest becomes matter
of supply” ([James Mill, Elements, p. 225;]
Parisot, p. 253).

In other words, this means nothing else but that all
commodities placed on the market constitute supply.

“As every man’s demand, therefore, is
equal to that part of the annual produce, or of the property
generally, which he has to dispose of”

<Stop! His demand is equal to the value
(when it is realised) of the portion of products which he
wants to dispose of. What he wants to dispose of is a
certain quantity of use-value; what he wishes to have is the
value of this use-value. Both things are
anything but identical>

“and each man’s supply is exactly the
same thing”

<by no means; his demand does not consist in what he
wishes to dispose of, i.e., the product, but in the demand
for the value of this product; on the other hand, his supply
really consists of this product, whereas the value is only
conceptually supplied>

“the supply and demand of every
individual are of necessity equal” ([James Mill,
Elements, pp. 225-26;] Parisot, pp. 253-54).

(That is, the value of the commodity supplied by
him and the value which he asks for it but does not
possess are equal; provided he sells the commodity at
its value, the value supplied (in the form of commodity) and
the value received (in the form of money) are equal.
But it does not follow that, because he wants to sell the
commodity at its value, he actually does so. A
quantity of commodities is supplied by him, and is on the
market. He tries to get the value for it.)

“Demand and supply are terms | related in a peculiar
manner. A commodity which is supplied, is always, at
the same time, a commodity which is the instrument of
demand. A commodity which is the instrument of demand,
is always, at the same time, a commodity added to the stock
of supply. Every commodity is always at one and the
same time matter of demand and matter of supply.
Of two men who perform an exchange, the one does not come
with only a supply, the other with only a demand; each of
them comes with both a demand and a supply. The
supply which he brings is the instrument of his
demand; and his demand and supply are of course exactly
equal to one another.”

“But if the demand and supply of
every individual are always equal to one another, and demand
and supply of all the individuals in the nation, taken
aggregately, must be equal. Whatever, therefore, be
the amount of the annual produce, it never can exceed the
amount of the annual demand. The whole of the annual
produce is divided into a number of shares equal to that of
the people to whom it is distributed. The whole of the
demand is equal to as much of the whole of the shares as the
owners do not keep for their own
consumption. But the whole of the shares is equal to
the whole of the produce” ([James Mil],
Elements, pp. 226-27;] Parisot, pp. 254-55).

Once Mill has assumed that supply and demand are
equal for each individual, then the whole long-winded
excursus to the effect that supply and demand are also equal
for all individuals, is quite superfluous.

How Mill was regarded by contemporary Ricardians can be
seen, for instance, from the following:

“There is thus at least one
case” <writes Prévost with regard to Mill’s
definition of the value of labour> “in which the
price” (i.e., the price of labour) “is
permanently determined by supply and demand relations”
(Prévost, Réflexions sur le systéme
de Ricardo [p. 187] appended to Discours sur
l’économie politique. Par McCulloch,
traduit par G-me Prévost, Genève-Paris,
1825).

In the work cited, McCulloch says that Mill’s
object is:

“… to give a strictly
logical deduction of the principles of Political
Economy…. Mr. Mill touches on almost every
topic of discussion: He has disentangled and simplified the
most complex and difficult questions; has placed the various
principles which compose the science in their natural
order” (op. cit., p. 88[i]).

One can conclude from his logic that he takes over the
quite illogical Ricardian structure, which we analysed
earlier, and naïvely regards it on the whole as a
“natural order”.

### [e)] Prévost [Rejection of some of the Conclusions of Ricardo and James Mill. Attempts to Prove That a Constant Decrease of Profit Is Not Inevitable]

As far as the above-mentioned Prévost is
concerned, who made Mill’s exposition of the Ricardian
system the basis of his Réflexions, a number
of his objections are founded on sheer, callow
misunderstanding of Ricardo.

But the following remark about rent is noteworthy:

“One may entertain a doubt about the
influence of inferior land on the determination of
prices, if one bears in mind, as one should, its relative
area” (Prévost, op. cit., p. 177).

Prévost cites the following from Mill,
which is also important for my argument, since Mill himself
here thinks of one example
where differential rent arises because the new
demand, the additional demand, is supplied by a better, not
a worse soil, consequently, the ascending line.

“Mr. Mill uses this
comparison: Suppose that all the land cultivated in the
country were of one uniform quality, and yielded the same
return to every portion of the capital employed upon it,
with the exception of one acre: that acre, we shall suppose,
yields six times as much as any other acre (Mill,
Elements, second ed., p. 71). It is
certain—as Mr. Mill demonstrates—that the farmer
who rents this last acre, cannot increase his rent”
(that is, cannot make a higher profit than the other
farmers; it is very badly expressed) “and that
five-sixths of the product will go to the
landowner.”

(Thus there is here differential rent without the
lowering of the rate of profit and without any increase in
the price of agricultural products) (this must happen all
the more frequently, since the situation | must improve
continuously with the industrial development of the country,
the growth of its means of communication and the increase in
population, irrespective of the natural fertility, and the
relatively better location has the same effect as [greater]
natural fertility.)

“But had the ingenious author thought
of making a similar supposition in the opposite case, he
would have realised that the result would be
different. Let us suppose that all the land was of
equal quality with the exception of one acre of inferior
land. The profit on the capital on this single acre
amounted to one-sixth of the profit yielded by every other
acre. Does he believe that the profit on several
million acres would be reduced to one-sixth of their
accustomed level? It is probable that this solitary
acre would have no effect at all, because the various
products (particularly corn), when they come onto the
market, would not be markedly affected by such a
minute amount. That is why we say that the
assertions of Ricardo’s supporters about the effect of
inferior soil should be modified by taking the relative
areas of land of different quality into account”
(Prévost, loc. cit., pp. 177-78).

<Say, in his notes to Ricardo’s book translated
by Constancio, makes only one correct remark about
foreign trade. Profit can also be made by
cheating, one person gaining what the other loses.
Loss and gain within a single country cancel each
other out. But not so with trade between different
countries. And even according to Ricardo’s theory,
three days of labour of one country can be exchanged against
one of another country—a point not noted by
Say. Here the law of value undergoes essential
modification. The relationship between labour days of
different countries may be similar to that existing between
skilled, complex labour and unskilled, simple labour within
a country. In
this case, the richer country exploits the poorer one,
even where the latter gains by the exchange, as John Stuart
Mill explains in his Some Unsettled
Questions.>

[Prévost says the following about the relationship
between agricultural and industrial profit:]

“We admit that, in general, the rate
of agricultural profit determines that of industrial
profit. But at the same time we must point out that
the latter also reacts of necessity on the former. If
the price of corn rises to a certain point, industrial
capitals turn to agriculture, and necessarily depress
agricultural profits” (loc. cit., p. 179).

The point is correct, but is conceived in a much too
limited sense. See above.[j]

The Ricardians insist that profit can fall only as a
result of a rise in wages, because necessaries rise in price
with [the growth of] population, this, however, is a
consequence of the accumulation of capital, since inferior
soils are cultivated as a result of this accumulation.
But Ricardo himself admits that profits can also fall when
capitals increase faster than population, when the
competition of capitals causes wages to rise. This
[corresponds to] Adam Smith’s theory. Prévost
says:

“When the growing demand of the
capitals increases the price of the labourer, that is,
wages, does it not then appear that there are no
grounds for asserting that the growing supply of these
selfsame capitals never causes the price of capitals, in
other words, profit, to fall?” (op. cit.,
p. 188.)

Prévost builds on the false Ricardian
foundation which can only explain falling profits as a
result of decreasing surplus-value, and therefore decreasing
surplus labour, and consequently as a result of greater
value or rising cost of the necessaries consumed by the
worker, that is, increasing value of labour, although
the real wages of the labourer may not rise but decline; on
this basis he seeks to prove that a continual decline in
profits is not inevitable.

He says first:

“To begin with, the state of
prosperity increases profits”

(namely, agricultural profits, for the population
increases with the state of prosperity, the demand for
agricultural produce
therefore grows and consequently the farmer makes
additional profits)

“and this happens long before new
land is taken into cultivation. The increased area
under cultivation does indeed affect rent and decreases
profits. But although profit is thus directly
decreased, it still remains as high as before the
advance… Why is the cultivation of land of
inferior quality undertaken at certain times? It is
undertaken in the expectation of a profit which is at
least equal to the customary profit. And what
circumstance can lead to the realisation of such a profit on
this kind of land? Increase | of population. It
presses on … the existing means of subsistence,
thereby raising the prices of food (especially of corn) so
that agricultural capitals obtain high profits. The
other capitals pour into agriculture, but since the soil is
limited in area, this competition has its limits and the
point is reached when even higher profits can be made
than in trade or manufacture through the cultivation of
inferior soils. If there is a sufficient area of
inferior land available, then agricultural profit must be
adjusted to the last capitals applied to the land. If
one proceeds from the rate of profit prevailing at the
beginning of the increasing prosperity” (division of
profit into profit and rent), “then it will be found
that profit has no tendency to decline. It rises with
the increase in the population until agricultural profit
rises to such a degree that it can suffer a considerable
reduction as a result of the cultivation [of new land]
without ever sinking below its original rate, or, to be more
precise, below the average rate determined by various
circumstances” (op. cit., pp. 190-92).

Prévost obviously misunderstands the Ricardian
view. As a result of prosperity, the population
increases, thus raising the price of agricultural products
and hence agricultural profits. (Although it is not
easy to see why, if this rise is constant, rents should not
be increased after the leases run out and why these
additional agricultural profits should not be collected in
the form of rent even before the inferior land is
cultivated.) But the same rise in [the price of]
agricultural produce which causes agricultural profits to go
up, increases wages in all industries and consequently
brings about a fall in industrial profits. Thus a new
rate of profit arises in industry. If at the existing
market prices the inferior lands even pay only this lower
rate of profit, capitals can be transferred to the
inferior land. They will be attracted to it by the
high agricultural profits and the high market price of
corn. As Prévost says, they may, before a
sufficient amount of capital has been transferred, even
yield higher profits than the industrial profits, which have
declined. But as soon as the additional supply is
adequate, the market price falls, so that the inferior soils
only yield the ordinary industrial profit. The
additional amount yielded by the product of the better
[soils] is converted into rent. This is the Ricardian
conception, whose
basic premises are accepted by Prévost and
from which he reasons. Corn is now dearer than it was
before the rise in agricultural profit. But the
additional profit which it brought the farmer is transformed
into rent. In this way, therefore, profit also
declines on the better land to the lower rate of industrial
profit brought about by the rise in the price of
agricultural produce. There is no reason for assuming
that as a consequence profits do not have to fall below
their “original rate” if no other modifying
circumstances intervene. Other circumstances
may, of course, intervene. According to the
assumption, after the increase in the price of necessaries,
agricultural profit is in any case higher than industrial
profit. If, however, as a result of the development of
productive power, the part of the workers’ necessaries
supplied by industry has fallen to such a degree that wages
(even though they are paid at their average value) do not
rise as much as they would have done without the
intervention of these paralysing circumstances,
proportionally to the increased [price of] agricultural
produce; if, furthermore, the same development of productive
power has reduced the prices of the products of the
extractive industries, and also of agricultural raw
materials which are not used as food (although the
supposition is not very likely), industrial profit need not
fall, though it would be lower than agricultural
profit. A decline of the latter as a result of a
transfer of capital to agriculture and the building-up of
rent, | would only restore
the old rate of profit.

[Secondly,] Prévost tries a different
approach.

“Soils of inferior quality …
are only put into cultivation if they yield profits as high
as—or even higher than—the profit yielded by
industrial capitals. Under these conditions, the price
of corn or of other agricultural products often remains very
high despite the newly cultivated land. These high
prices press on the working population, since rises in wages
do not correspond exactly to rises in the prices of the
goods used by workers. They are more or less a burden
to the whole population, since nearly all commodities are
affected by the rise in wages and in the prices of essential
goods. This general pressure, linked with the
increasing mortality brought about by too large a
population, results in a decline in the number of
wage-workers and, consequently, in a rise in wages and a
decline in agricultural profits. Further development
now proceeds in the opposite direction to that taken
previously. Capitals are withdrawn from the inferior
soils and reinvested in industry. But the population
principle soon begins to operate once again. As soon
as poverty has been ended, the number of workers increases,
their wages decline, and profits rise as a
consequence. Such fluctuations follow one another
repeatedly without bringing about a change in the average
rate of profit. Profit may decline or rise for other
reasons or as a result of these causes; it may alternately
go up and down, and yet it may not be possible
to attribute the average rise or fall to the necessity
for cultivating new soils. The population is the
regulator which establishes the natural order and keeps
profit within certain limits” (op. cit.,
pp. 194-96).

Although confused, this is correct according to the
“population principle”. It is however not
in line with the assumption that agricultural profits rise
until the additional supply required by the population has
been produced. If this presupposes a constant increase
in the prices of agricultural produce, then it leads not to
a decrease in population, but to a general lowering of the
rate of profit, hence of accumulation, and, consequently, to
a decrease of population. According to the
Ricardian-Malthusian view, the population would grow more
slowly. But Prévost’s basis is: that the
process would depress wages below their average level, this
fall in wages and the poverty of the workers causes the
price of corn to fall and hence profits to rise again.

This latter argument, however, does not belong here, for
here it is assumed that the value of labour is always paid;
that is, that the workers receive the means of subsistence
necessary for their reproduction.

This [exposition] of Prévost is important, because
it demonstrates that the Ricardian view—along with the
view he adopted from Malthus—can indeed explain
fluctuations in the rate of profit, but cannot explain
(constant) falls in the same without repercussions, for upon
reaching a certain level the rise in corn prices and the
drop in profit would force wages below their level, bringing
about a violent decrease in the population, and therefore a
fall in the prices of corn and other necessaries, and this
would lead again to a rise in profits.

### 3. Polemical Writings

| The period between
1820 and 1830 is metaphysically speaking the most important
period in the history of English political
economy—theoretical tilting for and against the
Ricardian theory, a whole series of anonymous polemical
works, the most important of which are quoted here,
especially in relation to those matters which concern our
subject. At the same time, however, it is a
characteristic of these polemical writings that all of them,
in actual fact, merely revolve around the definition of the
concept of value and its relation to capital.

a) [“Observations on certain Verbal
Disputes”. Scepticism in Political Economy]

Observations on certain Verbal Disputes in Political
Economy, particularly relating to Value, and to Demand and
Supply, London, 1821.

This is not without a certain acuteness. The title
Verbal Disputes is characteristic.

Directed in part against Smith and Malthus, but also
against Ricardo.

The real sense of this work lies in the following:

“… disputes … are
entirely owing to the use of words in different senses by
different persons; to the disputants looking, like the
knights in the story, at different sides of the
shield” (Observations etc., London, 1821,
pp. 59-60).

This kind of scepticism always heralds the dissolution of
a theory, it is the harbinger of a frivolous and
unprincipled eclecticism designed for domestic use.

First of all in relation to Ricardo’s theory of
value:

“There is an obvious difficulty in
supposing that labour is what we mentally allude to,
when we talk of value or of real price, as opposed to
nominal price; for we often want to speak of the value or
price of labour itself. Where by labour, as the
real price of a thing, we mean the labour which
produced the thing, there is another difficulty
besides; for we often want to speak of the value or price
of land; but land is not produced by labour. This
definition, then, will only apply to
commodities” (op. cit., p. 8).

As far as labour is concerned, the objection to Ricardo
is correct insofar as he presents capital as the purchaser
of immediate labour and consequently speaks directly of the
value of labour, while what is bought and sold is the
temporary use of labour-power, itself a product.
Instead of the problem being resolved, it is only emphasised
here that a problem remains unsolved.

It is also quite correct that “the value or
price of land”, which is not produced by
labour, appears directly to contradict the concept of value
and cannot be derived directly from it. This
proposition is [all the more] insignificant when used
against Ricardo, since its author does not attack Ricardo’s
theory of rent in which precisely Ricardo sets forth how the
nominal value of land is evolved on the basis of capitalist
production and does not contradict the definition of
value. The value of land is nothing but the price
which is paid for capitalised ground-rent. Much more
far-reaching developments have therefore to be presumed here
than can be deduced prima facie from the simple
consideration
of the commodity and its value, just as from the
simple concept of productive capital one cannot evolve
fictitious capital, the object of gambling on the stock
exchange, which is actually nothing but the selling and
buying of entitlement to a certain part of the annual tax
revenue.

The second objection—that Ricardo transforms value,
which is a relative concept, into an absolute
concept—is made the chief point of the attack on the
whole Ricardian system in another polemical work (written by
Bailey), which appeared later. In considering this
latter work, we will also cite relevant passages from the
Observations.

A very pertinent observation about the source from which
capital, which pays labour, arises, is contained in an
incidental remark unconsciously made by the author, who on
the contrary wants to use it to prove what is said in the
following sentence not underlined [by me], namely, that the
supply of labour itself constitutes a check on the tendency
of labour to sink to its natural price.

“<An increased supply of labour
is an increased supply of that which is to purchase
labour.> If we say, then, with Mr. Ricardo, that
labour is at every moment tending to what he calls
its natural price, we must only recollect, that the increase
made in its supply, in order to tend to that, is
itself one cause of the counteracting power, which prevents
the tendency from being effectual” (op. cit.,
pp. 72-73).

No analysis is possible unless the average price of
labour, i.e., the value of labour, is made the point of
departure; just as little would it be possible if one failed
to take the value of commodities in general as the
point of departure. Only on this basis is it possible
to understand the real phenomena of price fluctuations.

“… it is not meant to be asserted by him”
(Ricardo), “that two particular lots of two different
articles, as a hat and a pair of shoes, exchange with one
another when those two particular lots were produced
by equal quantities of labour. By
‘commodity’, we must here understand
‘description of commodity’, not a
particular individual hat, pair of shoes, etc. The
whole labour which produces all the hats in England is to be
considered, to this purpose, as divided among all the
hats. This seems to me not to have been expressed at
first, and in the general statements of his doctrine”
(op. cit., pp. 53-54).

… for example, Ricardo says that
“a portion of the labour of the engineer” who
makes the machines (Ricardo, On the Principles of
Political Economy, and Taxation, third ed., London,
1821, quoted from the Observations) is contained, for
instance, in a pair of stockings. “Yet the
‘total labour’ that produced each single pair of
stockings, if it is of a single pair we are speaking, includes the whole labour of the
engineer; not a ‘portion’; for one machine makes
many pairs, and none of those pairs could have been done
without any part of the machine…”
(Observations etc., London, 1821, p. 54).

The last passage is based on a misunderstanding.
The whole machine enters into the labour process, but only a
part of it enters the formation of value.

Apart from this, some things in the remark are
correct.

We start with the commodity, this specific social
form of the product, as the foundation and prerequisite of
capitalist production. We take individual products and
analyse those distinctions of form which they have as
commodities, which stamp them as commodities. In
earlier modes of production—preceding the capitalist
mode of production—a large part of the output never
enters into circulation, is never placed on the market, is
not produced as commodities, and does not become
commodities. On the other hand, at that time a large
part of the products which enter into production are not
commodities and do not enter into the process as
commodities. The transformation of products into
commodities only occurs in individual cases, is limited only
to the surplus of products, etc., or only to individual
spheres of production (manufactured products), etc. A
whole range of products neither enter into the process as
articles to be sold, nor arise from it as such.
Nevertheless, the prerequisite, the
starting-point, of the formation of capital and of
capitalist production is the development of the product into
a commodity, commodity circulation and consequently money
circulation within certain limits, and consequently trade
developed to a certain degree. It is as such a
prerequisite that we treat the commodity, since we proceed
from it as the simplest element in capitalist
production. On the other hand, the product, the result
of capitalist production, is the commodity. What
appears as its element is later revealed to be its own
product. Only on the basis of capitalist production
does the commodity become the general form of the product
and the more this production develops, the more do the
products in the form of commodities enter into the process
as ingredients. The commodity, as it emerges in
capitalist production, is different from the commodity taken
as the element, the starting-point of capitalist
production. We are no longer faced with the individual
commodity, the individual product. The individual
commodity, the individual product, manifests itself not only
as a real product but also as a commodity, as a part
both really and
conceptually of production as a whole. Each
individual commodity represents a definite portion of
capital and of the surplus-value created by it.

The value of the capital advanced plus the surplus labour
appropriated, for example, a value of £120 (if it is
assumed that £100 is the value of the capital and
£20 that of surplus labour), is, as far as its value
is concerned, contained in the total product let us say, in
1,200 yards of cotton. Each yard, therefore, equals
£120/1200 or
1/10 of £1 or 2s. It is
not the individual commodity which appears as the result of
the process, but the mass of the commodities in which the
value of the total capital has been reproduced plus a
surplus-value. The total value produced divided by the
number of products determines the value of the individual
product and it becomes a commodity only as such an aliquot
part. It is no longer the labour expended on the
individual particular commodity (in most cases, it can no
longer be calculated, and may be greater in the case of one
commodity than in that of another) but a proportional part
of the total labour—i.e., the average of the total
value [divided] by the number of products—which
determines the value of the individual product and
establishes it as a commodity. Consequently, the total
mass of commodities must also be sold, each commodity at its
value, determined in this way, in order to replace the total
capital together with a surplus-value. If only 800 out
of the 1,200 yards were sold, then the capital would not be
replaced, still less would there be a profit. But each
yard would also have been sold below its value, for
its value is determined not in isolation but as an aliquot
part of the total product.

 “If you call labour a commodity, it is not
like a commodity which is first produced in order to
exchange, and then brought to market where it must exchange
with other commodities according to the respective
quantities of each which there may be in the market at the
time; labour is created at the moment it is brought
to market; nay, it is brought to market, before it is
created” (op. cit., pp. 75-76).

What is in fact brought to market is not labour, but the
labourer. What he sells to the capitalist is not his
labour but the temporary use of himself as a working
power. This is the immediate object of the contract
which the capitalist and the worker conclude, the purchase
and sale which they transact.

Where payment is for piece-work, task-work, instead of
according to the, time for which the labour-power is placed
at the disposal of the employer, this is only another method
of determining
the time. It is measured by the product, a
definite quantity of products being considered as a standard
representing the socially necessary labour-time. In
many branches of industry in London where piece-work is the
rule, payment is thus made by the hour, but disputes often
arise as to whether this or that piece of work constitutes
“an hour” or not.

Irrespective of the individual form, it is the case not
only with regard to piece-work, but in general, that,
although labour-power is sold on definite terms before its
use, it is only paid for after the work is completed,
whether it is paid daily, weekly, and so on. Here
money becomes the means of payment after it has
served previously as an abstract means of purchase, because
the nominal transfer of the commodity to the buyer is
distinct from the actual transfer. The sale of the
commodity—labour-power—the legal transfer of the
use-value and its actual alienation, do not occur at the
same time. The realisation of the price therefore
takes place later than the sale of the commodity (see the
first part of my book, p. 122). It can also be
seen that here it is the worker, not the capitalist, who
does the advancing, just as in the case of the renting of a
house, it is not the tenant but the landlord who advances
use-value. The worker will indeed be paid (or at least
he may be, if the goods have not been ordered beforehand and
so on) before the commodities produced by him have been
sold. But his commodity, his labour-power, has
been consumed industrially, i.e., has been transferred into
the hands of the buyer, the capitalist, before he, the
worker, has been paid. And it is not a question of
what the buyer of a commodity wants to do with it, whether
he buys it in order to retain it as a use-value or in order
to sell it again. It is a question of the
direct transaction between the first buyer and
seller.

[Ricardo says in the Principles:]

“In different stages of society, the
accumulation of capital, or of the
means of employing labour, is more or less rapid, and
must in all cases depend on the productive powers of
labour. The productive powers of labour are generally
greatest where there is an abundance of fertile land”
(David Ricardo, Principles of Political Economy,
third ed., London, 1821, p. 92). [Quoted from
Observations on certain Verbal Disputes in Political
Economy etc., London, 1821, p. 74.]

[The author of the Observations makes] the
following remark on this passage of Ricardo’s:

“If, in the first sentence, the
productive powers of labour mean the smallness of that
aliquot part of any produce that goes to those whose manual
labour
produced it, the sentence is nearly
identical, because the remaining aliquot part is the fund
whence capital can, if the owner pleases, be
accumulated” [Observations, London, 1821,
p. 74].

(This is a tacit admission that from the standpoint of
the capitalist “productive powers of labour
mean the smallness of that aliquot part of any produce that
goes to those whose manual labour produced it”.
This sentence is very nice.)

“But then this does not generally
happen where there is most fertile land” [loc. cit.,
p. 74].

(This is silly. Ricardo presupposes capitalist
production. He does not investigate whether it
develops more freely with fertile or relatively unfertile
land. Where it exists, it is most productive where
land is most fertile.) Just as the social productive
forces, the natural productive forces of labour, that is,
those labour finds in inorganic nature, appear as the
productive power of capital. (Ricardo himself, in the
passage cited above, rightly identifies productive power of
labour with labour productive of capital, productive of the
wealth that commands labour, not of the wealth that belongs
to labour. His expression “capital, or the
means of employing labour” is, in fact, the only
one in which he grasps the real nature of capital. He
himself is so much the prisoner of a | capitalist standpoint that
this conversion, this quid pro quo, is for him a
matter of course. The objective conditions of
labour—created, moreover, by labour itself—raw
materials and working instruments, are not means employed
by labour as its means, but, on the contrary, they are
the means of employing labour. They are not
employed by labour; they employ labour. For them
labour is a means by which they are accumulated as capital,
not a means to provide products, wealth for the worker.)

“It does in North America, but that
is an artificial state of things”(that is, a
capitalistic state of things).

“It does not in Mexico. It does
not in New Holland. The productive powers of labour
are, indeed, in another sense, greatest where there
is much fertile land, viz. the power of man, if he chooses
it, to raise much raw produce in proportion to the
whole labour he performs. It is, indeed, a gift of
nature, that men can raise more food than the lowest
quantity that they could maintain and keep up the existing
population on…” [loc. cit., pp. 74-75].

(This is the basis of the doctrine of the
Physiocrats. The physical basis of
surplus-value is this “gift of nature”, most
obvious in agricultural labour, which originally satisfied
nearly all human
needs. It is not so in manufacturing labour,
because the product must first be sold as a commodity.
The Physiocrats, the first to analyse surplus-value,
understand it in its natural form.)

“… but ‘surplus
produce’ (the term used by Mr. Ricardo, page 93),
generally means the excess of the whole price of a thing
above that part of it which goes to the labourers who made
it… ”

(the fool does not see that where the land is fertile,
the part of the price of the produce that goes to the
labourer, although it may be small, buys a sufficient
quantity of necessaries; the part that goes to the
capitalist is great)

“a point, which is settled by
human arrangement, and not fixed by nature”
(loc. cit., pp. 74-75).

If the last, concluding passage has any meaning at all,
it is that “surplus produce” in the capitalist
sense must be strictly distinguished from the productivity
of industry as such. The latter is of interest to the
capitalist only insofar as it realises profit for him.
Therein lies the narrowness and limitation of capitalist
production.

“When the demand for an article
exceeds […] that which is, with reference to the
present rate[k] of
supply, the effectual demand; and when, consequently, the
price has risen, either additions can be made to the rate of
supply at the same rate of cost of production as before; in
which case they will be made till the article is brought to
exchange at the same rate as before with other articles
[…]: or, 2ndly, no possible additions can be
made to the former rate of supply: and then the price, which
has risen, will not be brought down […], but continue
to afford, as Smith says, a greater rent, or profits, or
wages (or all three), to the particular land, capital, or
labour, employed in producing the article, […] or,
3rdly, the additions which can be made will require
proportionally more land, or capital, or labour, or
all three, than were required for the periodical
production” (note these words) “of the
amount previously supplied. Then the addition will not
be made till the demand is strong enough, 1st, to pay this
increased price for the addition; 2ndly, to pay the same
increased price upon the old amount of supply. For the
person who has produced the additional quantity will be no
more able to get a high price for it, than those who
produced the former quantity… There will then
be surplus profits in this trade… The
surplus profits will be either in the hands of some
particular producers only … or, if the
additional produce cannot be distinguished
from the rest, will be a surplus shared by all…
People will give something to belong to a trade in which
surplus profit can be made… What they so
give, is rent” (op. cit., pp. 79-81).

Here, one need only say that in this book rent is for the
first time regarded as the general form of consolidated
surplus profit.

“‘Conversion of revenue into capital’ is
another of these verbal sources of controversy.
One man means by it, that the capitalist lays out part of
the profits he bas made by his capital, in making additions
to his capital, instead of spending it for his private use,
as he might else have done: another man means by it, that a
person lays out as capital something which he never got as
profits, or any capital of his own, but received as rent,
wages, salary” (op. cit., pp. 83-84).

This last passage—“another of these
verbal sources of controversy. One man means by
it … another man means by it…
”—testifies to the method used by this smart
alec.

b) “An Inquiry into those
Principles…” [The Lack of Understanding of the
Contradictions of the capitalist Mode of production Which
Cause Crises]

An Inquiry into those Principles, respecting the
Nature of Demand and the Necessity of Consumption, lately
advocated by Mr. Malthus etc., London, 1821.

A Ricardian work. Good against Malthus.
Demonstrates the infinite narrow-mindedness to which the
perspicacity of these fellows is reduced as soon as they
examine not landed property, but capital.
Nevertheless, it is one of the best of the polemical works
of the decade mentioned.

“If the capital employed in cutlery
is increased as 100:101, and can only produce an increase of
cutlery in the same proportion, the degree in which it will
increase the command which its producers have over things in
general, no increased production of them having by
the supposition taken place, will be in a less
proportion; and this, and not the increase of the
quantity of cutlery, constitutes the employers’ profits, or
the increase of their wealth. But if the like addition
of one per cent had been making at the same time to the
capitals of all other trades […] and with the
like result as to produce, this […] would not
follow: for the rate at which each article would exchange
with the rest would remain unaltered, and therefore a given
portion of each would give the same command as before over
the rest” ([An Inquiry into those Principles,
London, 1821,] p. 9).

First of all, if there has been no increase of production
(and of the capital devoted to production) except in the
cutlery trade, as is assumed, then the return will not be
“in a less proportion”, but an absolute
loss. There are then only three courses open to the
cutlery producer. Either he must exchange his
increased product as he would have done his smaller product,
and his increased production would thus result in a positive
loss. Or he must try to get new consumers; if amongst
the old circle, this could only be done by withdrawing
customers from another trade and shifting his loss upon
other shoulders; or he must enlarge his market
beyond his former limits; but neither the one nor the
other operation depends on his good will; nor on the mere
existence of an increased quantity of knives. Or, in
the last instance, he must carry over his production to
another year and diminish his new supply for that year,
which, if his addition of capital did exist not only in
additional wages, but in additional fixed capital, will
equally result in a loss.[l]

Furthermore: If all other capitals have accumulated at
the same rate, it does not follow at all that their
production has increased at the same rate. But if it
has, it does not follow that they want one per cent more of
cutlery, as their demand for cutlery is not at all
connected, either with the increase of their own produce, or
with their increased power of buying cutlery. What
follows is merely the tautology: If the increased capital
used in each particular branch of production is
proportionate to the rate in which the wants of society
increase the demand for each particular commodity, then the
increase of one commodity se-cures a market for the
increased supply of other commodities.

Here, therefore, is presupposed 1. capitalist
production, in which the production of each particular
industry and its increase are not directly regulated
and | controlled by
the wants of society, but by the productive forces at the
disposal of each individual capitalist, independent of the
wants of society. 2. It is assumed that nevertheless
production is proportional [to the requirements] as
though capital were employed in the different spheres of
production directly by society in accordance with its
needs.

On this assumption—if capitalist production were
entirely socialist production—a contradiction in
terms—no over-production could, in fact, occur.

By the way, in the various branches of industry in which
the same accumulation of capital takes place (and
this too is an unfortunate assumption that capital is
accumulated at an equal rate in different spheres),
the amount of products corresponding to the increased
capital employed may vary greatly, since the productive
forces in the different industries or the total use-values
produced in relation to the labour employed differ
considerably. The same value is produced in both
cases, but the quantity of commodities in which it is
represented is very different. It is
quite incomprehensible, therefore, why industry A,
because the value of its output has increased by 1 per cent
while the mass of its products has grown by 20 per cent,
must find a market in B where the value has likewise
increased by 1 per cent, but the quantity of its output only
by 5 per cent. Here, the author has failed to take
into consideration the difference between use-value and
exchange-value.

Say’s earth-shaking discovery that “commodities can
only be bought with commodities” simply means that
money is itself the converted form of the commodity.
It does not prove by any means that because I can buy only
with commodities, I can buy with my commodity, or
that my purchasing power is related to the quantity
of commodities I produce. The same value can be
embodied in very different quantities [of
commodities]. But the
use-value—consumption—depends not on value, but
on the quantity. It is quite unintelligible why I
should buy six knives because I can get them for the same
price that I previously paid for one. Apart from the
fact that the workers do not sell commodities, but labour, a
great number of people who do not produce commodities at all
buy things with money. Buyers and sellers of
commodities are not identical. The landlord, the
moneyed capitalist and others obtain in the form of
money commodities produced by other people.
They are buyers without being sellers of
“commodities”. Buying and selling occurs
not only between industrial capitalists, but they also sell
to workers; and likewise to owners of revenue who are not
commodity producers. Finally, the purchases and sales
transacted by them as capitalists are very different from
the purchases they make as revenue-spenders.

“Mr. Ricardo (p. 359, second ed.),
after quoting the doctrine of Smith about the cause of the
fall of profits, adds, ‘M. Say has, however, most
satisfactorily shown, that there is no amount of capital
which may not be employed in a country, because demand is
only limited by production’” [An
Inquiry into those Principles, London, 1821, p. 18].

(This is very wise. Limited, indeed.
Nothing can be demanded which cannot be produced upon
demand, or which the demand does not find ready made in the
market. Hence, because demand is limited by
production, it by no means follows that production is, or
was, limited by demand, and can never exceed the demand,
particularly the demand at the market price. This is
Say-like acumen.)

“‘There
cannot be accumulated (p. 360) in a country any amount of
capital which cannot be employed productively’
(meaning, I presume,”—says the author in
brackets—“‘with profit to the
owner’) ‘until wages rise so high in
consequence of the rise of necessaries, and so little
consequently remains for the profits of stock, that the
motive for accumulation ceases’” [loc. cit.,
pp. 18-19].

(Ricardo here equates “productively” and
“profitably”, whereas it is precisely the fact
that in capitalist production “profitably” alone
is “productively”, that constitutes the
difference between it and absolute production, as well as
its limitations. In order to produce
“productively”, production must be carried on in
such a way that the mass of producers are excluded from the
demand for a part of the product. Production has to be
carried on in opposition to a class | whose consumption stands in no
relation to its production—since it is precisely in
the excess of its production over its consumption that the
profit of capital consists. On the other hand,
production must be carried on for classes who consume
without producing. It is not enough merely to give the
surplus product a form in which it becomes an object of
demand for these classes. On the other hand, the
capitalist himself, if he wishes to accumulate, must not
himself consume as much of his own products, insofar as they
are consumer goods, as he produces. Otherwise he
cannot accumulate. That is why Malthus opposes to the
capitalist classes whose task is not accumulation but
expenditure. And while on the one hand all these
contradictions are assumed, it is assumed on the other that
production proceeds without any friction just as if these
contradictions did not exist at all. Purchase is
divorced from sale, commodity from money, use-value from
exchange-value. It is assumed however that this
separation does not exist, but that there is barter.
Consumption and production are separated; [there are]
producers who do not consume and consumers who do not
produce. It is assumed that consumption and production
are identical. The capitalist directly produces
exchange-value in order to increase his profit, and not for
the sake of consumption. It is assumed that he
produces directly for the sake of consumption and only for
it. [If it is] assumed that the contradictions
existing in bourgeois production—which, in fact, are
reconciled by a process of adjustment which, at the same
time, however, manifests itself as crises, violent fusion of
disconnected factors operating independently of one another
and yet correlated—if it is assumed that the
contradictions existing in bourgeois production
do not exist, then these contradictions obviously
cannot come into play. In every industry each
individual capitalist produces in proportion to his
capital irrespective of the needs of society and especially
irrespective of the supply of competing capitalists in the
same industry. It is assumed that he produces as if he
were fulfilling orders placed by society. If there
were no foreign trade, then luxuries could be produced at
home, whatever their cost. In that case, labour, with
the exception of [the branches producing] necessaries,
would, in actual fact, be very unproductive. Hence
accumulation of capital [would proceed at a low rate].
Thus every country would be able to employ all the capital
accumulated there, since according to the assumption very
little capital would have been accumulated.)

“The latter sentence limits (not to
say contradicts) the former, if ‘which may not be
employed’, in the former, means ‘employed
productively’, or rather,
‘profitably’. And if it means simply
‘employed’, the proposition is useless; because
neither Adam Smith nor any body else, I presume, denied that
it might ‘be employed’ if you did not care what
profit is brought” (loc. cit., p. 19).

Ricardo says indeed that all capital in a given country,
at whatever rate accumulated, may be employed profitably; on
the other hand he says that the very fact of the
accumulation of capital checks its “profitable”
employment, because it must result in lessening profits,
that is, the rate of accumulation.

“… the very meaning of an
increased demand by them” (the labourers) “is a
disposition to take less themselves, and leave a larger
share for their employers; and if it be said that this, by
diminishing consumption, increases glut, I can only answer,
that glut […] is synonymous with high
profits…” (op. cit., p. 59).

This is indeed the secret basis of glut.

“… the labourers do not,
considered as consumers, derive any benefit from machines,
while flourishing” (as Mr. Say says in his
Traité d’économie politique, fourth
ed., Vol. I, p. 60) “unless the article, which the
machines cheapen, is one that can be brought, by cheapening,
within their use. Threshing-machines, windmills, may
be a great thing for them in this view; but the invention of
a veneering machine, or a block machine, or a lace frame,
does not mend their condition much” (op. cit.,
pp. 74-75).

“The habits of the labourers, where
division of labour has been carried very far, are applicable
only to the particular line they have been used to; they
are a sort of machines. Then, there is a long
period of idleness, that is, of labour lost; of wealth cut
off at its root. It is quite useless to repeat, like a
parrot, that things have a tendency to find their
level. We must look about us, and see they | cannot for a long time
find a level; that when they do, it will be a far lower
level than they set out from” (op. cit.; p.72).

This Ricardian, following Ricardo’s example, recognises
correctly crises resulting from sudden changes in the
channels of trade. This was the case in England after
the war of 1815. And consequently, whenever a crisis
occurred, all later economists declared that the most
obvious cause of the particular crisis was the only
possible cause of all crises.

The author also admits that the credit system may be a
cause of crises (p. 81 et seq.) (as if the credit
system itself did not arise out of the difficulty of
employing capital “productively”, i.e.,
“profitably”). The English, for example,
are forced to lend their capital to other countries in order
to create a market for their commodities.
Over-production, the credit system, etc., are means by which
capitalist production seeks to break through its own
barriers and to produce over and above its own
limits. Capitalist production, on the one hand,
has this driving force; on the other hand, it only tolerates
production commensurate with the profitable employment of
existing capital. Hence crises arise, which
simultaneously drive it onward and beyond [its own limits]
and force it to put on seven-league boots, in order to reach
a development of the productive forces which could only be
achieved very slowly within its own limits.

What the author writes about Say is very true. This
should be dealt with in connection with Say (see p. 134,
notebook VII).

“He” (the worker) “will
agree to work part of his time for the capitalist,
or, what comes to the same thing, to consider part of the
whole produce, when raised and exchanged, as belonging to
the capitalist, He must do so, or the capitalist would not
have afforded him this[m] assistance” [op. cit.,
p. 102].

(Namely capital. Very fine that it comes to the
same thing whether the capitalist owns the whole produce and
pays part of it as wages to the labourer, or whether the
labourer leaves, makes over to the capitalist part of his
(the labourer’s) produce.)

“But as the capitalist’s motive
was gain, and as these advantages always depend, in a
certain degree, on the will to save, as well as on
the power, the capitalist will be disposed to afford
an additional portion of these assistances; and as he will
find fewer people in want of this additional portion, than
were in want of the original portion, he must expect to have
a less share of the benefit to himself; he must be content
to make a present” (!!!) “(as it were) to
the labourer, of part of the benefit his assistance
occasions, or else he would not get the other part: the
profit is reduced, then, by competition” (loc. cit.,
pp. 102-03).

This is very fine. If, as a consequence of the
development of labour productivity, capital accumulates so
quickly that the demand for labour increases wages and the
worker works for a shorter time gratis for the capitalist
and shares to some degree in the benefits of his more
productive labour—the capitalist makes him a
“present”.

The same author demonstrates in great detail that high
wages are bad, a discouragement for workers, although,
speaking of the landlords, he considers that low profit is a
discouragement for the capitalists (see p. 13, notebook
XII).

“Adam Smith thought […] that
accumulation or increase of stock in general lowered the
rate of profit in general, on the same principle which makes
the increase of stock in any particular trade lower the
profits of that trade. But such increase of stock in a
particular trade means an increase more in proportion
than stock is at the same time increased in other
trades” (op. cit., p. 9).

Against Say. (Notebook XII, p. 12.)

“The immediate market for capital, or
field for capital may be said to be labour. The
amount of capital which can be invested at a given moment,
in a given country, or the world, so as to return not less
than a given rate of profits, seems principally to depend on
the quantity of labour, which it is possible, by
laying out that capital, to induce the then existing number
of human beings to perform” (op. cit., p. 20).

| “Profits
do not depend on price, they depend on price compared
with outgoings” (op. cit., p. 28).

“The proposition of M. Say does not
at all prove that capital opens a market for itself,
but only that capital and labour open a market for one
another” (op. cit., p. 111).

c) Thomas De Quincey [Failure to Overcome the Real Flaws
in the Ricardian Standpoint]

Dialogues of Three Templars on Political Economy,
chiefly in relation to the Principles of Mr. Ricardo (London
Magazine, Vol. IX, 1824) (author: Thomas De
Quincey).

Attempt at a refutation of all the attacks made on
Ricardo. That he is aware of what is at issue is to be
seen from this sentence:

“… all […]
difficulties” of political economy “will be
found reducible” [to] “this: What is the ground
of exchangeable value?”([De Quincey, Dialogues of
Three Templars, 1824,] p. 347.)

In this work, the inadequacies of the Ricardian view are
often pointedly set forth, although the dialectical depth is
more affected than real. The real difficulties, which
arise not out of the determination
of value, but from Ricardo’s inadequate
elaboration of his ideas on this basis, and from his
arbitrary attempt to make concrete relations directly fit
the simple relation of value, are in no way resolved or even
grasped. But the work is characteristic of the period
in which it appeared. It shows that in political
economy consistency and thinking were still taken seriously
at that time.

(A later work by the same author: The Logic of
Political Economy, Edinburgh, 1844, is weaker.)

De Quincey very clearly outlines the differences between
the Ricardian view and those which preceded it, and does not
seek to mitigate them by re-interpretation or to abandon the
essential features of the problems in actual fact while
retaining them in a purely formal, verbal way as happened
later on, thus opening the door wide to easy-going,
unprincipled eclecticism.

One point in the Ricardian doctrine which is especially
emphasised by De Quincey and which should be mentioned here
because it plays a role in the polemic against Ricardo to
which we shall refer below, is that the command which one
commodity has over other commodities (its purchasing power;
in fact, its value expressed in terms of another commodity)
is altogether different from its real value.

It is quite wrong to conclude “that
the real value is great because the quantity it buys is
great, or small because the quantity it buys is
small… If A double its value, it will not
therefore command double the former quantity of B. It
may do so: and it may also command five hundred times more,
or five hundred times less… No man has ever
denied that A by doubling its own value will command a
double quantity of all things which have been stationary in
value. […] But the question is whether
universally, from doubling its value, A will command a
double quantity…” ([Dialogues of Three
Templars,] pp. 552-54 passim).

d) Samuel Bailey

[α) Superficial Relativism on the Part of the Author of
“Observations on certain Verbal Disputes” and on
the Part of Bailey in Treating the Category of Value.
The Problem of the Equivalent. Rejection of the Labour
Theory of Value as the Foundation of Political Economy]

A Critical Dissertation on the Nature, Measures, and
Causes of Value; chiefly in Reference to the Writings of
Mr. Ricardo and his Followers. By the Author of
Essays on the Formation and Publication of Opinions (Samuel
Bailey), London, 1825.

This is the main work directed against Ricardo.
(Also aimed against Malthus.) It seeks to overturn the
foundation of the doctrine—value. It is
definitely worthless except for the definition of the
“measure of value”, or rather, of money
in this function. Compare also the same author’s: A
Letter to a Political Economist; occasioned by an Article in
the Westminster Review on the Subject of Value etc.,
London, 1826.

Since, as has been mentioned,[n] this work basically agrees with
Observations on certain Verbal Disputes in Political
Economy, it is here necessary to add the relevant
passages from these Observations.

The author of the Observations accuses Ricardo of
having transformed value from a relative attribute of
commodities in their relationship to one another, into
something absolute.

The only thing that Ricardo can be accused of in this
context is that, in elaborating the concept of value, he
does not clearly distinguish between the various aspects,
between the exchange-value of the commodity, as it
manifests itself, appears in the process of commodity
exchange, and the existence of the commodity as value
as distinct from its existence as an object, product,
use-value.

| It is said in the
Observations:

“If the absolute quantity of labour,
which produces the greater part of commodities, or all
except one, is increased, would you say that the value of
that one is unaltered? In what sense? since it
will exchange for less of every commodity besides. If,
indeed, it is meant to be asserted that the meaning
of increase or diminution of value is increase or diminution
in the quantity of labour that produced the commodity spoken
of, the conclusions I have just been objecting to might be
true enough. But to say, as Mr. Ricardo does, that the
comparative quantities of labour that produce two
commodities are the cause of the rate at which these two
commodities will exchange with each other, i.e., of the
exchangeable value of each, understood in relation to the
other, is very different from saying that the
exchangeable value of either means the quantity of
labour which produced it, understood without any reference
to the other, or to the existence of any other”
(Observations etc., p. 13).

“Mr. Ricardo tells us indeed
[…] that ‘the inquiry to which he wishes to
draw the reader’s attention relates to the effect of the
variations in the relative value of commodities, and
not in their absolute value’; as if be there
considered that there is such a thing as exchangeable
value which is not relative” (op. cit., pp. 9-10).

“That Mr. Ricardo has departed from
his original use of the term value, and has made of it
something absolute, instead of relative, is still more
evident
in his chapter entitled ‘Value and Riches,
their distinctive Properties’. The question
there discussed, has been discussed also by others, and is
purely verbal and useless…” (op. cit.,
pp. 15-16).

Before dealing with this author, we shall add the
following about Ricardo. In his chapter on
“Value and Riches”, he argues that social wealth
does not depend on the value of the commodities produced,
although this latter point is decisive for every individual
producer. It should have been all the more clear to
him that a mode of production whose exclusive aim is
surplus-value, in other words, which is based on the
relative poverty of the mass of the producers, cannot
possibly be the absolute form of the production of wealth,
as he constantly asserts.

Now to the Observations of the
“verbal” wiseacre.

If all commodities except one increase in value because
they cost more labour-time than they did before, smaller
amounts of these commodities will be exchanged for the
single commodity whose labour-time remains unchanged.
Its exchange-value, insofar as it is realised in
other commodities—that is, its exchange-value
expressed in the use-values of all other
commodities—has been reduced. “Would you
then say that the value of that one is
unaltered?” This is merely a formulation of the
point at issue, and it calls neither for a positive nor for
a negative reply. The same result would occur if the
labour-time required for the production of the one commodity
were reduced and that of all the others remained
unchanged. A given quantity of this particular
commodity would exchange for a reduced quantity of all the
other commodities. The same phenomenon occurs in both
cases although from directly opposite causes.
Conversely, if the labour-time required for the production
of commodity A remained unchanged, while that of all others
were reduced, then it would exchange for larger amounts of
all the other commodities. The same would happen for
the opposite reason, if the labour-time required for the
production of commodity A increased and that required for
all other commodities remained unchanged. Thus,
sometimes commodity A exchanges for smaller quantities of
all the other commodities, and this for either of two
different and opposite reasons. At other times it
exchanges for larger quantities of all the other
commodities, again for two different and opposite
reasons. But it should be noted that it is assumed
that it always exchanges at its value, consequently
for an equivalent. It always realises its value
in the quantity of use-values of the
other commodities for which it exchanges, no matter how
much the quantity of these use-values varies.

From this it obviously follows: that the rate at which
commodities exchange for one another as use-values, although
it is an expression of their value, their
realised value, is not their value itself, since the
same proportion of value can be represented by quite
different quantities of use-values. Value as an aspect
of the commodity is not expressed in its own use-value, or
in its existence as use-value. Value manifests
itself when commodities are expressed in other use-values,
that is, it manifests itself in the rate at which these
other use-values are exchanged for them. If one ounce
of gold equals a ton of iron, that is, if a small quantity
of gold exchanges for a large quantity of iron, is therefore
the value of the gold expressed in iron greater than the
value of the iron expressed in gold? That commodities
exchange for one another in proportion to the labour
embodied in them, means that they are equal, alike, insofar
as they constitute the same quantity of labour.
Consequently it means likewise that every commodity,
considered in itself, is something different from its
own use-value, | from its
own existence as use-value.

The value of the same commodity can, without
changing, be expressed in infinitely different
quantities of use-values, always according to whether I
express it in the use-value of this or of that
commodity. This does not alter the value, although it
does alter the way it is expressed. In the same way,
all the various quantities of different use-values in which
the value of commodity A can be expressed, are equivalents
and are related to one another not only as values, but as
equal values, so that when these very unequal quantities of
use-value replace one another, the value remains completely
unchanged, as if it had not found expression in quite
different use-values.

When commodities are exchanged in the proportion in which
they represent equal amounts of labour-time, then it is
their aspect as materialised labour-time, as embodied
labour-time, which manifests their substance, the
identical element they contain. As such, they
are qualitatively the same, and differ only
quantitatively, according to whether they represent
smaller or larger quantities of the same substance,
i.e., labour-time. They are values as
expressions of the same element; and they are equal values,
equivalents, insofar as they represent an equal
amount of labour-time. They can only be compared as
magnitudes, because
they are already homogeneous magnitudes,
qualitatively identical.

It is as manifestations of this substance that these
different things constitute values and are related to
one another as values; their different magnitudes of
value, their immanent measure of value are thus also
given. And only because of this can the value
of a commodity be represented, expressed, in the use-values
of other commodities as its equivalents. Hence the
individual commodity as value, as the
embodiment of this substance, is different from
itself as use-value, as an object, quite apart from the
expression of its value in other commodities. As the
embodiment of labour-time, it is value in general, as
the embodiment of a definite quantity of labour-time, it is
a definite magnitude of value.

It is therefore typical of our wiseacre when he says: If
we mean that, we do not mean that and vice
versa. Our “meaning” has nothing at all to
do with the essential character of the thing we
consider. If we speak of the value in exchange
of a thing, we mean in the first instance of course
the relative quantities of all other commodities that
can be exchanged for the first commodity. But, on
further consideration, we shall find that for the
proportion, in which one thing exchanges for an infinite
mass of other things which have nothing in common with
it—and even if there are natural or other similarities
between those things, they are not considered in the
exchange—for the proportion to be a fixed
proportion, all those various heterogeneous things must
be considered as proportionate representations, expressions
of the same common unity, [of] an element quite
different from their natural existence or appearance.
We shall furthermore find, that if our views have any sense,
the value of a commodity is something which not only
distinguishes it from or relates it to other commodities,
but is a quality differentiating it from its own existence
as a thing, a value in use.[o]

“The rise of value of article A, only
meant value estimated in articles B, C, etc., i.e.,
value in exchange for articles B, C, etc.”
([Observations, London, 1821,] p. 16).

To estimate the value of A, a book for instance,
in B, coals, and C, wine, A, B and C must be as value
something different from their existence as books, coals or
wine. To estimate the value
of A in B, A must have a value independent of the
estimation of that value in B, and both must be equal to a
third thing expressed in both of them.

It is quite wrong to say that the value of a commodity is
thereby transformed from something relative into
something absolute. On the contrary, as a
use-value, the commodity appears as something
independent. On the other hand, as value it appears as
something merely contingent, something merely
determined by its relation to socially necessary, equal,
simple labour-time. It is to such an extent relative
that when the labour-time required for its reproduction
changes, its value changes, although the labour-time really
contained in the commodity has remained unaltered.

| How deeply our
wiseacre has sunk into fetishism and how he
transforms what is relative into something positive, is
demonstrated most strikingly in the following passage:

“Value is a property of
things, riches of men. Value, in this sense,
necessarily implies exchange, riches do not”
(loc. cit., p. 16).

Riches here are use-values. These, as far as men
are concerned, are, of course, riches, but it is through its
own properties, its own qualities, that a thing is a
use-value and therefore an element of wealth for men.
Take away from grapes the qualities that make them grapes,
and their use-value as grapes disappears for men and they
cease to be an element of wealth for men. Riches which
are identical with use-values are properties of
things that are made use of by men and which express a
relation to their wants. But “value” is
supposed to be a “property of
things”.

As values, commodities are social magnitudes, that
is to say, something absolutely different from their
“properties” as “things”. As
values, they constitute only relations of men in their
productive activity. Value indeed “implies
exchanges”, but exchanges are exchanges of things
between men, exchanges which in no way affect the things as
such. A thing retains the same
“properties” whether it be owned by A or by
B. In actual fact, the concept “value”
presupposes “exchanges” of the products.
Where labour is communal, the relations of men in their
social production do not manifest themselves as
“values” of “things”. Exchange
of products as commodities is a method of exchanging labour,
[it demonstrates] the dependence of the labour of each upon
the labour of the others [and corresponds to] a certain mode
of social labour or social production.

In the first part of my book, I mentioned that it is
characteristic of labour based on private exchange that the
social character of labour “manifests” itself in
a perverted form—as the “property” of
things; that a social relation appears as a relation between
things (between products, values in use, commodities).
This appearance is accepted as something real by our
fetish-worshipper, and he actually believes that the
exchange-value of things is determined by their properties
as things, and is altogether a natural property of
things. No scientist to date has yet discovered what
natural qualities make definite proportions of snuff tobacco
and paintings “equivalents” for one another.

Thus he, the wiseacre, transforms value into something
absolute, “a property of things”, instead of
seeing in it only something relative, the relation of things
to social labour, social labour based on private exchange,
in which things are defined not as independent entities, but
as mere expressions of social production.

But to say that “value” is not an absolute,
is not conceived as an entity, is quite different from
saying that commodities must impart to their exchange-value
a separate expression which is different from
and independent of their use-value and of their
existence as real products, in other words, that commodity
circulation is bound to evolve money. Commodities
express their exchange-value in money, first of all in the
price, in which they all present themselves as
materialised forms of the same labour, as only
quantitatively different expressions of the same
substance. The fact that the exchange-value of
the commodity assumes an independent existence in
money is itself the result of the process of exchange, the
development of the contradiction of use-value and
exchange-value embodied in the commodity, and of another no
less important contradiction embodied in it, namely, that
the definite, particular labour of the private individual
must manifest itself as its opposite, as equal, necessary,
general labour and, in this form, social labour. The
representation of the commodity as money implies not only
that the different magnitudes of commodity values are
measured by expressing the va1ues in the use-value of one
exclusive commodity, but at the same time that they are all
expressed in a form in which they exist as the embodiment of
social labour and are therefore exchangeable for
every other commodity, that they are translatable at will
into any use-value desired. Their representation as
money—in the price—therefore appears first only
as something nominal, a representation
which is realised only through actual
sale. Ricardo’s mistake is that he is concerned
only with the magnitude of value. Consequently
his attention is concentrated on | the relative quantities of
labour which the different commodities represent, or
which the commodities as values embody. But the labour
embodied in them must be represented as social
labour, as alienated individual labour. In the price
this representation is nominal; it becomes reality only in
the sale. This transformation of the labour of private
individuals contained in the commodities into uniform
social labour, consequently into labour which can be
expressed in all use-values and can be exchanged for them,
this qualitative aspect of the matter which is
contained in the representation of exchange-value as money,
is not elaborated by Ricardo. This
circumstance—the necessity of presenting the
labour contained in commodities as uniform social
labour, i.e., as money—is overlooked by
Ricardo.

For its part, the development of capital already
presupposes the full development of the
exchange-value of commodities and consequently its
independent existence as money. The point of departure
in the process of the production and circulation of capital,
is the independent form of value which maintains itself,
increases, measures the increase against the original
amount, whatever changes the commodities in which it
manifests itself may undergo, and quite irrespective of
whether it presents itself in the most varied use-values and
moves from commodity to commodity. The relation
between the value antecedent to production and the value
which results from it—capital as antecedent value is
capital in contrast to profit—constitutes the
all-embracing and decisive factor in the whole process of
capitalist production. It is not only an independent
expression of value as in money, but dynamic value, value
which maintains itself in a process in which use-values pass
through the most varied forms. Thus in capital the
independent existence of value is raised to a higher power
than in money.

From this we can judge the wisdom of our
“verbal” wiseacre, who treats the independent
existence of exchange-value as a figure of speech, a manner
of talking, a scholastic invention.

“Value, or valeur in French, is not
only used absolutely instead of relatively as a quality of
things, but is even used by some […] as […] a
measurable commodity, ‘Possessing a value’,
‘transferring a portion of value’” (a very
important factor with regard to fixed capital),
“‘the sum, or totality of values’
(valeurs), etc. I do not know what this means”
(op. cit., p. 57).

The fact that the value which has become independent
acquires only a relative expression in money, because money
itself is a commodity, and hence has a changeable value,
makes no difference but is a shortcoming which arises from
the nature of the commodity and the necessity of expressing
its exchange-value, as distinct from its use-value.
Our author has made it abundantly clear that he does
“not know” this. This is shown by the kind
of criticism which would like to talk out of existence the
difficulties innate in the contradictory functions of things
themselves, by declaring them to be the result of reflexions
or of conflicting definitions.

“‘The relative value of
two things’ […] is open to two meanings: the
rate at which two things exchange or would exchange with
each other, or the comparative portions of a
third for which each exchanges or would exchange”
(op. cit., p. 53).

To begin with, this is a fine definition, If 3 lbs. of
coffee exchange for 1 lb. of tea today or would do so
tomorrow, it does not at all mean that equivalents have been
exchanged for each other. According to this, a
commodity could always be exchanged only at its value, for
its value would constitute any quantity of some other
commodity for which it had been accidentally
exchanged. This, however, is not what people generally
mean, when they say that 3 lbs. of coffee have been
exchanged for their equivalent in tea. They assume
that after, as before, the exchange, a commodity of the
same value is in the hands of either of the
exchangers. The rate at which two commodities exchange
does not determine their value, but their value determines
the rate at which they exchange. If value were nothing
more than the quantity of commodities for which commodity A
is accidentally exchanged, how is it possible to express the
value of A in terms of commodity B, or C, etc.?
Because | then, since
there is no immanent measure common to the two
commodities, the value of A could not be expressed in terms
of B before it had been exchanged against B.

Relative value means first of all magnitude of
value in contradistinction to the quality of having
value at all. For this reason, the latter is
not something absolute. It means, secondly, the value
of one commodity expressed in the use-value of another
commodity. This is only a relative
expression of its value, namely, in relation to the
commodity in which it is expressed. The value of a
pound of coffee is only relatively expressed in
tea; to express it absolutely—even in a relative
way, that is to say, not in regard to labour-time, but to
other commodities—it ought to be expressed in an
infinite series of equations with all other
commodities. This would be an absolute
expression of its relative value; its absolute
expression would be its expression in terms of
labour-time and this absolute expression would express
it as something relative, but in the absolute relation, by
which it is value.

Let us now turn to Bailey.

His book has only one positive merit—that he was
the first to give a more accurate definition of the
measure of value, that is, in fact, of one of the
functions of money, or money in a particular, determinate
form. In order to measure the value of
commodities—to establish an external measure of
value—it is not necessary that the value of the
commodity in terms of which the other commodities are
measured, should be invariable. (It must on the
contrary be variable, as I have shown in the first part,
because the measure of value is, and must be, a commodity
since otherwise it would have no immanent measure in
common with other commodities.) If, for example, the
value of money changes, it changes to an equal degree in
relation to all other commodities. Their relative
values are therefore expressed in it just as correctly as if
the value of money had remained unchanged.

The problem of finding an “invariable measure of
value” is thereby eliminated. But this problem
itself (the interest in comparing the value of commodities
in different historical periods, is, indeed, not an
economic interest as such, [but] an academic
interest) arose out of a misunderstanding and conceals a
much more profound and important question.
“Invariable measure of value” signifies
primarily a measure of value which is itself of invariable
value, and consequently, since value itself is a predicate
of the commodity, a commodity of invariable value. For
example, if gold and silver or corn, or labour, were such
commodities, then it would be possible to establish, by
comparison with them, the rate at which other commodities
are exchanged for them, that is, to measure exactly the
variations in the values of these other commodities by their
prices in gold, silver, or corn, or their relation to
wages. Stated in this way, the problem therefore
presupposes from the outset that in the “measure
of
value” we are dealing simply with the commodity in
which the values of all other commodities are expressed,
whether it be the commodity by which they are really
represented—i.e., money, the commodity which functions
as money—or a commodity which, because its value
remains invariable, would function as the money in terms of
which the theoretician makes his calculations. It thus
becomes evident that in this context it is in any case a
question only of a kind of money which as the measure of
value—either theoretically or practically—would
itself not be subject to changes in value.

But for commodities to express their exchange-value
independently in money, in a third commodity, the exclusive
commodity, the values of commodities must already be
presupposed. Now the point is merely to compare them
quantitatively. A homogeneity which makes them
the same—makes them values—which as values
makes them qualitatively equal, is already presupposed in
order that their value and their differences in value can be
represented in this way. For example, if all
commodities express their value in gold, then this
expression in gold, their gold price, their equation with
gold, is an equation on the basis of which it is possible to
elucidate and compute their value relation to one another,
for they are now expressed as different quantities of
gold and in this way the commodities are represented in
their prices, | as
comparable magnitudes of the same common denominator.

But in order to be represented in this way, the
commodities must already be identical as
values. Otherwise it would be impossible to
solve the problem of expressing the value of each commodity
in gold, if commodity and gold or any two commodities as
values were not representations of the same substance,
capable of being expressed in one another. In other
words, this presupposition is already implicit in the
problem itself. Commodities are already presumed as
values, as values distinct from their use-values,
before the question of representing this value in a special
commodity can arise. In order that two quantities of
different use-values can be equated as equivalents, it is
already presumed that they are equal to a third, that
they are qualitatively equal and only constitute
different quantitative expressions of this qualitative
equality.

The problem of an “invariable measure of
value” was simply a spurious name for the quest for
the concept, the nature, of value itself, the
definition of which could not be another value,
and consequently could not be subject to variations as
value. This was labour-time, social labour, as
it presents itself specifically in commodity
production. A quantity of labour has no value, is not
a commodity, but is that which transforms commodities into
values, it is their common substance; as
manifestations of it commodities are qualitatively
equal and only quantitatively different.
They [appear] as expressions of definite quantities of
social labour-time.

Let us assume that gold has an invariable value. If
the value of all commodities were then expressed in gold one
could measure variations in the values of commodities by
their gold prices. But in order to express the value
of commodities in gold, commodities and gold must be
identical as values. Gold and commodities can
only be considered to be identical as definite quantitative
expressions of this value, as definite magnitudes of
value. The invariable value of gold and the variable
value of the other commodities would not prevent them, as
value, from being the same, [Consisting of] the same
substance. Before the invariable value of gold can
help us to make a step forward, the value of commodities
must first be expressed, assessed, in gold—that is,
gold and commodities must be represented as equivalents, as
expressions of the same substance.

{In order that the commodities may be measured according
to the quantity of labour embodied in them—and the
measure of the quantity of labour is time—the
different kinds of labour contained in the different
commodities must be reduced to uniform, simple labour,
average labour, ordinary, unskilled labour. Only then
can the amount of labour embodied in them be measured
according to a common measure, according to time. The
labour must be qualitatively equal so that its differences
become merely quantitative, merely differences of
magnitude. This reduction to simple, average labour is
not, however, the only determinant of the quality of
this labour to which as a unity the values of the
commodities are reduced. That the quantity of labour
embodied in a commodity is the quantity socially
necessary for its production—the labour-time being
thus necessary labour-time—is a definition
which concerns only the magnitude of value. But
the labour which constitutes the substance of value is not
only uniform, simple, average labour; it is the labour of a
private individual represented in a definite product.
However, the product as value must be the embodiment of
social labour and, as such, be directly convertible
from one use-value into all others.
(The particular use-value in which labour is directly
represented is irrelevant so that it can be converted from
one form into another.) Thus the labour of
individuals has to be directly represented as its
opposite, social labour; this transformed labour is,
as its immediate opposite, abstract, general labour,
which is therefore represented in a general equivalent, only
by its alienation does individual labour manifest itself as
its opposite. The commodity, however, must have this
general expression before it is alienated. This
necessity to express individual labour as general labour is
equivalent to the necessity of expressing a commodity as
money. The commodity receives this expression insofar
as the money serves as a measure and expresses the value of
the commodity in its price. It is only through
sale, through its real transformation into money, that the
commodity acquires its adequate expression as
exchange-value. The first transformation is merely a
theoretical process, the second is a real one.

| Thus, in considering
the existence of the commodity as money, it is not
only necessary to emphasise that in money commodities
acquire a definite measure of their value—since
all commodities express their value in the use-value of
the same commodity—but that they all become
manifestations of social, abstract, general labour; and as
such they all possess the same form, they all appear as the
direct incarnation of social labour and as such they all act
as social labour, that is to say, they can be directly
exchanged for all other commodities in proportion to the
size of their value; whereas in the hands of the people
whose commodities have been transformed into money, they
exist not as exchange-value in the form of a particular
use-value, but as use-value (gold, for example) which merely
represents exchange-value. A commodity may be sold
either below or above its value. This is purely a
matter of the magnitude of its value. But
whenever a commodity is sold, transformed into money, its
exchange-value acquires an independent existence, separate
from its use-value. The commodity now exists only as a
certain quantity of social labour-time, and it proves that
it is such by being directly exchangeable for any
commodity whatsoever and convertible (in proportion to its
magnitude) into any use-value whatsoever. This point
must not be overlooked in relation to money any more than
the formal transformation undergone by the labour a
commodity contains as its element of value. But an
examination of money—of that absolute exchangeability
which the commodity possesses as money, of its absolute
effectiveness as exchange-value
which has nothing to do with the magnitude of
value—shows that it is not quantitatively, but
qualitatively determined and that as a result of the
very process through which the commodity itself passes, its
exchange-value becomes independent, and is really
represented as a separate aspect alongside its use-value as
it is already nominally in its price.

This shows, therefore, that the “verbal
observer” understands as little of the value and the
nature of money as Bailey, since both regard the independent
existence of value as a scholastic invention of
economists. This independent existence becomes even
more evident in capital, which, in one of its aspects, can
be called value in process—and since value only
exists independently in money, it can accordingly be called
money in process, as it goes through a series of
processes in which it preserves itself, departs from itself,
and returns to itself increased in volume. It goes
without saying that the paradox of reality is also reflected
in paradoxes of speech which are at variance with common
sense and with what vulgarians mean and believe they are
talking of. The contradictions which arise from the
fact that on the basis of commodity production the labour of
the individual presents itself as general social labour, and
the relations of people as relations between things and as
things—these contradictions are innate in the
subject-matter, not in its verbal expressions.}

Ricardo often gives the impression, and sometimes indeed
writes, as if the quantity of labour is the solution to the
false, or falsely conceived problem of an “invariable
measure of value” in the same way as corn, money,
wages, etc., were previously considered and advanced as
panaceas of this kind, In Ricardo’s work this false
impression arises because for him the decisive task is the
definition of the magnitude of value. Because of this
he does not understand the specific form in which labour is
an element of value, and fails in particular to grasp that
the labour of the individual must present itself as abstract
general labour and, in this form, as social
labour. Therefore he has not understood that the
development of money is connected with the nature of value
and with the determination of this value by labour-time.

Bailey’s book has rendered a good service insofar as the
objections he raises help to clear up the confusion between
“measure of value” expressed in money as a
commodity along with other commodities, and the immanent
measure and substance of value. But if he had analysed
money as a “measure of value”, not only
as a quantitative measure but as a qualitative
transformation of commodities, he would have arrived at a
correct analysis of value. Instead of this, he
contents himself with a mere superficial consideration of
the external “measure of value”—which
already presupposes value—and remains rooted in a
purely frivolous approach to the question.

| There are, however,
occasional passages in Ricardo in which he directly
emphasises that the quantity of labour embodied in a
commodity constitutes the immanent measure of the
magnitude of its value, of the differences in the
amount of its value, only because labour is the factor
the different commodities have in common, which
constitutes their uniformity, their substance, the intrinsic
foundation of their value. The thing however he failed
to investigate is the specific form in which labour plays
that role.

“In making labour the
foundation of the value of commodities, and
the comparative quantity of labour which is necessary
to their production, the rule which determines the
respective quantities of goods which shall be given in
exchange for each other, we must not be supposed to deny the
accidental and temporary deviations of the actual or market
price of commodities from this, their primary and natural
price” ([David Ricardo, The Principles of Political
Economy, and Taxation,] third ed., 1821, p. 80).

Destutt de Tracy says that “To
measure … is to find how many times they” (the
things measured) “contain […] unities of the
same description. A franc is not a measure of
value for any thing, but for a quantity of the same
metal of which francs are made, unless francs, and the
thing to be measured, can be referred to some other
measure which is common to
both. This, I think, they can be, for they are
both the result of labour; and, therefore”
(because labour is their effective cause) “labour is a
common measure, by which their real as well as
their relative value may be estimated”
(op. cit., pp. 333-34).

All commodities can be reduced to labour as their common
element. What Ricardo does not investigate is the
specific form in which labour manifests itself as the
common element of commodities. That is why he does not
understand money. That is why in his work the
transformation of commodities into money appears to be
something merely formal, which does not penetrate deeply
into the very essence of capitalist production. He
says however: only because labour is the common factor of
commodities, only because they are all mere manifestations
of the same common element, of labour, is labour their
measure. It is their measure only because it forms
their substance as values. Ricardo does not
sufficiently differentiate between labour insofar as it is
represented in use-values or in exchange-value. Labour
as the foundation of value is not any particular labour,
with particular
qualities. Ricardo continuously confuses the labour
which is represented in use-value and that which is
represented in exchange-value. It is true that the
latter species of labour is only the former species
expressed in an abstract form.

By real value, Ricardo, in the passage cited
above, understands the commodity as the embodiment of a
definite amount of labour-time. By relative
value, he understands the labour-time the commodity
contains expressed in the use-values of other
commodities.

Now to Bailey.

Bailey clings to the form in which the exchange-value of
the commodity—as commodity—appears, manifests
itself. It manifests itself in a general form
when it is expressed in the use-value of a third commodity,
in which all other commodities likewise express their
value—a commodity which serves as money—that
is, in the money price of the commodity. It
manifests itself in a particular form when the
exchange-value of any particular commodity is expressed in
the use-value of any other, that is, as the corn price,
cotton price, etc. In actual fact, the
exchange-value of the commodity always appears, manifests
itself with regard to other commodities, only in the
quantitative relationship in which they
exchange. The individual commodity as such cannot
express general labour-time, or it can only express it in
its equation with the commodity which constitutes money, in
its money price. But then the value of
commodity A is always expressed in a certain quantity of the
use-value of the commodity which functions as money.

This is how matters appear directly. And
Bailey clings to this. The most superficial form of
exchange-value, that is the quantitative relationship
in which commodities exchange with one another,
constitutes, according to Bailey, their value.
The advance from the surface to the core of the problem is
not permitted. He even forgets the simple
consideration that if y yards of linen equal x
lbs. of straw, this [implies] a parity between two unequal
things—linen and straw—making them equal
magnitudes. This existence of theirs as things that
are equal must surely be different | from their existence as straw
and linen. It is not as straw and linen that they are
equated, but as equivalents. The one side of the
equation must, therefore, express the same value as the
other. The value of straw and linen must, therefore,
be neither straw nor linen, but something common to both and
different from both commodities considered as straw
and linen. What is it? He does not answer
this question. Instead, he wanders off into all the
categories of political economy in order to repeat the same
monotonous litany over and over again, namely, that value is
the exchange relation of commodities and consequently is not
anything different from this relation.

“If the value of an
object is its power of purchasing, there must be
something to purchase. Value denotes
consequently nothing positive or intrinsic, but
merely the relation in which two objects stand to
each other as exchangeable commodities”
([Samuel Bailey, A Critical Dissertation an the Nature,
Measures, and Causes of Value, London, 1825,]
pp. 4-5).

His entire wisdom is, in fact, contained in this
passage. “If value is nothing but
power of purchasing” (a very fine definition
since “purchasing” presupposes not only value,
but the representation of value as “money”),
“it denotes”, etc. However let us first
clear away from Bailey’s proposition the absurdities which
have been smuggled in. “Purchasing” means
transforming money into commodities. Money already
presupposes value and the development of value.
Consequently, out with the expression
“purchasing” first of all. Otherwise we
are explaining value by value. Instead of purchasing
we must say “exchanging against other
objects”. It is quite superfluous to say that
“there must be something to purchase”. If
the “object” was to be consumed by its producers
as a use-value, if it was not merely a means of
appropriating other objects, not a “commodity”,
then obviously there could be no question of value.

First, it is a matter of objects. But then the
relation “in which two objects stand to each
other” is transformed into “the relation in
which two objects stand to each other as exchangeable
commodities”. After all, the objects stand only
in relation of exchange or as exchangeable objects to each
other. That is why they are
“commodities”, which is something
different from “objects”. On the other
hand, the “relation of exchangeable commodities”
is either nonsense, since “not exchangeable
objects” are not commodities, or Mr. Bailey has beaten
himself. The objects are not to be exchanged in any
arbitrary proportion, but are to be exchanged as
commodities, that is, they are to stand to one another as
exchangeable commodities, that is, as objects each of which
has a value, and which are to be exchanged with one another
in proportion to their equivalence. Bailey
thereby admits that the rate at which they are exchanged,
that is, the power of each of the commodities to purchase
the other, is determined
by its value, but this value however is not
determined by this power, which is merely a corollary.

If we strip the passage of everything that is wrong,
nonsensical or smuggled in, then it will read like this.

But wait: we must dispose of yet another snare and piece
of nonsense. We have two sorts of expression. An
object’s “power” of exchanging, etc. (since the
term “purchasing” is unjustified and makes no
sense without the concept of money), and the
“relation in which” an object exchanges
with others. If “power” is to be regarded
as something different from “relation”, then one
ought not to say that “power of exchanging” is
“merely the relation”, etc. If it
is meant to be the same thing, then it is confusing
to describe the same thing with two different expressions
which have nothing in common with each other. The
relation of a thing to another is a relation of the
two things and cannot be said to belong to either.
Power of a thing, on the contrary, is something
intrinsic to the thing, although this, its intrinsic
quality, may only |
manifest itself in its relation to other things. For
instance, power of attraction is a power of the thing itself
although that power is “latent” so long as there
are no things to attract. Here an attempt is made to
represent the value of the “object” as something
intrinsic to it, and yet as something merely existing as a
“relation”. That is why Bailey uses first
the word “power” and then the word
“relation”.

Accurately expressed it would read as follows:

“If the value of an object is
the relation in which it exchanges with other objects, value
denotes, consequently” (viz., in consequence of
the “if”), “nothing but the relation in
which two objects stand to each other as exchangeable
objects.”

Nobody will contest this tautology. What follows
from it, by the way, is that the “value” of an
object “denotes nothing”. For
example, 1 lb. of coffee=4 lbs. of cotton. What then
is the value of 1 lb. of coffee? 4 lbs. of
cotton. And of 4 lbs. of cotton? 1 lb. of
coffee, Since the value of 1 lb. of coffee is 4 lbs. of
cotton, and, on the other hand, the value of 4 lbs. of
cotton is 1 lb. of coffee, then it is clear that the value
of 1 lb. of coffee is 1 lb. of coffee (since 4 lbs. of
cotton=1 lb. of coffee), a=b, b=a, hence
a=a. What arises from this explanation is,
therefore, that the value of a use-value is equal to a
[certain] quantity of the same use-value.
Consequently, the value of 1 lb. of coffee is nothing else
than 1 lb. of coffee. If 1 lb. of coffee=4 lbs. of
cotton, then it is
clear that 1 lb. of coffee > 3 lbs. of cotton and 1
lb. of coffee < 5 lbs. of cotton. To say that 1
lb. of coffee > 3 lbs. of cotton and < 5 lbs. of
cotton, expresses a relation between coffee and
cotton just as well as saying that 1 lb. of coffee=4 lbs.
of cotton. The symbol = does not express any more of a
relation than does the symbol > or the symbol <, but
simply a different relation. Why is it then
precisely the relation represented by the sign of equality,
by =, which expresses the value of the coffee in cotton and
that of the cotton in coffee? Or is this sign of
equality the result of the fact that these two amounts
exchange for one another at all? Does this sign =
merely express the fact of exchange? It cannot be
denied that if coffee exchanges for cotton in any proportion
whatever, they are exchanged for one another, and if the
mere fact of their exchange constitutes the relation
between the commodities, then the value of the coffee is
equally well expressed in cotton whether it exchanges for 2,
3, 4 or 5 lbs. of cotton. But what is then the word
“relation” supposed to mean? Coffee
in itself has no “intrinsic positive” quality
which determines the rate at which it exchanges for
cotton. It is not a relation which is determined by
any kind of determinant intrinsic to coffee and separate
from real exchange. What is then the purpose of the
word “relation”? What is the
relation? The quantity of cotton against which a
quantity of coffee is exchanged. Then one could not
speak of a relation in which it exchanges but only of a
relation in which it is or has been exchanged.
For if the relation were determined before the exchange,
then the exchange would be determined by “the
relation” and not the relation by the exchange.
We must therefore drop the relation as signifying
something which stands over and above the coffee and
the cotton and is distinct from them.

[Thus the passage from Bailey cited above takes the
following form:]

“If the value of an object is
the quantity of another object exchanged with it, value
denotes, consequently, nothing but the quantity of the other
object exchanged with it.”

As a commodity, a commodity can only express its value in
other commodities, since general labour-time does not exist
for it as a commodity. [Bailey believes that] if the
value of one commodity is expressed in another commodity,
the value of one commodity is nothing apart from this
equation with another commodity. Bailey flaunts this
piece of wisdom tirelessly—and
all the more tiresomely. As he conceives it, it is a
tautology, for he says [in essence]: If the value of
any commodity is nothing but its exchange relation with
another commodity, it is nothing apart from this
relation.

He reveals his philosophical profundity in the following
passage:

“As we cannot speak of the
distance of any object without implying some other
object, between which and the former this relation
exists, so we cannot speak of the value of a commodity
but in reference to another commodity | compared with it.
A thing cannot be valuable in itself without reference to
another thing” (Is social labour, to which the value
of a commodity is related, not another thing?)
“any more than a thing can be distant in itself
without reference to another thing” (loc. cit.,
p. 5).

If[p] a thing is
distant from another, the distance is in fact a relation
between the one thing and the other; but at the same time,
the distance is something different from this relation
between the two things. It is a dimension of space, it
is a certain length which may as well express the distance
of two other things besides those compared. But this
is not all. If we speak of the distance as a relation
between two things, we presuppose something
“intrinsic”, some “property” of the
things themselves, which enables them to be distant from
each other. What is the distance between the syllable
A and a table? The question would be
nonsensical. In speaking of the distance of two
things, we speak of their difference in space. Thus we
suppose both of them to be contained in space, to be points
of space. Thus we equalise them as being both
existences of space, and only after having them equalised
sub specie spatii[q] we distinguish them as
different points of space. To belong to space is their
unity.*

But what is this unity of objects exchanged against each
other? This exchange is not a relation which exists
between them as natural things. It is likewise not a
relation which they bear as natural things to human needs,
for it is not the degree of their utility that determines
the quantities in which they exchange. What is
therefore their identity, which enables them to be exchanged
in certain proportions for one another? As what do
they become exchangeable?

In fact, in all this Bailey merely follows the author of
the Verbal Observations.

“… it” (value)
“cannot alter as to one of the objects compared,
without altering as to the other…” (loc.
cit., p. 5).

This again simply means that the expression of the value
of one commodity in another commodity can only change as
such an expression. And the expression as such
presupposes not one but two commodities.

Mr. Bailey is of the opinion that if one were to consider
only two commodities—in exchange with one
another—one would automatically discover the mere
relativity of value, in his sense. The
fool. As if it were not just as necessary to say, in
connection with [two] commodities which exchange with one
another—two products which are related to one another
as commodities—in what they are identical, as
it would be in the case of a thousand. For that
matter, if only two products existed, the products would
never become commodities, and consequently the
exchange-value of commodities would never evolve
either. The necessity for the labour in product I to
manifest itself as social labour would not arise.
Because the product is not produced as an immediate object
of consumption for the producers, but only as a bearer of
value, as a claim, so to speak, to a certain
quantity
of all materialised social labour, all products as
values are compelled to assume a form of existence
distinct from their existence as use-values, And it is this
development of the labour embodied in them as social labour,
it is the development of their value, which
determines the formation of money, the necessity for
commodities to represent themselves in respect of one
another as money—which means merely as
independent forms of existence of exchange-value—and
they can only do this by setting apart one commodity
from the mass of commodities, and all of them measuring
their values in the use-value of this excluded commodity,
thereby directly transforming the labour embodied in this
exclusive commodity into general, social labour.

Mr. Bailey, with his queer way of thinking which only
grasps the surface appearance of things, concludes on the
contrary: Only because, besides commodities,
money exists, and we are so used to regarding the
value of commodities not in their relation to one
another but as a relation to a third, as | a third relation distinct from
the direct relation, is the concept of value
evolved—and consequently value is transformed from the
merely quantitative relation in which commodities are
exchanged for one another into something independent of this
relation (and this, he thinks, transforms the value of
commodities into something absolute, into a scholastic
entity existing in isolation from the commodities).
According to Bailey, it is not the determination of the
product as value which leads to the establishment of money
and which expresses itself in money, but it is the
existence of money which leads to the fiction of the concept
of value. Historically it is quite correct that the
search for value is at first based on money, the
visible expression of commodities as value, and that
consequently the search for the definition of value is
(wrongly) represented as a search for a commodity of
“invariable value”, or for a commodity which is
an “invariable measure of value”. Since
Mr. Bailey now demonstrates that money as an external
measure of value—and expression of value—has
fulfilled its purpose, even though it has a variable
value, he thinks he has done away with the question of the
concept of value—which is not affected by the
variability of the magnitudes of value of
commodities—and that in fact it is no longer necessary
to attribute any meaning at all to value. Because the
representation of the value of a commodity in money—in
a third, exclusive commodity—does not exclude
variation in the value of this third commodity, because the
problem of an “invariable
measure of value” disappears, the problem of the
determination of value itself disappears. Bailey
carries on this insipid rigmarole for hundreds of pages,
with great self-satisfaction.

The following passages, in which he constantly repeats
the same thing, are, in part, illicitly copied from the
“Verbal Disputes”.

Supposing that only two commodities
existed, both exchangeable in proportion to the amount of
labour [they contained], “If […] A should, at
a subsequent period, require double the quantity of labour
for its production, while B continued to require only the
same, A would become of double value to B… But
although B continued to be produced by the same labour, it
would not continue of the same value, for it would exchange
for only half the quantity of A, the only commodity,
by the supposition, with which it could be compared”
(loc. cit., p. 6).

“It is from this circumstance of
constant reference to other commodities” (instead
of regarding value merely as a relation between two
commodities) “or to money, when we are
speaking of the relation between any two commodities,
that the notion of value, as something intrinsic
and absolute, has arisen” (op. cit., p. 8).

“What I assert is, that if all
commodities were produced under exactly the same
circumstances, as for instance, by labour alone, any
commodity, which always required the same quantity of
labour, could not be invariable in value”
<that is, invariable when its value is expressed
in other commodities—a tautology> “while
every other commodity underwent alteration” (op. cit.,
pp. 20-21).

Value is nothing intrinsic and
absolute… (op. cit., p. 23).[r]

“It is impossible to designate, or express the value of a
commodity, except by a quantity of some other
commodity” (op. cit., p. 26).

(As impossible as it is to “designate”
or “express” a thought except by a
quantity of syllables. Hence Bailey concludes that a
thought is—syllables.)

“Instead of regarding value as a
relation between two objects, they” (Ricardo
and his followers) “seem to consider it as a positive
result produced by a definite quantity of labour”
(op. cit., p. 30).

“Because the values of A and B,
according to their doctrine, are to each other as the
quantities of producing labour, or … are determined
by the quantities of producing labour, they appear to have
concluded, that the value of A alone, without reference to
any thing else, is as the quantity of its producing
labour. There is no meaning certainly in this last
proposition…” (op. cit., pp. 31-32).

They speak of “value as a sort of
general and independent property” (op. cit.,
p. 35).

“The value of a commodity must be its
value in something” (loc. cit.).

We can see why it is so important for Bailey to limit
value to two commodities, to understand it as the
relation between two commodities, But a difficulty
now arises:

“The value of a commodity
denoting its relation of exchange to some other
commodity”

(what is in this context the purpose of the
“relation | of
exchange”? Why not its
“exchange”? But at the same time exchange
is intended to express a definite relation, not
merely the fact of exchange, Hence value is equal to
relation in exchange)

“… we may speak of it as
money-value, corn-value, cloth-value, according to the
commodity with which it is compared; and hence there are
a thousand different kinds of value, as many kinds of
value as there are commodities in existence, and all are
equally real and equally nominal” (op.
cit., p.39).

Here we have it. Value equals
price. There is no difference between
them. And there is no “intrinsic”
difference between money price and any other
expression of price, although it is the money price
and not the cloth price, etc., which expresses the
nominal value, the general value of the
commodity.

But although the commodity has a thousand different kinds
of value, or a thousand different prices, as many kinds of
value as there are commodities in existence, all these
thousand expressions always express the same
value. The best proof of this is that all these
different expressions are equivalents which not only
can replace one another in this expression, but do replace
one another in exchange itself. This relation
of the commodity, with the price of which we are concerned,
is expressed in a thousand different “relations in
exchange” to all the different commodities and yet
always expresses the same relation. Thus this
relation, which remains the same, is distinct from its
thousand different expressions, or value is different from
price, and the prices are only expressions of value:
money price is its general expression, other prices
are particular expressions. It is not even this
simple conclusion that Bailey arrives at. In this
context Ricardo is not a fictionist but Bailey is a
fetishist in that he conceives value, though not as a
property of the individual object (considered in isolation),
but as a relation of objects to one another, while it
is only a representation in objects, an objective
expression, of a relation between men, a social relation,
the relationship of men to their reciprocal productive
activity.

[β) Confusion with Regard to Profit and the
Value of Labour]

[Bailey says the following about the value of
labour.]

“Hence Mr. Ricardo, ingeniously
enough, avoids a difficulty, which, on a first view,
threatens to encumber his doctrine, that value depends on
the quantity of labour employed in production. If this
principle is rigidly adhered to, it follows, that the
value of labour depends on the quantity of labour
employed in producing it—which is evidently
absurd. By a dexterous turn, therefore, Mr. Ricardo
makes the value of labour depend on the quantity
of labour required to produce wages, or, to give him the
benefit of his own language, he maintains, that the value of
labour is to be estimated by the quantity of labour
required to produce wages, by which he means, the quantity
of labour required to produce the money or commodities given
to the labourer. This is similar to saying, that the
value of cloth is to be estimated, not by the quantity of
labour bestowed on its production, but by the quantity of
labour bestowed on the production of the silver for which
the cloth is exchanged” (op. cit., pp. 50-51).

This is a justified criticism of Ricardo’s mistake of
making capital exchange directly with labour instead of with
labour-power. It is the same objection which we have
already come across in another form.[s] Nothing else. Bailey’s
comparison cannot be applied to labour-power. It is
not cloth, but an organic product such as mutton, that he
ought to compare with living lab our-power. Apart from
the labour involved in tending live-stock and that required
for the production of their food, the labour required for
their production is not to be understood as meaning the
labour which they themselves perform in the act of
consumption, the act of eating, drinking, in short, the
appropriation of those products or means of
subsistence. It is just the same with
labour-power. [What does] the labour required for its
production consist of? Apart from the labour involved
in developing a person’s labour—power, his
education, his apprenticeship—and this hardly
arises in relation to unskilled labour—its
reproduction costs no labour apart from that involved in the
reproduction of the means of subsistence which the labourer
consumes. The appropriation of these means of
subsistence is not “labour”. | Any more than the labour
contained in the cloth, in addition to the labour of the
weaver and the labour which is contained in the wool, the
dye-stuff, etc., comprises the chemical or physical action
of the wool in absorbing the dye-stuff,
etc., an action which corresponds to the
appropriation of the means of subsistence by the worker or
the cattle.

Bailey then seeks to invalidate Ricardo’s law that the
value of labour and profit stand in inverse
proportion to one another. He seeks, moreover, to
invalidate that part of it which is correct. Like
Ricardo, he identifies surplus-value with profit. He
does not mention the one possible exception to this law,
namely, when the working-day is lengthened and workers and
capitalists share equally in that prolongation, but even
then, since the value of the working power will be consumed
more quickly—in fewer years—the surplus-value
rises at the expense of the working-man’s life, and his
working power depreciates in comparison with the
surplus-value it yields to the capitalist.

Bailey’s reasoning is most superficial. Its
starting-point is his conception of value. The value
of the commodity is the expression of its value in a certain
quantity of other values in use (the use-value of other
commodities). The value of labour is thus equal to the
quantity of other commodities (use-values) for which it is
exchanged. (The real problem, how it is possible to
express the value in exchange of A in the value in use of
B—does not even occur to him.) So long,
therefore, as the worker receives the same quantity of
commodities, the value of labour remains unchanged, because,
as before, it is expressed in the same quantity of other
useful things. Profit, on the other hand, expresses a
relation to capital, or else to the total product. The
portion received by the worker can, however, remain
the same although the proportion received by the
capitalist rises if the productivity of labour
increases. It is not clear why, in dealing with
capital, we suddenly come to a proportion and of what use
this proportion is supposed to be to the capitalist,
since the value of what he receives is determined not by the
proportion, but by its “expression in other
commodities”.

The point he makes here has, in fact, already been
mentioned by Malthus.[t] Wages are equal to a quantity of
use-values. Profit, on the other hand, is (but
Bailey must avoid saying so) a relation of
value. If I measure wages according to
use-value and profit according to exchange-value, it is
quite evident that neither an inverse nor any other kind of
relation exists between them, because I should then be
comparing incommensurable magnitudes, things which have
nothing in common.

But what Bailey says here about the value of
labour applies—according to his
principle—to the value of every other commodity
as well. It is nothing but a certain quantity of other
things exchanged against it. If I receive 20 lbs. of
twist for £1, then [according to this theory] the
value of the £1 always remains the same, and will
therefore be always paid, although the labour required to
produce 1 lb. of twist can on one occasion be double that
required on another. The most ordinary merchant does
not believe that he is getting the same value for his
£1 when he receives 1 quarter of wheat for it in a
period of famine and the same amount in a period of
glut. But the concept of value ends here. And
there remains only the unexplained and inexplicable fact
that a quantity of A is exchanged against a quantity of B in
an arbitrary proportion. And whatever that proportion
may be it is an equivalent. Even Bailey’s formula, the
value of A expressed in B, thus becomes quite
meaningless. If the value of A is expressed in B, the
same value is supposed to be expressed, at one time in A,
and at another time in B, so that, when it is expressed in
B, the value of A remains the same as it was before.
But according to Bailey there is no value of A that could be
expressed in B, because neither A nor B have a value apart
from that expression. The value of A expressed in B
must be something quite different from the value of A in C,
as different as B and C are. It is not the same
value, identical in both expressions, but there are two
relations of A which have nothing in common with each other,
and of which it would be nonsense to say that they are
equivalent expressions.[u]

| “… a
rise or fall of labour implies an increase or decrease in
the quantity of the commodity given in exchange for
it” (op. cit., p. 62).

Nonsense! [From Bailey’s standpoint] there can be
no rise or fall in the value of labour, nor in the value of
any other thing. For one A I get today 3 Bs, tomorrow
6 Bs and the day after tomorrow 2 Bs. But [according
to Bailey] in all these cases the value of A is nothing but
the quantity of B for which it has been exchanged. It
was 3 Bs, it is now 6 Bs. How can its value be said to
have risen or fallen? The A expressed in 3 Bs had a
different value from that expressed in 6 Bs or 2 Bs.
But then it is not the identical A which at the identical
time has been exchanged for
3 or 2 or 6 Bs. The identical A at the identical
time has always been expressed in the same quantity of
B. It is only with regard to different moments of time
that it could be said the value of A had changed. But
it is only with “contemporaneous” commodities
that A can be exchanged, and it is only the fact (not even
the mere possibility of exchange) of exchange with other
commodities which makes [according to Bailey] A a
value. It is only the actual “relation in
exchange” which constitutes its value; and the actual
“relation in exchange” can of course only take
place for the same A at the identical time. Bailey
therefore declares the comparison of commodity values at
different periods to be nonsense. But at the same time
he should also have declared the rise or fall of
value—which is impossible if there is no comparison
between the value of a commodity at one time and its value
at another time—to be nonsense and consequently, also,
the “rise or fall in the value of
labour”.

“Labour is an exchangeable thing, or
one which commands other things in exchange; but the term
profits denotes only a share or proportion of
commodities, not an article which can be exchanged against
other articles. When we ask whether wages have
risen, we mean, whether a definite portion of labour
exchanges for a greater quantity of other things than
before” (loc. cit., pp. 62-63).

(Thus when corn becomes dearer, the value of labour falls
because less corn is exchanged for it. On the other
hand, if cloth becomes cheaper at the same time, the value
of labour rises simultaneously, because more cloth
can be exchanged for it. Thus the value of labour both
rises and falls at the same time and the two expressions of
its value—in corn and in cloth—are not
identical, not equivalent, because its increased
value cannot be equal to its reduced value.)

“… but when we ask whether
profits have risen, we … mean … whether the
gain of the capitalist bears a higher ratio to the capital
employed…” (loc. cit., p. 63).

“… the value of labour does
not entirely depend on the proportion of the whole produce
which is given to the labourers in exchange for their
labour, but also on the productiveness of […]
labour” (loc. cit., pp. 63-64).

“The proposition, that when labour
rises profits must fall, is true only when its rise is not
owing to an increase in its productive powers”
(loc. cit., p. 64).

“… if this productive power be
augmented, that is, if the same labour produce more
commodities in the same time, labour may rise in value
without a fall, nay even with a rise of profits”
(loc. cit., p. 66).

(Accordingly it can also be said of every other commodity
that a rise in its value does not imply a fall in the value
of the other
commodity with which it exchanges, nay, may even imply a
rise in value on the other side. For instance,
supposing the same labour which produced 1 quarter of corn,
now produces 3 quarters. The 3 quarters cost £1,
as the one quarter did before. If 2 quarters are now
exchanged for £1, the value of money has risen,
because it is expressed in 2 quarters instead of one.
Thus the purchaser of corn gets a greater value for his
money. But the seller who sells for £1 what has
cost him only 2/3 [of £1] gains
1/3. And thus the value of his
corn has risen at the same time that the money price of corn
has fallen.)

“Whatever the produce of the labour of six men might
be, whether 100 or 200 or 300 quarters of corn, yet so long
as the proportion of the capitalist was one-fourth of the
produce, that fourth part estimated in labour would be
invariably the same.”

(And so would the 3/4 of the
produce accruing to the labourer, if estimated in
labour.)

“Were the produce 100 quarters, then,
as 75 quarters would be given to 6 men, the 25 accruing to
the capitalist would command the labour of 2 men;”

(and that given to the labourers would command the labour
of 6 men)

“if the produce were 300 quarters,
the 6 men would obtain 225 quarters, and the 75 falling to
the capitalist would still command 2 men and no
more.”

(Likewise the 225 quarters falling to the 6 men would
still command 6 men and no more.) (Why does the
almighty Bailey then forbid Ricardo to estimate the portion
of the men, as well as that of the capitalist, in labour,
and compare their mutual value as expressed in labour?)

“Thus a rise in the proportion which
went to the capitalist would be the same as an increase of
the value of profits estimated in labour,”

(How can he speak of the value of profits and an
increase in their value, if “profit … does not
denote an article which can be exchanged against other
articles” (see above) and, consequently, denotes no
“value”? And, on the other hand, is a rise
in the proportion which went to the capitalist
possible without a fall in the proportion that goes
to the labourer?)

“or, in other words, an increase in
their power of commanding labour” (op. cit.,
p. 69).

(And is this increase in the power of the
capitalist to appropriate the labour of others not exactly
identical with the decrease in the power of the
labourer to appropriate his own labour?)

“Should it be objected to the
doctrine of profits and the value of labour rising at the
same time, that as the commodity produced is the only
source whence the capita list and the labourer can obtain
their remuneration, it necessarily follows that what one
gains the other loses, the reply is obvious. So long
as the product continues the same, this is undeniably true;
but it is equally undeniable, that if the product be doubled
the portion of both may be increased, although the
proportion of one is lessened and that of the other
augmented” (loc. cit., p. 70).

(This is just what Ricardo says. The
proportion of both cannot increase, and if the
portion of both increases, it cannot increase in the
same proportion, as otherwise portion and proportion would
be identical. The proportion of the one cannot
increase without that of the other decreasing.
However, that Mr. Bailey calls the portion of the
labourer “value” of “wages”,
and the proportion [of the capitalist] value of
“profits”, in other words, that the same
commodity has two values for him, one in the hands of the
labourer, and the other in the hands of the capitalist, is
nonsense of his own.)

“So long as the product continues the
same, this is undeniably true; but it is equally undeniable,
that if the product be doubled the portion of both
may be increased, although the proportion of one is
lessened and that of the other augmented. Now it is an
increase in the portion of the product assigned to
the labourer which constitutes a rise in the value of
his labour…”

(because here we understand by value a certain
quantity of articles)

“… but it is an increase in
the proportion assigned to the capitalist which
constitutes a rise in […] profits,”

(because here we understand by value the same
articles not estimated by their quantity, but by the labour
worked up in them)

“whence”

(that is, because of the absurd use of two measures, in
the one case articles, in the other case the value of the
same articles)

“it clearly follows, that there is
nothing inconsistent in the supposition of a simultaneous
rise in both” (loc. cit., p. 70).

This absurd argument against Ricardo is quite | futile since he merely
declares that the value of the two portions must
rise and fall in inverse proportion to one another.
It merely amounts to a repetition by Bailey of his
proposition that value is the quantity of articles
exchanged for an article. In dealing with
profit he was bound to find himself in an
embarrassing position. For here, the value of capital
is compared with the value of the product. Here he
seeks refuge in taking value to mean the value of an
article estimated in labour (in the Malthusian manner).

“Value is a relation between
contemporary commodities, because such only admit of
being exchanged for each other; and if we compare the value
of a commodity at one time with its value at another, it is
only a comparison of the relation in which it stood at these
different times to some other commodity” (op. cit.,
p. 72).

Consequently, as has been stated, value can neither rise
nor fall, for this always involves comparing the value of a
commodity at one time with its value at another. A
commodity cannot be sold below its value any more than above
it, for its value is what it is sold for. Value and
market price are identical. In fact one cannot speak
either of “contemporary” commodities, or
of present values, but only of past
ones. What is the value of 1 quarter of wheat?
The £1 for which it was sold yesterday. For its
value is only what one gets in exchange for it, and as long
as it is not exchanged, its “relation to money”
is only imaginary. But as soon as the exchange has
been transacted, we have £1 instead of the quarter of
wheat and we can no longer speak of the value of the quarter
of wheat. In comparing values at different periods,
Bailey has in mind merely academic researches into the
different values of commodities, for example in the
eighteenth and the sixteenth centuries. There the
difficulty arises from the fact that the same monetary
expression of value—owing to the vicissitudes of the
value of money itself—denotes different values [at
different times]. The difficulty here lies in reducing
the money price to value. But what a fool he is!
Is it not a fact that, in the process of circulation or the
process of reproduction of capital, the value of one period
is constantly compared with that of another period, an
operation upon which production itself is based?

Mr. Bailey does not understand at all what the
expressions—to determine the value of commodities by
labour-time or by the value of labour—mean. He
simply does not understand the difference.

“… I beg not to be understood
as contending, either that the values of commodities are to
each other as the quantities of labour necessary for
their production, or that the values of commodities are to
each other as the values
of the labour: all that I intend to insist
upon is, that if the former is true, the latter cannot be
false…” (op. cit., p. 92).

The determination of the value of commodities by the
value of another commodity (and insofar as they are
determined by the “value of labour”, they are
determined by another commodity; for value of labour
presupposes labour as a commodity) and its determination by
a third entity, which has neither value nor is itself a
commodity, but is the substance of value, and that which
turns products into commodities, are for Bailey
identical. In the first case, it is a question of a
measure of the value of commodities, that is, in
fact, of money, of a commodity in which the other
commodities express their value. In order that
this can happen, the values of the commodities must
already be presupposed. The commodity which
measures as well as that to be measured must have a
third element in common. In the second case,
this identity itself is first established; later it
is expressed in the price, either money price or any other
price.

Bailey identifies the “invariable measure of
value” with the search for an immanent measure of
value, that is, the concept of value itself. So long
as the two are confused it is even a reasonable instinct
which leads to the search for an “invariable measure
of value”. Variability is precisely the
characteristic of value. The term
“invariable” expresses the fact that the
immanent measure of value must not itself be a commodity, a
value, but rather something which constitutes value and
which is therefore also the immanent measure
of value. Bailey demonstrates | that commodity values can find
a monetary expression and that, if the value relation of
commodities is given, all commodities can express their
value in one commodity, although the value of this
commodity may change. But it nevertheless always
remains the same for the other commodities at a given time,
since it changes simultaneously in relation to all of
them. From this he concludes that no value
relation between commodities is necessary nor is there any
need to look for one. Because he finds it reflected in
the monetary expression, he does not need to
“understand” how this expression becomes
possible, how it is determined, and what in fact it
expresses.

These remarks, in general, apply to Bailey as they do to
Malthus, since he believes that one is concerned with the
same question, on the same plane, whether one makes
quantity of labour or value of labour the measure of
value. In the latter case, one presupposes the
values whose measure is being sought, that is
to say, their external measure, their representation as
value. In the first case one investigates the genesis
and immanent nature of value itself. In the second,
the development of the commodity into money or the form
which exchange-value acquires in the process of the exchange
of commodities. In the first, we are concerned with
value, independent of this representation, or rather
antecedent to this representation. Bailey has
this in common with the other fools: to determine the value
of commodities means to find their monetary
expression, an external measure of their value.
They say, however, impelled by an instinctive thought, that
this measure then must have invariable value, and must
itself therefore stand outside the category of value,
whereas Bailey says that one does not need to understand it,
since one does in fact find the expression of value
in practice, and this expression itself has and can have
variable value without prejudice to its function.

In particular, he himself has informed us that 100, 200
or 300 quarters can be the product of the labour of 6 men,
that is, of the same quantity of labour, whereas
“value of labour” only means for him the portion
of the 100, 200 or 300 quarters which the 6 men
receive. This could be 50, 60 or 70 quarters per
man. The quantity of labour and the value of the same
quantity of labour are therefore, according to Bailey
himself, very different expressions. And how can it be
the same if the value is expressed first in one thing and
then in something essentially different? If the same
labour which formerly produced 3 quarters of corn now
produces 1 quarter, while the same labour which formerly
produced 20 yards of cloth (or 3 quarters of corn) still
produces 20 yards, then, reckoned according to labour-time,
1 quarter of corn is now equal to 20 yards of cloth, or 20
yards of cloth to 1 quarter of corn, and 3 quarters of corn
equal 60 yards of cloth instead of 20. Thus the values
of the quarter of corn and the yard of linen have been
altered relatively. But they have by no means been
altered according to the value of labour, for 1 quarter of
corn and 20 yards of cloth remain the same use-values as
before. And it is possible that 1 quarter of corn does
not command a larger quantity of labour than before.

If we take a single commodity, then Bailey’s assertion
makes no sense whatever. If the labour-time required
for the production of shoes decreases and now only one-tenth
of the labour-time formerly required is necessary, then the
value of shoes drops to one-tenth of the former value; and
this also holds true
when the shoes are compared with, or expressed in,
other commodities, provided the labour required for their
production has remained the same or has not decreased at the
same rate. Nevertheless, the value of labour—for
example the daily wage in shoemaking as well as in all other
industries—may have remained the same; or it may even
have increased. Less labour is contained in the
individual shoe, hence also less paid labour. But when
one speaks of the value of labour, one does not mean
that for one hour’s labour, i.e., for a smaller quantity of
labour, less is paid than for a greater quantity.
Bailey’s proposition could have meaning only in relation to
the total product of capital. Suppose 200 pairs of
shoes are the product of the same capital (and the same
labour) which formerly produced 100 pairs. In this
case, the value of the 200 pairs is the same as [previously]
that of 100 pairs. And it could be said that the 200
pairs of shoes are to 1,000 yards of linen (say the product
of £200 of capital) as the value of the labour
set in motion by the two amounts of capital. In what
sense? In the sense in which it would also
apply | to the relation of
the individual shoe to the single yard of linen?

The value of labour is the part of the labour-time
contained in a commodity which the worker himself
appropriates; it is the part of the product in which the
labour-time which belongs to the worker himself is
embodied. If the entire value of a commodity is
reduced to paid and unpaid labour-time—and if the rate
of unpaid to paid labour is the same, that is, if
surplus-value constitutes the same proportion of total value
in all commodities—then it is clear that if the ratio
of one commodity to another is proportional to the total
quantity of labour they contain, they must also represent
equal proportionate parts of these total quantities
of labour, and their ratio must therefore also be as that of
the paid labour-time in one commodity to the paid
labour-time in the other.

C [commodity]: C’=TLT (total labour-time [embodied in C])
to TLT’ (total labour-time [embodied in C’]).
TLT/x= the paid labour-time in C, and TLT’/x=
the paid labour-time in C’, since it is presupposed that the
paid labour-time in both commodities constitutes the same
proportional part of the total labour-time.

C:C’=TLT : TLT’

TLT : TLT’ = TLT/x:TLT’/x

therefore C : C’=TLT/x : TLT’/x

or the commodities are to one another as the
quantities of paid labour-time contained in them, that
is, as the values of the labour contained in them.

The value of labour is then, however, not
determined in the way Bailey would like, but by the
labour-time [contained in the commodity].

Further, disregarding the conversion of values into
prices of production and considering only the values
themselves, capitals consist of different proportions of
variable and constant capital. Hence, as far as values
are concerned, the surplus-values are not equal, or the paid
labour does not form the same proportion of the total labour
advanced.

In general, wages—or values of labour—would
here be indices of the values of commodities, not as values,
not insofar as wages rise or fall, but insofar as the
quantity of paid labour—represented by
wages—contained in a commodity would be an index of
the total quantity of the labour contained in the
corresponding commodities.

In a word, the point is that, if the values of
commodities are to one another as LT to LT’ (the amounts of
labour-time contained in them), then their ratio is likewise
as LT/x to LT’/x, i.e., the amounts of paid
labour-time embodied in them, if the proportion of
the paid labour-time to the unpaid is the same in all
commodities, that is, if the paid labour-time is
always equal to the total labour-time, whatever this may be,
divided by x. But the “if” does not
correspond to the real state of affairs. Supposing
that the workers in different industries work the same
amount of surplus labour-time, the relation of paid to
actually employed labour-time is nevertheless different in
different industries, because the ratio of immediate
labour employed to accumulated labour employed is
different. [Let us take two capitals consisting] for
example, the one of 50v [variable] and 50c [constant] and
the other of 10v and 90c. In both cases, let the
unpaid labour amount to one-tenth. [The value of] the
first commodity would accordingly be 105, [of] the second
101. The paid labour-time would be equal to one-half
of the labour advanced in the first case, and only to
one-tenth in the second.

|Bailey says:

“… if commodities are to each
other as the quantities, they must also be to each other as
the va1ues of the producing labour; for the contrary would
necessarily imply, that the two commodities A and B might be
equal in value, although the value of the labour employed in
one was greater or less than the value of the labour
employed in the other; or that A and B might be unequal in
value, if the labour employed in each was equal in
value. But this difference in the value of two
commodities, which were produced by labour of equal
value, would be inconsistent with the acknowledged
equality of profits, which Mr. Ricardo maintains in
common with other writers” (op. cit., pp.
79-80).

In this last phrase, Bailey stumbles unconsciously on a
real objection to Ricardo, who directly identifies profit
with surplus-value and values with cost-prices.
Correctly stated, it is-if the commodities are sold at their
value, they yield unequal profits, for then
profit is equal to the surplus-value embodied in them.
And this is correct. But this objection does not refer
to the theory of value, but to a blunder of Ricardo’s in
applying this theory.

How little Bailey himself, in the above passage, can have
correctly understood the problem, is shown in the following
statement:

Ricardo on the other hand maintains “that labour
may rise and fall in value without affecting the value of
the commodity. This is obviously a very different
proposition from the other, and depends in fact on the
falsity of the other, or on the contrary proposition”
(loc. cit., p. 81).

The fool himself previously asserted that the result of
the same labour may be 100, 200 or 300 quarters [of
corn]. This determines the relation of a quarter to
other commodities irrespective of the changing value of
labour, that is, irrespective of how much of the 100, 200 or
300 quarters falls to the labourer himself. The fool
would have shown some consistency if he had said: the values
of labour may rise or fall, nevertheless the values of
commodities are as the values of labour,
because—according to a false assumption—the rise
or fall of wages is general, and the value of wages always
forms the same proportionate part of the total
quantity of labour employed.

[γ) Confusion of Value and Price. Bailey’s
Subjective Standpoint]

[Bailey says:]

“…the capability of
expressing the values of commodities has nothing to
do with the constancy of their
values…”

<Indeed not! but it has much to do with first
finding the value, before expressing it; finding in what way
the values in use, so different from each other, fall under
the common category and denomination of value, so
that the value of one commodity may be expressed in the
other>

“… either to each other or to
the medium employed; neither has the capability of comparing
these expressions of value anything to do with
it.”

<If the values of different commodities are expressed
in the same third commodity, however variable its value may
be, it is of course very easy to compare these
expressions, which already have a common
denomination.>

“Whether A is worth 4 B or 6
B”

<the difficulty consists in equating A with a portion
of B; and this is only possible if there exists a common
element for A and B, or if A and B are different
representations of the same element. If all
commodities are to be expressed in gold, or money, the
difficulty remains the same. There must be an element
common to gold and to each of the other commodities>

“… and whether C is worth 8 B
or 12 B, are circumstances which make no difference in
the power of expressing the value of A and C in B, and
certainly no difference in the power of comparing the value
of A and C when expressed” (op. cit., pp. 104-05).

But how [is it possible] to express A in B or
C? In order to express “ them” in
each other, or, what amounts to the same thing, to treat
them as equivalent expressions of the same unity, A, B, C
must all be considered as something different from what they
are as things, as products, as values in use. A=4
B. Then the value of A is expressed in 4 B, and
the value of 4 B in A, so that both sides express the
same. They are equivalents. They are both
equal expressions of value. It would be the
same if they were unequal ones or A greater than 4 B, A
smaller than 4 B. In all these cases they are, insofar
| as they are values, only
different or equal in quantity, but they are always
quantities of the same quality. The difficulty is to
find this quality.

“The requisite condition in the
process is, that the commodities to be measured should be
reduced to a common denomination”

<for example, in order to compare a triangle with
any of the other polygons it is only necessary to transform
the latter into triangles, to express them in
triangles. But to do this the triangle and the polygon are in fact supposed to
be something identical, different figures of the same
thing—space>

“… which may be done at all
times with equal facility; or rather it is ready done
to our hands, since it is the prices of commodities
which are recorded, or their relations in value to
money” (op. cit., p. 112).

“Estimating value is the same
thing as expressing it…” (op. cit.,
p. 152).

We have the fellow here. We find the values
measured, expressed in the prices. We can
therefore [asserts Bailey] content ourselves with not
knowing what value is. He confuses the development of
the measure of value into money and further the development
of money as the standard of price with the discovery of the
concept of value itself in its development as the
immanent measure of commodities in exchange. He is
right in thinking that this money need not be a commodity of
invariable value; from this he concludes that no separate
determination of value independent of the commodity itself
is necessary.

As soon as the value of commodities, as the element they
have in common, is given, the measurement of their relative
value and the expression of this value coincide. But
we can never arrive at the expression so long as we
do not find the common factor, which is different from the
immediate existence of the commodities.

This is shown by the very example he gives, the distance
between A and B.[v]
When one speaks of their distance one already presupposes
that they are points (or lines) in space. Having been
reduced to points, and points of the same line, their
distance may be expressed in inches, or feet, etc. The
element the two commodities A and B have in common is, at
first sight, their exchangeability. They are
“exchangeable” objects. As
“exchangeable” objects they are
magnitudes of the same denomination. But this
“their” existence as “exchangeable”
objects must be different from their existence as values in
use. What is it?

Money is already a representation of value, and
presupposes it. As the standard of price money,
for its part, already presupposes the (hypothetical)
transformation of the commodity into money. If the
values of all commodities are represented in money prices,
then one can compare them, they are in fact already
compared. But for the value to be represented as
price, the value of commodities must have been expressed
previously as money. Money is merely the form in which
the value of commodities
appears in the process of circulation. But how can
one express x cotton in y money? This question
resolves itself into this—how is it at all possible to
express one commodity in another, or how to present
commodities as equivalents? Only the elaboration of
value, independent of the representation of one commodity in
another, provides the answer.

It is a “… mistake … that
the relation of value can exist between commodities at
different periods, which is in the nature of the case
impossible; and if no relation exists there can be no
measurement of it” (op. cit., p. 113).

We have already had the same nonsense before.[w] “The relation
of value between commodities at different periods”
already exists when money acts as means of payment.
The whole circulation process is a perpetual comparison of
values of commodities at different periods.

“… if […] it”
(money) “is not a good medium of comparison between
commodities at different periods [it asserts] its
incapability of performing a function in a case where there
is no function for it to perform”[x] (op. cit., p. 118).

Money has this function to perform as means of payment
and as treasure.

All this is simply copied from the “verbal
observer” and in fact the secret of the whole
nonsense oozes out in the following phrase which has also
convinced me that the Verbal Observations,[y] which
were very carefully concealed by Bailey, were used by him in
the manner of a plagiarist.

| “Riches are the
attribute of men, value is the attribute of
commodities. A man or a community is rich; a pearl or
a diamond is valuable” (op. cit., p. 165).

A pearl or a diamond is valuable as a pearl or a
diamond, that is, by their qualities, as values in use for
men, that is, as riches. But there is nothing
in a pearl or a diamond by which a relation of exchange
between them is given, etc.

Bailey now becomes a profound philosopher:

Difference between labour as cause and
measure, and in general between cause and
measure of value (op. cit., p. 170 et seq.).[z]

There is, in actual fact, a very significant difference
(which Bailey does not notice) between “measure”
(in the sense of money) and “cause of
value”. The “cause” of value
transforms use-values into value. The external
measure of value already presupposes the existence of
value. For example, gold can only measure the
value of cotton if gold and cotton—as
values—possess a common factor which is
different from both. The “cause” of value
is the substance of value and hence also its immanent
measure.

“Whatever circumstances … act
with assignable influence, whether mediately or immediately,
on the mind in the interchange of commodities, may be
considered as causes of value” (op. cit.,
pp. 182-83).

This in fact means nothing more than: the cause of
the value of a commodity or of the fact that two commodities
are equivalent are the circumstances which cause the seller,
or perhaps both the buyer and the seller, to consider
something to be the value or the equivalent of a
commodity. The “circumstances” which
determine the value of a commodity are by no means further
elucidated by being described as circumstances which
influence the “mind” of those engaging in
exchange, as circumstances which, as such, likewise exist
(or perhaps they do not, or perhaps they are incorrectly
conceived) in the consciousness of those engaging in
exchange.

These same circumstances (independent of the mind, but
influencing it), which compel the producers to sell their
products as commodities—circumstances which
differentiate one form of social production from
another—provide their products with an exchange-value
which (also in their mind) is independent of their
use-value. Their “mind”, their
consciousness, may be completely ignorant of, unaware of the
existence of, what in fact determines the value of their
products or their products as values. They are placed
in relationships which determine their thinking but they may
not know it. Anyone can use money as money without
necessarily understanding what money is. Economic
categories are reflected in the mind in a very distorted
fashion. He [Bailey] transfers the problem into the
sphere of consciousness, because his theory has got
stuck.

Instead of explaining what he himself understands by
“value” (or “cause of value”) Bailey
tells us that it is something which buyers and sellers
imagine in the act of exchange.

In fact, however, the following considerations are the
basis of the would-be philosophical proposition.

1) The market price is determined by various
circumstances which express themselves in the relation of
demand and supply and which, as such, influence “the
mind” of the operators on the market. This is a
very important discovery!

2) In connection with the conversion of
commodity values into cost-prices, “various
circumstances” are taken into account which as
“reasons for compensation” influence the mind or
are reflected in the mind. All these reasons for
compensation, however, affect only the mind of the
capitalist as capitalist and stem from the nature of
capitalist production itself, and not from the subjective
notions of buyers and sellers. In their mind they
exist rather as self-evident “eternal
truths”.

Like his predecessors, Bailey catches hold of Ricardo’s
confusion of values and cost-prices in order to prove that
value is not determined by labour, because cost-prices are
deviations from values. Although this is quite correct
in relation to Ricardo’s identification [of values with
cost-prices], it is incorrect as far as the question itself
is concerned.

In this context, Bailey quotes first from Ricardo himself
about the change in the relative values of | commodities in consequence of
a rise in the value of labour. He quotes further the
“effect of time” (different times of production
though the labour-time remains unchanged), the same case
which aroused scruples in Mill.[aa] He does not notice the real
general contradiction—the very existence of
an average rate of profit, despite the different
composition of capital [in different industries], its
different times of circulation, etc. He simply repeats
the particular forms in which the contradiction appears, and
which Ricardo himself—and his followers—had
already noticed. Here he merely echoes what has
been previously said but does not advance criticism a step
forward.

He emphasises further that the costs of production are
the main cause of “value”, and therefore the
main element in value. However, he stresses
correctly—as was done [by other writers] after
Ricardo—that the concept of production costs
itself varies. He himself in the last analysis
expresses his agreement with Torrens that value is
determined by the capital advanced, which is correct in
relation to cost-prices but meaningless if it is not evolved
on the basis of value itself, that is, if the value of a
commodity
is to be derived from a more developed relationship, the
value of capital, and not the other way round.

His last objection is this: The value of commodities
cannot be measured by labour-time if the labour-time in one
trade is not the same as in the others, so that the
commodity in which, for example, 12 hours of an engineer’s
labour is embodied has perhaps twice the value of the
commodity in which 12 hours of the labour of an agricultural
labourer is embodied. What this amounts to is the
following: A simple working-day, for example, is not a
measure of value if there are other working-days which,
compared with days of simple labour, have the effect of
composite working-days. Ricardo showed that this fact
does not prevent the measurement of commodities by
labour-time if the relation between unskilled and skilled
labour is given. He has indeed not described how this
relation develops and is determined. This belongs to
the definition of wages, and, in the last analysis,
can be reduced to the different values of labour power
itself, that is, its varying production costs
(determined by labour-time).

The passages in which Bailey expresses what has been
summarised above are:

“It is not, indeed, disputed, that
the main circumstance, which determines the quantities
in which articles of this class” (that is, where
no monopoly exists and where it is possible to increase
output by expanding industry)

“are exchanged, is the cost of
production; but our best economists do not exactly agree
on the meaning to be attached to this term; some contending
that the quantity of labour expended on the
production of an article constitutes its cost; others, that
the capital employed upon it is entitled to that
appellation” (op. cit., p. 200).

“What the labourer produces without
capital, costs him his labour; what the capitalist produces
costs him his capital” (p. 201).

(This is the factor which determines Torrens’s
views. The labour which the capitalist employs, costs
him nothing apart from the capital he lays out in
wages.)

“ … the mass of commodities
are determined in value by the capital expended upon
them” (p. 206).

[Bailey raises the following objections] to the
determination of the value of commodities simply by the
quantity of labour contained in them:

“Now this cannot be true if we can
find any instances of the following nature: 1) Cases in
which two commodities have been produced by an equal
quantity of labour, and yet sell for different quantities of
money. 2) Cases in which two commodities, once equal
in value, have become unequal in
value, without any change in the quantity of labour
respectively employed in each” (p. 209).

“It is no answer” (with regard
to cases of the first kind) “to say, with Mr. Ricardo,
that ‘the estimation in which different qualities of
labour are held, comes soon to be adjusted in the market
with sufficient precision for all practical purposes’;
or with Mr. Mill, that ‘in estimating equal quantities
of labour, an allowance would, of course, be included for
different degrees of hardness and skill’.
Instances of this kind entirely destroy the integrity of the
rule” (p. 210).

“There are only two possible methods
of comparing one quantity of labour with another; one is to
compare them by the time expended, the other by
the results produced” (the latter is done in the
piece-rate system). “The former is applicable to
all kinds of labour; the latter can be used only in
comparing labour bestowed on similar articles. If
therefore, in estimating two different sorts of work, the
time spent will not determine the proportion between the
| quantities of labour, it
must remain undetermined and undeterminable”
(p. 215).

With reference to 2: “Take any two commodities of
equal value, A and B, one produced by fixed capital and the
other by labour, without the intervention of machinery; and
suppose, that without any change whatever in the fixed
capital or the quantity of labour, there should happen to be
a rise in the value of labour; according to Mr. Ricardo’s
own showing, A and B would be instantly altered in their
relation to each other; that is, they would become unequal
in value” (pp. 215-16).

“To these cases we may add the
effect of time on value. If a commodity take
more time than another for its production, although no
more capital and labour, its value will be
greater. The influence of this cause is admitted by
Mr. Ricardo, but Mr. Mill contends…” and so on
(loc. cit. [p. 217]).

Finally Mr. Bailey remarks, and this is the only new
contribution he makes in this respect:

“… although we have arranged
commodities under three divisions,”[bb] <this, i.e., the three
divisions, is again taken from the author of the Verbal
Observations> (these three divisions depend on the
existence of absolute monopoly, limited monopoly, as is the
case with corn, or completely free competition) “yet
they are all, not only promiscuously exchanged for each
other, but blended in production. A commodity,
therefore, may owe part of its value to monopoly, and part
to those causes which determine the value of unmonopolised
products. An article, for instance, may be
manufactured amidst the freest competition out of a raw
material, which a complete monopoly enables its producer to
sell at six times the actual cost” (p. 223).

“In this case it is obvious, that
although the value of the article might be correctly said to
be determined by the quantity of capital expended upon it by
the manufacturer, yet no analysis could possibly resolve the
value of the capital into quantity of labour”
(pp. 223-24).

This remark is correct. But monopoly does not
concern us here, where we are dealing with two things only,
value and
cost-price. It is clear that the conversion
of value into cost-price works in two ways. First, the
profit which is added to the capital advanced may be either
above or below the surplus-value which is contained
in the commodity itself, that is, it may represent more or
less unpaid labour than the commodity itself
contains. This applies to the variable part of capital
and its reproduction in the commodity. But apart from
this, the cost-price of constant capital—or of the
commodities which enter into the value of the newly produced
commodity as raw materials, auxiliary materials and
machinery [or] labour conditions—may likewise be
either above or below its value. Thus the commodity
comprises a portion of the price which differs from value,
and this portion is independent of the quantity of labour
newly added, or of the labour whereby these conditions of
production with given cost-prices are transformed into a new
product. It is clear that what applies to the
difference between the cost-price and the value of the
commodity as such—as a result of the production
process—likewise applies to the commodity
insofar as, in the form of constant capital, it becomes an
ingredient, a pre-condition, of the production
process. Variable capital, whatever difference between
value and cost-price it may contain, is replaced by a
certain quantity of labour which forms a constituent part of
the value of the new commodity, irrespective of whether its
price expresses its value correctly or stands above or below
the value. On the other hand, the difference between
cost-price and value, insofar as it enters into the price of
the new commodity independently of its own production
process, is incorporated into the value of the new commodity
as an antecedent element.

The difference between the cost-price and the value of
the commodity is thus brought about in two ways: by the
difference between the cost-price and the values of
commodities which constitute the pre-conditions of the
process of production of the new commodity; by the
difference between the surplus-value which is really added
to the conditions of production and the profit which is
calculated [on the capital advanced]. But every
commodity which enters into another commodity as constant
capital, itself emerges as the result, the product, of
another production process. And so the commodity
appears alternately as a pre-condition for the production of
other commodities and as the result of a process in which
the existence of other commodities is the pre-condition for
its own production. In agriculture
(cattle-breeding), the same commodity appears at one
point of time as a product and at another as a condition of
production.

This important deviation of cost-prices from values
brought about by capitalist production does not alter the
fact that cost-prices continue to be determined by
values.

### 4. McCulloch

### [a) Vulgarisation and Complete Decline of the Ricardian System under the Guise of Its Logical Completion. Cynical Apologia for Capitalist Production. Unprincipled Eclecticism]

| McCulloch, the
vulgariser of Ricardian political economy and simultaneously
the most pitiful embodiment of its decline.

He vulgarises not only Ricardo but also James Mill.

He is moreover a vulgar economist in everything and an
apologist for the existing state of affairs. His only
fear, driven to ridiculous extremes, is the tendency of
profit to fall; he is perfectly contented with the position
of the workers, and in general, with all the contradictions
of bourgeois economy which weigh heavily upon the working
class. Here everything is green. He even knows
that

“the introduction of machines into
any employment necessarily occasions an equal or greater
demand for the disengaged labourers in some other
employment” [J. R. McCulloch, The Principles of
Political Economy, Edinburgh, 1825, pp. 181-82; quoted
by Cazenove in Outlines of Political Economy, London,
1832, pp. 119-20].

In this question he deviates from Ricardo, and in his
later writings, he also becomes very mealy-mouthed about the
landowners. But his whole tender anxiety is reserved
for the poor capitalists, in view of the tendency of the
rate of profit to fall.

Mr. McCulloch, unlike other exponents of science, seems
to look not for characteristic differences, but only
“for resemblances; and proceeding upon this
principle, he is led to confound material with immaterial
objects; productive with unproductive labour; capital with
revenue; the food of the labourer with the labourer himself;
production with consumption; and labour with
profits”[cc]
(T. R. Malthus, Definitions in Political Economy,
London, 1827, pp. 69-70).

“Mr. McCulloch,
in his Principles of Political Economy, divides
value into real and exchangeable;[dd] the
former, he says, (page 225)[ee] is dependent on the quantity of
labour required for the production of any commodity,[ff] and the latter on
the quantity of labour, or of any other commodity,
for which it will exchange; and these two values are,
he says, (page 215), identical, in the ordinary state
of things, that is, when the supply of commodities in the
market is exactly proportioned to the effectual demand for
them. Now, if they be identical, the two quantities of
labour which he refers to must be identical also; but, at
page 221, he tells us that they are not, for that the one
includes profits, while the other excludes them” (
[John Cazenove,] Out- lines of Political Economy,
London, 1832, p. 25).

McCulloch says [in a note] on page 221 of his
Principles of Political Economy:

“In point of fact, it” (the
commodity) “will always exchange for
more”<labour than has been required for its
production> “and it is this excess that
constitutes profits.”

This is a brilliant example of the methods used by this
arch-humbug of a Scotsman.

The arguments of Malthus, Bailey, etc., compel him to
differentiate between real value and
exchangeable or relative value. But he
does so, basically, in the way he finds the difference dealt
with by Ricardo. Real value means the commodity
examined with regard to the labour required for its
production; relative value implies the consideration
of the proportions of different commodities which can
be produced in the same amount of time, which are
consequently equivalents, and the value of one of
which can therefore be expressed in the quantity of
use-value of the other which costs the same amount of
labour-time. The relative value of commodities,
in this Ricardian sense, is only another expression for
their real value and means nothing more than that the
commodities exchange with one another in proportion to the
labour-time embodied in them, in other words, that the
labour-time embodied in both is equal. If,
therefore, the market price of a commodity is equal to its
exchange-value (as is the case when supply and demand are in
equilibrium), then the commodity bought contains as much
labour as that
which is sold. It merely realises its
exchange-value, or it is only sold at its
exchange-value when one receives the same amount
of labour in exchange for it as one hands over.

McCulloch relates all this, correctly repeating what has
already been said. But he goes too far here since the
Malthusian definition of exchange-value—the quantity
of wage-labour which a commodity commands—already
sticks in his throat. He therefore defines relative
value as the “quantity of labour, or of any
other commodity, for which it” (a commodity)
“will exchange”. Ricardo, in dealing with
relative value, always speaks only of commodities and does
not include labour, since in the exchange of commodities a
profit is only realised because in the exchange between
commodity and labour unequal quantities of labour are
exchanged. By putting the main emphasis right at the
beginning of his book on the fact that the determination of
the value | of a commodity
by the labour-time embodied in it differs immensely from the
determination of this value by the quantity of labour which
it can buy, Ricardo, on the one hand, establishes the
difference between the quantity of labour contained in a
commodity and the quantity of labour which it
commands. On the other hand, he excludes the exchange
of commodity and labour from the relative value of a
commodity. For if a commodity is exchanged for a
commodity, equal quantities of labour are exchanged; but if
a commodity is exchanged for labour, unequal quantities of
labour are exchanged, and capitalist production rests on the
inequality of this exchange. Ricardo does not explain
how this exception fits in with the concept of
value. This is the reason for the arguments amongst
his followers. But his instinct is sound when he makes
the exception. (In actual fact, there is no
exception; it exists only in his formulation.)
Thus McCulloch goes farther than Ricardo and is apparently
more consistent than he.

There is no flaw in his system; it is all of a
piece. Whether a commodity is exchanged for a
commodity or for labour, this ratio of exchange is the
relative value of the commodity. And if the
commodities exchanged are sold at their value (i.e., if
demand and supply coincide), this relative value is always
the expression of the real value. That is,
there are equal quantities of labour at both poles of the
exchange. Thus “in the ordinary state of
things” a commodity only exchanges for a quantity of
wage-labour equal to the quantity of labour contained in
it. The workman receives in wages just as much
materialised labour
as he gives back to capital in the form of immediate
labour. With this the source of surplus-value
disappears and the whole Ricardian theory collapses.

Thus Mr. McCulloch first destroys it under the appearance
of making it more consistent.

And what next? He then flits shamelessly from
Ricardo to Malthus, according to whom the value of a
commodity is determined by the quantity of labour which it
buys and which must always be greater than that which the
commodity itself contains. The only difference is that
in Malthus this is plainly stated to be what it is,
opposition to Ricardo, and Mr. McCulloch adopts
this opposite viewpoint after he has adopted the Ricardian
formula with an apparent consistency (that is, with the
consistency of incogitancy) which destroys the whole sense
of the Ricardian theory. McCulloch therefore does not
understand the essential kernel of Ricardo’s
teaching—how profit is realised because commodities
exchange at their value—and abandons it.
Since exchangeable value—which “in the ordinary
state of […] the market” is, according to
McCulloch, equal to the real value but “in point of
fact” is always greater, since profit is based on
this surplus (a fine contradiction and a fine discourse
based on a “point of fact”)—is “the
quantity of labour, or of any other commodity”, for
which the commodity is exchanged, hence what applies to
“labour” applies to “any other
commodity”. This means that the commodity is not
only exchanged for a greater amount of immediate labour than
it itself contains, but for more materialised labour in the
other commodities than it itself contains; in other words,
profit is “profit upon expropriation” and with
this we are back again amongst the Mercantilists.
Malthus draws this conclusion. With McCulloch this
conclusion follows naturally but with the pretence that this
constitutes an elaboration of the Ricardian system.

And this total decline of the Ricardian system into
twaddle—a decline which prides itself on being its
most consistent exposition—has been accepted by the
mob, especially by the mob on the Continent (with Herr
Roscher naturally amongst them), as the conclusion of the
Ricardian system carried too far, to its extreme
limit; they thus believe Mr. McCulloch that the Ricardian
mode of “coughing and spitting”, which he uses
to conceal his helpless, thoughtless and unprincipled
eclecticism, is in fact a scientific attempt to set forth
Ricardo’s system consistently.

McCulloch is simply a man who wanted to turn
Ricardian
economics to his own advantage—an aim in
which he succeeded in a most remarkable degree. In the
same way Say used Smith, but Say at least made a
contribution by bringing Smith’s theories into a certain
formal order and, apart from misconceptions, he occasionally
also ventured to advance theoretical objections. Since
McCulloch first obtained a professorial chair in London on
account of Ricardian economics, in the beginning he had to
come forward as a Ricardian and especially to participate in
the struggle against the landlords. As soon as he had
obtained a foothold and climbed to a position on Ricardo’s
shoulders, | his main
effort was directed to expounding political economy,
especially Ricardian economics, within the framework of
Whiggism and to eliminate all conclusions which were
distasteful to the Whigs. His last works on money,
taxes, etc., are mere pleas on behalf of the Whig Cabinet of
the day. In this way the man secured lucrative
jobs. His statistical writings are merely catch-penny
efforts. The incogitant decline and vulgarisation of
the theory likewise reveal the fellow himself as a
vulgarian, a matter to which we shall have to return before
we have done with that speculating Scotsman.

In 1828 McCulloch published Smith’s Wealth of
Nations, and the fourth volume of this edition contains
his own “notes” and “dissertations”
in which, to pad out the volume, he reprints in part some
mediocre essays which he had published previously, e.g., on
“entail”, and which have absolutely nothing to
do with the matter, and in part, his lectures on the history
of political economy repeated almost verbatim; he himself
says that he “largely draws upon them”; in part,
however, he tries in his own way to assimilate the new ideas
advanced in the interim by Mill and by Ricardo’s
opponents.

In his Principles of Political Economy,
Mr. McCulloch presents us with nothing more than a copy of
his “notes” and “dissertations”
which he had already copied from his earlier
“scattered manuscripts”. But things turned
out slightly worse in the Principles, for
inconsistencies are of less importance in notes than in an
allegedly methodical treatment. Thus the passages
quoted above, though they are, in part, taken verbatim from
the “notes”, look rather less inconsistent in
these “notes” than they do in the
Principles. <In addition the
Principles contain plagiarisms of Mill amplified by
absurd illustrations, and reprints of articles on corn
trade, etc., which he has repeatedly published, maybe
verbatim, under twenty different
titles in different periodicals, often even in the
same periodical at different periods.>

In the above-mentioned Volume IV of his edition of
Adam Smith (London, 1828), Mac says (he repeats the same
thing word for word in his Principles of Political
Economy but without making the distinctions which he
still felt to be necessary in the “notes”):

“… it is necessary to
distinguish between the exchangeable value, and the
real or cost value of commodities or
products. By the first, or the exchangeable
value of a commodity or product, is meant its
power or capacity of exchanging either for other commodities
or for labour; and by the second, or its real
or cost value, is meant the quantity of labour which it
required for its production or appropriation, or rather the
quantity which would be required for the production or
appropriation of a similar commodity at the time when the
investigation is made” ([J. R. McCulloch in: Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations, Vol. IV, London, 1828,] pp. 85-86
[Note II]).

“A commodity produced by a
certain quantity of labour will” <when the supply
of commodities is equal to the effectual demand>
“uniformly exchange for, or buy any other commodity
produced by the same quantity of labour. It will
never, however, exchange for, or buy exactly the same
quantity of labour that produced it; but though it will not
do this, it will always exchange for, or buy the same
quantity of labour as any other commodity produced under the
same circumstances, or by means of the same quantity of
labour, as itself” (op. cit., pp. 96-97).

“In point of fact” (this
phrase is repeated literally in the Principles,
since, in point of fact, this “in point of fact”
constitutes the whole of his deduction), “it”
(the commodity) “will always exchange for more”
(viz., for more labour than that by which it was produced)
“and it is this excess that constitutes
profits. No capitalist could have any
motive” (as if the “motive” of the
buyer was the point in question when dealing with the
exchange of commodities and the investigation of their
value) “to exchange the produce of a given quantity of
labour already performed |
for the produce of the same quantity of labour to be
performed. This would be to lend”
(“to exchange” would be “to lend”)
“without receiving any interest on the loan”
(loc. cit., p. 96 [note to Note II]).

Let us start at the end.

If the capitalist did not get back more labour than the
amount he advances in wages, he would “lend”
without receiving a “profit”. What has to
be explained is how profit is possible if commodities
(labour or other commodities) are exchanged at their
value. And the answer is that no profit would be
possible if equivalents were exchanged. It is assumed,
first of all, that capitalist and worker
“exchange”. And then, in order to explain
profit, it is assumed that they do “not”
exchange, but that one of the parties lends (i.e., gives
commodities) and the other borrows, that is, pays only after
he has received the commodities.
In other words, in order to explain profit, it is said
that the capitalist secures “no interest” if he
makes no profit. This is [putting] the thing
wrongly. The commodities in which the capitalist pays
wages and the commodities which he gets back as a result of
the labour, are different use-values. He does
not therefore receive back what he advanced, any more than
he does when he exchanges one commodity for another.
Whether he buys another commodity, or whether he buys the
specific [commodity] labour which produces the other
commodity for him, amounts to the same. For the
use-value he advances he receives back another use-value, as
happens in all exchanges of commodities. If, on the
other hand, one pays attention only to the value of the
commodity, then it is no longer a contradiction to exchange
“a given quantity of labour already performed”
for “the same quantity of labour to be
performed” (although the capitalist in fact pays only
after the labour has been performed), nor is it a
contradiction to exchange a quantity of labour performed for
the same quantity of labour performed. This latter is
an insipid tautology. The first part of the passage
implies that “the labour to be performed” will
be embodied in a use-value different from that in which the
labour performed is embodied. In this case there is
thus a difference [between the objects to be exchanged] and,
consequently, a motive for exchange arising out of the
relationship itself, but this is not so in the other case,
since A only exchanges for A insofar as in this exchange it
is a matter of the quantity of labour. This is why
Mr. Mac has recourse to the motive. The motive
of the capitalist is to receive back a greater
“quantity of labour” than he advances.
Profit is here explained by the fact that the capitalist has
the motive to make “profit”. But
the same thing can be said about the sale of goods by the
merchant and about every sale of commodities not for
consumption but for gain. The seller has no motive to
exchange a quantity of performed labour for the same
quantity of performed labour. His motive is to get in
return more performed labour than he gives away. Hence
he must get more performed labour in the form of
money or commodities than he gives away in the form of a
commodity or of money. He must, therefore, buy cheaper
than he sells, and sell dearer than he has bought.
Profit upon alienation is thus explained, not by the
fact that it corresponds to the law of value, but by
declaring that buyers and sellers have no
“motive” for buying and selling in accordance
with the law of value. This is Mac’s
first “sublime” discovery, it fits
beautifully into the Ricardian system, which seeks to show
how the law of value asserts itself despite the
“motives” of seller and buyer.

| For the rest, Mac’s
presentation in the “notes” differs from the one
in the Principles only in the following:

In the Principles he makes a distinction between
“real value” and “relative value”
and says that both are equal “under ordinary
circumstances” but “in point of fact” they
cannot be equal if there is to be a profit. He
therefore says merely that the “fact”
contradicts the “principle”.

In the “notes” he distinguishes three sorts
of value: “real value”, the “relative
value” of a commodity in its exchange with other
commodities, and the relative value of a commodity exchanged
with labour. The “relative value” of a
commodity in its exchange with another commodity is its
real value expressed in another commodity, or
in an “equivalent”. On the other hand, its
relative value in exchange with labour is its real value
expressed in another real value that is greater than
itself. That means, its value is the exchange with a
greater value, with a non-equivalent. If it were
exchanged for an equivalent in labour, then there would be
no profit. The value of a commodity in its exchange
with labour is a greater value.

Problem: The Ricardian definition of value
conflicts with the exchange of commodities with labour.

Mac’s solution: In the exchange of a commodity
with labour the law of value does not exist, but its
contrary. Otherwise profit could not be
explained. Profit for him, the Ricardian, is to be
explained by the law of value.

Solution: The law of value (in this case) is
profit. “In point of fact” Mac only
reiterates what the opponents of the Ricardian theory say,
namely, that there would be no profit if the law of
value applied to exchange between capital and labour.
Consequently, they say, the Ricardian theory of value is
invalid. He [McCulloch] says that in this
case, which he must explain by the Ricardian law, the
law does not exist and that in this case “value”
“means” something else.

From this it is obvious how little he understands of the
Ricardian law. Otherwise he would have had to say that
profit arising in exchange between commodities which are
exchanged in proportion to the labour-time [embodied in
them], is due to the fact that “unpaid” labour
is contained in the commodities. In other words, the
unequal exchange between capital and
labour explains the exchange of commodities at their
value and the profit which is realised in the course of this
exchange. Instead of this he says: Commodities which
contain the same amount of labour-time command the same
amount of surplus labour, which is not contained in
them. He believes that in this way he has reconciled
Ricardo’s propositions with those of Malthus, by
establishing an identity between the determination of the
value of commodities by labour-time and the determination of
the value of commodities by their command over labour.
But what does it mean when he says that commodities which
contain the same amount of labour-time command the same
amount of surplus labour in addition to the labour
contained in them? It means nothing more than that a
commodity in which a definite amount of labour-time
is embodied commands a definite quantity of surplus labour
[that is, more labour] than it itself contains. That
this applies not only to commodity A, in which x
hours of labour-time are embodied, but also to commodity B,
in which x hours of labour-time are likewise
embodied, follows by definition from the Malthusian formula
itself.

The contradiction is therefore solved by Mac in this way:
If the Ricardian theory of value were really a valid one,
then profit, and consequently capital and capitalist
production, would be impossible. This is exactly what
Ricardo’s opponents assert. And this is what Mac
answers them, how he refutes them. And in so doing, he
does not notice the beauty of an explanation of exchangeable
value in [exchange with] labour which amounts to saying that
value is exchange for something which has no
value.

### [b) Distortion of the Concept of Labour Through Its
Extension to Processes of Nature. Confusion of
Exchange-Value and Use-Value]

| After Mr. Mac has
thus abandoned the basis of Ricardian political economy, he
proceeds even further and destroys the basis of this
basis.

The first difficulty in the Ricardian system was [to
present] the exchange of capital and labour so that it
corresponded to the “law of value”.

The second difficulty was that capitals of equal
magnitude, no matter what their organic composition,
yield equal profits or the general rate of
profit. This is indeed the unrecognised problem of
how values are converted into cost-prices.

The difficulty arose because capitals of equal
magnitude, but of unequal composition—it is
immaterial whether the unequal composition is due to the
capitals containing unequal proportions of constant and
variable capital, or of fixed and circulating capital, or to
the unequal period of circulation of the capitals—set
in motion unequal quantities of immediate labour, and
therefore unequal quantities of unpaid labour; consequently
they cannot appropriate equal quantities of surplus-value or
surplus product in the process of production. Hence
they cannot yield equal profit if profit is nothing but the
surplus-value calculated on the value of the whole capital
advanced. If, how-ever, the surplus-value were
something different from (unpaid) labour, then labour could
after all not be the “foundation and measure” of
the value of commodities.

The difficulties arising in this context were discovered
by Ricardo himself (although not in their general form) and
set forth by him as exceptions to the law of
value. Malthus used these exceptions to throw the
whole law overboard on the grounds that the exceptions
constituted the rule. Torrens, who also criticised
Ricardo, indicated the problem at any rate when he said that
capitals of equal size set unequal quantities of labour
in motion, and nevertheless produce commodities of equal
“values”, hence value cannot be determined by
labour. Ditto Bailey, etc. Mill for
his part accepted the exceptions noted by Ricardo as
exceptions, and he had no scruples about them except with
regard to one single form. One particular cause of
the equalisation of the profits of the capitalists he
found incompatible with the law. It was the
following. Certain commodities remain in the process
of production (for example, wine in the cellar) without any
labour being applied to them; there is a period during which
they are subject to certain natural processes (for example,
prolonged breaks in labour occur in agriculture and in
tanning before certain new chemicals are applied—these
cases are not mentioned by Mill). These periods are
nevertheless considered as profit-yielding. The period
of time during which the commodity is not being worked on by
labour [is regarded] as labour-time (the same thing in
general applies where a longer period of circulation time
is involved). Mill “lied” his way—so
to speak—out of the difficulty by saying that one can
consider the time in which the wine, for example, is in
the cellar as a period when it is soaking up labour,
although according to the assumption this is, in
point of fact, not the case. Otherwise one
would have to say that “time” creates profit
and [according to Mill] time as such is “sound and
fury”. McCulloch uses this balderdash of Mill as
a starting-point, or rather he reproduces it in his
customary affected, plagiarist manner in a general form in
which the latent nonsense becomes apparent and the last
vestiges of the Ricardian system, as of all economic
thinking whatsoever, are happily discarded.

On closer consideration, all the difficulties mentioned
above resolve themselves into the following difficulty.

That part of capital which enters into the production
process in the form of commodities, i.e., as raw materials
or tools, does not add more value to the product than it
possessed before production. For it only has value
insofar as it is embodied labour and the labour contained in
it is in no way altered by its entry into the production
process. It is to such an extent independent of the
production process into which it enters and dependent on the
socially determined labour required for its own production
that its own value changes when more labour or less labour
than it itself contains is required for its
reproduction. As value, this part of capital therefore
enters unchanged into the production process and emerges
from it unchanged. Insofar as it really enters into
the production process and is changed, this change affects
only its use-value, i.e., it undergoes a change as
use-value. And all operations undergone by the
raw material or carried out by the instrument of labour are
merely processes to which they are submitted as specific
kinds of raw material, etc., and particular tools (spindles,
etc.), processes which affect their use-value, but which, as
processes, have nothing to do with their
exchange-value. Exchange-value is maintained in this
| change. That is
all.

It is different with that part of capital which is
exchanged against labour-power. The use-value of
labour-power is labour, the element which produces
exchange-value. Since the labour provided by
labour-power in industrial consumption is greater than the
labour which is required for the reproduction of the
labour-power, i.e., it provides more than an equivalent of
the wages the worker receives, the value which the
capitalist receives from the worker in exchange is greater
than the price he pays for this labour. It follows
from this that, if equal rates of exploitation are assumed,
of two capitals of equal size, that which sets less living
labour in motion—whether this is due to the fact that
the proportion of variable
capital is less from the start, or to the fact that it
has a [longer] period of circulation or period of production
during which it is not exchanged against labour, does not
come into contact with it, does not absorb it—will
produce less surplus-value, and, in general, commodities of
less value. How then can the values created be
equal and the surplus-values proportional to the
capital advanced? Ricardo was unable to answer this
question because, put in this way, it is absurd
since, in fact, neither equal values nor [equal]
surplus-values are produced. Ricardo, however, did not
understand the genesis of the general rate of profit nor,
consequently, the transformation of values into cost-prices
which differ specifically from them.

Mac, however, eliminates the difficulty by basing himself
on Mill’s insipid “evasion”. One gets
round the inconvenience by talking out of existence by means
of a phrase the characteristic difference out of which it
arose. This is the characteristic difference: The
use-value of labour-power is labour; it consequently
produces exchange-value. The use-value of the other
commodities is use-value as distinct from exchange-value,
therefore no change which this use-value undergoes can
change the predetermined exchange-value. McCulloch
gets round the difficulty by calling the use-values of
commodities—exchange-value, and the operations in
which they are involved as use-values, the services they
render as use-values in production—labour. For after all, in ordinary life we
speak of labouring animals, working machines, and even say
poetically that the iron works in the furnace, or works
under the blows of the hammer. It even screams.
And nothing is easier than to prove that every
“operation” is labour, for labour is—an
operation. In the same way one can prove that
everything material experiences sensation, for everything
which experiences sensation is—material.

“… labour may
properly be defined to be any sort of action or
operation, whether performed by man, the lower animals,
machinery, or natural agents, that tends to bring about
any[gg] desirable
result” (op. cit., p. 75, Note I).

And this does not by any means apply [solely] to
instruments of labour. It is in the nature of things
that this applies equally to raw materials. Wool
undergoes a physical action or operation when it is
dyed. In general, nothing can be acted upon
physically, mechanically, chemically, etc., in order
“to bring about
any desirable result” without the thing itself
reacting. It cannot therefore be worked upon without
itself working. Thus all commodities which enter into
the production process bring about an increase in value not
only by retaining their own value, but by creating new
value, because they “work” and are not merely
materialised labour. In this way, all the difficulties
are naturally eliminated. In reality, this is merely a
paraphrase, a new name for Say’s “productive services
of capital”, “productive services of
land”, etc., which Ricardo attacked continuously and
against which Mac—strange to say—himself
polemises in the same “dissertation” or
“note” where he pompously presents his
discovery, borrowed from Mill and embellished still
further. In criticising Say, McCulloch makes lavish
use of recollected passages from Ricardo and remembers that
these “productive services” are in fact only
the attributes displayed by things as use-values in
the production process. But naturally, all this is
changed when he calls these “productive
services” by the sacramental name of
“labour”.

| After Mac has
happily transformed commodities into workers, it goes
without saying that these workers also draw wages and that,
in addition to the value they possess as “accumulated
labour”, they must be paid wages for their
“operations” or “action”.
These wages of the commodities are pocketed by the
capitalists per procurationem; they are
“wages of accumulated labour”—alias
profit. And this [according to McCulloch] is proof
that equal profit on equal capitals, whether they set large
or small amounts of labour in motion, follows directly from
the determination of value by labour-time.

The most extraordinary thing about all this, as we have
already noted, is the way Mac, at the very moment when he is
basing himself on Mill and appropriating Say, hurls
Ricardian phrases against Say. How literally he copies
Say—except that where Say speaks of action, he
[McCulloch] calls this action labour—can best
be seen from the following passages from Ricardo where the
latter is criticising Say.

“M. Say … imputes to
him” (Adam Smith) “as an error, that ‘he
attributes to the labour of man alone, the power of
producing value. A more correct analysis shows us that
value is owing to the action of labour, or rather the
industry of man, combined with the action of those
agents which nature supplies, and with that of
capital. His ignorance of this principle prevented
him from establishing the true theory of the influence of
machinery in the production of riches.’ In
contradiction to the opinion of Adam Smith, M. Say …
speaks of the value which is given to commodities by
natural
agents… But those natural agents, though
they add greatly to value in use, never add
exchangeable value, of which M. Say is
speaking…” (David Ricardo, Principles of
Political Economy, and Taxation, third ed., London,
1821, pp. 334-36).

“… machines and natural
agents might very greatly add to the riches of a
country,” but they do “not … add any
thing to the value of those riches” (loc. cit., p. 335
[note]).

Like all economists worth naming, [including] Adam Smith
(although in a fit of humour he once called the ox a
productive labourer), Ricardo emphasises that labour as
human activity, even more, as socially determined
human activity, is the sole source of value. It
is precisely through the consistency with which he treats
the value of commodities as merely
“representing” socially determined labour, that
Ricardo differs from the other economists. All these
economists understand more or less clearly, but Ricardo more
clearly than the others, that the exchange-value of
things is a mere expression, a specific social form,
of the productive activity of men, something entirely
different from things and their use as things, whether in
industrial or in non-industrial consumption. For them,
value is, in fact, simply an objectively expressed relation
of the productive activity of men, of the different types of
labour to one another. When he argues against Say,
Ricardo explicitly quotes the words of Destutt de Tracy, as
expressing his own views.

“As it is certain that our physical
and moral faculties are alone our original riches, the
employment of those faculties” (the faculties
of men), “labour of some kind” (that is,
labour as the realisation of the faculties of men),
“is our only original treasure, and that it is always
from this employment, that all those things are created
which we call riches… It is certain too, that
all those things only
represent the labour which has created them, and if they
have a value, or even two distinct values, they can
only derive them from that of the labour from which they
emanate” ( [Destutt do Tracy, Elémens
d’idéologie, IV-e et V-e parties.
“Traité de la volonté et de ses
effets”, Paris, 1826, pp. 35-36; quoted by Ricardo in
his Principles of Political Economy, and Taxation,
third ed., London, 1821,] p. 334).

Thus commodities, things in general, have value only
because they represent human | labour, not insofar as they
are things in themselves, but insofar as they are
incarnations of social labour.

And yet some persons have had the temerity to say that
the miserable Mac has taken Ricardo to extremes, he who, in
his incogitant efforts to “utilise” the
Ricardian theory eclectically along with those opposed to
it, identifies its basic principle and that of
all political economy—labour itself as human
activity
and as socially determined human activity—with the
physical action, etc., which commodities possess as
use-values, as things. He who abandons the very
concept of labour itself!

Rendered insolent by Mill’s “evasion”, he
plagiarises Say while arguing against him with Ricardian
phrases and copies precisely those phrases of Say which
Ricardo in Chapter 20 of his book, entitled “Value and
Riches”, attacks as being fundamentally opposed to his
own ideas and those of Smith. (Roscher naturally
repeats that Mac has carried Ricardo to extremes.)
Mac, however, is sillier than Say, who does not call the
“action” of fire, machinery, etc.,
labour. And more inconsistent.

While Say attributes the creation of “value”
to wind, fire, etc., Mac considers that only those
use-values, things, which can be monopolised create value,
as if it were possible to utilise the wind, or steam, or
water as motive power without the possession of windmills,
steam-driven machinery or water-wheels! As if those
who own, monopolise, the things, whose possession alone
enables them to employ the natural agents, did not also
monopolise the natural agents. I can have as much air,
water, etc., as I like. But I possess them as
productive agents only if I have the commodities, the
things, by the use of which these agents will operate as
such. Thus Mac is even lower than Say.

This vulgarisation of Ricardo represents the most
complete and most frivolous decline of Ricardo’s theory.

“In so far, however, as that
result” (i.e., the result produced by the action or
operation of any thing) “is effected by the labour
or operation of natural agents, that can neither be
monopolised nor appropriated by a greater or smaller number
of individuals to the exclusion of others, it has no
value. What is done by these agents is done
gratuitously” (J. R. McCulloch [in: Adam Smith,
An Inquiry into the Nature and Causes of the Wealth of
Nations, Vol. IV, London, 1828], p. 75 [Note I]).

As if what is done by cotton, wool, iron or machinery,
were not also done “gratuitously”. The
machine costs money, but the operation of the machine is not
paid for. No use-value of any kind of commodity costs
anything after its exchange-value has been paid.

“The man who sells oil makes no
charge for its natural qualities. In estimating its
cost he puts down the value of the labour employed in its
pursuit, and such is its value” (H. C. Carey,
Principles of Political Economy… Part I,
Philadelphia, 1837, p. 47).

In arguing against Say, Ricardo emphasises precisely that
the action of the machine, for
example, costs just as little as that of wind and water.

“… the services which …
natural agents and machinery
perform for us … are serviceable to us … by
adding to value in use; but as they perform their
work gratuitously … the assistance which they
afford us, adds nothing to value in exchange”
(David Ricardo, [Principles of Political Economy, and
Taxation, third ed., London, 1821,] pp. 336-37).

Thus Mac has not understood the most elementary
propositions of Ricardo. But the sly dog thinks: if
the use-value of cotton, machinery, etc., costs
nothing, is not paid for apart from its
exchange-value, then, on the other hand, this use-value is
sold by those who use cotton, machinery, etc.
They sell what costs them nothing.

| The brutal
thoughtlessness of this fellow is evident, for after
accepting Say’s “principle”, he sets forth rent
with great emphasis, plagiarising extensively from
Ricardo.

Land is a

“natural agent” that can be
“monopolised or appropriated by a greater or smaller
number of individuals to the exclusion of others”
[J. R. McCulloch, loc. cit., p. 75, Note I],

and its natural, vegetative action or
“labour”, its productive power, consequently has
value, and rent is thus ascribed to the
“productive power” of land, as is done by the
Physiocrats. This is an outstanding example of Mac’s
way of vulgarising Ricardo. On the one hand, he copies
Ricardo’s arguments, which only make sense if they are based
on the Ricardian assumptions, and on the other hand, he
takes from others the direct negation of these assumptions
(with the reservation that he uses his
“nomenclature” or makes some small changes in
the propositions). He should have said: “Rent is
the wages of land” pocketed by the landowner.

“If a capitalist expends the same sum
in paying the wages of labourers, and maintaining horses, or
in hiring a machine, and if the men, the horses, and the
machine can all perform the same piece of work, its
value will obviously be the same by whichever of them
it may have been performed” (op. cit., p. 77 [Note
I]).

In other words: the value of the product depends on the
value of the capital laid out. This is the problem to
be solved. The formulation of the problem is,
according to Mac, “obviously” the
solution of it. But since the machine, for example,
performs a greater piece of work than the men displaced by
it, it is even
more “obvious” that the product of the
machine will not fall but rise in value compared with the
value of the product of the men who “perform the same
work”. Since the machine can produce 10,000
units of work where a man can only produce one, and every
unit has the same value, the product of the machine
should be 10,000 times as dear as that “of
man”.

Moreover, in his anxiety to distinguish himself from Say
by stating that value is produced not by the action
of natural agents but only by the action of monopolised
agents, or agents produced by labour, Mac gets into
difficulties and falls back on Ricardian phrases. For
example, the labour of the wind produces the desired
effect on the ship (produces a change in it).

“… but the value of
that change is not increased by, and is in no degree
dependent on, the operation or labour of the natural agents
concerned, but on the amount of capital, or the
produce of previous labour, that cooperated in the
production of the effect; just as the cost of
grinding corn does not depend on the action of the wind
or water that turns the mill, but on the amount of capital
wasted in the operation” (op. cit., p. 79 [Note
I]).

Here, all of a sudden, grinding is viewed as adding value
to the corn insofar only as capital—“the
produce of previous labour”—is
“wasted” in the act of grinding. That is,
it is not due to the millstone “working”, but to
the fact that along with the “waste” of the
millstone, the value contained in it, the labour embodied in
it, is also “wasted”.

After these pretty arguments, Mac sums up the wisdom
(borrowed from Mill and Say) in which he brings the concept
of value into harmony with all kinds of contradictory
phenomena, in the following way:

“… the word labour
means … in all discussions respecting value
… either the immediate labour of man, or the
labour of the capital produced by man, or both”
(op. cit., p. 84 [note to Note II]).

Hence labour | is to be
understood as meaning the labour of man, then his
accumulated labour, and finally, the practical
application, that is, the physical, etc., properties of
use-values evolved in (industrial) consumption. Apart
from these properties, use-value means nothing at all.
Use-value operates only in consumption. Consequently,
by the exchange-value of the products of labour, we [are to]
understand the use-value of these products, for this
use-value consists only in its action, or, as Mac
calls it, “labour”, in consumption,
regardless of whether this is industrial consumption or
not. However, the types
of “operation”, “action”,
or “labour” of use-values, as well as their
physical measures, are as varied as the use-values
themselves. But what is the unity, the measure by
means of which we compare them? This is established by
the general word “labour” which is substituted
for these quite different applications of use-values, after
labour itself has been reduced to the words
“operation” or “action”.

Thus, with the identification of use-value and
exchange-value ends this vulgarisation of Ricardo, which we
must therefore consider as the last and most sordid
expression of the decline of the Ricardian school as
such.

“The profits of capital are
only another name for the wages of accumulated
labour” (J. R. McCulloch, The Principles of
Political Economy, London, 1825, p. 291),

that is, for the wages paid to commodities for the
services they render as use-values in production.

In addition, these wages of accumulated labour have their
own mysterious connotation as far as Mr. McCulloch is
concerned. We have already mentioned that, apart from
his plagiarism of Ricardo, Mill, Malthus and Say, which
constitutes the real basis of his writings, he himself
continually reprints and sells his “accumulated
labour” under various titles, always “largely
drawing” upon writings for which he has been paid
before. This method of drawing “the wages of
accumulated labour” was discussed at great length as
early as 1826 in a special work, and what has not
McCulloch done since then—from 1826 to 1862—with
regard to drawing wages for accumulated labour! (This
miserable phrase has also been adopted by Roscher in his
role of Thucydides.)

The book referred to is called: Some illustrations of
Mr. McCulloch’s Principles of Political Economy,
Edinburgh, 1826, by Mordecai Mullion. It traces how
our chevalier d’industrie made a name for
himself. Nine-tenths of his work is copied from Adam
Smith, Ricardo and others, the remaining tenth being culled
repeatedly from his own accumulated labour which he repeats
most shamelessly and contemptibly. Mullion shows, for
example, not only that McCulloch sold the same
articles to The Edinburgh Review and The
Scotsman and the Encyclopaedia Britannica as his
own “dissertations” and as new works, but also
that he published the same articles word for
word and with only a few transpositions and under new
titles in different issues of The Edinburgh Review
over the years.

In this respect Mullion says the following about
“this most incredible cobbler”, “this most
Economical of all Economists”:

“Mr. McCulloch’s articles are as
unlike as may be to the heavenly bodies […] but, in
one respect, they resemble such luminaries—they have
stated times of return” ([Mordecai Mullion,]
(op. cit., p. 21).

No wonder he believes in “the wages of accumulated
labour.”

Mr. McCulloch’s fame illustrates the power of fraudulent
baseness.

||850a| In order to perceive
how McCulloch exploits some of Ricardo’s propositions to
give himself airs, see, inter alia, The Edinburgh
Review for March 1824, where this friend of the wages of
accumulated labour gives vent to a veritable jeremiad about
the fall in the rate of profit. (This claptrap is
called “Considerations on the Accumulation of
Capital”.)

“The author … expresses the
fears in him by the decline in profit as
follows:”

‘…the condition
of’ (England) ‘however prosperous in appearance,
is had and unsound at bottom; […] the plague of
poverty is secretly creeping on the mass of her citizens;
[…] the foundations of her power and greatness have
been shaken… ’

‘… where […] the rate
of interest is low, as in [Holland and] England, […]
the profits of stock are also low […], those are
countries […] that […] are approaching the
termination of their career.’

“These observations must surprise
everybody acquainted with England’s splendid
situation” ([McCulloch, Discours sur
l’économie, traduit par] Prévost, p. 197[hh]).

There was no need for Mr. Mac to distress himself over
the fact that “land” gets better
“wages” than “iron, bricks, etc.”
The cause must be that it “labours”
harder. |XIV-850a||

||XV-925| <Even a blind
sow sometimes finds an acorn and so does McCulloch in the
following passages. But even this, as he presents it,
is only an inconsistency, since he does not distinguish
surplus-value from profit. Secondly, it is again one
of his thoughtless, eclectic acts of plagiarism.
According to fellows like Torrens, for whom value is
determined by capital—and the same applies to
Bailey—profit is proportionate to the capital
advanced. Unlike Ricardo, they do not consider that
profit and surplus-value are identical concepts, but
only
because they have no need whatsoever to explain profit on
the basis of value, since they regard the visible form of
surplus-value—profit as the relation of surplus-value
to the capital advanced—as the original form and, in
fact, they merely trans-late the apparent form into
words.

The passages in Mac’s work, who is (1) a Ricardian and
(2) plagiarises Ricardo’s opponents—without attempting
to reconcile [the conflicting ideas]—read:

Ricardo’s law [that a rise in profits can be brought
about in no other way than by a fall in wages, and a fall in
profits only by a rise in wages] is only true “in
those cases in which the productiveness of industry
[…] remains constant”[ii] (J. R. McCulloch,
The Principles of Political Economy, London, 1825,
p. 373), that is, the productiveness of the industry which
produces constant capital.

“… profits depend on the
proportion which they bear to the capital by which they are
produced, and not on the proportion […] to
wages”[jj]
(loc.cit., pp. 373-74). If the productivity of
industry in general is doubled and the additional
product thus obtained is divided between capitalists and
workers, then the proportion of the share of the capitalists
to that of the workers remains unchanged, although the
rate of profit calculated on the capital advanced has
risen.[kk]

Even in this case, as Mac also notes, one can say that
wages have fallen relatively as compared with the
product, because profits have risen. (But in
this case it is the rise in profits which is the cause of
the fall in wages.) This calculation, however, rests
on the incorrect method of calculating wages as a share in
the product, and, as we saw previously, Mr. John Stuart
Mill seeks to generalise the Ricardian law in this
sophistical manner.> |XV-925||

## 5. Wakefield [Some Objections to Ricardo’s Theory
Regarding the “Value of Labour” and Rent]

||XIV-850a| Wakefield’s real
contribution to the understanding of capital has already
been dealt with in the previous section on the Conversion
of Surplus-Value into Capital. Here we shall only
deal with what is directly relevant to the
“topic”.

“Treating labour as a commodity, and
capital, the produce of labour, as another, then, if the
value of these two commodities were regulated by equal
quantities of labour, a given amount of labour would, under
all circumstances,
exchange for that quantity of capital which
had been produced by the same amount of labour;
antecedent labour […] would always exchange
for the same amount of present labour […]
the[ll] value of
labour in relation to other commodities, in so far, at
least, as wages depend upon share, is determined, not by
equal quantities of labour, but by the proportion between
supply and demand” (Wakefield’s edition of Adam Smith,
An Inquiry into the Nature and Causes of the Wealth of
Nations, Vol. I, London, 1835, pp. 230-31, note).

Thus, according to Wakefield, profit would be
inexplicable if wages corresponded to the value of
labour.

In Vol. II of his edition of Adam Smith’s work Wakefield
remarks:

“Surplus produce […] always
constitutes rent: still rent may be paid, which does not
consist of surplus produce” (p. 216).

“If” (as in Ireland) “the
bulk of a people be brought to live upon potatoes, and in
hovels and rags, and to pay, for permission so to live, all
that they can produce beyond hovels, rags, and potatoes,
then, in proportion as they put up with less, the owner of
the land on which they live, obtains mole, even though the
return to capital or labour should remain unaltered.
What the miserable tenants give up, the landlord
gathers. […] A[mm] fall in the standard of living
amongst the cultivators of the earth is another cause of
surplus produce… When wages fall, the effect upon
surplus produce is the same as a fall in the standard of
living: the whole produce remaining the same, the surplus
part is greater; the producers have less, and the landlord
more” (pp.220-21).

In this case, profit is called rent, just as it is
called interest when, for example, as in India, the
worker (although nominally independent) works with advances
he receives from the capitalist and has to hand over all the
surplus produce to the capitalist.

## 6. Stirling [Vulgarised Explanation of Profit by
the Interrelation of Supply and Demand]

Patrick James Stirling, The Philosophy of Trade
etc., Edinburgh, 1846.

“… the quantity of every
commodity […] must be so regulated that the supply of
each commodity shall bear a less proportion to the demand
for it than the supply of labour bears to the demand for
labour. The difference between the price or value of
the commodity, and the price or value of the labour worked
up in it […] constitutes the […]
profits”[nn] (op. cit.,
pp. 72-73).

|The same author informs us:

When the values of commodities are exchanged with one
another according to their production costs, “the
value of these commodities may be said to be at
par” (p. 18).[oo]

Thus if demand and supply of labour correspond with one
another, then labour would be sold at its value
(whatever Stirling may understand by value). And if
demand and supply of the commodities in which the labour is
worked up do correspond, then the commodities would be sold
at their production costs, by which Stirling
understands the value of labour. The price of
the commodity would then be equal to the value of the labour
worked up in it. And the price of labour would be on a
par with its own value. The price of the
commodity would therefore be equal to the price of the
labour worked up in it. Consequently there would be no
profit or surplus.

Stirling explains profit, or the surplus, in this
way.

The supply of labour in relation to the demand for it
must be greater than the supply of commodities in which the
labour is worked up is in relation to the demand for
them. The matter must be so arranged that the
commodity is sold at a higher price than that paid for the
labour contained in it.

This is what Mr. Stirling calls explaining the phenomenon
of the surplus, whereas it is, in fact, nothing but a
paraphrase of what is supposed to be explained. If we
go into it further, then there are only three
possibilities. [1] The price of labour is on a par
with value, that is, the demand for and supply of labour
balance, the price of labour is equal to the value of
labour. In these circumstances, the commodities must
be sold above their value, or things must be arranged
in such a way that the supply is below the
demand. This is pure “profit upon
alienation”, except that the condition is stated
under which it is possible. [2] Or the demand for
labour is greater than the supply and the price [of labour]
is higher than its value. In these circumstances, the
capitalist has paid the worker more than the value of the
commodity, and the buyer must then pay the capitalist a
twofold surplus—first to replace the amount he [the
capitalist] has already paid to the worker and then his
profit. [3] Or the price of labour is below its
value and the supply of labour above the demand for
it. The surplus would then arise from
the fact that labour is paid below its value and
is sold [embodied in commodities] at its value or,
at least, above its price.

If one strips this of all nonsense, then Stirling’s
surplus is [here] due to the fact that labour is bought by
the capitalist below its value and is sold again
above its price in the form of commodities.

The other cases, divested of their ridiculous
form—according to which the producer has to
“arrange” matters in such a way that he is able
to sell his commodity above its value, or above “the
par of value”—mean nothing but that the
market price of a commodity rises above its
value, if the demand for it is greater than the
supply. This is certainly not a new discovery and
explains one sort of “surplus” which never
caused Ricardo or anyone else the slightest
difficulty. |XIV-851||

## 7. John Stuart Mill [Unsuccessful Attempts
to Deduce the Ricardian Theory of the Inverse
Proportionality Between the Rate of Profit and the Level of
Wages Directly from the Law of Value]

### [a) Confusion of the Rate of Surplus-value with the Rate
of Profit. Elements of the Conception of “Profit
upon Alienation”. Confused Conception of the
“Profits Advanced” by the Capitalist]

||VII-319| In the booklet
mentioned above, which, in fact, contains all that is
original in Mr. John Stuart Mill’s writings about political
economy (in contrast to his bulky compendium), he says in
Essay IV—“On Profits, and
Interest”:

“Tools and materials, like other
things, have originally cost nothing but
labour… The labour employed in making the tools
and materials being added to the labour afterwards employed
in working up the materials by the aid of tools, the sum
total gives the whole of the labour employed in the
production of the completed commodity… To
replace capital, is to replace nothing but the wages of
the labour employed” ([John Stuart Mill, Essays
on some Unsettled Questions of Political Economy,
London, 1844,] p. 94).

This in itself is quite wrong, because the employed
labour and the wages paid are by no means identical.
On the contrary, the employed labour is equal to the sum of
wages and profit. To replace capital means to replace
the labour for which the capitalist pays (wages) and the
labour for which he does not pay but which he nevertheless
sells (profit). Mr. Mill is here confusing
“employed labour” and that portion of the
employed labour which is paid for by the capitalist who
employs it. This
confusion is itself no recommendation for his
understanding of the Ricardian theory, which he claims to
teach.

Incidentally, it should be noted in relation to constant
capital that though each part of it can be reduced to
previous labour and therefore one can imagine that at some
time it represented profit or wages or both, but once it
exists as constant capital, one part of it—for
example, seeds, etc.—can no longer be transformed into
profit or wages.

Mill does not distinguish surplus-value from
profit. He therefore declares that the rate of
profit (and this is correct for the surplus-value which
has already been transformed into profit) is equal to the
ratio of the price of the product to the price of its means
of production (labour included). (See
pp. 92-93.) At the same time he seeks to deduce the
laws governing the rate of profit directly from the
Ricardian law, in which Ricardo confuses surplus-value and
profit, land to prove] that “profits depend upon
wages; rising as wages fall, and falling as wages
rise”[p.94].

Mr. Mill himself is not quite clear about the
question which he seeks to answer. We will
therefore formulate his question briefly before we
hear his answer. The rate of profit is the ratio of
surplus-value to the total amount of the capital
advanced (constant and variable capital taken together)
while surplus-value itself is the excess of the quantity of
labour performed by the labourer over the quantity of labour
which is advanced him as wages; that is, surplus-value is
considered only in relation to the variable capital, or to
the capital which is laid out in wages, not in relation to
the whole capital. Thus the rate of surplus-value and
the rate of profit are two different rates, although profit
is only surplus-value considered from a particular point of
view. It is correct to say with regard to the rate of
surplus-value that it exclusively depends “upon wages;
rising as wages fall, and falling as wages
rise”. (But it would be wrong with regard to the
total amount of surplus-value, for this depends not only on
the rate at which the surplus labour of the individual
worker is appropriated but likewise on the number of workers
exploited at the same time.) Since the rate of profit
is the ratio of surplus-value to the total amount of capital
advanced, it is naturally affected and determined by the
fall or rise of surplus-value, and hence, by the rise or
fall of wages, but in addition to this, the rate of profit
includes factors | which
are independent of it and not directly reducible to it.

Mr. John Stuart Mill, who, on the one hand,
directly identifies profit and surplus-value, like
Ricardo, and, on the other hand (moved by considerations
concerning the polemic against the anti-Ricardians), does
not conceive the rate of profit in the Ricardian
sense, but in its real sense, as the ratio of
surplus-value to the total value of the capital advanced
(variable capital plus constant capital), goes to great
lengths to prove that the rate of profit is determined
directly by the law which determines surplus-value
and can be simply reduced to the fact that the smaller the
portion of the working-day in which the worker works for
himself, the greater the portion going to the capitalist,
and vice versa. We will now observe his torment, the
worst part of which is that he is not sure which problem he
really wants to solve. If he had formulated the
problem correctly, it would have been impossible for him to
solve it wrongly in this way.

He says, then:

“Though […] tools, materials,
and buildings […] are themselves the produce of
labour […] yet the whole of their value is not
resolvable into the wages of the labourers by whom they were
produced.” <He says above that the replacement of
capital is the replacement of wages.> The profits
which the capitalists make on these wages, need to be
added. The last capitalist has to replace from his
product “not only the wages paid both by
himself and by the tool-maker, but also the profit of the
tool-maker, advanced by him himself out of his own
capital” (op. cit., p. 98).[pp] Hence “…
profits do not compose merely the surplus
after replacing the outlay; they also enter into the outlay
itself. Capital is expended partly in paying or
reimbursing wages, and partly in paying the profits of other
capitalists, whose concurrence was necessary in order to
bring together the means of production” (loc. cit.,
pp. 98-99). “An article, therefore, may be
the produce of the same quantity of labour as before,
and yet, if any portion of the profits which the last
producer has to make good to previous producers can be
economised, the cost of production of the article is
diminished… It is, therefore, strictly
true, that the rate of profit varies inversely as the cost
of production of wages” (op. cit., pp. 102-03).

We are naturally always working on the assumption here
that the price of a commodity is equal to its value.
It is on this basis that Mr. Mill himself carries on the
investigation.

Profit, in the passages quoted, appears first of all to
bear a very strong resemblance to profit upon alienation,
but let us proceed. Nothing is more wrong than to say
that (if it is sold at its value) an article is
“the produce of the same quantity of labour as
before” and at the same time that by some
circumstance
or other “the cost of production of the
article” can be diminished. <Unless it is in
the sense I first advanced, i.e., when I distinguished
between the [real] production cost of the article and the
production cost to the capitalist, since he does not pay a
part of the production costs. In this case, it is
indeed true that the capitalist makes his profit out of the
unpaid surplus labour of his own workers just as he may also
make it by under-paying the capitalist who supplies
him with his constant capital, that is, by not paying this
capitalist for a part of the sur-plus labour embodied in the
commodity and not paid for by this capitalist (and which
precisely for that reason constitutes his profit).
This amounts to the fact that he always pays for the
commodity less than its value. The rate of
profit (that is, the ratio of surplus-value to the total
value of the capital advanced) can increase either because
the quantity of capital [goods] advanced by the capitalist
becomes objectively cheaper (due to the increased
productivity of labour in those spheres of production which
produce constant capital) or because it be-comes
subjectively cheaper for the buyer, since he pays for the
goods at less than their value. For him,
it is then always the result of a smaller quantity of
labour.>

| What Mill says first
of all, is that the constant capital of the
capitalist who manufactures the last commodity resolves not
into wages alone, but also into profit. His line of
reasoning is as follows:

If it were resolvable into wages alone, then profit would
be the surplus accruing to the last capitalist after he has
reimbursed himself for all wages paid <and the whole
(paid) costs of the product could be reduced to wages>,
which would constitute the whole of the capital
advanced. The total value of the capital advanced
would be equal to the total value of the wages embodied in
the product. Profit would be the surplus over
this. And since the rate of profit is equal to the
ratio of this surplus to the total value of the capital
advanced, then the rate of profit would obviously rise and
fall in proportion to the total value of the capital
advanced, that is, in proportion to the value of
wages, the aggregate of which constitutes the capital
advanced. <This objection is, in fact, silly, if
we consider the general relation of profits and
wages. Mr. Mill needed only to put on one side that
part of the whole product which is resolvable into profit
(irrespective of whether it is paid to the last or to
the previous capitalists, the co-functionaries in the
production of the commodity) and then
put that part which resolves into wages on the other, and
the amount of profit would still be equal to the surplus
over the total amount of wages, and it could be asserted
that the Ricardian “inverse ratio” applied
directly to the rate of profit. It is not true,
however, that the whole of the capital advanced can be
resolved into profit and wages.> But the capital
advanced does not resolve itself into wages alone, but also
into profits advanced. Profit therefore is a surplus
not only over and above the wages advanced, but also over
the profits advanced. The rate of profit is
therefore determined not only by the surplus over wages, but
by the last capitalist’s surplus over the total sum of wages
plus profits, the sum of which, according to this
assumption, constitutes the whole of the capital
advanced. Hence this rate can obviously be altered not
only as a result of a rise or fall in wages, but also as a
result of a rise or fall in profit. And if we
disregarded the changes in the rate of profit arising from
the rise or fall in wages, that is, if we assumed—as
is done innumerable times in practice—that the value
of the wages, in other words, the costs of their production,
the labour-time embodied in them, remained the same,
remained unchanged, then, following the path outlined by
Mr. Mill, we would arrive at the pretty law that the rise or
fall in the rate of profit depends on the rise or fall of
profit.

“…if any portion of the
profits which the last producer has to make good to previous
producers can be economised, the cost of production of the
article is diminished” [loc. cit., p. 102].

This is in fact very true. If we assume that no
portion of the previous producers’ profit was a mere
surcharge—“profit upon alienation” as
James Stuart says, then every economy in one “portion
of profit” (so long as it is not achieved by the
latter producer swindling the previous one, that is, by not
paying him for the whole of the value contained in his
commodity) is an economy in the quantity of labour required
for the production of the commodity. (Here we
disregard the profit paid, for instance, for that time
during the period of production, etc., when the capital lies
idle.) For example, if two days were required to bring
raw materials—coal, for instance—from the pit to
the factory, and now only one day is required, then there is
an economy of one day’s work, but this applies as much to
that part of it which resolves into wages as to that which
resolves into profit.

After Mr. Mill has made it clear to himself that the rate
of surplus of the last capitalist, or the rate of
profit in general, depends not only on the direct ratio of
wages to profits, but on the ratio of the last profit, or
the profit on every particular capital, to the whole value
of the capital advanced, which is equal to the variable
capital (that laid out in wages) plus the constant
capital—that, in other words, | the rate of profit is
determined not only by the ratio of profit to the part of
capital laid out in wages, that is, not only by the cost of
production or the value of wages, he continues:

“It is, therefore […] true,
that the rate of profits varies inversely as the cost of
production of wages” [loc. cit., p. 103].

Although it is false, it is nevertheless true.

The illustration which he now gives can serve as a
classical example of the way in which economists use
illustrations, and it is all the more astonishing since its
author has also written a book about the science of
logic.

“Suppose, for example, that 60
agricultural labourers, receiving 60 quarters of corn for
their wages, consume fixed capital and seed amounting to the
value of 60 quarters more, and that the result of their
operations is a produce of 180 quarters. When we
analyse the price of the seed and tools into its elements,
we find that they must have been the produce of the labour
of 40 men: for the wages of those 40, together with profit
at the rate previously supposed (50 per cent) make up 60
quarters. The produce, therefore, consisting of 180
quarters, is the result of the labour altogether of 100
men.”

Now[qq] supposing
that the amount of labour required remained the same, but as
a result of some discovery no fixed capital and seed were
needed. Whereas previously the outlay of 120
quarters was required to obtain a product of 180 quarters,
now an outlay of only 100 quarters is necessary to achieve
this result.

“The produce (180 quarters) is still
the result of the same quantity of labour as before
[…], the labour of 100 men. A quarter of corn,
therefore, is still, as before, the produce of
10/18 of a man’s labour, […]
A[rr]
quarter of corn, which is the remuneration of a single
labourer, is indeed the produce of the same quantity of
labour as before; but its cost of production is
nevertheless diminished. It is now the produce of
10/18 of a man’s labour, and nothing
else; whereas formerly it required for its production the
conjunction of that quantity of labour with[ss] an expenditure, in the form of
reimbursement of profit, amounting to one-fifth more.
If the cost of production of wages had remained the same as
before, profits could not have risen. Each labourer
received one quarter of corn; but one quarter of corn at
that time was the result of the same cost of production, as
1 1/5 quarter now. In order,
therefore, that each labourer should receive the same
cost of production, each must now receive one quarter of
corn, plus one-fifth” (op. cit., pp.99-103
passim).

“Assuming, therefore, that the
labourer is paid in the very article he produces, it is
evident that, when any saving of expense takes place in the
production of that article, if the labourer still receives
the same cost of production as before, he must receive an
increased quantity, in the very same ratio in which the
productive power of capital has been increased. But,
if so, the outlay of the capitalist will bear exactly the
same proportion to the return as it did before; and profits
will not rise. The variations, therefore, in the rate
of profits, and those in the cost of production of wages, go
hand in hand, and are inseparable. Mr. Ricardo’s
principle […] is strictly true,[tt] if by low wages be meant not
merely wages which are the produce of a smaller quantity of
labour, but wages which are produced at less cost, reckoning
labour and previous profits together” (loc. cit.,
p.104).

With regard to this wonderful illustration, we note first
of all that, as a result of a discovery, corn is supposed to
be produced without seeds (raw materials) and without fixed
capital; that is, without raw materials and without tools,
by means of mere manual labour, out of air, water and
earth. This | absurd
presupposition contains nothing but the assumption that a
product can be produced without constant capital, that is,
simply by means of newly applied labour. In this case,
what he set out to prove has of course been proved, namely,
that profit and surplus-value are identical, and
consequently that the rate of profit depends solely on the
ratio of surplus labour to necessary labour. The
difficulty arose precisely from the fact that the rate of
surplus-value and the rate of profit are two different
things because there exists a ratio of surplus-value to the
constant part of capital—and this ratio we call the
rate of profit. Thus if we assume constant capital to
be zero, we solve the difficulty arising from the existence
of constant capital by abstracting from the existence of
this constant capital. Or we solve the difficulty by
assuming that it does not exist. Pro batum
est.[uu]

Let us now arrange the problem, or Mill’s illustration of
the problem, correctly.

According to the first assumption we have:

Constant capital (fixed capital and seed)

Variable capital (capital laid out in wages)

Total product

Profit

60 quarters

60 quarters (60 workmen)

180 quarters

60 quarters

It is assumed in this example that
the labour which is added to the constant capital amounts to
120 quarters and that, since every quarter represents the
wages of a working-day (or of a year’s labour, which is
merely a working-day of 365 working-days), the 180 quarters
contain only 60 working-days, 30 of which account for the
wages of the workers and 30 constitute profit. We thus
assume in fact that one working-day is embodied in 2
quarters and that consequently the 60 working-days of the 60
workmen are embodied in 120 quarters, 60 of which constitute
their wages and 60 constitute the profit. In other
words, the worker works one half of the working-day for
himself, to make up his wages, and one half for the
capitalist, thus producing the capitalist’s
surplus-value. The rate of surplus-value is therefore
100 per cent and not 50 per cent. On the other hand,
since the variable capital constitutes only half of the
total capital advanced, the rate of profit is not 60
quarters to 60 quarters, that is, not 100 per cent, but 60
quarters to 120 quarters and therefore only 50 per
cent. If the constant part of the capital had equalled
zero, then the whole of the capital advanced would have
consisted of only 60 quarters, i.e., only of the capital
advanced in wages, equalling 30 working-days; in this case,
profit and surplus-value, and therefore also their rates,
would be identical. Profit would then amount to 100
per cent and not 50 per cent; 2 quarters of corn would be
the product of one working-day, and 120 quarters the product
of 60 working-days, even though one quarter of corn would
only be the wages of one working-day and 60 quarters the
wages of 60 working-days. In other words, the worker
would only receive half, 50 per cent, of his product, while
the capitalist would receive twice as much—100%
calculated on his outlay.

What is the position with regard to the constant capital,
the 60 quarters? These were likewise the product of 30
working days, and if it is assumed with regard to this
constant capital that the elements which went into its
production are so made up that one-third consists of
constant capital and two-thirds of newly added labour, and
that the [rate of] surplus-value and the rate of profit are
also the same as before, we get the following
calculation:

Constant capital

Variable capital

Total product

Profit

20 quarters

20 quarters (wages for 20 workers)

60 quarters

20 quarters

Here again the rate of profit would
be 50 per cent and the rate of surplus-value 100 per
cent. The total product would be | the product of 30
working-days, 10 of which however (equalling 20 quarters)
would represent the pre-existing labour (the constant
capital) and 20 working-days the newly added labour of 20
workers, each of whom would only receive half his product as
wages. Two quarters would be the product of one man’s
labour as in the previous case, although, again as
previously, one quarter would represent the wages of one
man’s labour and one quarter the capitalist’s profit, the
capitalist thus appropriating half of the man’s labour.

The 60 quarters which the last capitalist producer makes
as surplus-value mean a rate of profit of 50 per cent,
because these 60 quarters of surplus-value are calculated
not only on the 60 quarters advanced in wages but also on
the 60 quarters expended in seed and fixed capital, which
together amount to 120 quarters .

If Mill calculates that the capitalist who produces the
seed and the fixed capital—a total of 60
quarters—makes a profit of 50 per cent, if he assumes
further that the constant and variable capital enter into
the product in the same proportion as in the case of the
production of the 180 quarters, then it will be correct to
say that the profit equals 20 quarters, wages 20 quarters
and the constant capital 20 quarters. Since wages
equal one quarter [a day], then 60 quarters contain 30
working-days in the same way as 120 quarters contain 60
working-days.

But what does Mill say?

“When we analyse the price of the
seed and tools into its elements, we find that they must
have been the produce of the labour of 40 men: for the wages
of those 40, together with profit at the rate previously
supposed (50 per cent) make up 60 quarters” [op. cit.,
p. 99].

In the case of the first capitalist, who employed 60
workers, each of whom he paid one quarter per day as wages
(so that he paid out 60 quarters in wages), and laid out 60
quarters in constant capital, the 60 working-days resulted
in 120 quarters, of which, however, the workers only
received 60 in wages; in other words, wages amounted to only
half the product of the labour of 60 men. Thus the 60
quarters of constant capital were only equal to the product
of the labour of 30 men; if they consisted only of profit
and wages, then wages would amount to 30 quarters and profit
to 30 quarters, thus wages would equal the labour
of 15 men and profit as well. But the profit
amounted to only 50 per cent, since it is assumed that of
the 30 days embodied in the 60 quarters, 10 represent
pre-existing labour (constant capital) and only 10 are
allocated to wages. Thus, 10 days are embodied in
constant capital, 20 are newly added working-days, of which,
however, the workers only work 10 for themselves, the other
10 being for the capitalist. But Mr. Mill asserts that
these 60 quarters are the product of 40 men, while just
previously he said that 120 quarters were the product of 60
men. In the latter case, one quarter contains half a
working-day (although it is the wages paid for a whole
working-day); in the former, 3/4 of a
quarter would equal half a working-day, whereas the
one-third of the product (i.e., the 60 quarters) which is
laid out in constant capital has just as much value, that
is, it contains just as much labour-time, as any other third
part of the product. If Mr. Mill desired to convert
the constant capital of 60 quarters wholly into wages and
profit, then this would not make the slightest
difference as far as the quantity of labour-time embodied in
it is concerned. It would still be 30 working-days as
before, but now, since there would be no constant capital to
replace, profit and surplus-value would coincide.
Thus, profit would amount to 100 per cent, not to 50 per
cent as previously. Surplus-value also amounted to 100
per cent in the previous case, but the profit was only 50
per cent precisely because constant capital entered into the
calculation.

We have here, therefore, a doubly false manoeuvre on the
part of Mr. Mill.

In the case of the first 180 quarters, the difficulty
consisted in the fact that surplus-value and profit did not
coincide, because the 60 quarters surplus-value had to be
calculated not only on 60 quarters (that part of the total
product which represented wages) but | on 120 quarters, i.e., 60
quarters constant capital plus 60 quarters wages.
Surplus-value therefore amounted to 100 per cent, and profit
only to 50 per cent. With regard to the 60 quarters
which constituted constant capital, Mr. Mill disposes of
this difficulty by assuming that, in this case, the whole
product is divided between capitalist and worker, i.e., that
no constant capital is required to produce the constant
capital, that is, the 60 quarters consisting of seed and
tools. The circumstance which had to be explained in
the case of capital I, is assumed to have disappeared
in the case of capital II, and in this way the problem
ceases to exist.

But secondly, after he has assumed that the value of the
60 quarters which constitute the constant capital of capital
I contains only [immediate] labour, but no pre-existing
labour, no constant capital, that profit and surplus-value
therefore coincide, and consequently also the rate of profit
and the rate of surplus-value, that no difference exists
between them, he then assumes, on the contrary, that just as
in the case of capital I, a difference between them does
exist, and that therefore the profit is only 50 per cent as
in the case of capital I. If a third of the product of
capital I had not consisted of constant capital, then profit
would have been the same as surplus-value; the whole product
consisted of only 120 quarters, equal to 60 working-days, 30
of which (equal to 60 quarters) are appropriated by the
workers and 30 (equal to 60 quarters) by the
capitalist. The rate of profit was the same as the
rate of surplus-value, that is, 100 per cent. It was
50 per cent because the 60 quarters of surplus-value were
not calculated on 60 quarters (wages) but on 120 quarters
(wages, seed and fixed capital). In the case of
capital II, he assumes that it contains no constant
capital. He also assumes that wages remain the same in
both cases—a quarter [of corn]. But he
nevertheless assumes that profit and surplus-value are
different, that profit amounts only to 50 per cent, although
surplus-value amounts to 100 per cent. In actual fact
he assumes that the 60 quarters, one-third of the total
product, contain more labour-time than another third of the
total product; he assumes that these 60 quarters are the
product of 40 working-days while the other 120 quarters were
the product of only 60.

In actual fact, however, there peeps out the old delusion
of profit upon alienation, which has nothing whatever to do
with the labour-time contained in the product and likewise
nothing to do with the Ricardian definition of value.
For he [Mill] assumes that the wages a man receives for
working for a day are equal to what he produces in a
working-day, i.e., that they contain as much labour-time as
he works. If 40 quarters are paid out in wages, and if
the profit amounts to 20 quarters, then the 40 quarters
embody 40 working-days. The payment for the 40
working-days is equal to the product of the 40
working-days. If 50 per cent profit, or 20 quarters,
is made on 60 quarters, it follows that 40 quarters are the
product of the labour of 40 men, for, according to the
assumption, 40 quarters constitute wages and each man
receives one quarter per day. But in that case
where do the other 20 quarters come from? The 40
men work 40 working-days because they receive 40
quarters. A quarter is therefore the product of one
working-day. The product of 40 working-days is
consequently 40 quarters, and not a bushel more.
Where, then, do the 20 quarters which make up the profit
come from? The old delusion of profit upon alienation,
of a merely nominal price increase on the product over and
above its value, is behind all this. But here it is
quite absurd and impossible, because the value is not
represented in money but in a part of the product
itself. Nothing is easier than to imagine
that—if 40 quarters of grain are the product of 40
workers,- each one of whom receives one quarter per day or
per year, they therefore receive the whole of their product
as wages, and if one quarter of grain in terms of money is
£3, 40 quarters are therefore £120—the
capitalist sells these 40 quarters for £180 and makes
£60, i.e., 50 per cent profit, equal to 20
quarters. But this notion is reduced to absurdity if
out of 40 quarters—which have been produced in 40
working-days and for which he pays 40 quarters—the
capitalist sells 60 quarters. He has in his possession
only 40 quarters, but he sells 60 quarters, 20 quarters more
than he has to sell.

| Thus first of all
Mill proves the Ricardian law, that is, the false Ricardian
law, which confuses surplus-value and profit, by means of
the following convenient assumptions:

1) he assumes that the capitalist who produces constant
capital does not himself in his turn need constant capital,
and thus he assumes out of existence the whole difficulty
which is posed by constant capital;

2) he assumes that, although the capitalist does not
[need] constant capital, the difference between
surplus-value and profit caused by constant capital
nevertheless continues to exist although no constant capital
exists;

3) he assumes that a capitalist who produces 40 quarters
of wheat can sell 60 quarters, because his total product is
sold as constant capital to another capitalist, whose
constant capital equals 60 quarters, and because capitalist
No. II makes a profit of 50 per cent on these 60
quarters.

This latter absurdity resolves itself into the notion of
profit upon alienation, which appears here so absurd only
because the profit is supposed to stem not from the nominal
value expressed in money, but from a part of the product
which has been sold. Thus, Mr. Mill, in seeking to
defend Ricardo, has abandoned
his basic concepts and fallen far behind Ricardo, Adam
Smith and the Physiocrats.

His first defence of Ricardo’s teachings therefore
consists in his abandoning them from the outset, namely,
abandoning the basic principle that profit is only a part of
the value of the commodity, i.e., merely that part of the
labour-time embodied in the commodity which the capitalist
sells in his product although he has not paid the
worker for it. Mill makes the capitalist pay the
worker for the whole of his working-day and still derive a
profit.

Let us see how he proceeds.

He does away with the need for seed and agricultural
implements in the production of corn by means of an
invention, that is, he does away with the need for constant
capital in the case of the last capitalist in the same way
as he abandoned seed and fixed capital in the case of the
producer of the first 60 quarters. Now he ought to
have argued as follows:

Capitalist No. I does not now need to lay out 60 quarters
in seed and fixed capital, for we have stated that his
constant capital equals zero. He therefore has to lay
out only 60 quarters for the wages of 60 workers who work 60
working-days. The product of these 60 working-days
amounts to 120 quarters. The workers receive only 60
quarters. The capitalist therefore makes 60 quarters
profit, i.e., 100 per cent. His rate of profit is
exactly equal to the rate of surplus-value, that is, it is
exactly equal [to the ratio] of the labour-time the workers
[worked for themselves to the labour-time they] worked not
for themselves, but for the capitalist. They worked 60
days. They produced 120 quarters, they received 60
quarters in wages. They thus received the product of
30 working-days as wages, although they worked 60
days. The quantity of labour-time which 2 quarters
cost is still equal to one working-day. The
working-day for which the capitalist pays is still
equal to one quarter, i.e., it is equal to half the
working-day worked. The product has fallen by a third,
from 180 quarters to 120 quarters, but the profit has
nevertheless risen by 50 per cent, namely, from 50 per cent
to 100 per cent. Why? Of the total of 180
quarters, a third merely replaced constant capital, it did
not therefore constitute a part of either profit or
wages. On the other hand, the 60 quarters, or the 30
working-days during which the workers produced or worked for
the capitalist, were calculated not on the 60
quarters spent on wages, that is, the 30 days during which
they worked
for themselves, but on the 120 quarters, i.e., the 60
working-days, which were expended on wages, seed and fixed
capital. Thus, although out of the total of 60 days
they worked 30 days for themselves and 30 for the
capitalist, and although a capital outlay of 60 quarters on
wages yielded 120 quarters to the capitalist, his rate of
profit was not 100 per cent, but only 50 per cent, because
it was calculated differently, in the one case on
2×60 and in the other on 60. The surplus-value
| was the same, but the
rate of profit was different.

But how does Mill tackle the problem?

He does not assume that the capitalist [who, as a result
of an invention, spends nothing on constant capital] with an
outlay of 60 quarters obtains 120 quarters (30 out of 60
working-days), but that he now employs 100 men who produce
180 quarters for him, always on the supposition that the
wage for one working-day is one quarter of wheat. The
calculation is therefore as follows:

Capital expended (only variable, only on
wages)

Total product

Profit

100 quarters (wages for 100 working-days)

180 quarters

80 quarters

This means that the capitalist makes a profit of 80 per
cent. Profit is here equal to surplus-value.
Therefore the rate of surplus-value is likewise only 80 per
cent. Previously it was 100 per cent, i.e., 20 per
cent higher. Thus we have the phenomenon that the rate
of profit has risen by 30 per cent while the rate of
surplus-value has fallen by 20 per cent.

If the capitalist had only expended 60 quarters on wages
as he did previously, we would have the following
calculation:

100quartersyield80quarterssurplus-value

10""8""

60""48""

But 60 quarters previously yielded 60 quarters [of
surplus-value] (that means it has fallen by 20 per
cent). Or to put it another way, previously:

[Capital expended]

Total product

Profit

60 quarters

120 quarters

60 quarters

100 "

200 "

100 "

100 "

200 "

100 "

Thus the surplus-value has fallen
by 20 per cent, from 100 to 80 (we must take 100 as the
basis of the calculation in both [cases]).

(60:48=100:80; 60:48=10:8; 60:48=5:4; 4×60=240 and
48 × 5 =240.)

Further, let us consider the labour-time or the value of
a quarter. Previously, 2 quarters were equal to one
working-day, or one quarter was equal to half a working-day
or 9/18 of a man’s labour. As
against this, 180 quarters are now the product of 100
working-days, one quarter is therefore the product of
100/180 or 10/18
of a working-day. That is, the product has become
dearer by 1/18 of a working-day, or
the labour has become less productive, since previously a
man required 9/18 of a working-day to
produce a quarter, whereas now he requires
10/18 of a working-day. The rate
of profit has risen although the surplus-value has fallen
and, consequently, the productivity of labour has fallen or
the real value, the cost of production, of wages has risen
by 1/18 or by 5
5/9 per cent. 180 quarters were
previously the product of 90 working-days (1 quarter,
90/180, equals half a working-day or
9/18 of a working-day). Now they
are the product of 100 working-days (1 quarter =
100/180=10/18 of
a working-day).

Let us assume that the working-day lasts 12 hours, i.e.,
60×12 or 720 minutes. | One-eighteenth part of a
working-day, that is, 720/18 therefore
amounts to 40 minutes. In the first case, the worker
gives the capitalist 9/18 or half of
these 720 minutes, that is, 360 minutes. 60 workers
will therefore give him 360×60 minutes. In the
second case, the worker gives the capitalist only
8/18, that is, 320 minutes out of the
720. But the first capitalist employs 60 men and
therefore obtains 360×60 minutes. The second
employs 100 men and therefore obtains 100×320, 32,000
minutes. The first gets 360 × 60, 21,600
minutes. Thus the second capitalist makes a larger
profit than the first because 100 workers at 320 minutes a
day amounts to more than 60 [workers] at 360 minutes.
His profit is bigger only because he employs 40 more men,
but he obtains relatively less from each worker. He
has a higher profit, although the rate of surplus-value has
declined, that is, the productivity of labour has declined,
the production costs of real wages have therefore risen, in
other words, the quantity of labour embodied in them has
risen. But Mr. Mill wanted to prove the exact
opposite.

Assuming that Capitalist No. I, who has not
“discovered” how to produce corn without seed or
fixed capital, likewise uses 100 working-days (like
capitalist No. II), whereas he only uses 90 days in the
above calculation. He must therefore use 10 more
working-days, 3 1/3 of which are
accounted for by his constant capital (seed and fixed
capital) and 3 1/3 by wages. The
product of these 10 working-days on the basis of the old
level of production would be 20 quarters, 6
2/3 quarters of which, however, would
replace constant capital,[vv] while 12
4/3 quarters would be the product of 6
2/3 working-days. Of this, wages
would take 6 2/3 quarters and
surplus-value 6 2/3 quarters.

We would thus arrive at the following calculation:

Constant capital

Wages

Total product

Surplus-value

Rate of Surplus-value

662/3 quarters

662/3 quarters

200 quarters

662/3 quarters

100 per cent

(331/3 working-days)

(Wages for 662/3 working-days)

(100 working-days)

(331/3 working-days)

He makes a profit of 33 1/3
working-days on the total product of 100 working-days.
Or 66 2/3 quarters on 200
quarters. Or, if We calculate the capital he lays out
in quarters, he makes a profit of 66
2/3 quarters on 133
1/3 quarters (the product of 66
2/3 working-days), whereas capitalist
No. II makes a profit of 80 quarters on an outlay of 100
quarters. Thus, the profit of the second capitalist is
greater than that of the first. Since the first
capitalist produces 200 quarters in the same labour-time
that it takes the second to produce 180, for the first
capitalist one quarter is equal to half a working-day and
for the second capitalist one quarter is equal to
10/18 or 5/9 of
a working-day, that is, it contains
1/18 more labour-time and would
consequently be dearer, and the first capitalist would drive
the second out of business. The latter would have to
give up his discovery and accommodate himself to using seed
and fixed capital in corn production, as before.

Let us assume that the profit of capitalist I amounted to
60 quarters on an outlay of 120 quarters, or to 50 per cent
(the same as 66 2/3 quarters on 133
1/3 quarters).

The profit of capitalist II amounted to 80 quarters on
100 quarters, or to 80 per cent.

The profit of the second capitalist compared to that of
the first is 80:50, or 8:5, or 1 :
5/8.

As against this, the surplus-value of the second
capitalist compared to that of the first is: 80 : 100, or 8
: 10, or 1 : 10/8, or 1 : 1
2/8, or 1
1/4.

The rate of profit of the second capitalist is 30 per
cent higher than that of the first.

The surplus-value of the second capitalist is 20 per cent
smaller than that of the first.

The second capitalist employs 66
2/3 per cent more workers, while the
first one appropriates only 1/8, or 12
1/2 per cent, more labour in a single
day.

| Mr. Mill has
therefore proved that capitalist No. I—who uses a
total of 90 days, 1/3 of which [is
embodied] in constant capital (seed, machinery, etc.), and
employs 60 workers whom, however, he pays only [the product
of] 30 days—produces one quarter of corn in half a
clay or in 9/18 of a day; so that in
90 working-days he produces 180 quarters, 60 quarters of
which represent the 30 working-days contained in the
constant capital, 60 quarters the wages for 60 working-days
or the product of 30 working-days, and 60 quarters the
surplus-value (or the product of 30 working-days). The
[rate of] surplus-value of this capitalist is 100 per cent,
his [rate of] profit is 50 per cent, for the 60 quarters of
surplus-value are not calculated on the 60 quarters of the
capital laid out in wages, but on 120 quarters, i.e., both
parts of capital (that is, variable capital plus constant
capital).

He has proved further that capitalist No. II, who uses
100 working-days and lays out nothing in constant capital
(by virtue of his discovery), produces 180 quarters, one
quarter is therefore equal to 10/18 of
a day, i.e., it is 1/18 of a day (40
minutes) dearer than that of No. I. His labour is
1/18 less productive. Since the
worker receives a daily wage of one quarter, as he did
previously, his wages have risen by
1/18 in real value, that is, in the
labour-time required for their production. Although
the production cost of wages has now risen by
1/18 and the total product is smaller
in relation to labour-time, and the surplus-value
produced by him amounts only to 80 per cent,
whereas that of No. I was 100 per cent, his rate of profit
is 80 per cent, while that of the first was 50.
Why? Because, although the cost of wages has risen for
capitalist No. II, he employs more labour, and because the
rate of surplus-value is equal to the rate of profit in the
case of No. II, since his surplus-value is calculated only
on the capital laid out in wages, the constant capital
amounting to zero. But Mill wanted on the contrary to
prove that the rise in the rate of profit was due to a
reduction in the production cost of wages according
to the Ricardian law. We have seen that this rise took
place despite the increase in the production cost of
wages, that, consequently, the Ricardian law is false if
profit and surplus-value are directly identified with
one another, and the rate of profit is understood as the
ratio of surplus-value or gross profit (which is equal to
the surplus-value) to the total value of the capital
advanced.

Mr. Mill continues:

“A return of 180 quarters could not
before be obtained but by an outlay of 120 quarters; it can
now be obtained by an outlay of not more than
100…”[loc. cit., p. 100].

Mr. Mill forgets that in the first case, the outlay of
120 quarters represents an outlay of 60 working-days.
And that in the second case, the outlay of 100 quarters
represents an outlay of 55 6/9
working-days (that is, a quarter equals
9/18 of a working-day in the first
case and 10/18 in the second).

“The produce (180 quarters) is still
the result of the [same] quantity of labour as before,
[namely] the labour of 100 men” [loc. cit.,
p. 100].

(Pardon me! The 180 quarters were previously the
result of 90 working-days. Now they are the result of
100.)

“A quarter of corn, therefore, is
still […] the produce of 10/18
of a man’s labour” [loc. cit., p. 100].

(Pardon me! It was previously the produce of
9/18 of a man’s labour.)

“A[ww] quarter of corn,
which is the remuneration of a single labour, is
indeed the produce of the same […] labour
as before …”[loc. cit., p. 102].

(Pardon me! Firstly, now a quarter of corn is
“indeed the produce” of
10/18 of a working-day, whereas
previously it was the produce of 9/18;
it therefore costs 1/18 of a day more
labour;
and secondly, whether the quarter costs
9/18 or 10/18 of
his working-day, the remuneration of an individual
worker should never be confused with the product of his
labour; since it is always only a part of that
product.)

“It is now the produce of
10/18 of a man’s labour, and
nothing else” (this is correct); “whereas
formerly it required for its production the conjunction of
that quantity of labour with[xx] an expenditure, in the form of
reimbursement of profit, amounting to one-fifth more”
[loc. cit., pp. 102-03].

Stop! First of all it is wrong, as has been | emphasised repeatedly, to say
that one quarter previously cost 10/18
of the working-day. It only cost
9/18. It would be even more
wrong (if a gradation in absolute falsehood were possible)
if there were added to these 9/18 of a
working-day “the conjunction […] of
reimbursement of profit, amounting to one-fifth
more”. In 90 working-days (taking constant and
variable capital together) 180 quarters are produced.
180 quarters are equal to 90 working-days. One quarter
equals 90/180, which equals
9/18, which equals one half of a
working-day. Consequently, no
“conjunction” whatsoever is added to these
9/18 of a working-day, or to the half
of a working-day which a quarter costs in case No. I.

We here discover the real delusion which is the centre
around which the whole of this nonsense revolves. Mill
first of all made a fool of himself by supposing that, if
120 quarters are the product of 60 days of labour, and this
product is equally divided between the 60 labourers and the
capitalist, the 60 quarters which represent the constant
capital could be the product of 40 days of labour.
They could only be the product of 30 days, in whatever
proportion the capitalist and the labourers producing the 60
quarters might happen to share in them. But let us
proceed. In order to make the delusion quite clear,
let us assume that not one-third, i.e., 20 quarters of the
60 quarters of constant capital, would be converted into
profit, but the whole amount of the 60 quarters. We
can make this assumption all the more readily since it is
not in our interest, but in Mill’s, and simplifies the
problem. Moreover it is easier to believe that the
capitalist who produces 60 quarters of constant capital,
discovers that 30 workers, who produce 60 quarters or
an equivalent value in 30 days, can be made to work for
nothing, without being paid any wages at all (as
happens in the case of statute
labour), than to believe in the ability of Mill’s
capitalist to produce 180 quarters of corn without seed or
fixed capital, simply by means of a
“discovery”. Let us therefore assume that
the 60 quarters contain only the profit of capitalist II,
the producer of constant capital for capitalist I, since
capitalist II has the product of 30 working-days to sell
without having paid a single farthing to the 30 workers,
each of whom worked one day. Would it then be correct
to say that these 60 quarters, which can be entirely
resolved into profit, enter into the production cost of
wages on the part of capitalist I, in
“conjunction” with the labour-time worked by
these workers?

Of course, the capitalist and the workers in case No. 1
could not produce 120 quarters or even one single quarter
without the 60 quarters which constitute constant capital
and which are resolvable into profit only. These are
conditions of production necessary for them, and conditions
of production, moreover, which have to be paid for.
Thus the 60 quarters were necessary to produce 180. 60
of these 180 quarters replace the 60 quarters [constant
capital]. Their 120 quarters—the product of 60
working-days—are not affected by this. If they
had been able to produce the 120 quarters without the 60,
then their product, the product of the 60
working-days, would have been the same, but the total
product would have been smaller, precisely because the 60
pre-existing quarters would not have been reproduced.
The capitalist’s rate of profit would have been greater
because his production costs would not have included the
expenditure on, or the cost of, the means of production
which enable him to make a surplus-value of 60
quarters. The absolute amount of profit would have
been the same—60 quarters. These 60 quarters,
however, would have required an outlay of only 60
quarters. Now they require an outlay of 120.
This outlay on constant capital therefore enters into the
production costs of the capitalist, but not into the
production costs of wages.

Let us assume that capitalist III, also without paying
his workers, can produce 60 quarters in 15 working-days
[instead of 30] by means of some “discovery”,
partly because he uses better machines, and so on.
This capitalist III would drive capitalist II out of the
market and secure the custom of capitalist I. The
capitalist’s outlay would now have fallen | from 60 to 45
working-days. The workers would still require 60
working-days to transform the 60 quarters into 180.
And they would need 30 working-days in order to produce
their
wages. For them one quarter would be equal to half
a working-day. But the 180 quarters would only cost
the capitalist an outlay of 45 working-days instead of
60. Since however it would be absurd to suggest that
corn under the name of seed costs less labour-time than it
does under the name of corn pure and simple, we would have
to assume that in the case of the first 60 quarters, seed
corn costs just as much as it did previously, but that less
seed is necessary, or that the fixed capital which forms
part of the value of the 60 quarters has become cheaper.

Let us write down the results so far obtained from the
analysis of Mill’s “illustration”.

First, it has emerged that:

Supposing that the 120 quarters were produced without any
constant capital and were the product of 60 working-days as
they were previously, whereas formerly, the 180 quarters, 60
quarters of which were constant capital, were the product of
90 working-days. In this case, the capital of 60
quarters laid out in wages, equal to 30 working-days but
commanding 60 working-days, would produce the same product
as formerly, namely, 120 quarters. The value of the
product would likewise remain unchanged, that is, one
quarter would be equal to half a working-day.
Previously the product was equal to 180 instead of 120 as at
present; but the 60 additional quarters represented only the
labour-time embodied in the constant capital. The cost
of production of wages has thus remained unchanged, and the
wages themselves—in terms of both use-value and
exchange-value—have also remained unchanged—one quarter being equal to half a working-day.
Surplus-value would similarly remain unchanged, namely, 60
quarters for 60 quarters, or half a working-day for half a
working-day. The rate of surplus-value in both cases
was 100 per cent. Nevertheless the rate of profit was
only 50 per cent in the first case, while it is now 100 per
cent. Simply because 60 : 60=100 per cent, while 60 :
120=50 per cent. The increase in the rate of profit,
in this case, is not [due] to any change in the production
cost of wages, but merely to the fact that constant capital
has been assumed to be zero. The position is similar
when the value of constant capital diminishes, and with it
the value of the capital advanced; that is, the
proportion of surplus-value to capital increases, and
this proportion is the rate of profit.

To obtain the rate of profit surplus-value is not only
calculated on that part of capital which really increases
and creates surplus-value, namely, the part laid out in
wages, but also on the value of the raw materials and
machinery whose value only reappears in the product.
It is calculated moreover on the value of the whole of the
machinery, not only on the part which really enters into the
process of creating value, i.e., the part whose wear and
tear has to be replaced, but also on that part which enters
only into the labour process.

Secondly, in the second example it was assumed
that capital I yields 180 quarters, equal to 90
working-days, so that 60 quarters (30 working-days)
represent constant capital; 60 quarters are variable capital
(representing 60 working-days, for 30 of which the workers
are paid); thus wages amount to 60 quarters (30
working-days) and surplus-value to 60 quarters (30
working-days on the other hand, the product of capital II
represents 100 working-days although it likewise comes to
180 quarters, 100 quarters of which are wages, and 80
surplus-value. In this case, the whole of the capital
advanced is laid out in wages. Here constant capital
is at zero; the real value of wages has risen although the
use-value the workers receive has remained the
same—one quarter; but a quarter is now equal to
10/18 of a working-day whereas
previously it was only worth
9/18. The [rate of]
surplus-value has declined from 100 per cent to 80 per cent,
that is, by 1/5 or by 20 per
cent. The rate of profit has increased from 50 per
cent to 80 per cent, that is, by 3/5
or by

60 per cent. In this case, therefore, the real
production cost of wages has not simply remained unchanged,
but has risen. Labour has become less productive and
consequently the surplus labour has diminished. And
yet the rate of profit has risen. Why? First of
all, because in this case there is no constant capital and
the rate of profit is consequently equal to the rate of
surplus-value. In all cases where capital is not
exclusively laid out on wages—an almost impossible
contingency in capitalist production—the rate of
profit must be smaller than the rate of surplus-value and it
must be smaller in the same proportion as the total value of
the capital advanced is greater than the value of the part
of the capital laid out in wages. Secondly, [the rate
of profit has risen because] capitalist II employs a
considerably greater number of workers than capitalist I,
thus more
than counterbalancing the difference in the productivity
of the labour they respectively employ.

Thirdly, from one point of view, the cases
outlined under the headings “firstly” and
“secondly” are a conclusive proof that
variations in the rate of profit can take place quite
independently of the cost of production of wages. For
under the heading “firstly” it was
demonstrated that the rate of profit can rise although the
cost of production of labour remains the same. Under
“secondly” it was demonstrated that the
rate of profit for capital II compared with that for capital
I rises although the productivity of labour declines, in
other words, although the production cost of wages
rises. This case therefore proves ||VIII-332| that if, on the other
hand, we compare capital I with capital II, the rate of
profit falls although the rate of surplus-value rises, the
productivity of labour increases and consequently the
production costs of wages fall. They amount to only
9/18 of a working-day [per quarter]
for capital I, whereas for capital II they amount to
10/18 of a working-day; but despite
this, the rate of profit is 60 per cent higher in the case
of capital II than in the case of capital I. In all
these cases, not only are variations in the rates of profit
not determined by variations in the production costs of
wages, but they take place in the same
proportions. Here it must be noted that it does
not follow from this that the movement of one is the
cause of movement of the other (for example, that the
rate of profit does not fall because the production costs of
wages fall, or that it does not rise because the production
costs of wages rise), but only that different circumstances
paralyse the opposite movements. Nevertheless, the
Ricardian law that variations in the rate of profit take
place in the opposite direction to variations in wages, that
one rises because the other falls, and vice versa, is
false. This law applies only to the rate of
surplus-value. At the same time, there exists
however a necessary connection (although not always) in the
fact that the rate of profit and the value of wages rise and
fall not in the opposite but in the same direction.
More manual labour is employed where the labour is less
productive. More constant capital is applied where the
labour is more productive. Thus in this context the
same circumstances which bring about an increase or a
decline in the rate of surplus-value, must as a consequence
bring about a decline or an increase in the rate of profit
[i.e., a movement] in the opposite direction.

### [b) Apparent Variation in the Rate of Profit Where the
Production of Constant Capital Is Combined with Its Working
Up by a single Capitalist]

But we shall now outline the case
as Mill himself conceived it, although he did not formulate
it correctly. This will at the same time clarify the
real meaning of his talk about the profits advanced by the
capitalist.

Despite any kind of “discovery” and any
possible “conjunction”, the example cannot be
left in the form in which Mill puts it forward, because it
contains absolute contradictions and absurdities and the
various presuppositions he makes cancel one another out.

Of the 180 quarters, 60 quarters (seed and fixed capital)
are supposed to consist of 20 quarters for profit and 40
quarters [wages] for 40 working-days, so that if the 20
quarters profit are omitted, the 40 working-days still
remain. According to this presupposition, the workers
therefore receive the whole product for their labour, and
consequently it is absolutely impossible to see where the 20
quarters profit and their value come from. If it is
assumed that they are merely nominal additions to the price,
if they do not constitute labour-time appropriated by the
capitalist, their omission would be just as profitable as if
20 quarters wages for workers who had not done any work were
included in the 60 quarters. Furthermore, the 60
quarters here simply express the value of the constant
capital. They are however supposed to be the product
of 40 working-days. On the other hand, it is assumed
that the remaining 120 quarters are the product of 60
working-days. But here working-days must be understood
as equal average labour. The assumption is therefore
absurd.

Thus one must assume, firstly, that in the 180 quarters
only 90 working-days are embodied and in the 60 quarters,
that is, the value of the constant capital, only 30
working-days. The assumption that the
profit—amounting to 20 quarters or to 10
working-days—can be omitted, is once again
absurd. For it must then be assumed that the 30
workers employed in the production of constant capital,
although not working for a capitalist, are nevertheless so
obliging that they are content to pay themselves wages which
only amount to half their labour-time, and not to reckon the
other half in their commodity. In a word, that that
they sell their working-day 50 per cent below its value.

Hence this assumption too is absurd.

But let us assume that capitalist I, instead of buying
his constant capital from capitalist II and then working it
up, combines both the production and the working up of
constant capital in his own undertaking. He thus
supplies seed, agricultural implements, etc., to
himself. Let us likewise ignore the discovery which
makes seed and fixed capital unnecessary. Supposing
that he expends 20 quarters (equal to 10 working-days) on
constant capital (for the production of his constant
capital) and 10 quarters on wages for 10 working-days, of
which the workers work 5 days for nothing, the calculation
would then be as follows:

Constant Capital

Variable capital for 80 workers

surplus-value

Total product

20 quarters

60+20=80 qrs. (wages for 80 working-days)

60+20=80 qrs.

180 qrs.

(10 working-days)

(=40 working-days)

(=40 working-days)

(=90 working-days)

The actual production costs of wages have remained the
same, and consequently the productivity of labour too.
The total product has remained the same, that is, 180
quarters, and the value of the 180 quarters has also
remained unchanged. The rate of surplus-value has
remained the same—80 quarters over 80 quarters.
The total amount or quantity of surplus-value has risen from
60 quarters to 80 quarters, that is, by 20 quarters.
The capital advanced has fallen from 120 to 100
quarters. Previously, 60 quarters were made on 120
quarters, or a rate of profit of 50 per cent. Now 80
quarters are made on 100 quarters, or a rate of profit of 80
per cent. The total value of the capital advanced has
fallen from 120 quarters by 20 quarters and the rate of
profit has risen from 50 per cent to 80 per cent. The
profit itself, irrespective of its rate, now amounts to 80
quarters, whereas previously it was 60 quarters, that is, it
has risen by 20 quarters, or as much as the amount (not the
rate) of the surplus-value.

Thus there has been no change here, no variation in the
production costs of real wages. The rise in the rate
of profit is due:

Firstly, to the fact that although the rate of
surplus-value
has not risen, the total amount has increased from 60
quarters to 80 quarters, that is, by a third; and it has
risen by a third, by 33 1/3 per cent,
because the capitalist now employs 80 workers and not 60 as
previously, that is, he exploits a third or 33
1/3 per cent more living labour; and
obtains the same rate of surplus-value from the 80 workers
he now employs as previously when he employed only 60
workers.

Secondly. While the absolute magnitude of
surplus-value (that is, the total profit) has risen by 33
1/3 per cent, i.e., from 60 to 80
quarters, the rate of profit has risen from 50 per cent to
80 per cent, by 30, that is, by 3/5
(since 1/5 of 50 is 10, and
3/5 30), i.e., by 60 per cent.
That is to say, the value of the capital laid out has fallen
from 120 [quarters] to 100, although the value of the part
of capital laid out in wages has risen from 60 to 80
quarters (from 30 to 40 working-days). This part of
the capital has increased by 10 working-days (20
quarters). On the other hand, the constant portion of
capital has decreased from 60 to 20 quarters (from 30
working-days to 10), that is, by 20 working-days. If
we subtract the 10 working-days by which the part of capital
laid out in wages has increased, then the total capital
expended decreases by 10 working-days (20 quarters).
Previously, it amounted to 120 quarters (60
working-days). Now it amounts to only 100 quarters (50
working-days). It has therefore decreased by a sixth,
that is, by 16 2/3 per cent.

Incidentally, this whole variation in the rate of profit
is only an illusion, only a transfer from one account book
to another. Capitalist I has 80 quarters profit
instead of 60 quarters, that is, an additional profit of 20
quarters. This, however, is the exact amount of profit
that the producer of constant capital made previously and
which he has now lost because capitalist I, instead of
buying his constant capital, now produces it himself, that
is, instead of | paying
capitalist II the surplus-value of 20 quarters (10
working-days) which the producer [of constant capital]
obtained from the 20 workers employed by him, capitalist I
now keeps it for himself.

80 quarters profit is made on 180 quarters as previously,
the only difference being that previously it was divided
between two people. The rate of profit appears to be
bigger, because previously capitalist I regarded the 60
quarters as constant capital only, which in fact they were
for him; he therefore disregarded the profit accruing to the
producer of constant capital. The rate of profit has
not altered, any more than the
surplus-value or any factor of production, including the
productivity of labour. Previously, the capital laid
out by the producer [of constant capital] amounted to 40
quarters (20 working-days); that [variable capital] laid out
by capitalist I amounted to 60 quarters (30
working-days), making a total of 100 quarters (50
working-days), and the profit of the first capitalist came
to 20 quarters, that of the other to 60, together 80
quarters (40 working-days). The whole product
amounting to 90 working-days (180 quarters) yielded 80
quarters profit on 100 laid out in wages and constant
capital. For society, the revenue deriving from the
profit has remained the same as before, and so has the ratio
of surplus-value to wages.

The difference arises from the fact that, when the
capitalist enters the commodity market as a buyer, he is
simply a commodity owner. He has to pay the full value
of a commodity, the whole of the labour-time embodied in it,
irrespective of the proportions in which the fruits of the
labour-time were divided or are divided between the
capitalist and the worker. If, on the other hand, he
enters the labour market as a buyer, he buys in actual fact
more labour than he pays for. If, therefore, he
produces his raw materials and machinery himself instead of
buying them, he himself appropriates the surplus labour he
would otherwise have had to pay out to the seller of the raw
materials and machinery.

It certainly makes a difference to the individual
capitalist although not to the rate of profit, whether he
himself derives a profit or pays it out to someone
else. (In calculating the reduction in the rate of
profit as a result of the growth of constant capital, the
social average is always taken as the basis, that is, the
aggregate amount of constant capital employed by society at
a particular moment and the proportion of this amount to the
amount of capital laid out directly in wages.) But
this point of view is seldom decisive and can seldom be
decisive even for the individual capitalist with regard to
such complex enterprises which do occur, for example, when
the capitalist is at the same time engaged in spinning and
weaving, making his own bricks, etc. What is decisive
here is the real saving in production costs, through saving
of time on transport, savings on buildings, on heating, on
power, etc., greater control over the quality of the raw
materials, etc. If he himself decided to manufacture
the machines he required, he would then produce them on a
small scale like a small producer who works to supply
his
own needs or the individual needs of a few customers, and
the machines would cost him more than they would if he
bought them from a machine manufacturer who produced them
for the market. Or if he wished at the same time to
spin and to weave and to make machines not only for himself,
but also for the market, he would require a greater amount
of capital, which he could probably invest to greater
advantage (division of labour) in his own enterprise.
This point of view can only apply when he provides for
himself a market sufficient to enable him to produce his
constant capital himself on an advantageous scale. His
own demand must be large enough to achieve this. In
this case, even if his work is less productive than that of
the proper producers of constant capital, he appropriates a
share of the surplus labour for which he would otherwise
have to pay another capitalist.

It can be seen that this has nothing to do with the rate
of profit. If—as in the example cited by
Mill—90 working-days and 80 workers were involved
previously, then nothing is saved from the production costs
by the fact that the surplus labour of 40 days (or 80
quarters) contained in the product is now pocketed by one
capitalist instead of by two, as was the case
previously. The 20 quarters profit (10 working-days)
simply disappears from one account book in order to appear
again in another.

This saving on previous profit, if it does not coincide
with a saving in labour-time and thus with a saving in
wages, is therefore a pure delusion.

### [c) On the Influence a Change in the value of Constant
Capital Exerts on surplus-value, Profit and Wages]

| Fourthly,
there remains the case in which the value of constant
capital decreases as a result of the increased productivity
of labour, and it remains for us to investigate whether or
not, and to what extent, this case is related to the real
production cost of wages or to the value of labour.
The question is, therefore, to what extent a real change in
the value of constant capital causes at the same time a
variation in the ratio of profit to wages. The value
of constant capital, its production costs, can remain
constant, yet more or less of it can be embodied in the
product. Even if its value is assumed to be constant,
the constant capital will increase in the measure that the
productivity of labour and production on a large scale
develop.
Variations in the relative amount of constant capital
employed while the production costs of the constant capital
remain stable or rise—variations which all affect
the rate of profit—are excluded in advance from this
investigation.

Furthermore, all branches of production whose products do
not enter directly or indirectly into the consumption of the
workers are likewise excluded. But variations in the
real rate of profit (that is, the ratio of the surplus-value
really produced in these branches of industry to the capital
expended) in these branches of industry affect the general
rate of profit, which arises as a result of the levelling of
profits, just as much as variations in the rate of profit in
branches of industry whose products enter directly or
indirectly into the consumption of the workers.

The question moreover must be reduced to the following:
How can a change in the value of constant capital
retrospectively affect the surplus-value? For once
surplus-value is assumed as given, the ratio of surplus to
necessary labour is given, and therefore also the value of
wages, i.e., their production cost. In these
circumstances, no change in the value of constant capital
can have any effect on the value of wages, any more than on
the ratio of surplus labour to necessary labour, although it
must always affect the rate of profit, the cost of
production of the surplus-value for the capitalist, and in
certain circumstances, namely, when the product enters into
the consumption of the worker, it affects the quantity of
use-values into which wages are resolved, although it does
not affect the exchange-value of wages.

Let us assume that wages are given, and that, for
example, in a cotton factory they come to 10 working hours
and surplus-value to 2 working hours. The price of raw
cotton falls by half as a result of a good harvest.
The same quantity of cotton which previously cost the
manufacturer £100, now costs him only £50.
The same amount of cotton requires just the same amount of
spinning and weaving as it did before. With an
expenditure of £50 for cotton, the capitalist can now
acquire as much surplus labour as he did previously with an
expenditure of £100, or, should he continue to spend
£100 on cotton, he will now receive, for the same
amount of money as he spent before, a quantity of cotton
from which he will be able to acquire twice the amount of
surplus labour. In both cases, the rate of
surplus-value, that is, the ratio of surplus-value to wages,
will be the same, but in
the second case the amount of surplus-value will rise,
since twice as much labour will be employed at the same rate
of surplus labour. The rate of profit will rise in
both cases, although there has been no change in the
production cost of wages. It will rise because, to
obtain the rate of profit, the surplus-value is calculated
on the production costs of the capitalist, that is,
on the total value of the capital he expends, and
this has fallen. He now needs a smaller outlay in
order to produce the same amount of surplus-value. In
the second case, not only the rate but also the amount of
profit will rise, because surplus-value itself has risen as
a consequence of the increased employment of labour, without
this increase resulting in an additional cost for raw
material. Here again, increases in the rate and the
amount of profit will take place without any kind of change
in the value of labour.

Suppose on the other hand that cotton doubles in value as
a result of a bad harvest so that the same amount of cotton
| which formerly cost
£100 now costs £200. In this case, the
rate of profit will fall at all events, but in certain
circumstances, the amount or absolute magnitude of profit
may fall as well. If the capitalist employs the same
number of workers, who do the same amount of work as they
did before, under exactly the same conditions as before, the
rate of profit will fall, although the ratio of surplus
labour to necessary labour, and therefore the rate and the
yield of surplus-value, will remain the same.
The rate of profit falls because the production costs of
surplus-value have risen, i.e., the capitalist has to spend
£100 more on raw material in order to appropriate the
same amount of other people’s labour-time as before.
However, if the capitalist is now forced to allocate a part
of the money which he formerly spent on wages to buying
cotton, e.g., to spend £150 on cotton, of which sum
£50 formerly went on wages, then the rate and the
amount of profit fall, the amount decreases because less
labour is being employed, even though the rate of
surplus-value remains the same. The result would be
the same if, owing to a bad harvest, there were not enough
cotton available to absorb the same amount of living labour
as formerly. In both cases, the amount and the rate of
profit would fall, although the value of labour would remain
the same; in other words, the rate of surplus-value or the
quantity of unpaid labour which the capitalist receives in
relation to the labour for which he pays wages, remains
unchanged.

Thus, when the rate of surplus-value, that is,
when the value of labour, remains unchanged, a
change in the value of constant capital must produce a
change in the rate of profit and may be accompanied by a
change in the total amount of profit.

On the other hand, as far as the worker is concerned:

If the value of cotton, and therefore the value of the
product into which it enters, falls, he still receives the
same amount of wages, equal to 10 hours of labour. But
he can now buy the cotton goods which he himself uses more
cheaply, and can therefore spend part of the money he
previously spent on cotton goods on other things. It
is only in this proportion that the necessities of life
available to him increase in quantity, that is, in the
proportion in which he saves money on the price of cotton
goods. For apart from this, he now receives no more
for a greater quantity of cotton goods than he did
previously for a smaller quantity. Other goods have
risen in the same proportion as cotton goods have
fallen. In short, a greater quantity of cotton goods
now has no more value than the smaller quantity had
previously. In this case, therefore, the value of
wages would remain the same, but it would represent a
greater quantity of other commodities
(use-values). Nevertheless, the rate of profit
would rise although, given the same circumstances, the rate
of surplus-value could not rise.

The opposite is the case when cotton becomes
dearer. If the worker is employed for the same amount
of time and still receives a wage equal to 10 hours as he
did previously, the value of his labour would remain the
same, but its use-value would fall insofar as the worker
himself is a consumer of cotton goods. In this case,
the use-value of wages would fail, its
value, however, would remain unchanged,
although the rate of profit would also fall. Thus,
whereas surplus-value and (real) wages always fall and rise
in inverse ratio (with the exception of the case where the
worker participates in the [yield of the] absolute
lengthening of his working-day; but when this happens, the
worker uses up his labour-power all the more quickly), it is
possible for the rate of profit to rise or fall in the first
case although the value of wages remains the same and their
use-value increases, in the second case although the
value of wages remains the same, while their
use-value falls.

Consequently, a rise in the rate of profit resulting from
a fall in the value of constant capital, has no
direct connection whatever with any kind of variation in the
real value of wages (that is, in the labour-time contained
in the wages).

If we assume, as in the above case, that cotton falls in
value by 50 per cent, then nothing could be more incorrect
than to say either that the production costs of wages have
fallen or that, if the worker is paid in cotton goods and
receives the same value as he did previously, that is, if he
receives a greater amount of cotton goods than he did
previously (since although 10 hours, for example, still
equals 10sh., I can buy more cotton goods for 10sh. than I
could before, because the value of raw cotton has fallen),
the rate of profit would remain the same. The rate of
surplus-value remains the same, but the | rate of profit rises.
The production costs of the product fall, because an
element of the product—its raw material—now
costs less labour-time than previously. The production
costs of wages remain the same as before, since the worker
works the same amount of labour-time for himself and
the same for the capitalist as he did before.
(The production costs of wages do not depend however on the
labour-time which the means of production used by the worker
cost, but on the time he works in order to reproduce his
wages. According to Mr. Mill, the production costs of
a worker’s wages would be greater if, for example, he worked
up copper instead of iron, or flax instead of cotton; and
they would be greater if be sowed flax seed rather than
cotton seed, or if he worked with an expensive machine
rather than with no machine at all, but simply with
tools.) The production costs of profit would
fall because the aggregate value, the total amount of the
capital advanced in order to produce the surplus-value would
fall. The cost of surplus-value is never greater than
the cost of the part of capital spent on wages. On the
other hand, the cost of profit is equal to the total cost of
the capital advanced in order to create this
surplus-value. It is therefore determined not only by
the value of the portion of capital which is spent on wages
and which creates the surplus-value, but also by the value
of the elements of capital necessary to bring into action
the one part of capital which is exchanged against living
labour. Mr. Mill confuses the production costs of
profit with the production costs of surplus-value, that is,
he confuses profit and surplus-value. This analysis
shows the importance of the cheapness or dearness of raw
materials for the industry which works them up (not to speak
of the relative cheapening of machinery*), even
assuming that the market price is equal to the value of
the commodity, that is, that the market price of the
commodity falls in exactly the same ratio as do the raw
materials embodied in it.

Colonel Torrens is therefore correct when he says with
regard to England:

In relation “… to a country in the condition
of England, the importance of a foreign market must be
measured not by the quantity of finished goods which it
receives, but by the quantity of the elements of
reproduction which it returns” (R. Torrens, A
Letter to [the Right Honourable] Sir Robert Feet
[…] on the Condition of England etc., second
ed., London, 1843, p. 275).

<The way Torrens seeks to prove this, however, is
bad. The usual talk about supply and demand.
According to him it would appear that if, for example,
English capital which manufactures cotton goods grows more
rapidly than capital which grows cotton, in the United
States for instance, then the price of cotton rises and
then, he says:

“… the value of cotton fabrics
will decline in relation to the elementary cost of their
production” [op. cit., p. 240].

That is to say, while the price of the raw material is
rising due to the growing demand from England, the price of
cotton fabrics, raised by the rising price of the raw
material, will fall; we can indeed observe at the present
time (spring 1862), for instance, that cotton twist is
scarcely more expensive than raw cotton and woven cotton
hardly any dearer than yarn. Torrens, however, assumes
that there is an adequate supply of cotton, though at a
rather high price, available for consumption by English
industry. The price of cotton rises above its
value. Consequently, if cotton fabrics are sold at
their value, this is only possible provided the
cotton-grower secures more surplus-value from the total
product than is his due, by actually taking part of the
surplus-value due to the cotton manufacturer. The
latter cannot replace this portion by raising the price,
because demand would fall if prices rose. On the
contrary, his profit may decline even more as a consequence
of falling demand than it does as a consequence of the
cotton-grower’s surcharge.

The demand for raw materials—raw cotton, for
example—is regulated annually not only by the
effective demand existing at a given moment, but by the
average demand throughout the year, that is, not only by the
demand from the mills that are working at the time, but by
this demand increased by the number of mills which,
experience shows, will start operating
during the course of the coming year, that is, by the
relative increase in the number of mills taking
place during the year, or by the surplus demand | corresponding to this relative
increase.

Conversely, if the price of cotton, etc., should fall,
e.g., as a result of an especially good harvest, then in
most cases the price falls below its value, again through
the law of demand and supply. The rate of
profit—and possibly, as we saw above, the total amount
of profit—increases, consequently, not only in the
proportion in which it would have increased had the cotton
which has become cheaper been sold at its value; but it
increases because the finished article has not become
cheaper in the total proportion in which the
cotton-grower sold his raw cotton below its value, that is,
because the manufacturer has pocketed part of the
surplus-value due to the cotton-grower. This does not
diminish the demand for his product, since its price falls
in any case due to the decrease in the value of
cotton. However, its price does not fall as much as
the price of raw cot-ton falls below its own value.

In addition, demand increases at such times because the
workers are fully employed and receive full wages, so that
they themselves act as consumers on a significant scale,
consumers of their own product. In cases in which the
price of the raw material declines, not as a result of a
permanent or continuous fall in its average production costs
but because of either an especially good or an especially
bad year (weather conditions), the workers’ wages do not
fall, the demand for labour, however, grows. The
effect produced by this demand is not merely
proportionate to its growth. On the contrary, when the
product suddenly becomes dearer, on the one hand many
workers are dismissed, and on the other hand the
manufacturer seeks to recoup his loss by reducing wages
below their normal level. Thus the normal demand on
the part of the workers declines, intensifying the now
general decline in demand, and worsening the effect this has
on the market price of the product.>

It was mainly his (Ricardian) conception of the
division of the product between worker and capitalist which
led Mill to the idea that changes in the value of constant
capital alter the value of labour or the production costs of
labour; for example, that a fall in the value of the
constant capital advanced results in a decline in the value
of labour, in its production costs, and therefore also in
wages. The value of yarn falls as a result of a
decrease in the value of the raw material—raw
cotton, for example. Its costs of production
decline: the amount of labour-time embodied in it is
reduced. If, for example, a pound of cotton twist were
the product of one man working a twelve-hour day, and if the
value of the cotton contained in this twist fell, then the
value of the pound of twist would fall in the precise degree
that the cotton required for spinning fell. For
example, [the price of] one pound of No. 40 Mule yarn 2nd
quality was 1s. on May 22nd, 1861. It was 11d.
on May 22nd, 1858 (11 6/8d. in actual
fact, since its price did not fall to the same extent as
that of raw cotton). But in the first case a pound of
fair raw cotton cost 8d. (8 1/8d. in
actual fact) and 7d. (7 3/8d. in
actual fact) in the second. In these cases, the value
of the yarn fell in exactly the same degree as the value of
cotton, its raw material. Consequently, says Mill, the
amount of labour remains the same as it was previously; if
it was 12 hours, the product is the result of the same 12
hours of labour. But there was 1d. less worth of the
pre-existing labour in the second case than in the
first. The labour [-time] is the same, but the
production costs of labour have been reduced (by 1d.).
Now although one pound of cotton twist as twist, as a
use-value, remains the product of 12 hours labour as it was
previously, the value of the pound of twist is
neither now, nor was it previously, the product of 12 hours
work by the spinner. The value of the raw cotton,
which in the first case amounted to two-thirds of 1s., i.e.,
8d., was not the product of the spinner; in the second case,
two-thirds of 11d., that is, 7d., was not his product.
In the first case the remaining 4d, is the product of 12
working hours, and just the same amount—4d.—is
the product in the second. In both cases, his labour
adds only a third to the value of the twist. Thus, in
the first case, only 1/3 lb. of twist
out of 1 lb. of yarn was the product of the spinner
(disregarding machinery) and it was the same in the second
case. The worker and the capitalist have only 4d. to
divide between them, the same as previously, that is,
1/3 lb. of twist. If the worker
buys cotton twist with the 4d., he will receive a greater
quantity of it in the second case than in the first, now
however a bigger quantity of twist is worth the same as a
smaller quantity of twist was previously. But the
division of the 4d. between worker and capitalist remains
the same. If the time worked by the worker to
reproduce or produce his wages is 10 hours, his surplus
labour amounts to 2 hours, as it did previously. He
receives 5/6 of 4d, or of
1/3 lb. of cotton
twist—as he did previously—and the capitalist
receives 1/6. Therefore no
change | has taken place
in respect of the division of the product, of the cotton
twist. None the less, the rate of profit has risen,
because the value of the raw material has fallen and,
consequently, the ratio of surplus-value to the total
capital advanced, that is, to the production costs of the
capitalist, has increased.

If, for the sake of simplification, we abstract from the
machines, etc., then the two cases stand as follows:

Price of 1 lb. of twist

Constant capital

Labour added

Wages

Total expenditure

surplus-value

Rate of profit

1st case

12d.

8d.

4d.

131/3 farthings

11d. 4/3 farthings

22/3 farthings

515/17 per cent

2nd case

11d.

7d.

4d.

131/3 farthings

10d. 4/3 farthings

22/3 farthings

614/31 per cent

Thus the rate of profit has risen although the
value of labour has remained the same and the
use-value of the labour as expressed in cotton twist has
risen. The rate of profit has risen without any kind
of variation in the labour-time which the worker
appropriates for himself, solely because the value of
the cotton, and consequently the total value of the
production costs of the capitalist, has fallen. 2
2/3 farthings on 11d.
4/3 farthings expenditure is naturally
less than 2 2/3 farthings on
10d. 4/3 farthings expenditure.

In the light of what has been said above, the
fallaciousness of the following passages with which Mill
concludes his illustration becomes clear,

“If the cost of production of wages
had remained the same as before, profits could not have
risen. Each labourer received one quarter of corn; but
one quarter of corn at that time was the result of the same
cost of production as 1 1/5 quarter
now. In order, therefore, that each labourer should
receive the same cost of production, each must […]
receive one quarter of corn, plus one-fifth” ([John
Stuart Mill, Essays on some unsettled Questions of Political
Economy, London, 1844,] p. 103).

“Assuming, therefore, that the
labourer is paid in the very article he produces, it is
evident that, when any saving of expense takes place in the
production of that article, if the labourer still receives
the same cost of production as before, he must receive an
increased quantity, in the very same ratio in which the
productive power of capital has been increased. But,
if
so, the outlay of the capitalist will bear exactly the
same proportion to the return as it did before; and profits
will not rise.” (This is wrong.) “The
variations, therefore, in the rate of profits, and those in
the cost of production of wages, go hand in hand, and are
inseparable. Mr. Ricardo’s principle […] is
strictly true, if by low wages be meant not merely wages
which are the produce of a smaller quantity of labour, but
wages which are produced at less cost, reckoning labour and
previous profits together” (loc. cit., p.104).

Thus according to Mill’s illustration, Ricardo’s view is
strictly true if low wages (or the production costs of wages
in general) are taken to mean not only the opposite of what
he said they mean, but if they are taken to mean absolute
nonsense, namely, that the production costs of wages are
taken to mean not that portion of the working-day which the
worker works to replace his wages, but also the production
costs of the raw material he works up and the machinery he
uses, that is, labour-time which he has not expended
at all—neither for himself nor for the capitalist.

Fifthly. Now comes the real question: How
far can a change in the value of constant capital affect the
surplus-value?

If we say that the value of the average daily wage is
equal to 10 hours or, what amounts to the same thing, that
from the working-day of, let us say, 12 hours which the
worker labours, 10 hours are required in order to produce
and replace his wages, and that only the time he works over
and above this is unpaid labour-time in which he produces
values which the capitalist | receives without having paid
for them; this means nothing more than that 10 hours of
labour are embodied in the total quantity of means of
subsistence which the worker consumes. These 10 hours
of labour are expressed in a certain sum of money with which
he buys the food.

The value of commodities however is determined by the
labour-time embodied in them, irrespective of whether this
labour-time is embodied in the raw material, the machinery
used up, or the labour newly added by the worker to the raw
material by means of the machinery. Thus, if there
were to be a constant (not temporary) change in the value of
the raw material or of the machinery which enter into this
commodity—a change brought about by a change in the
productivity of labour which produces this raw material and
this machinery, in short, the constant capital embodied in
this commodity—and if, as a result, more or
less labour-time were required in order to produce this
part of the commodity, the commodity itself would
consequently be dearer or cheaper (provided both the
productivity of the labour which transforms the raw material
into the commodity and the length of the working-day
remained unchanged). This would lead either to a rise
or to a fall in the production costs, i.e., the value, of
labour-power; in other words, if previously out of the 12
hours the worker worked 10 hours for himself, he must now
work 11 hours, or, in the opposite case, only 9 hours for
himself. In the first case, his labour for the
capitalist, i.e., the surplus-value, would have declined by
half, from two hours to one; in the second case it would
have risen by half, from two hours to three. In this
latter case, the rate of profit and the total profit of the
capitalist would rise, the former because the value of
constant capital would have fallen, and both because the
rate of surplus-value (and its amount in absolute figures)
would have increased.

This is the only way in which a change in the value of
constant capital can affect the value of labour, the
production cost of wages, or the division of the working-day
between capitalist and worker, hence also the
surplus-value.

However, this simply means that for the capitalist who,
for example, spins cotton, the necessary labour-time of his
own workers is determined not only by the productivity of
labour in the spinning industry, but likewise by the
productivity of labour in the production of cotton, of
machinery, etc., just as it is also determined by the
productivity in all branches of industry whose
products—although they do not enter as constant
capital, that is, either as raw material or as machinery,
etc., into his product (a product which, it is assumed,
enters into the consumption of the worker), into the
yarn—constitute a part of the circulating capital
which is expended in wages, that is, by the productivity in
the industries producing food, etc. What appears as
the product in one industry appears as raw material or
instrument of labour in another; the constant capital of one
industry thus consists of the products of another industry;
in the latter it does not constitute constant capital, but
is the result of the production process within this
branch. To the individual capitalist it makes a great
deal of difference whether the increased productivity of
labour (and therefore also the fall in the value of
labour-power) takes place within his own branch of industry
or amongst those which supply his industry with constant
capital. For the capitalist class, for
capital as a whole, it is all the same.

Thus this case <in which a fall (or a rise) in the
value of constant capital is not due to the fact that the
industry employing this constant capital produces on a large
scale, but to the fact that the production costs of constant
capital itself have changed> concurs with the laws
elaborated for surplus-value.

When in general we speak about profit or rate of profit,
then surplus-value is supposed to be
given. The influences therefore which determine
surplus-value have all operated. This is the
presupposition.

Sixthly. In addition, one could have set
forth how the ratio of constant capital to variable capital
and hence the rate of profit is altered by a
particular form of surplus-value. Namely, by the
lengthening of the working-day beyond its normal
limits. | This
results in the diminution of the relative value of the
constant capital or of the proportionate part of value which
it constitutes in the total value of the product. But
we will leave this till Chapter III where the greater part
of what has been dealt with here really belongs.

Mr. Mill, basing himself on his brilliant illustration,
advances the general (Ricardian) proposition:

“The only expression of the
law of profits … is, that they depend on the cost of
production of wages” (loc. cit., pp. 104-05).

On the contrary, one should say: The rate of profit (and
this is what Mr. Mill is talking about) depends
exclusively on the cost of production of wages only
in one single case. And this is when the rate
of surplus-value and the rate of profit are
identical. But this can only occur if the whole
of the capital advanced is laid out directly in wages, so
that no constant capital, be it raw material, machinery,
factory buildings, etc., enters into the product, or that
the raw material, etc., insofar as it does enter, is not the
product of labour and costs nothing—a case which is
virtually impossible in capitalist production.
Only in this case are the variations in the rate of
profit identical with the variations in the rate of
surplus-value, or, what amounts to the same thing, with the
variations in the production costs of wages.

In general however (and this also includes the
exceptional case mentioned above) the rate of profit is
equal to the ratio of surplus-value to the total value of
the capital advanced.

If we call the surplus-value S, and the value of
the capital advanced C, then profit works out at
S: C or S/C. This ratio is
determined not only by the size of S <and all
the factors which determine the production cost of wages
enter into the determination of S> but also by
the size of C. But C, the total value of
the capital advanced, consists of the constant capital,
c, and the variable capital, v (laid out in
wages). The rate of profit is therefore S :
(v+c)=S: C. But S itself, the
surplus-value, is determined not only by its own rate, i.e.,
by the ratio of surplus labour to necessary labour, in other
words, by the division of the working-day between capital
and labour, that is, its division into paid and unpaid
labour-time. The quantity of surplus-value, i.e., the
total amount of surplus-value, is likewise determined by the
number of working-days which capital exploits
simultaneously. And, for a particular capital, the
amount of labour-time employed at a definite rate of unpaid
labour depends on the time in which the product remains in
the actual production process without labour being
applied or without the same amount of labour as was required
formerly (for example, wine before it has matured, corn once
it has been sown, skins and other materials which are
subjected to chemical treatment for a certain period, etc.),
as well as on the length of time involved in the circulation
of the commodity, the length of time required for the
metamorphosis of the commodity, that is, the interval
between its completion as a product and its reproduction as
a commodity. How many days can be worked
simultaneously (if the value of wages, and therefore the
rate of surplus-value, is given) depends in general on the
amount of capital expended on wages. But on the
whole, the factors mentioned above modify the total amount
of living labour-time which a capital of a given size
can employ during a definite period—during a year, for
example. These circumstances determine the absolute
amount of labour-time which a given capital can
employ. This does not, however, alter the fact that
surplus-value is determined exclusively by its own rate
multiplied by the number of days worked
simultaneously. These circumstances only determine the
operation of the last factor, the amount of labour-time
employed.

The rate of surplus-value is equal to the ratio of
surplus labour in one working-day, that is, it is
equal to the surplus-value yielded by a single
working-day. For example, if the working-day is 12
hours and the surplus labour 2 hours, then these 2 hours
constitute 1/6 of the total
labour-time of 12 hours; but we must calculate them on the
necessary labour (or on the wages paid for it, they
represent the same quantity of labour-time in
materialised form); [therefore it is]
1/5 (1/5 of 10
hours=2 hours) (1/5=20 per
cent). In this case the amount of surplus-value
(yielded in a single day) is determined entirely by the
rate. If the capitalist operates on the scale of 100
such | days, then the
surplus-value (its total amount) will be 200 labour
hours. The rate has remained the same—200 hours
for 1,000 hours of necessary labour will give
1/5, or 20 per cent. If the rate
of surplus-value is given, its amount depends entirely on
the number of workers employed, that is, on the total amount
of capital expended on wages, variable capital. If the
number of workers employed is given, that is, the
amount of capital laid out in wages, the variable
capital, then the amount of surplus-value depends entirely
on its rate, that is, on the ratio of surplus labour to
necessary labour, on the production costs of wages, on the
division of the working-day between capitalist and
worker. If 100 workers (working 12 hours a day)
provide me with 200 labour hours, then the total amount of
surplus-value will be 200, the rate
1/5 of a [paid] working-day, or 2
hours. And the surplus-value comes to 2 hours
multiplied by 100 [=200]. If 50 workers provide me
with 200 labour hours, then the total amount of the
surplus-value is 200 hours; the rate is
2/5 of a (paid) working-day, that is,
4 hours. And the surplus-value amounts to 4 hours
multiplied by 50 =200. Since the total amount of
surplus-value is equal to the product of its rate and the
number of working-days, it can remain the same although the
factors change in an inverse ratio.

The rate of surplus-value is always expressed in the
ratio of surplus-value to variable capital. For
variable capital is equal to the total amount of the paid
labour-time; surplus-value is equal to the total amount of
unpaid labour-time. Thus the ratio of surplus-value to
variable capital always expresses the ratio of the unpaid
part of the working-day to the paid part. For example,
in the case mentioned previously, let the wage for 10 hours
be 1 thaler, where 1 thaler represents a quantity of silver
which contains 10 hours of labour. 100 working-days
are consequently paid for with 100 thaler. Now if the
surplus-value amounts
to 20 thaler, the rate is 20/100,
or 1/5, or 20 per cent. Or what
amounts to the same thing, the capitalist receives 2 hours
for every 10 working hours (equal to 1 thaler); for 100x10
working hours, that is, 1,000 hours, he receives 200 hours
or 20 thaler.

Thus, although the rate of surplus-value is determined
exclusively by the ratio of surplus labour-time to necessary
time, in other words, by the corresponding part of the
working-day which the worker requires to produce his wages,
that is, by the production cost of wages, the amount of
surplus-value is moreover determined by the number of
working-days, by the total quantity of labour-time which is
employed at this definite rate of surplus-value, that is, by
the total amount of capital expended on wages (if the rate
of surplus-value is given). But since profit is the
ratio, not of the rate of surplus-value, but of the total
amount of surplus-value to the total value of the capital
advanced, then clearly its rate is determined not only by
the rate, but also by the total amount of surplus-value, an
amount which depends on the compound ratio of the rate and
the number of workingdays, on the amount of capital expended
on wages and the production costs of wages.

If the rate of surplus-value is given, then its amount
depends exclusively on the amount of capital advanced (laid
out in wages). Now the average wage is the same, in
other words, it is assumed that workers in all branches of
industry receive a wage of 10 hours, for example. (In
those branches of industry where wages are higher than the
average, this, from our point of view and for the matter
under consideration, would amount to the capitalist
employing a greater number of unskilled
workers.) Thus, if it is assumed that the surplus
labour is equal, and this means that the entire normal
working-day is equal (the inequalities cancel one another
out in part since one hour of skilled labour, for example,
is equal to two hours of unskilled labour), | then the amount of the
surplus-value depends entirely on the amount of capital
expended [on wages]. It can therefore be said that the
amounts of surplus-value are proportional to the amounts of
capital laid out (in wages). This does not, however,
apply to profit, since profit [expresses] the ratio of
surplus-value to the total value of the capital expended,
and the portion which capitals of equal size lay out in
wages, or the ratio of variable capital to the total
capital, can be and is very different. The amount of
profit—as regards the different capitals—here
depends on the ratio between the variable capital and the
total capital, that is,
on v/c+v. Thus, if the rate of
surplus-value is given, and it is always expressed by
s/v, by the ratio of surplus-value to variable
capital, then the rate of profit is determined entirely by
the ratio of variable capital to the total capital.

The rate of profit is thus determined, firstly, by the
rate of surplus-value, that is, by the ratio of unpaid
labour to paid labour; and it changes, rises or falls
(insofar as this action is not rendered ineffectual by
movements of the other determining factors), with changes in
the rate of surplus-value. This, however, rises or
falls in direct proportion to the productivity of
labour and in inverse proportion to the value of
labour, that is, to the production costs of wages or the
quantity of necessary labour.

Secondly, however, the rate of profit is
determined by the ratio of variable capital to the total
capital, by v/c+v. The total amount of
surplus-value, where its rate is given, depends of course
only on the size of the variable capital, which, on the
assumption made, is determined by, or simply expresses, the
number of working-days worked simultaneously, that is, the
total amount of labour-time employed. But the rate of
profit depends on the ratio of this absolute magnitude of
surplus-value, which is determined by the variable capital,
to the total capital, that is, on the ratio between variable
capital and total capital, on v/c+v. Since S,
surplus-value, has been assumed as given in calculating the
rate of profit, and therefore v is likewise assumed
as given, any variations occurring in can be due only to
variations in c, that is, in constant capital.
For if v is given, the sum c+v, equal to
C, can only change if c changes and the ratio
v/c+v or v/C changes with changes in the
sum.

If v=100, c=400, then v+c=500 and
v/v+c = 100/500=
1/5 = 20 per cent. Therefore, if
the rate of surplus-value came to 5/10
or 1/2, [the amount of surplus-value]
would be 50. But since the variable capital is only
equal to 1/5 the total capital, the
profit is therefore a half of a fifth, that is, one-tenth
[of the total capital] and, in fact,
1/10 of 500, which is 50, that is, 10
per cent. The ratio v/c+v changes with every
change in c, but naturally not by the same numerical
quantity. If we assume that v and c
amount
originally to 10 each, that is to say, that the total
capital consists of half variable and half constant capital,
then v/v+c = 10/10+10
=10/20=1/2.
If the rate of surplus-value is 1/2 of
v, then it is equal to 1/4 of
C. In other words, if the surplus-value is 50
per cent, then in this case, where the variable capital is
C/2, the rate of profit comes to 25 per cent. If we
now assume that the constant capital is doubled, i.e., it
increases from 10 to 20 then v/c+v =
10/20+10 = 10/30
= 1/3. (The rate of
surplus-value, 1/2 of 10, would now be
1/2 of 1/3 of
C, that is, 1/6 of 30, that is,
5. Thus 1/2 of 10=5, 5calculated
on 10 is 50 per cent, 5 calculated on 30 is 16
2/3 per cent. On the other hand,
5 calculated on 20 was 1/4, that is 25
per cent.) The constant capital has doubled, that is,
it has increased from 10 to 20. But the sum c+v
has only increased by half namely, from 20 to 30. The
constant capital has increased by 100 per cent, the sum
c+v only by 50 per cent. The ratio v/c+v
originally 10/20, has fallen to
10/30, that is, from a half to a
third, that is, from 3/6 to
2/6. Thus it has fallen by only
1/6, where- as the constant capital
has been doubled. How the growth or decline in the
constant capital affects the ratio v/c+v depends
evidently on the proportion in which c and v
originally constitutee parts of the whole capital C
(consisting of c+v).

| The constant
capital (that is, its value) can firstly rise(or
fall) although the amounts of raw material, machinery, etc.,
employed, remain the same. In this case therefore, the
variations in constant capital are not determined by the
conditions of production prevailing in the industrial
process into which it enters as constant capital, but are
independent of them. Whatever the causes
bringing about the change in value may be, they always
influence the rate of profit. In this case, the same
amount of raw material, machinery, etc., has more or less
value than it did previously, because more or less
labour-time was required to produce them. The
variations, then, are determined by the conditions
production of the processes from which the component parts
of constant capital emerge as products. We have
already[yy] examined
how this affects the rate of profit.

As far as the rate of profit is concerned, whether in a
particular industry constant capital, raw material, for
example, rises or falls in value because its own production
has become dearer, etc., amounts to the same thing as if in
some branch of industry (or even in the same branch) more
expensive raw material were used for the production of one
type of commodity than for that of another type, while the
outlay on wages remained unchanged.

When there is equal expenditure on wage-labour, but the
raw material worked up by one kind of capital (corn,
for example) is dearer than the raw material worked up by
another (oats, for example) (or, for that matter, silver and
copper, etc., or wool and cotton, etc.), the rate of profit
for the two capitals must be in inverse proportion to the
dearness of the raw material. Thus, if on the average
the same profit is made in both branches of industry, then
this is only possible because the surplus-value is shared
between the capitalists, not in accordance with the ratio of
surplus-value which each capitalist produces in his own
particular sphere of production but in relation to the size
of the capital they employ. This can happen in two
ways. A, who works up the cheaper material, sells his
commodity at its real value; he thereby also pockets the
surplus-value he himself has produced. The price of
his commodity is equal to its value. B, who works up
dearer material, sells his commodity above its value and
charges as much in his price [in order that his commodity
should yield a corresponding profit] as if he had been
working up a cheaper material. If A and B exchange
their products, then it is the same for A as if he had
included a smaller amount of surplus-value in the price of
his commodity than it actually contains. Or as if both
A and B had from the very beginning charged a rate of profit
commensurate with the size of the capital invested, that is,
had divided the joint surplus-value between them on the
basis of the amount of the capital they had invested.
And this is what the term general rate of profit
denotes.

Naturally this equalisation does not take place when the
constant element in a particular capital such as raw
materials, for example, falls or rises temporarily under the
influence of the seasons, etc. Although the
extraordinary profits made by the cotton-spinners, for
example, in years of especially good cotton crops,
undoubtedly lead to an influx of new capital into this
branch of industry and give rise to the building of a large
number of new factories and of textile machinery. If a
bad year for
cotton ensues, then the loss [because of the sudden rise
in the price of cotton] will be all the greater.

Secondly, the production costs of machinery, raw
materials, in short of constant capital, remain the same,
but larger amounts of them may be required; their value
therefore grows in proportion to the growing amount used as
a result of the changed conditions of production in the
processes in which those elements enter as means of
production. In this case, as in the previous example,
the increase in the value of constant capital results of
course in a fall in the rate of profit. On the other
hand however, these variations in the conditions of
production themselves indicate that labour has become more
productive and thus that the rate of surplus-value has
risen. For more raw material is now being consumed by
the same amount of living labour only because it can now
work up the same amount in less time, and more machinery is
now being used only because the cost of machinery is smaller
than the cost of the labour it replaces. Thus it is a
question here of making up to a certain extent the fall in
the rate of profit by increasing the rate of surplus-value
and therefore also the total amount of surplus-value.

Finally, the two factors responsible for the change in
value can operate together in very different
combinations. For example, | the average value of raw
cotton has fallen, but simultaneously the value of the
amount of cotton which can be worked up in a certain time,
has increased even more. [Or] the value of cotton has
risen, and so has the value of the total amount of it which
can be worked up in a given time. Machinery with
increased productive capacity has become dearer in absolute
terms, but has become cheapen in relation to its efficiency,
and so forth.

It has been assumed hitherto that the variable capital
remains unchanged. Variable capital, however, can also
decline not only relatively but absolutely, as for example
in agriculture; that is, it can decline not only relative to
the size of the constant capital. Alternatively,
variable capital can increase absolutely. In this
case, however, it is the same as if it remained unchanged,
insofar as the constant capital grows in a greater or in the
same ratio the reasons mentioned above.

If the constant capital remains unchanged, then any rise
or fall of it in relation to the variable capital is
accounted for only by a relative rise or fall of the
constant capital due to an absolute fall or rise of the
amount of variable capital.

If the variable capital remains unchanged, then every
rise or fall in the constant capital can be explained only
by its own absolute rise or fall.

If variations take place in both variable and constant
capital simultaneously, then after deducting the variations
which are identical in both, the result is the same as if
one had remained unchanged while the other had risen or
fallen.

Once the rate of profit is given, the amount of
profit depends on the size of the capital employed. A
large capital with a low rate of profit yields a larger
profit than a small capital with a high rate of profit.

So much for this digression.

Apart from this, only the two following passages from
John Stuart Mill require comment:

“Capital, strictly speaking,
has no productive power. The only productive
power is that of labour; assisted, no doubt, by tools, and
acting upon raw materials”[zz] (op. cit., p. 90).

Strictly speaking, he here confuses capital with the
material elements of which it is constituted. However,
the passage is valuable for those who do the same thing and
who nevertheless assert that capital has productive
power. Of course, here too the matter is only stated
correctly insofar as the production of value is
considered. After all, nature also produces insofar as
it is only a question of use-values.

“… productive power of
capital […] can only mean[aaa] the quantity of real productive
power which the capitalist, by means of his capital, can
command” (loc. cit., p. 91).

Here capital is conceived correctly as a production
relation. |VIII-345||

||XIV-851| In a previous
notebook I have traced in detail how Mill violently attempts
to derive Ricardo’s law of the rate of profit (in
inverse proportion to wages) directly from the law of value
without distinguishing between surplus-value and
profit.

## [8. Conclusion]

This whole account of the Ricardian
school shows that it declines at two points.

1) Exchange between capital and labour corresponding to
the law of value.

2) Elaboration of the general rate of profit.
Identification of surplus-value and profit. Failure to
understand the relation between values and cost-prices.

* ||XV-887| <The following has to
be added with regard to Bailey’s insipidity.

When he says that A is distant from B, he does not
thereby compare them with one another, equalise them, but
separates them in space. They do not
occupy the same space. Nevertheless he still
declares that both are spatial things and are
differentiated in virtue of being things which belong in
space. He therefore makes them equal in advance, gives
them the same unity. However, here it is a question of
equation.

If I say that the area of the triangle A is equal to that
of the parallelogram B, this means not only that the area of
the triangle is expressed in the parallelogram and that of
the parallelogram in the triangle, but it means that if the
height of the triangle is equal to h and the base
equal to b, then
A=h×b/2, a property which
belongs to it itself just as it is a property of the
parallelogram that it is likewise equal to
h×b/2. As areas,
the triangle and the parallelogram are here declared to be
equal, to be equivalents, although as a triangle and a
parallelogram they are different. In order to equate
these different things with one another, each must represent
the same common element regardless of the
other. If geometry, like the political economy of
Mr. Bailey, contented itself with saying that the equality
of the triangle and of the parallelogram means that the
triangle is expressed in the parallelogram, and the
parallelogram in the triangle, it would be of little
value.> |XV-887||

* By
relative cheapening of machinery, I mean that the
absolute value of the amount of machinery employed
increases, but that it does not increase in the same
proportion as the mass and efficiency of the machinery.

[a] See this volume,
pp. 30-32.—Ed.

[b] See this volume,
pp. 14 and 29-31.—Ed.

[c] See this volume,
p. 58.—Ed.

[d] In the
manuscript, “proportion”.—Ed.

[e] The manuscript
has “time can do nothing”.—Ed.

[f] The manuscript
has “add to value” instead of “create
value”.—Ed.

[g] In the
manuscript, “Mr. Mill”.—Ed.

[h] This and the
other passages taken by Marx from Parisot’s translation of
Mill’s work are quoted in this volume from James Mill,
Elements of Political Economy, London, 1824.
These quotations are marked “Parisot” and the
French text Marx used can be found in the Appendix of this
volume.—Ed.

[i] This passage
taken by Marx from Prévost’s translation of
McCulloch’s book A Discourse on the Rise, Progress,
Peculiar Objects, and Importance of Political Economy,
is quoted here from the English original, p. 71.—Ed.

[j] See this
volume, pp. 99-100.—Ed.

[k] The manuscript
has “state”.—Ed.

[l] Marx wrote
most of this and of the two following paragraphs in
English.—Ed.

[m] The manuscript
has “his”.—Ed.

[n] See this
volume, p. 111.—Ed.

[o] Marx
wrote this paragraph and the one following the passage
quoted almost entirely in English.—Ed.

[p] Marx
wrote this paragraph in English—Ed.

[q] Under the
aspect of space.—Ed.

[r]
Marx here sums up Bailey’s argument in his own
words.—Ed.

[s] See this
volume, pp. 110-11.—Ed.

[t] See this
volume, p. 34.—Ed.

[u] Marx wrote
most of this paragraph and the one following the quotation
in English.—Ed.

[v] See this
volume, p. 143.—Ed.

[w] See this
volume, pp. 150 and 153-54.—Ed.

[x] In the
manuscript, this reads: “there is for it no function
to perform”.—Ed.

[y] See this
volume, p. 129.—Ed.

[z] Marx
here summarises the ideas developed by Bailey in Chapter X
of his book.—Ed.

[aa] See this
volume, pp. 85-88.—Ed.

[bb] Instead
of this part of the sentence Marx wrote in the manuscript:
“The three types of commodities cannot be entirely
distinguished from one another.”—Ed.

[cc] The beginning
of this paragraph up to “for resemblances”
is Marx’s summary of Malthus’s views on McCulloch.
The rest is a direct quotation.—Ed.

[dd] Instead of
“real and exchangeable”, the
manuscript has “real and relative or
exchangeable value”.—Ed.

[ee] Marx mentions
p. 211 and p. 225.—Ed.

[ff] Instead of
“required for the production of any commodity”,
the manuscript has “expended in its appropriation or
production”.—Ed.

[gg] The
manuscript has “a”.—Ed.

[hh] This passage
from McCulloch which Marx quotes from Prévost’s
translation is quoted here from The Edinburgh Review,
Vol. XL, March-July 1824.—Ed.

[ii] The
manuscript has “stationary” instead of
“constant”.—Ed.

[jj] The
manuscript has “to the wages”.—Ed.

[kk] In this
sentence, which is written in German, Marx summarises the
ideas set forth by McCulloch on
pp. 373-74.—Ed.

[ll] The
manuscript has “But the”.—Ed.

[mm] The
manuscript has “So a”.—Ed.

[nn] Instead of
“constitutes the […] profits”, the
manuscript has “constitutes the profit or
surplus which Ricardo cannot explain on the basis of
his theory”.—Ed.

[oo] Marx here is
summarising a paragraph printed on p, 18 of Stirling’s
book.—Ed.

[pp] This sentence
and the one preceding it are a summary by Marx of Mill’s
arguments on this page.—Ed.

[qq] This and the
following sentence are a compression by Marx of Mill’s
ideas, which are spread over several paragraphs in his
book.—Ed.

[rr] The
manuscript has “For a”.—Ed.

[ss] The
manuscript has “plus”.—Ed.

[tt] The
manuscript has “is therefore strictly
true”.—Ed.

[uu] It is
proved.—Ed.

[vv] The
manuscript has “fixed capital”.—Ed.

[ww] The
manuscript has “For a”.—Ed.

[xx] The
manuscript has “plus”.—Ed.

[yy] See this
volume, pp.218-25.—Ed.

[zz] The
manuscript has “machinery”.—Ed.

[aaa] The
manuscript has “is nothing but” instead of
“can only mean”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XXI] Opposition to the Economists (Based
on the Ricardian Theory)

| During the Ricardian period of political
economy its antithesis, communism (Owen) and socialism
(Fourier, St. Simon, the latter only in his first
beginnings), [comes] also [into being]. According to
our plan we are here concerned only with that opposition,
which takes as its starting-point the premises of the
economists.

It will be seen from the works which we quote that in
fact they all derive from the Ricardian form.

## 1. [The Pamphlet] “The Source and Remedy of
the National Difficulties”

### [a) Profit, Rent and Interest Regarded as Surplus Labour
of the Workers. The Interrelation Between the
Accumulation of Capital and the so-called “Labour
Fund”]

The Source and Remedy of the National Difficulties,
[deduced from Principles of Political Economy, in] a Letter
to Lord John Russell, London, 1821.
(anonymous).

This scarcely known pamphlet (about 40 pages) [which
appeared] at a time when McCulloch, “this incredible
cobbler”, began to make a stir, contains an important
advance on Ricardo. It bluntly describes
surplus-value—or “profit”, as Ricardo
calls it (often also “surplus produce”), or
“interest”, as the author of the pamphlet
terms it—as “surplus labour”, the
labour which the worker performs gratis, the labour he
performs over and above the quantity of labour by which the
value of his labour-power is replaced, i.e., by which he
produces an equivalent for his wages. Important as it
was to reduce value to labour, it was equally
important [to present] surplus-value, which
manifests
itself in surplus product, as surplus
labour. This was in fact already stated by Adam
Smith and constitutes one of the main elements in Ricardo’s
argumentation. But nowhere did he clearly express it
and record it in an absolute form.

Whereas the only concern of Ricardo and others is to
understand the conditions of capitalist production, and to
assert them as the absolute forms of production, the
pamphlet and the other works of this kind to be mentioned
seize on the mysteries of capitalist production which have
been brought to light in order to combat the latter from the
standpoint of the industrial proletariat.

[We read in the pamphlet:]

“… whatever may be due
to the capitalist” (from the viewpoint of the
capitalist) “he can only receive the surplus
labour of the labourer; for the labourer must
live…” (The Source and Remedy of the National
Difficulties, p. 23).

To be sure, these conditions of life, the minimum on
which the worker can live, and consequently also the
quantity of surplus labour which can be squeezed out of him,
are relative magnitudes.

“… if capital does not
decrease in value as it increases in amount, the capitalists
will exact from the labourers the produce of every hour’s
labour beyond what it is possible for the labourer to
subsist on: and however horrid and disgusting it may seem,
the capitalist may eventually speculate on the food that
requires the least labour to produce it, and eventually say
to the labourers, ‘You sha’n’t eat bread, because
barley meal is cheaper; you sha’n’t eat meat, because it is
possible to subsist on beet root and potatoes’.
And to this point have we come!” (loc. cit.,
pp. 23-24).

“… if the labourer can be
brought to feed on potatoes instead of bread, it is
indisputably true that more can be exacted from his labour;
that is to say,[a] if when he
fed on bread he was obliged to retain for the maintenance
of himself and family the labour of Monday and Tuesday,
he will, on potatoes, require only the half of Monday; and
the remaining half of Monday and the whale of Tuesday
are available either for the service of the state or the
capitalist” (loc. cit., p. 26).

Here profit, etc., is reduced directly to appropriation
of the labour-time for which the worker receives no
equivalent.

“It is admitted that the interest
paid to the capitalists, whether in the nature of rents,
interests of money, or profits of trade, is paid out of
the labour of others” (loc. cit., p. 23).

Rent, money interest, industrial profit, are thus merely
different forms of “interest of capital”,
which again is reduced
to the “surplus labour of the
labourer”. This surplus labour takes the form of
surplus produce. The capitalist is the owner of the
surplus labour or of the surplus produce. The surplus
produce is capital.

“Suppose … there is no
surplus labour, consequently, nothing that can be
allowed to accumulate as capital” (op. cit.,
p. 4).

And, immediately after this he says:

“… the possessors of the
surplus produce, or capital…”
(loc. cit., p. 4).

The author says, in a quite different sense from the
whining Ricardians:

“… the natural and necessary
consequence of an increased capital, [is] its decreasing
value…” (op. cit., pp. 21-22).

And in reference to Ricardo:

“Why set out by telling us that no
accumulation of capital will lower profits, because nothing
will lower profits but increased wages, when it appears that
if population does not increase with capital, wages would
increase from the disproportion between capital and labour;
and if population does increase, wages would increase from
the difficulty of producing food” (loc. cit., p. 23,
note).

| If the value of
capital, that is, the interest of capital, i.e., the surplus
labour which it commands, which it appropriates, did not
decrease when the amount of capital increases, the
[accumulation of] interest from interest would follow in
geometrical progression, and just as, calculated in money
(see Price), this presupposes an impossible
accumulation (rate of accumulation), so, reduced to its real
element—labour, it would swallow up not only the
surplus labour, but also the necessary labour as
“being due” to capital. (We shall return
to Price’s fantasy in the section on Revenue and its
Sources.)

“… if it were possible to
continue to increase capital and keep up the value of
capital, which is proved by the interest of money continuing
the same, the interest to be paid for capital would soon
exceed the whole produce of labour… capital
tends in more than arithmetical progression to increase
capital. It is admitted that the interest paid
to the capitalists, whether in the nature of rents,
interests of money, or profits of trade, is
paid out of the labour of others. If then[b] capital go on
accumulating […] the labour to be given for the use
of capital must go on increasing, interest paid for capital
continuing the same, till all the labour of all the
labourers of the society is engrossed by the
capitalist. […] that it is[c]b […] impossible to
happen;
for whatever may be due to the capitalist, he can
only receive the surplus labour of the labourer; for
the labourer must live…” (loc. cit.,
p. 23).

But it is not clear to him how the value of capital
decreases. He himself says, when dealing with Ricardo,
that this recurs because wages rise when capital accumulates
more rapidly than the population grows, or because the
value of wages (not the quantity) increases when the
population grows more rapidly than capital accumulates (or
even if population increases simultaneously) as a
result of decreasing productivity of agriculture. But
how does he explain it? He does not accept the latter
alternative; he assumes that wages are reduced more and more
to the minimum possible. [A reduction of
“interest” on capital] can only take place, he
says, because the portion of capital which is exchanged for
living labour declines relatively, although the worker is
exploited more than, or just as much as, before.

In any case, it is a step forward that the nonsense about
the geometrical progression of interest is reduced to its
true sense, that is, nonsense.*

There are, by the way, according to the pamphleteer, two
methods which, in spite of the growth of surplus product or
surplus labour, prevent capital from being forced to give a
greater share of its plunder back to the workers.

The first is the conversion of surplus product into fixed
capital, which prevents the labour fund—or the part of
the product consumed by the worker—from necessarily
increasing with the accumulation of capital.

The second is foreign trade, which enables the capitalist
to exchange the surplus product for foreign luxury articles
and thus to consume it himself, In this way, even that part
of the product which exists as necessaries may quite
well increase without the need for it to be returned to the
worker in the form of a proportionate increase in wages.

It should be noted that the first method—which is
only effective for a time and then neutralises its own
effect (at least as regards the fixed capital consisting of
machinery, etc., which itself is used in the production of
necessaries)—implies the transformation of surplus
product into capital, whereas the second method implies
consumption of an ever-increasing portion of the surplus
product by the capitalists—increasing consumption on
the part of the capitalists and not the reconversion
of surplus product into capital. If the same surplus
product were to remain in the form in which it immediately
exists, a greater part of it would have to be exchanged with
the workers as variable capital. The result would be
an increase in wages and a reduction in the amount of
absolute or relative surplus-value. Here is the real
secret of the necessity for increasing consumption by
“the rich”, advocated by Malthus, in order
that the part of the product which is exchanged for labour
and converted into capital, should have great value, yield
large profits, absorb a large amount of surplus
labour. He does not however propose that the
industrial capitalists themselves should increase their
consumption, but [allots] this function to
landlords, sinecurists, etc., because the urge for
accumulation and the urge for expenditure, if united in the
same person, would play tricks on each other. It is
here also that the erroneousness of the view of Barton,
Ricardo, and others stands out. Wages are not
determined by that portion of the total product that is
either consumed as, or can be converted into,
variable capital, but by that part of it which is
actually converted into variable capital. A part can
be consumed by retainers even in its natural form, another
can be consumed in the shape of luxury products by means of
foreign trade, etc.

Our pamphleteer overlooks two things:

As a result of the introduction of machinery, a mass of
workers is constantly being thrown out of employment, a
section of the population is thus made redundant; the
surplus product therefore finds fresh labour for which it
can be exchanged without any increase in population and
without any need to extend the absolute working-time.
Let us assume that 500 workers were employed previously,
whereas now there are 300 workers, who perform relatively
more surplus labour. The other 200 can be employed by
the surplus product as soon as it has increased
sufficiently. One portion of the old [variable]
capital is converted into fixed capital, the other gives
employment to fewer workers but extracts from them more
surplus-value in relation to their number and
in particular also more surplus product. The
remaining 200 are material created for the purpose of
capitalising additional surplus product.

||853a| The transformation
of necessaries into luxuries by means of
foreign trade, as interpreted in the pamphlet, is important
in itself:

1) because it puts an end to the nonsensical idea that
wages depend on the amount of necessaries produced, as if
these necessaries had to be consumed in this form by the
producers or even by the whole body of people engaged in
production, in other words that they must be transformed
again into variable capital or “circulating
capital”, as it is termed by Barton and Ricardo;

2) because it determines the whole social pattern of
backward nations—for example, the slave-holding states
in the United States of North America (see Cairnes)
or Poland, etc. (as was already understood by
old Büsch, unless he stole the idea from
Steuart)—which are associated with a world market
based on capitalist production. No matter how large
the surplus product they extract from the surplus labour of
their slaves in the simple form of cotton or corn, they can
adhere to this simple, undifferentiated labour because
foreign trade enables them [to convert] these simple
products into any kind of use-value.

The assertion that the portion of the annual product
which must be expended as wages depends on the size of the
circulating capital, is equal to the assertion that, when a
large part of the product consists of
“buildings”, houses for workers are built in
large numbers relative to the size of the working
population, and that consequently the workers must live in
cheap and well-built houses because the supply of houses
increases more quickly than the demand for them.

It is correct, on the other hand, that, if the surplus
product is large and the greater part of it is to be
employed as capital, then there must be an increase in the
demand for labour and therefore also in that part of the
surplus product which is exchanged for wages (provided large
numbers of workers did not have to be thrown out of work in
order to obtain a surplus product of this size). At
all events, it is not the absolute size of the
surplus product (in whatever form it may exist, even that of
necessaries) which necessarily requires it to be expended as
variable capital and which consequently causes an increase
in wages, but it is the desire to capitalise which results
in a large part of the surplus product being laid out in
variable capital and this would consequently
make wages grow with the accumulation of
capital if machinery did not constantly make [a section of]
the population redundant and if an ever greater portion of
capital (in particular as a result of foreign trade) were
not exchanged for capital, not for labour. The
portion of surplus product which is already produced
directly in a form in which it can only serve as capital,
and that portion of it which acquires this form as a result
of foreign trade, grow more rapidly than the portion which
must be exchanged against immediate labour.

The proposition that wages depend on existing capital and
that therefore a rapid accumulation of capital is the sole
means by which wages are made to rise, amounts to this:

On the one hand, to a tautology, if we disregard
the form in which the conditions of labour exist as
capital. How rapidly the number of workers can be
increased without worsening their living conditions depends
on the productivity of labour which a given number of
workers perform. The more raw materials, tools and
means of subsistence they produce, the greater the means at
their disposal not only to bring up their children so long
as these cannot work themselves, but to realise the labour
of the new, growing generation, and consequently to make the
growth of production keep up with, and even outdo, the
growth of population, since with the growth of the
population, the [workers’] skill increases, division of
labour grows, the possibility [for using] machinery grows,
constant capital grows, in short, the productivity of labour
grows.

While the growth of population depends on the
productivity of labour, the productivity of labour depends
on the growth of population. It is a case of
reciprocity. But this, expressed in capitalist terms,
signifies that the means of subsistence of the working
population depend on the productivity of capital, on the
largest possible portion of their product confronting them
as a force which commands their labour. Ricardo
himself expresses the matter correctly—I mean
the tautology—when he makes wages depend on the
productivity of capital, and the latter de-pendent on the
productivity of labour.[d]

That labour depends on the growth of capital signifies
nothing more than, on the one hand, the tautology | that the increase in the means
of subsistence and the means of employment of the
population depends on the productivity of the
population’s own labour and, secondly, expressed in
capitalist terms, that it depends on the fact that
the population’s own product confronts them as alien
property and that as a consequence their own
productivity confronts them as the productivity of
the things which they create.

In practice this means that the worker must appropriate
the smallest possible part of his product in order that the
largest possible part of it may confront him as
capital; he must surrender as much as possible to the
capitalist gratis, in order that the latter s means
for purchasing his labour—with what has been taken
away from the worker without compensation—may increase
as much as possible. In this case it can happen that,
if the capitalist has made the worker work a great deal for
nothing, he may then, in exchange for what he has received
for nothing, allow the worker to do a little less work for
nothing. However, since this prevents the achievement
of what is aimed at, namely, accumulation of capital as
rapidly as possible, the worker must live in such
circumstances that this reduction in the amount of labour he
performs for nothing is in turn counteracted by a growth of
the working population, either relatively as a result of the
use of machinery, or absolutely as a result of early
marriage. (It is the same relationship which is
derided by the Ricardians when the Malthusians preach it
between landlords and capitalists.) The workers must
relinquish the largest possible part of their product to the
capitalist without receiving anything in return, so as, when
conditions are more favourable, to buy back with new
labour a part of the product so relinquished. However,
since the conditions for the favourable change are at the
same time counteracted by this favourable change, it can
only be temporary and must turn again into its own
opposite.

3) What applies to the transformation of necessaries into
luxuries by means of foreign trade, applies in general to
luxury production, whose unlimited diversification and
expansion depends, however, on foreign trade. Although
the workers engaged in luxury production produce capital for
their employers, their product, in the form in which it
exists, cannot be transformed into capital, either constant
or variable capital.

Luxury products, apart from those which are sent abroad
to be exchanged for necessaries which enter into variable
capital either in whole or in part, simply constitute
surplus labour and [moreover] surplus labour which is
immediately in the shape
of surplus products which the rich consume as
revenue. But they do not represent only the surplus
labour of the workers who produce them. On the
average, these perform the same surplus labour as the
workers in other branches of industry. But in the same
way as one-third of the product, which contains a third of
the surplus labour, can be considered as the embodiment of
this surplus labour, and the remaining two-thirds as
reproduction of the capital advanced, so the surplus labour
of the producers of those necessaries which constitute the
wages of the producers of luxuries can also be considered as
the necessary labour of the work-in g class as a
whole. Their surplus labour consists 1) of that part
of the necessaries which is consumed by the capitalists and
their retainers; and 2) of the total amount of
luxuries. With regard to the individual capitalist or
a particular branch of industry the matter appears quite
different. For the capitalist, one part of the
luxuries created by him represents merely an equivalent for
the capital laid out.

If too large a part of surplus labour is embodied
directly in luxuries, then clearly, accumulation and the
rate of reproduction will stagnate, because too small a part
is reconverted into capital. If too small a part [of
surplus labour] is embodied in luxuries, then the
accumulation of capital (that is, of that part of the
surplus product which can in kind serve as capital again)
will proceed more rapidly than increase in population, and
the rate of profit will fall, unless a foreign market for
necessaries exists.

### [b) On the Exchange Between Capital and Revenue in the
Case of Simple Reproduction and of the Accumulation of
Capital]

In the exchange between capital and revenue I have
regarded wages, too, as revenue and have merely examined the
relationship of constant capital to revenue. The fact
that the revenue of the worker is at the same time variable
capital is important only insofar as in the accumulation of
capital—the formation of new capital—the surplus
consisting of means of subsistence (necessaries) in the
possession of the capitalist producing them can be exchanged
directly for the surplus consisting of raw materials or
machinery in the possession of the capitalist producing
constant capital. Here one form of revenue is
exchanged for the other, |
and, once the exchange is effected, the revenue of A is
converted into the constant capital of B and the revenue of
B into the variable capital of A.

In considering this circulation, reproduction and manner
of replacement of the different capitals, etc., one must
first of all disregard foreign trade.

Secondly, it is necessary to distinguish between the two
aspects of the phenomenon:

1) Reproduction on the existing scale,

2) Reproduction on an extended scale, or accumulation;
transformation of revenue into capital.

With regard to 1.

I have shown:

That what the producers of necessaries have to
replace is 1) their constant capital, 2) their variable
capital. The part of their product in excess of these
two constitutes the surplus product, the material
existence of surplus-value, which in its turn only
represents surplus labour.

Variable capital, that part of their product which
represents it, is made up of wages, the revenue of the
workers. This part already exists here in the
natural form in which it serves as variable capital
once again. With this part, the equivalent reproduced
by the worker, the labour of the worker is bought once
again. This is the exchange of capital for immediate
labour. The worker receives this part in the form of
money with which he buys back his own product, or other
products of the same category. This is the exchange of
the different portions of the variable part of capital
for one another after the worker has in the form of
money received an assignment to his quota. This is
exchange of one part of newly added labour for another part
within the same category (necessaries).

The part of the surplus product (newly added labour)
consumed by the capitalists (who produce necessaries)
themselves, is either consumed by them in kind or they
exchange one type of surplus product existing in consumable
form against another type. This is exchange of revenue
for revenue, both of them consisting of newly added
labour.

We cannot really speak of exchange between revenue and
capital in the above transaction. Capital
(necessaries) is exchanged against labour
(labour-power). This is therefore not an exchange of
revenue for capital. It is true that as soon as the
worker receives his wages, he consumes them. But what
he exchanges for capital is not his revenue, but his
labour.

The third part [of the product of the producer of
necessaries which constitutes] constant capital is exchanged
for a part of the
product of those manufacturers who produce constant
capital; namely, for that part which represents newly added
labour. This consists of an equivalent for the wages
(that is, of variable capital) and of the surplus product,
the surplus-value, the revenue of the capitalists which
exists in a form in which it can only be consumed
industrially and not individually. On the one hand,
this is therefore exchange of the variable capital of
these producers for a part of the necessaries which
constitute the constant capital [of the producers of
necessaries]. In fact they exchange a part of their
product which constitutes variable capital but exists in the
form of constant capital, for a part of the product of those
manufacturers who produce necessaries, a part which
constitutes constant capital but exists in the form of
variable capital. Here newly added labour is exchanged
for constant capital.

On the other hand, that part of the product which
represents surplus product but exists in the form of
constant capital is exchanged for a portion of necessaries
which represents constant capital for its producers.
Here revenue is exchanged for capital. The revenue of
the capitalists who produce constant capital is exchanged
for necessaries and replaces the constant capital of the
capitalists who produce necessaries.

Finally, a part of the product of the capitalists who
produce constant capital, namely, that part which itself
represents constant capital, is replaced partly in kind,
partly through barter (concealed by money) between the
producers of constant capital.

It is assumed in all this that the scale of reproduction
is the same as the original scale of production.

If we enquire what part of the total annual product is
made up of newly added labour, then the calculation is quite
simple.

A. Consumable articles [for individual
consumption. These] consist of three parts.
[Firstly,] the revenue of the capitalist which equals the
surplus labour added during the year.

Secondly, wages, i.e., variable capital, which is equal
to the newly added labour by which the workers have
reproduced their wages.

Finally, the third part, raw materials, machinery,
etc. This is constant capital, that part of the value
of the product which is only retained, not produced.
That is, it is not labour newly added during the course of
the year.

| If we call constant
capital [in this category] c', variable capital
v', and surplus product, the revenue r', then
this category consists of [c' and v'+r']:

c' (which constitutes a part
of the product) is merely retained value and does not
consist of newly added labour; on the other hand,
v'+r' consist of labour newly added during the course
of the year.

The total product [of the category A] (or its value)
Pa after deduction of c',
therefore, consists of newly added labour.

Thus the product of category A, namely:
Pa–c', is equal to the labour newly added
during the course of the year.

B. Articles for industrial
consumption.

Here also v''+r'' are made up of newly
added labour. But not c'', the constant
capital which operates in this sphere.

But v''+r''=c' for which they are exchanged.
c' is transformed into variable capital and revenue for
B. On the other hand, v'' and r'' are
transformed into c', into constant capital for A.

The product of the category [B, that is]
Pb. Pb–c''
is equal to the labour newly added during the course of the
year.

But Pb-c''=c', for the whole
product of Pb after deduction of c'',
the constant capital employed in this category, is exchanged
for c'.

After v''+r'' have been exchanged for
c', the matter can be presented as follows:

Pa consists solely of newly added
labour, the product of which is divided between profits and
wages, that is, it constitutes the equivalent of necessary
labour and the equivalent of surplus labour. For the
v''+r'' which now replace c' are equal to
the newly added labour in category B.

Thus the whole product Pa—not
only its surplus product, but also its variable capital and
its constant capital—consists of the products of
labour newly added during the course of the year.

On the other hand, Pb can be regarded
in such a way that it does not represent any part of the
newly added labour, but merely old labour which is retained,
For its part c'' does not represent newly added
labour. Neither does the part c' which it has
received in exchange for v''+r'', for this
c' represents the constant capital laid out in A, and
not newly added labour.

The whole part of the annual product which, as variable
capital, constitutes the revenue of the workers and as
surplus product constitutes the consumption fund of the
capitalist, therefore consists of newly added labour,
whereas the remaining part of the product, which represents
constant capital, consists merely of old labour which has
been retained and simply replaces constant capital.

Consequently, just as it is correct to say that the whole
portion of the annual product which is consumed as revenue,
wages and profits (together with the branches of profit,
rent, interest, etc., as well as the wages of the
unproductive labourers) consists of newly added labour, so
it is false to assert that the total annual product resolves
itself into revenue, wages and profits and thus merely into
portions of newly added labour. A part of the annual
product resolves itself into constant capital, which
regarded as value does not comprise newly added
labour and, as regards use does not form part of either
wages or profits. Its value represents accumulated
labour in the real sense of the word, and its use-value, the
utilisation of this accumulated past labour.

On the other hand, it is equally correct that the
labour added during the year is not represented
entirely by that part of the product which constitutes wages
and profits. For these wages and profits also buy
services, that is, labour which does not enter into the
product of which wages and profit form [a part]. These
services are labour which is used up in the consumption of
the product and does not enter into its immediate
production.

| With regard to 2.

It is a different matter with regard to accumulation,
transformation of revenue into capital, reproduction on
an extended scale, insofar as this latter does not
simply result from more productive employment of the
old capital. Here the whole new capital consists of
newly added labour, that is, of surplus labour in the form
of profit, etc. But although it is correct that here
the entire element in new production arises from and
consists of newly added labour—which is a part of the
surplus labour of the labourers—it is wrong to assume,
as the economists do, that, when it is converted into
capital, it constitutes only variable capital, that is,
wages. Let us suppose for example that a part of the
surplus product of the farmer is exchanged for a part of the
surplus product of the machine manufacturer. It is
then possible that the latter will convert the corn into
variable capital and employ more workers, directly or
indirectly. On the other hand, the farmer has
converted a part of his surplus product into constant
capital, and it is possible that, as a result of this
conversion, he will discharge some of his old workers
instead of taking on new ones. The farmer may
cultivate more land. In this case, a part of his corn
will be converted not into wages, but into constant capital,
etc.

It is precisely accumulation which reveals clearly that
everything—i.e., revenue, variable capital and
constant capital—is nothing but appropriated
alien labour; and that both the means of labour with
which the worker works, and the equivalent he receives for
his labour, consist of labour performed by the worker and
appropriated by the capitalist, who has not given any
equivalent for it.

[The same applies] even to original accumulation.
Let us assume that I have saved £500 from my
wages. In fact, therefore, this Sum represents
not only accumulated labour but, in contrast to the
“accumulated labour” of the capitalist,
my own labour accumulated by me and for me. I
convert the £500 into capital, buy raw material, etc.,
and take on workers. Profit is, say, 20 per cent, that
is, £100 a year. In five years I shall have
“eaten up” my capital in the form of revenue
(provided new accumulation does not continuously take place
and the £100 [profit] is consumed). In the sixth
year, my capital of £500 itself consists of other
people’s labour appropriated without any equivalent.
If, on the other hand, I had always accumulated half of the
profit made, the process [of eating up my original capital]
would have been slower, for I would not have consumed so
much, and [the process of appropriating other people’s
labour] more rapid.

capital

Profit

Consumed

First year

500

100

50

Second year

550

110

55

Third year

605

121

60

Fourth year

665

133

66

Fifth year

731

146

73

Sixth year

804

160

So

Seventh year

884

176

88

Eighth year

972

194

97

569

My capital will have been almost doubled in eight years
although I have consumed more than my original
capital. The capital of £972 does not contain a
single farthing of paid labour or of labour for which I have
returned any kind of equivalent. I have consumed my
entire original capital in the form of revenue, that is, I
have received an equivalent for it, which I have
consumed. The new capital consists solely of the
appropriated labour of other people.

In considering surplus-value as such, the original form
of the product, hence of the surplus product, is of no
consequence. It
becomes important when considering the actual process of
reproduction, partly in order to understand its forms, and
partly in order to grasp the influence of luxury production,
etc., on reproduction. Here is another example of how
use-value as such acquires economic significance.

### [c) The Merits of the Author of the pamphlet and the
Theoretical Confusion of His Views. The Importance of
the Questions He Raises about the Role of Foreign Trade in
Capitalist society and of “Free Time” as Real
Wealth]

|| Now to return to
our pamphlet.

“Suppose the whole labour of the
country to raise just sufficient for the support of the
whole population; it is evident there is no surplus labour,
consequently, nothing that can be allowed to accumulate as
capital. Suppose the whole labour of the country to
raise as much in one year as would maintain it two
years, it is evident one year’s consumption must perish, or
for one year men must cease from productive labour.
But the possessors of the surplus produce, or
capital, will neither maintain the population the
following year in idleness, nor allow the produce to perish;
they will employ them upon something not directly and
immediately productive, for instance, in the erection of
machinery, etc., etc., etc. But the third year, the
whole population may again return to productive labour, and
the machinery erected in the last year coming now into
operation, it is evident the produce […] will be
greater than the first year’s produce [… ]
and[e] the produce of
the machinery in addition. […] this surplus
labour must[f] perish,
or be put to use as before; and this usance again adds to
the productive power […] of the society […]
till men must cease from productive labour for a
time, or the produce of their labour must perish, This is
the palpable consequence in the simplest state of
society” (op. cit., pp. 4-5).

“The demand of other countries is
limited, not only by our power to produce, but by
their power to produce… ”

<This is the answer to Say’s assertion that we do not
produce too much, but they produce too little. Their
power to produce is not necessarily equal to our power to
produce.>

“For do what you will, in a series of
years the whole world can take little more of us, than we
take of the world […] so that all your foreign trade,
of which there is so much talking, never did, never could,
nor ever can, add one shilling, or one doit to the wealth of
the country, as for every bale of silk, chest of tea, pipe
of wine that ever was imported, something of equal value was
exported; and even the profits made by our merchants in
their foreign trade are paid by the consumer of the return
goods here” (op. cit., pp. 17-18).

“…foreign trade is mere
barter and exchange for the convenience and enjoyment of the
capitalist: he has not a hundred bodies, nor a hundred legs:
he cannot consume, in cloth and cotton stockings, all the
cloth and cotton stockings that are manufactured; therefore
they are exchanged for wines and silks; but those wines
and silks represent the surplus labour of our own
population, as much as the cloths and cottons, and in
this way the destructive power of the capitalist list is
increased beyond all bounds:—by foreign trade the
capitalists contrive to outwit nature, who had put a
thousand natural limits to their exactions, and to their
wishes to exact; there is no limit now, either to their
power, or […] desires…” (loc. cit.,
p. 18).

One sees that he accepts Ricardo’s teaching on foreign
trade. In Ricardo’s work its only purpose is to
support his theory of value or to demonstrate that
his views on foreign trade are not at variance with
it. But the pamphlet stresses that it is not only
national labour, but also national surplus labour which
is embodied in the outcome of foreign trade.

If surplus labour or surplus-value were represented only
in the national surplus product, then the increase of value
for the sake of value and therefore the exaction of surplus
labour would be restricted by the limited, narrow circle of
use-values in which the value of the [national] labour would
be represented. But it is foreign trade which develops
its [the surplus product’s] real nature as value by
developing the labour embodied in it as social labour which
manifests itself in an unlimited range of different
use-values, and this in fact gives meaning to abstract
wealth.

“… It is the infinite
variety of wants, and of the kinds of
commodities” <and therefore also the infinite
variety of real labour, which produces those different kinds
of commodities> “necessary to their
gratification, which alone renders the passion for
wealth” (and hence the passion for appropriating other
people’s labour) “indefinite and insatiable”
(Wakefield’s edition of Adam Smith, An Inquiry into the
Nature and Source of the Wealth of Nations, Vol. 1,
London, 1835, p. 64, note).

But it is only foreign trade, the development of the
market to a world market, which causes money to develop into
world money and abstract labour into social
labour. Abstract wealth, value, money, hence
abstract labour, develop in the measure that concrete
labour becomes a totality of different modes of labour
embracing the world market. Capitalist production
rests on the value or the transformation of the
labour embodied in the product into social labour. But
this is only [possible] on the basis of foreign trade and of
the world market. This is at once the pre-condition
and the result of capitalist production.

| The pamphlet is no theoretical treatise. [It is a]
protest against the false reasons given by the economists
for the distress and the “national difficulties”
of the times. It does not, consequently, make the
claim that its conception of surplus-value as surplus
labour carries with it a general criticism of the entire
system of economic categories, nor can this be expected of
it. The author stands rather on Ricardian ground and
is only consistent in stating one of the consequences
inherent in the system itself and he advances it in the
interests of the working class against capital.

For the rest, the author remains a captive of the
economic categories as he finds them. Just as in the
case of Ricardo the confusion of surplus-value with profit
leads to undesirable contradictions, so in his case the fact
that he christens surplus-value the interest of
capital.

To be sure, he is in advance of Ricardo in that he first
of all reduces all surplus-value to surplus labour, and when
he calls surplus-value interest of capital, he at the
same time emphasises that by this he understands the general
form of surplus labour in contrast to its special
forms—rent, interest of money and industrial
profit.

“…interest paid to the
capitalists, whether in the nature” (it should
be shape, form) “of rents, interests of money,
or profits of trade” ([The Source and Remedy
of the National Difficulties, London, 1821,]
p. 23).

He thus distinguishes the general form of surplus labour
or surplus-value from their particular forms, something
which neither Ricardo nor Adam Smith [does], at least not
consciously or consistently. But on the other hand, he
applies the name of one of these particular
forms—interest—to the general form. And
this suffices to make him relapse into economic slang.

“The progress of […]
increasing capital would, in established societies, he
marked by the decreasing interest of money, or, which is the
same thing,[g] the
decreasing quantity of the labour of others that would be
given for its use…” (op. cit., p. 6).

This passage reminds one of Carey. But with him it
is not the labourer who uses capital, but capital which uses
the labourer. Since by interest he understands
surplus labour in any form, the matter of the remedy of our
“national difficulties” amounts to an increase
in wages; for the reduction of interest means a
reduction of surplus labour.
However, what he really means is that in the exchange of
capital for labour the appropriation of alien labour should
be reduced or that the worker should appropriate more of his
own labour and capital less.

Reduction of surplus labour can mean two things:

Less work should be performed over and above the time
which is necessary to reproduce the labour-power, that is,
to create an equivalent for wages;

or, less of the total quantity of labour should
assume the form of surplus labour, that is,
the form of time worked gratis for the capitalist; therefore
less of the product in which labour manifests itself should
take the form of surplus product; in other words, the
worker should receive more of his own product and less of it
should go to the capitalist.

The author is not quite clear about this himself, as can
be seen from the following passage which is really the last
word in this matter as far as the pamphlet is concerned:

A[h] nation is
really rich only if no interest is paid for the use of
capital; when only six hours instead of twelve hours are
worked… “Wealth […] is
disposable time, and nothing more” (loc. cit.,
p. 6).

Since what is understood by interest here is profit,
rent, interest—in short, all the forms of
surplus-value—and since, according to the author
himself, capital is nothing but the produce of labour,
i.e., accumulated labour which is able to exact in exchange
for itself not only an equal quantity of labour, but surplus
labour, according to him the phrase: capital bears no
interest, therefore means that capital | does not exist. The
product is not transformed into capital. No surplus
product and no surplus labour exist. Only
then is a nation really rich.

This can mean however: There is no product and no labour
over and above the product and the labour required
for the reproduction of the workers. Or, they [the
workers] themselves appropriate this surplus either
of the product or of the labour.

That the author does not simply mean the latter
is, however, clear from the fact that the words “no
interest is paid for the use of capital” are
juxtaposed to the proposition that a nation is really rich
when only six hours not twelve hours are worked[i];
“wealth […] is disposable time, and
nothing more”.

This can now mean:

If everybody has to work, if the contradiction between
those who have to work too much and those who are idlers
disappears—and this would in any case be the result
of capital ceasing to exist, of the product ceasing to
provide a title to alien surplus labour—and if,
in addition, the development of the productive forces
brought about by capitalism is taken into account, society
will produce the necessary abundance in six hours,
[producing] more than it does now in twelve, and, moreover,
all will have six hours of “disposable time”,
that is, real wealth; time which will not be absorbed in
direct productive labour, but will be available for
enjoyment, for leisure, thus giving scope for free activity
and development, Time is scope for the development of
man’s faculties, etc. The economists themselves
justify the slave-labour of the wage-labourers by saying
that it creates leisure, free time for others, for
another section of society—and thereby also for the
society of wage-labourers.

Or it can also mean:

The workers now work six hours more than the time
(now) required for their own reproduction.
(This can hardly be the author’s view, since he describes
what they use now as an in human minimum.) If
capital ceases to exist, then the workers will work for six
hours only and the idlers will have to work the same amount
of time. The material wealth of all would thus be
depressed to the level of the workers. But all would
have disposable time, that is, free time for their
development.

The author himself is obviously not clear about
this. Nevertheless, there remains the fine
statement:

A nation is really rich when six hours instead of twelve
hours are worked. “Wealth […]
is disposable time, and nothing more.”

Ricardo himself, in the chapter entitled “Value
and Riches, Their Distinctive Properties”, also
says that real wealth consists in producing the greatest
possible amount of values in use having the least possible
[exchange-] value. This means, in other words, that
the greatest possible abundance of material wealth is
created in the shortest possible labour-time. Here
also, the “disposable time” and the enjoyment of
that which is produced in the labour-time of others, appear
as the real wealth, but like everything in capitalist
production—and consequently in its
interpreters—it appears in the form of a
contradiction. In Ricardo’s work the contradiction
between riches and value later
appears in the form that the net product should be as
large as possible in relation to the gross product, which
again, in this contradictory form, amounts to saying that
those classes in society whose time is only partly or not at
all absorbed in material production although they enjoy its
fruits, should be as numerous as possible in comparison with
those classes whose time is totally absorbed in material
production and whose consumption is, as a consequence, a
mere item in production costs, a mere condition for their
existence as beasts of burden. There is always the
wish that the smallest possible portion of society should be
doomed to the slavery of labour, to forced labour.
This is the utmost that can be accomplished from the
capitalist standpoint.

The author puts an end to this. Labour-time,
even if exchange-value is eliminated, always remains the
creative substance of wealth and the measure of the
cost of its production. But free time,
disposable time, is wealth itself, partly for the
enjoyment of the product, partly for free activity
which—unlike labour—is not dominated by the
pressure of an extraneous purpose which must be fulfilled,
and the fulfilment of which is regarded as a natural
necessity or a social duty, according to one’s
inclination.

It is self-evident that if labour-time is reduced to a
normal length and, furthermore, labour is no longer
performed for someone else, but for myself, and, at the same
time, the social contradictions between master and men,
etc., being abolished, it acquires a quite different, a free
character, it becomes real social labour, and finally the
basis of disposable time—the labour of a
man who has also disposable time, must be of a much higher
quality than that of the beast of burden.

## 2. Ravenstone. [The View of Capital as the
Surplus Product of the Worker. Confusion of the
Antagonistic Form of Capitalist Development with Its
Content. This Leads to a Negative Attitude Towards the
Results of the Capitalist Development of the Productive
Forces]

| Piercy Ravenstone,
M. A., Thoughts on the Funding System, and its
Effects, London, 1824.

A most remarkable work.

The author of The Source and Remedy of the National
Difficulties discussed above understands surplus-value
in its original form, i.e., that of Surplus
labour. Consequently his attention
is mainly centred on the extent of labour-time. In
particular, the conception of surplus labour or
[surplus-] value in its absolute form; the extension of
labour-time beyond that required for the reproduction of the
labourer himself, not the reduction of necessary labour as a
result of the development of the productive power of
labour.

The reduction of this necessary labour is the principal
aspect examined by Ricardo, but in the way it is carried out
in capitalist production, namely, as a means for extending
the amount of labour-time accruing to capital. This
pamphlet, on the contrary, declares that the final aim is
the reduction of the producers’ labour-time
and the cessation of labour for the possessor of surplus
produce.

Ravenstone seems to assume the working-day as
given. Hence, what he is particularly interested
in—just as was also the author of the pamphlet
previously discussed, so that the theoretical questions only
crop up incidentally—is relative surplus-value or the
surplus product (which accrues to capital) as a result of
the development of the productive power of labour. As
is usual with those who adopt this standpoint, surplus
labour is conceived here more in the form of surplus
product, whereas in the previous [pamphlet], surplus product
is conceived more in the form of surplus labour.

“To teach that the wealth and power
of a nation depend on its capital is to make industry
ancillary to riches, to make men subservient to
property” ([Ravenstone, Thoughts on the Funding
System, and its Effects, London, 1824,] p. 7).

The opposition evoked by the Ricardian theory—on
the basis of its own assumptions—has the following
characteristic feature.

To the same extent as political economy
developed—and this development finds its most
trenchant expression in Ricardo, as far as fundamental
principles are concerned—it presented labour as the
sole element of value and the only creator of use-values,
and the development of the productive forces as the only
real means for increasing wealth; the greatest possible
development of the productive power of labour as the
economic basis of society. This is, in fact, the
foundation of capitalist production. Ricardo’s
work, in particular, which demonstrates that the law of
value is not invalidated either by landed property or by
capitalist accumulation, etc., is, in reality, only
concerned with eliminating all contradictions or phenomena
which appear to run
counter to this conception. But in the same measure
as it is understood that labour is the sole source of
exchange-value and the active source of use-value,
“capital” is likewise conceived by the
same economists, in particular by Ricardo (and even more by
Torrens, Malthus, Bailey, and others after him), as the
regulator of production, the source of wealth and the aim of
production, whereas labour is regarded as wage-labour, whose
representative and real instrument is inevitably a pauper
(to which Malthus’s theory of population contributed), a
mere production cost and instrument of production dependent
on a minimum wage and forced to drop even below this minimum
as soon as the existing quantity of labour is
“superfluous” for capital. In this
contradiction, political economy merely expressed the
essence of capitalist production or, if you like, of
wage-labour, of labour alienated from itself, which stands
confronted by the wealth it has created as alien wealth, by
its own productive power as the productive power of its
product, by its enrichment as its own impoverishment and by
its social power as the power of society. But this
definite, specific, historical form of social labour
which is exemplified in capitalist production is proclaimed
by these economists as the general, eternal form, as a
natural phenomenon, and these relations of production
as the absolutely (not historically) necessary, natural and
reasonable relations of social labour. Their thoughts
being entirely confined within the bounds of capitalist
production, they assert that the contradictory form
in which social labour manifests itself there, is just as
necessary as labour itself freed from this
contradiction. Since in the self-same breath they
proclaim on the one hand, labour as such (for them,
labour is synonymous with wage-labour) and on the other,
capital as such—that is the poverty of the
workers and the wealth of the idlers—to be the sole
source of wealth, they are perpetually involved in absolute
contradictions without being in the slightest degree aware
of them. (Sismondi was epoch-making in
political economy because he had an inkling of this
contradiction.) Ricardo’s phrase “labour
or capital” reveals in a most striking fashion
both the contradiction inherent in the terms and the
naïvety with which they are stated to be identical.

Since the same real development which provided bourgeois
political economy with this striking theoretical expression,
unfolded the real contradictions contained in it, especially
the contradiction between the growing wealth of the English
“nation” and the growing misery of the workers,
and since moreover these
contradictions are given a theoretically
compelling if unconscious expression in the Ricardian
theory, etc., it was natural for those thinkers ||XV-862| who rallied to the side of
the proletariat to seize on this contradiction, for which
they found the theoretical ground already prepared.
Labour is the sole source of exchange-value and the only
active creator of use-value. This is what you
say. On the other hand, you say that capital is
everything, and the worker is nothing or a mere production
cost of capital. You have refuted yourselves.
Capital is nothing but defrauding of the
worker. Labour is everything.

This, in fact, is the ultimate meaning of all the
writings which defend the interests of the proletariat from
the Ricardian standpoint basing themselves on his
assumptions. Just as little as he [Ricardo]
understands the identity of capital and labour
in his own system, do they understand the
contradiction they describe. That is why the most
important among them—Hodgskin, for
example—accept all the economic pre-conditions of
capitalist production as eternal forms and only desire to
eliminate capital, which is both the basis and necessary
consequence [of these preconditions].

Ravenstone’s main idea is as follows:

The development of the productive power of labour creates
capital or property, in other words a surplus
product for “idlers”, non-workers; and indeed
the more the productive power of labour develops, the more
it produces this, its parasitical excrescence which sucks it
dry. Whether the title to this surplus product, or the
power to appropriate the product of other people’s labour,
accrues to the non-worker because he already possesses
wealth, or because he possesses land, landed property, does
not affect the case. Both are capital, that is,
mastery over the product of other people’s labour. For
Ravenstone property is merely appropriation of the
products of other people’s labour and this is only possible
insofar as and in the degree that productive industry
develops. By productive industry Ravenstone
understands industry which produces necessaries.
Unproductive industry, the industry of consumption,
is a consequence of the development of capital, or
property. Ravenstone appears ascetic like the author
of the pamphlet discussed above.[j] In this respect he himself remains
a captive of the notions set forth by the economists.
Without capital, without property, the
necessaries of the workers would be produced in abundance,
but there would be no luxury industry. Or it can also
be said that Ravenstone, like the author of the pamphlet
discussed above, understands or at least in fact admits the
historical necessity of capital; since capital,
according to the author of the pamphlet, produces surplus
labour over and above the labour strictly necessary for
the maintenance [of the worker] and at the same time leads
to the creation of machinery (what he calls fixed capital)
and gives rise to foreign trade, the world market, in order
to utilise the surplus product filched from the workers
partly to increase productive power, partly to give this
surplus product the most diverse forms of use-value far
removed from those required by necessity. Similarly,
according to Ravenstone, no conveniences, no machinery, no
luxury products would be produced without capital and
property, neither would the development of the natural
sciences have taken place, nor the literary and artistic
productions which owe their existence to leisure, nor the
urge of the wealthy to receive an equivalent for their
“surplus product” from the non-workers.
Ravenstone and the pamphleteer do not say this in
justification of capital, but simply seize on it as a point
of attack because all this is done in opposition to
[the interest of] the workers and not for
them. But in fact they thus admit that this is a
result of capitalist production, which is therefore a
historical form of social development, even though it stands
in contradiction to that part of the population which
constitutes the basis of that whole development, In this
respect they share the narrow-mindedness of the economists
(although from a diametrically opposite position) for they
confuse the contradictory form of this development
with its content. The latter wish to perpetuate the
contradiction on account of its results. The former
are determined to sacrifice the fruits which have developed
within the antagonistic form, in order to get rid of the
contradiction. This distinguishes their opposition to
[bourgeois] political economy from that of contemporary
people like Owen; likewise from that of Sismondi, who harks
back to antiquated forms of the contradiction in order to be
rid of it in its acute form.

[Ravenstone writes:]

It is the “wants” of the poor which
“constitute his” (the rich man’s)
“wealth… When all were equal, none would
labour for another. The necessaries of life would be
overabundant whilst its comforts were entirely
wanting” (op. cit., p. 10).

“The industry which produces is the
parent of property; that which aids consumption is its
child” (loc. cit., p. 12).

“It is this[k] growth of property, this greater
ability to maintain idle men, and unproductive industry,
that in political economy is called capital”
(loc. cit., p. 13).

“As the destination of property is
expense, as without that it is wholly useless to its owner,
its existence is intimately connected with that | of the industry of
consumption” (loc. cit.).

“If each man’s labour were but
enough to procure his own food, there could be no
property, and no part of a people’s industry could be
turned away to work for the wants of the imagination”
(loc. cit., pp. 14-15).

“In every [subsequent] stage of
society, as increased numbers and better contrivances add to
each man’s power of production, the number of those who
labour is gradually diminished… Property
grows from the improvement of the means of production; its
sole business is the encouragement of idleness. When
each man’s labour is barely sufficient for his own
subsistence, as there can be no property, there will be no
idle man. When one man’s labour can maintain five,
there will be four idle men for one employed in production:
in no other way can the produce be consumed…
the object of society is to magnify the idle at the expense
of the industrious, to create power out of plenty”
(loc. cit., p. 11).

<With regard to rent he says (not quite correctly,
for it is precisely here that it is necessary to explain why
rent accrues to the landlord and not to the farmer, the
industrial capitalist) what applies to surplus-value in
general, insofar as it develops as a result of the increase
in the productivity of labour.

“In the early stages of society, when
men have no artificial assistance to their powers of
industry, the proportion of their earnings which can be
afforded to rent is exceedingly small: for land […]
has no natural value, it owes all its produce to
industry. But every increase of skill adds to the
proportion which can be reserved for rent. Where the
labour of nine is required for the maintenance of ten, only
one-tenth of the gross produce can be given to rent.
Where one man’s labour is sufficient for the maintenance of
five, four—fifths will go to rent, or the other
charges of the state, which can only be provided for out of
the surplus produce of industry. The first proportion
seems to have prevailed in England at the time of the
Conquest, the last is that which actually takes place”
now since “only one-fifth part of the people are
[…] employed in the cultivation of the
land”… (op. cit., pp. 45-46).

“… so true it is that society
turns every improvement but to the increase of
idleness”… (loc. cit., p. 48).>

Note. An original piece of work. Its
real subject is the modern system of national debt, as its
title indicates.

Amongst other things he says:

“…the history of the last
thirty years[l]
[…] has achieved no higher adventure than the turning
of a few Jews into gentlemen, and a few blockheads into
political economists” (op. cit., pp. 66-67).

The funding system has one beneficial
consequence although “the ancient gentry of the
land” are robbed “of a large portion of their
property” in order “to transfer it to these new
fangled hidalgos as a reward for their skill in the arts of
fraud and peculation… If it encourage fraud and
meanness; if it clothe quackery and pretension in the garb
of wisdom; if it turn a whole people into a nation of
jobbers … if it break down all the prejudices of rank
and birth to render money the only distinction among men
… it destroys the perpetuity of
property…” (op. cit., pp. 51-52).

[See Labour Defended against the Claims of Capital, Hodgskin 1825.]

## 3. Hodgskin

Labour Defended against the Claims of Capital; or, the
Unproductiveness of Capital Proved, By a Labourer,
London, 1825. (With reference to the Present
Combinations amongst Journeymen.)

Thomas Hodgskin, Popular Political Economy. Four
Lectures delivered at the London Mechanics’ Institution,
London, 1827.

The anonymous first work is also by Hodgskin.
Whereas the pamphlets mentioned previously and a series of
similar ones have disappeared without trace, these writings,
especially the first one, made a considerable stir and are
still regarded as belonging to the most important works of
English political economy (see John Lalor, Money and
Morals, London, 1852). We shall consider each of
these works in turn.

### [a) The Thesis of the Unproductiveness of Capital as a
Necessary Conclusion from Ricardo’s Theory]

Labour Defended etc. As the title indicates,
the author wishes to prove the “unproductiveness of
capital”.

Ricardo does not assert that capital is productive of
value. It only adds its own value to the product,
and its own value depends on the labour-time required for
its reproduction. It only has value as accumulated
labour (or rather |,
materialised labour) and it only adds this—its
value—to the product in which it is embodied. It
is true that he is inconsistent when discussing
the general rate of profit. But this is precisely
the contradiction which his opponents attacked.

As far as the productivity of capital in relation to
use-value is concerned, this is construed by Smith,
Ricardo and others, and by political economists in general,
as meaning nothing else than that products of previous
useful work serve anew as means of production, as objects of
labour, instruments of labour and means of subsistence for
the workers. The objective conditions of labour do not
face the worker, as in the primitive stages, as mere natural
objects (as such, they are never capital), but as natural
objects already transformed by human activity. But in
this sense the word “capital” is quite
superfluous and meaningless. Wheat is nourishing not
because it is capital but because it is wheat. The
use-value of wool derives from the fact that it is wool, not
capital. In the same way, the action of steam-powered
machinery has nothing in common with its existence as
capital. It would do the same work if it were not
“capital” and if it belonged, not to the factory
owner, but to the workers. All these things serve in
the real labour process because of the relationship which
exists between them as use-values—not as
exchange-values and still less as capital—and the
labour which sets them in motion. Their productivity
in the real labour process, or rather the productivity of
the labour materialised in them, is due to their nature as
objective conditions of real labour and not to their
social existence as alienated, independent
conditions which confront the worker and are
embodied in the capitalist, the master over living
labour. It is as wealth, as Hopkins (not
our Hodgskin) rightly says, and not as
“net” wealth, as product and not as
“net” product, that they are here consumed and
used. It is true that the particular social form of
these things in relation to labour and their real
determinateness as factors of the labour process are as
confused and inseparably interwoven with one another in the
minds of the economists as they are in the mind of the
capitalist. Nevertheless, as soon as they analyse the
labour process, they are compelled to abandon the term
capital completely and to speak of material of labour,
means of labour, and means of subsistence. But the
determinate form of the product as material, instrument and
means of subsistence of the worker expresses nothing but the
relationship of these objective conditions to labour;
labour itself appears as the activity which dominates
them. It says however nothing at all about [the
relationship of] labour and capital, only about the
relationship
of the purposeful activity of men to their own products
in the process of reproduction. They neither cease to
be products of labour nor mere objects which are at the
disposal of labour. They merely express the
relationship in which labour appropriates the objective
world which it has created itself, at any rate in this form;
but they do not by any means express any other domination
of these things over labour, apart from the fact that
activity must be appropriate to the material, otherwise it
would not be purposeful activity, labour.

One can only speak of the productivity of capital
if one regards it as the embodiment of definite social
relations of production. But if it is conceived in
this way, then the historically transitory character of this
relationship becomes at once evident, and the general
recognition of this fact is incompatible with the continued
existence of this relationship, which itself creates the
means for its abolition.

But the economists do not regard it [capital] as such a
relationship because they cannot admit its relative
character, and do not understand it either. They
simply express in theoretical terms the notions of the
practical men who are engrossed in capitalist production,
dominated by it and interested in it.

In his polemic [with the bourgeois economists], Hodgskin
himself starts out from a standpoint which is economically
narrow-minded. Insofar as they [the economists] define
capital as an eternal production relation, they reduce it to
the general relations of labour to its material conditions,
relations which are common to all modes of production and do
not express the specific nature of capital. Insofar as
they hold that capital produces “value”, the
best of them and [especially] Ricardo, admit that it does
not produce any value which it has not received and
constantly continues to receive from labour, since the value
of a product is determined by the labour-time necessary to
reproduce it, that is, its value is the result of living,
present labour and not of past labour. And as Ricardo
emphasises, increase in the productivity of labour is marked
by the continuous devaluation of the products of past
labour. On the other hand, the economists continually
mix up the definite, specific form in which these things
constitute capital with their nature as things and as simple
elements of every labour process. The mystification
contained in capital—as employer of
labour—is not explained by them, but it is
constantly expressed by them unconsciously, for it is
inseparable from the material aspect of capital.

| The first pamphlet[m] draws the correct conclusions from
Ricardo and reduces surplus-value to surplus
labour. This is in contrast to Ricardo’s opponents
and followers who continue to adhere to his confusion of
surplus-value with profit.

In opposition to them, the second pamphlet[n] defines relative
surplus-value more exactly as being dependent on the level
of development of the productive power of labour.
Ricardo says the same thing, but he avoids the conclusion
drawn by the second pamphlet [that by Ravenstone], namely,
that the increase in the productive power of labour only
increases capital, the wealth of others which dominates
labour.

Finally, the third pamphlet[o] bursts forth with the general
statement, which is the inevitable consequence of Ricardo’s
presentation—that capital is
unproductive. This is in contrast to Torrens,
Malthus and others, who, taking one aspect of the Ricardian
theory as their point of departure, turn Ricardo’s statement
that labour is the creator of value into the opposite—that capital is the creator of value. The pamphlet,
moreover, disputes the statement—which recurs in all
of them, from Smith to Malthus, especially in the latter
where it is elevated into an absolute dogma (ditto in the
case of James Mill)—that labour is absolutely
dependent on the amount of capital available, as this
is the condition of its existence.

Pamphlet No. 1 ends with the statement:

“Wealth is disposable time, and
nothing more”.[p]

### [b) Polemic against the Ricardian Definition of
Capital as Accumulated Labour. The Concept of
Coexisting Labour. Underestimation of the Importance
of Materialised Past Labour. Available Wealth in
Relation to the Movement of Production]

According to Hodgskin, circulating capital is nothing but
the juxtaposition of the different kinds of social
labour (coexisting labour) and accumulation is nothing but
the amassing of the productive powers of social labour, so
that the accumulation of the skill and knowledge (scientific
power) of the workers themselves is the chief form of
accumulation, and infinitely more
important than the accumulation—which goes hand in
hand with it and merely represents it—of the
existing objective conditions of this accumulated
activity. These objective conditions are only
nominally accumulated and must be constantly produced anew
and consumed anew.

“… productive capital and
skilled labour are […] one.” “Capital and
a labouring population are precisely synonymous” (
[Hodgskin, Labour Defended against the Claims of
Capital, London, 1825,] p. 33).

These are simply further elaborations of Galiani’s
thesis:

“… The real wealth … is
man” (Della Moneta, Custodi. Parte
Moderna, t. III, p. 229).

The whole objective world, the “world of
commodities”, vanishes here as a mere aspect, as the
merely passing activity, constantly performed anew, of
socially producing men. Compare this
“idealism” with the crude, material fetishism
into which the Ricardian theory develops in the writings
“of this incredible cobbler”, McCulloch, where
not only the difference between man and animal disappears
but even the difference between a living organism and an
inanimate object. And then let them say that as
against the lofty idealism of bourgeois political economy,
the proletarian opposition has been preaching a crude
materialism directed exclusively towards the satisfaction of
coarse appetites.

In his investigations into the productivity of capital,
Hodgskin is remiss in that he does not distinguish between
how far it is a question of producing use-values or
exchange-values.

Further—but this has historical
justification—he takes capital as it is defined by the
economists. On the one hand (insofar as it operates in
the real process of production) as a merely physical
condition of labour, and therefore of importance only as a
material element of labour, and (in the process of the
production of value) nothing more than the quantity of
labour measured by time, that is, nothing different from
this quantity of labour itself. On the other hand,
although in fact, insofar as it appears in the real process
of production, it is a mere name for, and re-christening
of, labour itself, it is represented as the power
dominating and engendering labour, as the basis of the
productivity of labour and as wealth alien to labour.
And this without any intermediate links. This is how
he found it. And he counterposes the real aspect of
economic development to this bourgeois humbug.

“…capital is a sort of
cabalistic word, like church or state, or any other
of those general terms which are invented by those
who fleece the rest of mankind to conceal the hand that
shears them” (Labour Defended etc., p.17).

In accordance with the tradition he found prevailing
among the economists, he distinguishes between circulating
and fixed capital; circulating capital moreover is described
as that part which mainly consists of, or is used as, means
of subsistence for the workers.

It is maintained “that division of labour is
a consequence of previous accumulation of
capital”. But “the effects
attributed to a stock of commodities, under the
name of circulating capital, are caused by coexisting
labour”(op. cit., pp. 8, 9).

Faced with the crude conception of the economists, it is
quite correct to say that “circulating capital”
is only “the name” for “a stock of”
certain “commodities”. Since the
economists have not analysed the specific social
relationship which is represented in the metamorphosis of
commodities, they can understand only the
material aspect of circulating capital. All the
differentiations in capital arising from the circulation
process |—in fact
the circulation process itself—are actually nothing
but the metamorphosis of commodities (determined by their
relationship to wage-labour as capital) as an aspect of the
reproduction process.

Division of labour is, in one sense, nothing but
coexisting labour, that is, the coexistence of
different kinds of labour which are represented in
different kinds of products or rather
commodities. The division of labour in the
capitalist sense, as the breaking down of the particular
labour which produces a definite commodity into a series of
simple and coordinated operations divided up amongst
different workers, presupposes the division of labour within
society outside the workshop, as separation of
occupations. On the other hand, it [division of
labour] increases it [separation of occupations]. The
product is increasingly produced as a commodity in the
strict sense of the word, its exchange-value becomes the
more independent of its immediate existence as
use-value—in other words its production becomes more
and more independent of its consumption by the producers and
of its existence as use-value for the producers—the
more one-sided it itself becomes, and the greater the
variety of commodities
for which it is exchanged, the greater the kinds
of use-values in which its exchange-value is expressed, and
the larger the market for it becomes. The more this
happens, the more the product can be produced as a
commodity; therefore also on an increasingly large
scale. The producer’s indifference to the
use-value of his product is expressed quantitatively
in the amounts in which he produces it, which bear no
relation to his own consumption needs, even when he is at
the same time a consumer of his own product. The
division of labour within the workshop is one of the
methods used in this mass production and consequently
in the production of the product [as a commodity].
Thus the division of labour within the workshop is based on
the division of occupations in society.

The size of the market has two aspects. First, the
mass of consumers, their numbers. But secondly, also,
the number of occupations which are independent of one
another. The latter is possible without the
former. For example, when spinning and weaving become
divorced from “domestic” industry and
agriculture, all those engaged in agriculture become a
market for spinners and weavers. They likewise [form
markets] for one another as a consequence of the separation
of their occupations. What the division of labour in
society presupposes above all, is that the different kinds
of labour have become independent of one another in such a
way that their products confront one another as commodities
and must be exchanged, that is, undergo the metamorphosis of
commodities and stand in relation to one another as
commodities. (This is why in the Middle Ages,
the towns prohibited the spread of as many professions as
possible to the countryside, not merely for the purpose of
preventing competition—the only aspect seen by Adam
Smith—but in order to create markets for
themselves.) On the other hand, the proper development
of the division of labour presupposes a certain density of
population. The development of the division of labour
in the workshop depends even more on this density of
population. This latter division is, to a certain
extent, a pre-condition for the former and in turn
intensifies it still further. It does this by
splitting formerly correlated occupations into separate and
independent ones, also by differentiating and increasing the
indirect preliminary work they require; and as a result of
the increase in both production and the population and the
freeing of capital and labour it creates new wants and new
modes of satisfying them.

Therefore when Hodgskin says “division of
labour” is the effect not of a stock of
Commodities called circulating capital but of
“coexisting labour”, it would be
tautologous if in this context he understood by division of
labour the separation of trades. It would only mean
that division of labour is the cause or the effect of the
division of labour. He can therefore only mean that
division of labour within the workshop depends on the
separation of occupations, the social division of labour,
and is, in a certain sense, its effect.

It is not a stock of commodities which gives rise to this
separation of occupations and with it the division of labour
in the workshop, but it is the separation of
occupations (and division of labour) that is manifested
in the stock of commodities, or rather in the fact that a
stock of products becomes a stock of
commodities. (The properties, the characteristic
features of the capitalist mode of production and
therefore of capital itself insofar as it expresses a
definite relation of the producers to one another and to
their products, are inevitably always described by the
economists as the properties of the objects.)

| If, however,
“previous accumulation of capital” is being
discussed from an economic standpoint (see Turgot, Smith,
etc.) as a condition for the division of labour, then
what is understood by this is the previous concentration of
a stock of commodities as capital in the
possession of the buyer of labour, since the kind of
co-operation characteristic of the division of labour
presupposes a conglomeration of
workers—consequently, accumulation of the means of
subsistence necessary for them while they are
working—increased productivity of
labour—consequently, increase in the amount of raw
materials, tools and auxiliary materials which must be
available in order that labour proceeds continuously, since
it constantly requires large amounts of these
things—in short, of the objective conditions of
production on a large scale.

Here, accumulation of capital cannot mean increase
in the amount of means of subsistence, raw materials and
instruments of labour as a condition for the division of
labour, for insofar as the accumulation of capital is
taken to mean this, it is a consequence of the division of
labour, not its pre-condition.

Similarly, accumulation of capital cannot here
mean that means of subsistence for the workers must be
available in general before new necessaries are reproduced,
or that products of their labour must constitute the raw
material and means of
labour for the new production which they carry out.
For this is the pre-condition of labour in general and was
just as true before the development of the division
of labour as it is after it.

On the one hand: if we consider the material
element of accumulation, it means nothing more than
that the division of labour requires the concentration of
means of subsistence and means of labour at particular
points, whereas formerly these were scattered and dispersed
as long as the workers in individual trades—which
could not have been very numerous under these
conditions—themselves carried out all the manifold and
consecutive operations required for the production of one or
more products. Not an increase in absolute
terms is presupposed, but concentration, the
gathering together of more at a given point, and of
relatively more [means of labour] compared with the
numbers of workers brought together there. More flax,
for example, [is used] by the workers in manufacture (in
proportion to their numbers) than the relative amount of
flax required in proportion to all the peasants—both
men and women—who used to spin flax as a
sideline. Hence, conglomeration of workers,
concentration of raw materials, instruments, and
means of subsistence.

On the other hand: if we consider the historical
foundation on which this process develops, from which
manufacture arises, the industrial mode of production whose
characteristic feature is the division of labour, then this
concentration can only take place in the form that these
workers are assembled together as wage-workers, that is, as
workers who must sell their labour-power because their
conditions of labour confront them as alien property, as an
independent, alien force. This implies that these
conditions of labour confront them as capital; in
other words, these means of subsistence and means of labour
(or, what amounts to the same thing, the disposal of them
through the intermediary of money) are in the hands of
individual owners of money or of commodities, who, as a
result, become capitalists. The loss of the
conditions of labour by the workers is expressed in the fact
that these conditions become independent as capital or as
things at the disposal of the capitalists.

Thus primitive accumulation, as I have already shown,
means nothing but the separation of labour and the worker
from the conditions of labour, which confront him as
independent forces. The course of history shows that
this separation is a factor in social development.
Once capital exists, the capitalist mode of
production itself evolves in such a way that it maintains
and reproduces this separation on a constantly increasing
scale until the historical reversal takes place.

It is not the ownership of money which makes the
capitalist a capitalist. For money to be transformed
into capital, the prerequisites for capitalist production
must exist, whose first historical presupposition is that
separation. The separation, and therefore the
existence of the means of labour as capital, is given in
capitalist production; this separation which constantly
reproduces itself and expands, is the foundation of
production.

Accumulation by means of the reconversion of
profit, or surplus product, into capital now becomes a
continuous process as a result of which the increased
products of labour which are at the same time its objective
conditions, conditions of reproduction, continuously
confront labour as capital, i.e., as forces—personified in the capitalist—which are alienated from
Labour and dominate it. Consequently, it becomes a
specific function of the capitalist to accumulate, that is,
to reconvert a part of the surplus product into conditions
of labour. And the stupid economist concludes from
this that if this operation did not proceed in this
contradictory, specific way, it could not take place at
all. Reproduction on an extended scale is inseparably
connected in his mind with accumulation, the
capitalist form of this reproduction.

| Accumulation merely
presents as a continuous process what in primitive
accumulation appears as a distinct historical process,
as the process of the emergence of capital and as a
transition from one mode of production to another.

The economists, caught as they are in the toils of the
notions proper to the agents of the capitalist mode of
production, advance a double quid pro quo, each side
of which depends on the other.

On the one hand, they transform capital from a
relationship into a thing, a stock of commodities (already
forgetting that commodities themselves are not
things) which, insofar as they serve as conditions of
production for new labour, are called capital and, with
regard to their mode of reproduction, are called circulating
capital.

On the other hand, they transform things into capital,
that is, they consider the social relationship which is
represented in them and through them as an attribute which
belongs to the thing as such as soon as it enters as an
element into the labour process or the technological
process.

[On the one hand,] the
concentration in the hands of non-workers of raw
materials and of the disposition over the means of
subsistence, i.e., the powers dominating labour, the
preliminary condition for the division of labour
(later on, the division of labour increases not only
concentration, but also the amount [available for]
concentration by increasing the productivity of labour), in
other words the preliminary accumulation of capital
as the condition for the division of labour therefore means
for them the augmentation or concentration (they do not
differentiate between the two) of means of subsistence and
means of labour.

On the other hand, these necessaries and means of
labour would not operate as objective conditions of
production if these things did not possess the attribute of
being capital, if the product of labour, the condition of
labour, did not absorb labour itself; [if] past labour did
not absorb living labour, and if these things did not belong
to them selves or by proxy to the capitalist instead of to
the worker.

As if the division of labour was not just as possible if
its conditions belonged to the associated workers (although
historically it could not at first appear in this form, but
can only achieve it as a result of capitalist production)
and were regarded by the latter as their own products and
the material elements of their own activity, which they are
by their very nature.

Furthermore, because in the capitalist mode of production
capital appropriates the surplus product of the worker,
consequently, because it has appropriated the
products of labour and these now confront the worker in the
form of capital, it is clear that the conversion of the
surplus product into conditions of labour can only be
initiated by the capitalist and only in the form that he
turns the products of labour—which he has appropriated
without any equivalent—into means of production of new
labour performed without receiving an equivalent.
Consequently, the extension of reproduction appears as the
transformation of profit into capital and as a saving
by the capitalist who, instead of consuming the surplus
product which he has acquired gratis, converts it anew into
a means of exploitation, but is able to do this only insofar
as he converts the surplus product again into productive
capital; this entails the conversion of surplus product into
means of labour. As a result, the economists conclude
that the surplus product cannot serve as an element of new
production if it has not been transformed previously
from the product of the worker into the property of his
employer in order to serve as capital once again and to
repeat the old process of exploitation. The more
inferior economists add to this the idea of hoarding and the
accumulation of treasure. Even the better
ones—Ricardo, for example—transfer the notion of
renunciation from the hoarder to the capitalist.

The economists do not conceive capital as a
relation. They cannot do so without at the same time
conceiving it as a historically transitory, i.e., a
relative—not an absolute—form of
production. Hodgskin himself does not share this
concept. Insofar as it justifies capital it does not
justify its justification by the economists, but on the
contrary refutes it. Thus Hodgskin is not concerned in
all this.

As far as matters stood between him and the economists,
the kind of polemic he had to wage seemed to be mapped out
beforehand and quite simple. To put it simply, he had
to vindicate the one aspect which the economists elaborate
“scientifically” against the fetishistic
conception they accept without thinking, naïvely and
unconsciously from the capitalist way of looking at
things.

The utilisation of the products of previous labour, of
labour in general, as materials, tools, means of
subsistence, is necessary if the worker wants to use his
products for new production. This particular mode of
consumption of his products is productive. But what on
earth has this kind of utilisation, this mode of consumption
of his product, to do with the domination of his product
over him, with its existence as capital, with the
concentration ||870a| in the
hands of individual capitalists of the right to dispose of
raw materials and means of subsistence and the exclusion of
the workers from ownership of their products? What has
it to do with the fact that first of all they have to hand
over their product gratis to a third party in order to buy
it back again with their own labour and, what is more, they
have to give him more labour in exchange than is contained
in the product and thus have to create more surplus product
for him?

Past labour exists here in two forms. [In
one] as product, use-value. The process of
production requires that the workers consume one portion of
this product [as means of subsistence, and use] another
portion as raw materials and instruments of labour.
This applies also to the technological process and merely
demonstrates the relations that have to exist in
industrial production between the workers and the
products of their own labour,
their own products, in order to turn them into
means of production.

Or, [past labour exists as] value. This only
shows that the value of their new product represents not
only their present, but also their past labour, and that by
increasing it they retain the old value, because they
increase it.

The claim put forward by the capitalist has nothing to do
with this process as such. It is true that he has
appropriated the products of labour, of past labour, and
that he therefore possesses a means for acquiring new
products and living labour. This, however, is
precisely the kind of procedure against which protests are
made. The preliminary concentration and accumulation
necessary for the “division of labour” must not
take the form of accumulation of capital. It
does not follow that because this [concentration] is
necessary, the capitalist must inevitably have the disposal
of the conditions of labour of today created by the labour
of yesterday. If accumulation of capital is supposed
to be nothing but accumulated labour, it by no means implies
that accumulation of other people’s labour has to take
place.

Hodgskin however does not follow this simple path, and at
first this seems strange. In his polemic against the
productivity of capital, to begin with, against circulating
and then even more, against fixed capital, he seems to
oppose or to reject the importance of past labour, or
of its product for the reproduction process as a
condition of new labour. From this follows the
importance of past labour embodied in products for labour as
present
έύέργεια[q] Why this change?

Since the economists identify past labour with
capital—past labour being understood in this
case not only in the sense of concrete labour embodied in
the product, but also in the sense of social labour,
materialised labour-time—it is understandable that
they, the Pindars of capital, emphasise the objective
elements of production and overestimate their importance as
against the subjective element, living, immediate
labour. For them, labour only becomes efficacious when
it becomes capital and confronts itself, the passive
element confronting its active counterpart. The
producer is therefore controlled by the product, the subject
by the object, labour which is being embodied by labour
embodied in an object, etc. In all these conceptions,
past labour appears not merely as an objective factor of
living labour, subsumed
by it, but vice versa; not as an element of the power of
living labour, but as a power over this labour. The
economists ascribe a false importance to the material
factors of labour compared with labour itself in order to
have also a technological justification for the
specific social form, i.e., the capitalist
form, in which the relationship of labour to the
conditions of labour is turned upside-down, so that it is
not the worker who makes use of the conditions of labour,
but the conditions of labour which make use of the
worker. It is for this reason that Hodgskin
asserts on the contrary that this physical factor, that is,
the entire material wealth, is quite unimportant compared
with the living process of production and that, in fact,
this wealth has no value in itself, but only insofar as it
is a factor in the living production process. In doing
so, he underestimates somewhat the value which the labour of
the past has for the labour of the present, but in opposing
economic fetishism this is quite all right.

If in capitalist production—hence in political
economy, its theoretical expression—past labour were
met with only as a pedestal etc. created by labour itself,
then such a controversial issue would not have arisen.
It only exists because in the real life of capitalist
production, as well as in its theory, materialised
labour appears as a contradiction to itself, to
living labour. In exactly the same way in
religious reasoning, the product of thought not only claims
but exercises domination over thought itself. |870a|| .

| The proposition

“… the effects attributed to a
stock of commodities, under the name of circulating
capital, are caused by coexisting labour”
(op. cit., p. 9),

means first of all:

the simultaneous coexistence of living labour brings
about a large part of the effects which are attributed to
the product of previous labour called circulating
capital.

For example, a part of circulating capital consists of
the stock of means of subsistence which the capitalist is
supposed to have stored up to support the labourer while
working.

The formation of a reserve stock is by no
means a feature peculiar to capitalist production although,
since under it production and consumption are greater than
ever before, the amount of commodities on the
market—the amount of commodities in the sphere of
circulation—is likewise greater than ever
before. Here memories of hoarding, of accumulation
of treasure by hoarders are still discernible.

The consumption fund must be disregarded first of all
because we are speaking here of capital and of industrial
production. What has reached the sphere of individual
consumption, whether it is consumed more quickly or more
slowly, has ceased to be capital. (Although it can be
partly reconverted into capital, for instance, houses,
parks, crockery.)

“Do all the capitalists of Europe
possess at this moment one week’s food and clothing for all
the labourers they employ? Let us first examine the
question as to food. One portion of the food of the
people is bread, which is never prepared till within
a few hours of the time when it is eaten… The
produce […] of the baker, cannot be stored up.
In no case can the material of bread, whether it exist as
corn or flour, be preserved without continual
labour. […] His conviction[r] that he will obtain bread when he
requires it, and his master’s conviction that the money he
pays him will enable him to obtain it, arise simply from the
fact that the bread has always been obtained when
required” (loc. cit., p. 10).

“Another article of the labourer’s
food is milk, and milk is manufactured … twice a
day. If it be said that the cattle to supply it are
already there;—why the answer is, they require
constant attention and constant labour, and their food,
through the greater part of the year, is of daily
growth. The fields in which they pasture, require
the hand of man. […] The meat, also […]
it cannot be stored up, for it begins instantly to
deteriorate after it is brought to market” (loc. cit.,
p. 10).

Because of moths, even of clothing “… only a
very small stock is ever prepared, compared to the
general consumption” (loc. cit., p. 11).

“Mr. Mill says, and says justly,
‘what is annually produced is annually
consumed’, so that, in fact, to enable men to carry
on all those operations which extend beyond a year,
there cannot be any stock of commodities stored
up. Those who undertake them must rely, therefore,
not on any commodities already created, but that
other men will labour and produce what they are to subsist
on till their own products are completed. Thus, should
the labourer admit that some accumulation of circulating
capital is necessary for operations terminated within the
year […] it is plain, that in all operations which
extend beyond a year, the labourer does not, and he cannot,
rely on accumulated capital” (loc. cit.,
p. 12).

“If we duly consider the number and
importance of those wealth-producing operations which are
not completed within the year, and the numberless products
of daily labour, necessary to subsistence, which are
consumed as soon as produced, we shall […] be sensible
that the success and productive power of every different species of labour is at all
times more dependent on the
coexisting productive labour of other men than on any
accumulation of circulating capital” (loc. cit.,
p. 13).

“… it is by the command
the capitalist possesses over the labour of some men,
not by his possessing a stock of commodities, that he
is enabled to support and consequently employ
other labourers” (loc. cit., p. 14).

“… the only thing which can be
said to be stored up or previously prepared, is the skill
of the labourer” (loc. cit., p. 12).

“ …all the effects usually
attributed to accumulation of circulating capital are
derived from the accumulation and storing up of skilled
labour; and […] this most important operation is
performed, as far as the great mass of the labourers is
concerned without any circulating capital whatever”
(loc. cit., p. 13).

“… the number of labourers
must at all times depend on the quantity of circulating
capital; or, as I should say, on the quantity of the
products of coexisting labour, which labourers are
allowed to consume…” (op. cit., p. 20).

| “Circulating
capital […] is created only for consumption; while
fixed capital […] is made, not to be consumed, but to
aid the labourer in producing those things which are to be
consumed” (loc. cit., p. 19).

Thus first of all:

“… the success and productive
power of every different species of labour is at all times
more dependent on the coexisting productive labour of
other men than on any accumulation of circulating
capital” [op. cit., p. 13], that is, of
“commodities already created”. These
“already created commodities” confront
“the products of coexisting labour”.

{The part of capital which consists of instruments and
materials of labour is as “commodities already
created” always a pre-condition in each
particular branch of production. It is
impossible to spin cotton which has not yet been produced,
to operate spindles which have yet to be manufactured, or to
burn coal which has not yet been brought up from the
mine. These always enter the [production] process as
forms of existence of previous labour. Existing
labour thus depends on antecedent labour and not only on
coexisting labour, although this antecedent labour, whether
in the form of means of labour or materials of labour, can
only be of any use (productive use) when it is in contact
with living labour as a material element of it. Only
as an element of industrial consumption, i.e., consumption
by labour.

But when considering circulation and the reproduction
process, we have seen that it is only possible to reproduce
the commodity after it is finished and converted into money,
because simultaneously all its elements have been
produced and reproduced by means of coexisting labour.

A twofold progression takes place in production.
Cotton, for example, advances from one phase of production
to another. It is produced first of all as raw
material, then it is subjected to a number of operations
until it is fit to be exported or, if it is further worked
up in the same country, it is handed over to a
spinner. It then goes on from the spinner to the
weaver and from the weaver to the bleacher, dyer, finisher,
and thence to
various workshops where it is worked up for definite
uses, i.e., articles of clothing, bed-linen, etc.
Finally it leaves the last producer for the consumer and
enters into individual consumption if it does not enter into
industrial consumption as means (not material) of
labour. But whether it is to be consumed industrially
or individually, it has acquired its final form as
use-value. What emerges from one sphere of production
as a product enters another as a condition of production,
and in this way, goes through many successive phases until
it receives its last finish as use-value. Here
previous labour appears continually as the condition for
existing labour.

Simultaneously, however, while the product is
advancing in this way from one phase to another, while it is
undergoing this real metamorphosis, production is being
carried on at every stage. While the weaver spins the
yarn, the spinner is simultaneously spinning cotton, and
fresh quantities of raw cotton are in the process of
production.

Since the continuous, constantly repeated process of
production is, at the same time, a process of reproduction,
it is therefore equally dependent on the coexisting
labour which produces the various phases of the product
simultaneously, while the product is passing through
metamorphosis from one phase to another. [Raw] cotton,
yarn, fabric, are not only produced one after the other and
from one another, but they are produced and reproduced
simultaneously, alongside one another. What
appears as the effect of antecedent labour, if one considers
the production process of the individual commodity, presents
itself at the same time as the effect of coexisting labour,
if one considers the reproduction process of the
commodity, that is, if one considers this production process
in its continuous motion and in the entirety of its
conditions, and not merely an isolated action or a limited
part of it. There exists not only a cycle comprising
various phases, but all the phases of the commodity are
simultaneously produced in the various spheres and branches
of production. If the same peasant just plants flax,
then spins it, then weaves it, these operations are
performed in succession, but not simultaneously as the mode
of production based on the division of labour within society
presupposes.

No matter what phase of the production process of an
individual commodity is considered, the antecedent labour
only acquires significance as a result of the living labour
which it provides with the necessary conditions of
production. On the other
hand, however, these conditions of production without
which living labour cannot realise itself always appear as
the result of antecedent labour. Thus the co-operating
labour of the contributing branches of labour always appears
as a passive factor and, as such a passive factor, it is a
pre-condition. The economists emphasise this
aspect. In production and circulation, on the other
hand, the mediating social labour on which the [production]
process of the commodity in each particular phase depends
and by which it is determined, appears as present,
coexisting, contemporaneous labour. The early forms of
the commodity and its successive or completed forms are
produced simultaneously. Unless this happened it would
not be possible, after it has undergone its real
metamorphosis, to reconvert it from money into its
conditions of existence. ||870b| A commodity is thus the
product of antecedent labour only insofar as it is the
product of contemporaneous living labour. From the
capitalist point of view, therefore, all material wealth
appears only as a fleeting aspect of the flow of production
as a whole, which includes the process of circulation.}

### [c)] So-called Accumulation as a Mere Phenomenon of
Circulation. (Stock, etc.—Circulation
Reservoirs)

Hodgskin examines only one of the constituent parts of
circulating capital. One part of circulating capital
is however continuously converted into fixed capital and
auxiliary materials and only the other part is converted
into articles of consumption. Moreover, even that part
of circulating capital which is ultimately transformed into
commodities intended for individual consumption always
exists, alongside the final form in which it emerges from
the finishing phase as end product, simultaneously in the
earlier phases of production in its rudimentary
forms—as raw material or semi-manufactured goods,
removed in various degrees from the final form of the
product—in which it cannot as yet enter into
consumption.

The problem Hodgskin is concerned with is: what is the
relation of the present labour performed by the worker for
the capitalist to the labour embodied in his articles of
consumption, the labour contained in those articles on which
his wages are spent, which, in actual fact, are the
use-values of which variable capital consists? It is
admitted that the worker cannot labour without finding these
articles ready for consumption. And that is why
the
economists say that circulating capital—the
previous labour, commodities already created which the
capitalist has stored up—is the condition for labour
and, amongst other things, also the condition for the
division of labour.

When the conditions of production, and especially
circulating capital in Hodgskin’s sense of the term, are
being discussed, it is usual to declare that the capitalist
must have accumulated the food which the worker has to
consume before his new commodity is finished, that is, while
he works, while the commodity he produces is only in
statu nascendi.[s] This is shot through with the
notion that the capitalist either gathers things like a
hoarder or that he stores up a supply of food like
the bees their honey.

This however is merely a modus loquendi.[t]

First of all, we are not speaking here of the shopkeepers
who sell means of subsistence. These must naturally
have a full stock in trade. Their stores, shops,
etc. are simply reservoirs in which the various commodities
are stored once they are ready for circulation. This
kind of storing is merely an interim period in which
the commodity remains until it leaves the sphere of
circulation and enters that of consumption. It is its
mode of existence as a commodity on the market.
Strictly speaking, as a commodity it exists only in this
form. It does not affect the matter whether, instead
of being in the possession of the first seller (the
producer), the commodity is in the possession of the third
or fourth and finally passes into the possession of the
seller who sells it to the real consumer. It merely
means that, in the intermediate stage, exchange of capital
(really of capital plus profit, for the producer sells not
only the capital in the commodity but also the profit made
on the capital) for capital is taking place, and in the last
stage exchange of capital for revenue (provided the
commodity is intended not for industrial but for individual
consumption, as is assumed here).

The commodity which is a finished use-value and
marketable, enters the market as a commodity, in the phase
of circulation; all commodities enter this phase when they
undergo their first metamorphosis, the transformation into
money. If this is called “storing up” then
it means nothing more than “circulation” or the
existence of commodities as commodities. This kind of
“storing” is exactly the opposite of
treasure-hoarding, the aim of
which is to retain commodities permanently in the form in
which they are capable of entering into circulation, and it
achieves this only by withdrawing commodities in the form of
money from circulation. If production, and therefore
also consumption, is varied and on a mass scale, then a
greater quantity of the most diverse commodities will be
found continually at this stopping place, at this
intermediate station, in a word, in circulation or on
the market. Regarded from the standpoint of
quantity, storing on a large scale in this context
means nothing more than production and consumption on a
large scale.

The stop made by the commodities, their
sojourn at this stage of the process, their presence on the
market instead of in the mill or in a private house (as
articles of consumption) or in the shop or the store of the
shopkeeper, is only | a
tiny fraction of time in their life-process. The
immobile, independent existence of this world of
commodities, of things, is only illusory. The station
is always full, but always full of different
travellers. The same commodities (commodities of the
same kind) are constantly produced anew in the sphere of
production, available on the market and absorbed in
consumption. Not the identical commodities, but
commodities of the same type, can always be found in these
three stages simultaneously. If the
intermediate stage is prolonged so that the commodities
which emerge anew from the sphere of production find the
market still occupied by the old ones, then it becomes
overcrowded, a stoppage occurs, the market is glutted, the
commodities decline in value, there is
over-production. Where, therefore, the
intermediate stage of circulation acquires independent
existence so that the flow of the stream is not merely
slowed down, where the existence of the commodities in the
circulation phase appears as storing up, then this is
not brought about by a free act on the part of the producer,
it is not an aim or an immanent aspect of production, any
more than the flow of blood to the head leading to apoplexy
is an immanent aspect of the circulation of the blood.
Capital as commodity capital (and this is the form in
which it appears in the circulation phase, on the market)
must not become stationary, it must only constitute a pause
in the movement. Otherwise the reproduction process is
interrupted and the whole mechanism is thrown into
confusion. This materialised wealth which is
concentrated at a few points is—and can only
be—very small in comparison to the continuous stream
of production and consumption. Wealth, therefore,
according to Smith, is “the annual”
reproduction. It is not, that is to say, something
out of the dim past. It is always something which
emerges from yesterday. If, on the other hand,
reproduction were to stagnate due to some disturbances or
others, then the stores etc. would soon empty, there would
be shortages and it would soon be evident that the
permanency which the existing wealth appears to possess, is
only the permanency of its being replaced, of its
reproduction, that it is a continuous materialisation of
social labour.

The movement C—M—C also takes place in the
transactions of the shopkeeper. Insofar as he makes a
“profit”, it is a matter which does not concern
us here. He sells goods and buys the same goods (the
same type of goods) over again. He sells them to the
consumer and buys them again from the producer. Here
the same (type of) commodity is converted perpetually into
money and money back again continuously into the same
commodity. This movement, however, simply represents
continuous reproduction, continuous production and
consumption, for reproduction includes consumption.
(The commodity must be sold, must reach the sphere of
consumption in order that it can be reproduced.) It
must be accepted as a use-value. (For C—M for
the seller is M—C for the buyer, that is, the
conversion of money into a commodity as use-value.)
The reproduction process, since it is a unity of circulation
and production, includes consumption, which is itself an
aspect of circulation. Consumption is itself both an
aspect and a condition of the reproduction process. If
one considers the process in its entirety, the shopkeeper,
in fact, pays the producer of the commodities with the same
sum of money as the consumer pays him when he buys from
him. He represents the consumer in his dealings with
the producer and the producer in his dealings with the
consumer. He is both seller and buyer of the same
commodity. The money with which he pays is, in fact,
considered from a purely formal standpoint, the final
metamorphosis of the consumer’s commodity. The latter
transforms his money into the commodity as a
use-value. The passing of the money into the
shopkeeper’s hands thus signifies the consumption of the
commodity or, considered formally, the transition of the
commodity from circulation into consumption. Insofar
as he buys again from the producer with the money, this
constitutes the first metamorphosis of the producer’s
commodity and signifies the transition of the commodity into
the intermediate stage, where it remains as a
commodity in the sphere of circulation.
C—M—C, insofar as it concerns the transformation
of
the commodity into the consumer’s money and the
transformation back again of the money, whose owner is now
the shopkeeper, into the same commodity (a commodity of the
same kind), expresses merely the constant passing
over of commodities into consumption, for the vacuum left by
the commodity reaching the sphere of consumption must be
filled by the commodity emerging from the production process
and now entering this stage.

| The period during
which the commodity stays in circulation and is replaced
by new commodities naturally depends also on the length of
time in which the commodities remain in the production
sphere, that is, on the duration of their reproduction time,
and varies in accordance with their different length.
For example, the reproduction of corn requires a year.
The corn harvested in the autumn, for example, of 1862
(insofar as it is not used again for seed) must suffice for
the whole coming year—until autumn 1863. It is
thrown all at once into circulation (it is already in
circulation when it is placed in the farmers’ granaries) and
absorbed in the various reservoirs of
circulation—storehouses, corn merchants, millers,
etc. These reservoirs serve as channels both for the
commodities issuing from production and those going to the
consumer. As long as the commodities remain in one of
them, they are commodities and are therefore on the
market, in circulation. They are withdrawn only
piecemeal, in small quantities, by the annual
consumption. The replacement, the stream of new
commodities which are to displace them, arrives only in the
following year. Thus these reservoirs are only
depleted gradually, in the measure that their replacements
move forward. If there is a surplus and if the new
harvest is above the average, then a stoppage takes
place. The space which these particular commodities
were to have occupied in the market is overstocked. In
order to permit the whole quantity to find a place on the
market, the price of the commodities is reduced, and this
causes them to move again. If the total quantity of
use-values is too large, they accommodate themselves to the
space they have to occupy by a reduction of their
prices. If the quantity is too small, it is
expanded by an increase of their prices.

On the other hand, commodities which quickly deteriorate
as use-values remain only for a very short time in the
reservoirs of circulation. The period of time during
which they have to be converted into money and reproduced,
is prescribed by the nature of their use-value which, if it
is not consumed daily or almost daily, is spoilt and
consequently ceases to be a commodity.
For exchange-value along with its basis, use-value,
disappears provided the disappearance of use-value is not
itself an act of production.

In general, it is clear that although in absolute
terms the quantity of the commodities which have
been stored up in the reservoirs of circulation increases as
a result of the development of industry, because production
and consumption increase, this same quantity represents a
decrease in comparison with the total annual production and
consumption. The transition of commodities from
circulation to consumption takes place more rapidly.
And for the following reasons. The speed of
reproduction increases:

1) When the commodity passes rapidly through its various
production phases, that is, when each production phase of
the production process is reduced in length; this is due to
the fact that the labour-time necessary to produce the
commodity in each one of its forms is reduced, this is a
result, therefore, of the development of the division of
labour, use of machinery, application of chemical processes,
etc. <The development of chemistry makes it
possible to speed up the transition of commodities from one
state of aggregation to another, their combination with
other material which, for instance, occurs in dyeing, their
separation from [other] substances as in bleaching; in
short, both [modifications in] the form of the same
substance (its state of aggregation) as well as changes to
be brought about in the substance, are artificially
accelerated quite apart from the fact, that for vegetative
and organic reproduction, plants, animals, etc., are
supplied with cheaper substances, that is, substances which
cost less labour-time.>

2) Partly as a result of the combination of various
branches of industry, that is, the establishment of centres
of production for particular industrial branches, [partly]
through the development of means of communication,
the commodity proceeds rapidly from one phase to another; in
other words, the interim period, the interval during which
the commodity remains in the intermediate station between
one production phase and another is reduced, that is, the
transition from one phase of production to another is
shortened.

3) This whole development—the shortening both of
the various phases of the production process and of the
transition from one phase to another—presupposes
production on a large scale, mass production and, at the
same time, production based on
a large amount of constant capital, especially fixed
capital; [it requires] therefore a continuous flow of
production. But not in the sense in which we have
earlier considered the flow, that is, not as the closing of
and overlapping of the separate production phases, but in
the sense that there are no deliberate breaks in
production. These occur as long as work is done to
order, as in | the
handicrafts, and continue even in manufacture properly
so-called (insofar as this has not been reshaped by
large-scale industry). In modern industry, however,
work is carried out on the scale allowed by the
capital. This process does not wait on demand, but is
a function of capital. Capital works on the same scale
continuously (if one disregards accumulation or expansion)
and constantly develops and extends the productive
forces. Production is therefore not only rapid,
so that the commodity quickly acquires the form in which it
is suitable for circulation, but it is continuous.
Production here appears only as constant reproduction and at
the same time it takes place on a mass scale.

Thus if the commodities remain in the circulation
reservoirs for a long time—if they accumulate
there—then they will soon glut them as a result of the
speed with which the waves of production follow one another
and the huge amount of goods which they deposit continuously
in the reservoirs. It is in this sense that
Corbet, for example, says the market is always
overstocked. But the same circumstances which produce
this speed and mass scale of reproduction likewise reduce
the necessity for the accumulation of commodities in the
reservoirs. In part—insofar as it is concerned
with industrial consumption—this is already
implied by the close succession of the production phases
which the commodity itself or its ingredients have to
undergo. If coal is produced daily on a mass scale and
brought to the manufacturer’s door by railways, steamships,
etc., he does not need to have a stock of coal, or at most
only a very small one; or, what amounts to the same thing,
if a merchant acts as an intermediary, he only needs to keep
a small amount of stock over and above the amount he sells
daily and which is daily delivered to him. The same
applies to yarn, iron, etc. But apart from
industrial consumption, in which the stock of
commodities (that is, the stock of the ingredients of
commodities) must decline in this way, the shopkeeper
likewise enjoys the benefits of the speed of communications
first of all, and secondly, the certainty of a continuous
and rapid renewal and delivery. Although his stock of
commodities
may grow in size, each element of it will remain in his
reservoir, in a state of transition, for a shorter period of
time. In relation to the total amount of commodities
which he sells, that is, in relation to the scale of both
production and consumption, the stock of commodities which
he accumulates and keeps in store, will be
small. It is different in the less developed stages of
production where reproduction proceeds slowly—where
therefore more commodities must remain in the circulation
reservoirs—the means of transport are slow, the
communications difficult and, as a consequence, the
renewal of stock can be interrupted and a great deal
of time elapses as a result between the emptying and the
refilling of the reservoir—that is, the renewal
of the stock in hand. The position is then similar to
that of products whose reproduction takes place yearly or
half-yearly, in short in more or less prolonged periods of
time, owing to the nature of their use-values.

<For example, cotton is an illustration of how
transport and communications affect the emptying of the
reservoir. Since ships continually ply between
Liverpool and the United States—speed of
communications is one factor, continuity another—all
the cotton supply is not shipped at once. It comes on
to the market gradually (the producer likewise does not want
to flood the market all at once). It lies at the docks
in Liverpool, that is, already in a kind of circulation
reservoir, but not in such quantities—in relation to
the total consumption of the article—as would be
required if the ship from America arrived only once or twice
a year, after a journey of six months. The cotton
manufacturer in Manchester and other places stocks his
warehouse roughly in accordance with his immediate
consumption needs, since the electric telegraph and the
railway make the transfer from Liverpool to Manchester
possible at a moment’s notice.>

Special filling of the reservoirs—insofar as this
is not due to the overstocking of the market, which can
happen much more easily in these circumstances than under
archaically slow conditions—occurs only for
speculative reasons and merely in exceptional cases because
of a real or suspected fall or rise of prices.
Regarding this relative decline in stock, that is,
the commodities which are in circulation, compared with the
amount of production and consumption, see Lalor, The
Economist, Corbet (give the corresponding quotations
| after Hodgskin).
Sismondi wrongly saw something lamentable in all this
(his writings to be looked up as well).

(On the other hand, there is indeed a continuous
extension of the market and in the degree that the
interval of time decreases in which the commodity
remains on the market, its flow in space increases,
that is, the market expands spatially, and the periphery in
relation to the centre, the production sphere of the
commodity, is circumscribed by a constantly extending
radius.)

The fact that consumption lives from hand to mouth,
changes its linen and its coat as rapidly as it does its
opinions and does not wear the same coat ten years running,
etc. is connected with the speed of reproduction, or is
another expression of it. To an increasing extent
consumption—even of articles where this is not
demanded by the nature of their use-value—takes place
almost simultaneously with production and becomes therefore
more and more dependent on the present, coexisting labour
(since it is, in fact, exchange of coexisting labour).
This takes place in the same degree in which past labour
becomes an ever more important factor of production, even
though this past itself is after all a very recent and only
relative one.

(The following example demonstrates how closely the
keeping of a stock is linked with deficiencies of
production. As long as it is difficult to keep cattle
throughout the winter, there is no fresh meat in
winter. As soon as stock-farming is able to overcome
this difficulty, the stock previously made up of
substitutes for fresh meat—pickled or smoked
varieties—ceases of itself.)

The product only becomes a commodity where it enters into
circulation. The production of goods as commodities,
hence circulation, expands enormously as a result of
capitalist production for the following reasons:

1. Production takes place on a large scale,
the quantity, the huge amounts produced,
therefore, do not stand in any kind of quantitative
relationship to the producer’s needs [of his own product];
in fact it is pure chance whether he consumes any,
even a small part of his own product. He only consumes
his own product on a mass scale where he produces some of
the ingredients of his own capital. On the other hand,
in the earlier stages [of economic development] only those
products which exceed the amount required by the producer
himself become commodities or, at any rate, this is mainly
the case.

2. The narrow range of goods produced
[stands] in inverse ratio to the increased variety of
needs. This is due to previously combined branches of
production becoming increasingly separated and
independent—in short, to increasing division of
labour
within society—a contributing factor is the
establishment of new branches of production and the
increasing variety of commodities produced. ([To be
inserted] at the end, after Hodgskin, also Wakefield
about this.) This increased variety and
differentiation of commodities arises in two ways. The
different phases of one and the same product, as well
as the auxiliary operations (that is, the labour connected
with various constituent parts, etc.) are separated
and become different branches of production, independent of
one another; or various phases of one product become
different commodities. But secondly, owing to
labour and capital (or labour and surplus product) becoming
free; on the other hand, to the discovery of new practical
applications of the same use-value, either because new needs
arise as a result of the modification of No. 1 (for example,
the need for more rapid and universal means of transport and
communication arising with the application of steam in
industry) and therefore new means of satisfying them, or new
possibilities of utilising the same use-value are
discovered, or new substances or new methods
(plastic-galvanisation, for instance) for treating
well-known substance in different ways.

All this amounts to the following: successive
phases or states of one product are
converted into separate commodities. New
products or new values in use are created and
become commodities.

3. Transformation of the majority of the population
who formerly consumed a mass of products in naturalibus[u] into
wage-workers.

4. Transformation of the tenant farmer into an
industrial capitalist <and with it the conversion
of rent into money rent and generally of all payments in
kind (taxes, etc., rent) into money payments>. In
general—industrial exploitation of the land with the
result that it is no longer confined to its own muck-heap as
previously, but that both its chemical and mechanical
conditions of production—even seeds, fertilisers,
cattle, etc. are subjected to the process of exchange.

5. Mobilisation of a mass of previously
“inalienable” possessions by conversion into
commodities and the creation of forms of property which
only exist in negotiable papers. On the one hand,
alienation of landed property (the lack of property of
the
masses causes them, for example, to regard the dwelling
in which they live as a commodity). [On the other
hand,] railway shares, in short, all kinds of shares.

### [d) Hodgskin’s Polemic Against the conception that the
Capitalists “store Up” Means of Subsistence for
the Workers. His Failure to Understand the Real causes
of the Fetishism of Capital]

| Back again to
Hodgskin now.

It is obvious that by “storing up”
[means of subsistence] for the workers by the
capitalists one cannot understand that commodities which are
passing from production into consumption are in the
circulation reservoirs, in the circulation system, on the
market. This would mean that the products circulate
for the benefit of the worker and become commodities
for his sake; and that in general, the production of
products as commodities is undertaken for his sake.

The worker shares with every other [commodity owner the
need] to transform the commodity he sells—which in
actual fact, though not in form, is his labour—at
first into money in order to convert the money back again
into commodities which he can consume. It is perfectly
obvious that [no] division of labour (insofar as it is based
on commodity production), [no] wage-labour and, in general,
no capitalist production can take place without
commodities—whether they be means of
consumption or means of production—being available on
the market; that this kind of production is impossible
without commodity circulation, without the
commodities spending a period of time in the circulation
reservoir. For the product is a commodity in the
strict sense of the word only within the framework of
circulation. It is as true for the worker as for
anybody else that he must find his means of subsistence in
the form of commodities.

The worker, moreover, does not confront the shopkeeper as
a worker confronts a capitalist, but as money confronts the
commodity, as a buyer faces the seller. There is no
relationship of wage-labour to capital here, except of
course, where the shopkeeper is dealing with his own
workers. But even they, insofar as they buy things
from him, do not confront him as workers. They
confront him as workers only insofar as he buys from
them. Let us therefore leave this circulation
agent.

But as far as the industrial capitalist is concerned, his
stock, his accumulation, consists of:

[First] his fixed capital, i.e., buildings,
machinery, etc.,
which the worker does not consume or, insofar as he does
consume them, does so through labour, and thus consumes them
industrially for the capitalist, and although they
are means of labour they are not means of subsistence for
him.

Secondly, his raw materials and auxiliary
materials, the stock of which, insofar as it does not enter
directly into production, declines, as we have seen.
This likewise does not consist of means of subsistence for
the workers. This accumulation by the
capitalist for the workers means nothing more than that he
does the worker the favour of depriving the latter of his
conditions of labour and converting the means of his labour
(which are themselves merely the transformed product of his
labour) into means for the exploitation of labour. In
any case, the worker, while he uses the machines and the raw
materials, does not live on them.

Thirdly, the commodities, which he keeps in the
storehouse or warehouse before they enter into
circulation. These are products of labour, not means
of subsistence stored in order to maintain labour during the
course of production.

Thus the “accumulation” of means of
subsistence by the capitalist for the worker means merely
that he must possess enough money in order to pay wages with
which the worker withdraws the articles of consumption he
needs from the circulation reservoir (and, if we consider
the [working] class as a whole, with which he buys back part
of his own product). This money, however, is simply
the transformed form of the commodity which the worker has
sold and handed over. In this sense, the means of
subsistence are “stored up” for him in the same
way as they are stored up for his capitalist, who likewise
buys consumption goods etc. with money (the transformed form
of the same commodity). This money may be a mere token
of value, it therefore does not have to be a representation
“of previous labour” but, in the hands of
whoever possesses it, simply expresses the realised price
not of past labour (or previously [sold] commodities) but of
the contemporaneous labour or commodities which he
sells. [Money has] merely a formal existence.
Or—since in previous modes of production the worker
also had to eat and consume during the course of production
irrespective of the period of time required for the
production of his product—“storing up” may
mean that the worker must first of all transform the product
of his labour into the product of the capitalist, into
capital, in order to receive back a portion of it in the
form of money, in lieu of payment.

| What interests Hodgskin about this whole
process (with regard to the process as such it is indeed a
matter of indifference whether the worker receives the
product of contemporaneous or previous labour, just as it
does not matter whether he receives the product of his own
previous labour or the product of labour performed
simultaneously in a different branch) is this:

A great part, [or] the greatest part of the products
consumed daily by the worker—which he must consume
whether his own product is finished or not—represent
by no means stored up labour of bygone time. On
the contrary he uses to a large extent products of labour
performed the same day or during the same week in which the
worker produces his own commodity. For example, bread,
meat, beer, milk, newspapers, etc. Hodgskin could also
have added that they are partly the products of
future labour, for the worker who buys an overcoat
with what he has saved out of six months’ wages buys one
which has only been made at the end of the six months,
etc. (We have seen that the whole of production
presupposes simultaneous reproduction of the required
constituent parts and products in their different forms as
raw materials, semi-manufactured goods, etc. But all
fixed capital presupposes future labour for its
reproduction and for the reproduction of its equivalent,
without which it cannot be reproduced.) Hodgskin says
that during the course of the year the worker must rely to
some degree on previous labour (because of the nature of the
production of corn, vegetable raw materials, etc.).
<This does not apply to a house, for example. As
regards use-values which, by their nature, only wear out
slowly, are not consumed at once, but gradually used up, it
is not due to any action specially devised for the benefit
of the workers that these products of previous labour are
available on “the market”. The worker also
used to have a “dwelling” before the capitalist
“piled up” deadly stink-holes for him.
(See Laing on this.)> (Apart from the enormous
mass of day-to-day needs which are of decisive importance
especially to the worker. Who at best, can only
satisfy his everyday needs, we have seen that, in general,
consumption becomes more and more contemporaneous
with production, and therefore, if one considers
society as a whole, consumption depends more and more on
simultaneous production, or rather on the products of
simultaneous production.) But when operations
extend over several years, the worker must
“depend” on his own production, on the
simultaneous and future producers of other commodities.

The worker always has to find his means of subsistence in
the form of commodities on the market (the
“services” he buys are ipso facto only
brought into being at the moment they are bought); as far as
he is concerned they must therefore be the products of
antecedent labour, that is of labour which is antecedent to
their existence as products but which is by no means
antecedent to his own labour with whose price he buys these
products. They can be—and mostly
are—contemporaneous products, especially for those who
live from hand to mouth.

Taking it all in all the “storing up” of
means of subsistence for the workers by the capitalists
comes to this.

1) Commodity production presupposes that articles of
consumption which one does not produce oneself are available
on the market as commodities, or that in general,
commodities are produced as commodities.

2) The majority of the commodities consumed by the worker
in the final form in which they confront him as commodities,
are in fact products of simultaneous labour (they are
therefore by no means stored up by the capitalist).

3) In capitalist production, the means of labour
and the means of subsistence produced by the worker himself
confront him as capital, the one as constant, the other as
variable capital; these, the worker’s conditions of
production, appear as the property of the capitalist; their
transfer from the worker to the capitalist and the partial
return of the worker’s product to the worker, or of the
value of his product to the worker, is called the
“storing up” of circulating capital for the
worker. These means of subsistence which the worker
must always consume before his product is finished, become
“circulating capital” because he [the worker],
instead of buying them direct or paying for
them with the value either of his past or of his future
product |, must first of
all receive a draft (money) on it; a draft moreover
which the capitalist is entitled to issue only thanks to the
worker’s past, present or future product.

Hodgskin is concerned here with demonstrating the
dependence of the worker on the coexisting labour of other
workers as against his dependence on previous labour,

1) in order to do away with the phrase about
“storing up”;

2) because “present labour” confronts
capital, whereas the economists always consider previous
labour as such to be capital, that is, an alienated
and independent form of labour which is hostile to labour
itself.

To grasp the all-round significance of contemporaneous
labour as against previous labour is however in itself a
very important achievement.

Hodgskin thus arrives at the following:

Capital is either a mere name and pretext or it does not
express a thing; the social relation of the labour of one
person to the coexisting labour of another, and the
consequences, the effects of this relationship, are
ascribed to the things which make up so-called circulating
capital. Despite the fact that the commodity exists as
money, its realisation in use-values depends on
contemporaneous labour. ([The labour performed in] the
course of a year is itself contemporaneous [labour].)
Only a small portion of the commodities entering into direct
consumption are the product of more than one year’s labour
and when they are—such as cattle etc., they require
renewed labour every year. All operations requiring
more than a year depend on continuous annual production.

“… it is by the command the
capitalist possesses over the labour of some men, not
by his possessing a stock of commodities, that he is enabled
to support and consequently employ other
labourers” (Labour Defended etc.,p.14).

Money however gives everyone “command” over
“the labour of some men”, over the labour
contained in their commodities as well as over the
reproduction of this labour, and to that extent therefore
over labour itself.

What is really “stored up”, not however as a
dead mass but as something living, is the skill of
the worker, the level of development of labour.
<It is true, however, that the stage of the development
of the productivity of labour which exists at any particular
time and serves as the starting-point, comprises not only
the skill and capacity of the worker, but likewise the
material means which this labour has created and which it
daily renews. (Hodgskin does not emphasise this
because, in opposing the crude views of the economists, it
is important for him to lay the stress on the
subject—so to speak, on the subjective in the
subject—in contrast to the object.)> This is
really the primary factor, the point of departure and it is
the result of a process of development.
Accumulation in this context means
assimilation, continual preservation and at the same
time transformation of what has already been handed over and
realised. In this way Darwin makes
“accumulation” through inheritance the driving
principle in the formation of all organic things, of
plants and animals; thus the various organisms themselves
are formed as a result of “accumulation” and are
only “inventions”, gradually accumulated
inventions of living beings. But this is not the only
prerequisite of production. Such a prerequisite in the
case of animals and plants is external nature, that is both
inorganic nature and their relationship with other animals
and plants. Man, who produces in society, likewise
faces an already modified nature (and in particular natural
factors which have been transformed into means of his own
activity) and definite relations existing between the
producers. This accumulation is in part the result of
the historical process, in part, as far as the individual
worker is concerned, transmission of skill. Hodgskin
says that as far as the majority of the workers are
concerned, circulating capital plays no part in this
accumulation.

He has demonstrated that “the stock of
commodities” (means of subsistence)
“prepared” is always small in comparison with
the total amount of consumption and production. On the
other hand, the degree of skill of the existing population
is always the pre-condition of production as a whole; it is
therefore the principal accumulation of wealth and the most
important result of antecedent labour; its form of
existence, however, is living labour itself.

“…all the effects usually attributed to
accumulation of circulating capital are derived from the
accumulation and storing up of skilled labour; and,
[…] this most important operation is performed, as
far as the great mass of labourers is concerned without any
circulating capital whatever” (op. cit., p. 13).

With regard to the assertion of the economists that the
number of workers (and therefore the well-being or poverty
of the existing working population) depends on the amount of
circulating capital available, Hodgskin comments correctly,
as follows:

“… the number of labourers
must at all times depend on the quantity of circulating
capital; or, as I should say, on the quantity of the
products of coexisting labour, which labourers are
allowed to consume” (op. cit., p. 20).

What is attributed to circulating capital, to a
stock of commodities, is the effect of “coexisting
labour”.

In other words, Hodgskin says that the effects of a
certain social form of labour are ascribed to objects, to
the products of labour; the relationship itself is imagined
to exist in material form. We have already seen
that this is a characteristic of labour
based on commodity production, on exchange-value, and
this quid pro quo is revealed in the commodity, in
money (Hodgskin does not see this), and to a still higher
degree in capital. The effects of things as
materialised aspects of the labour process are attributed to
them in capital, in their personification, their
independence in respect of labour. They would cease to
have these effects if they were to cease to confront labour
in this alienated form. The capitalist,
as capitalist, is simply the personification of capital,
that creation of labour endowed with its own will and
personality which stands in opposition to labour.
Hodgskin regards this as a pure subjective illusion which
conceals the deceit and the interests of the exploiting
classes. He does not see that the way of looking at
things arises out of the actual relationship itself; the
latter is not an expression of the former, but vice
versa. In the same way, English socialists say
“We need capital, but not the
capitalists”. But if one eliminates the
capitalists, the means of production cease to be
capital.

<The “Verbal Observer”, Bailey, and
others remark that “value”, “valeur”
express a property of things. In fact the terms
originally express nothing but the use-value of things for
people, those qualities which make them useful or agreeable
etc. to people. It is in the nature of things that
“value”, “valeur”,
“Wert” can have no other etymological
origin. Use-value expresses the natural relationship
between things and men, in fact the existence of things for
men. Exchange-value, as the result of the
social development which created it, was later superimposed
on the word value, which was synonymous with
use-value. It [exchange-value] is the social
existence of things.

The Sanskrit—Wer [means]
cover, protect, consequently respect, honour and love,
cherish. From these the adjective Wertas
(excellent, respectable) is derived; Gothic, wairths;
Old German, Old Frankish, wert; Anglo-Saxon,
weorth, vordh, wurth; English, worth, worthy;
Dutch, waard, waardig; Alemanic, werth;
Lithuanian, wertas (respectable, precious, dear,
estimable).

The Sanskrit, wertis; Latin,
virtus; Gothic, wairthi; German, Werth[v] [Chavée,
Essai d’étymologie philosophique, Brussels,
1844, p. 176].

The value of a thing is, in fact, its own virtus[w], while
its exchange-value is quite independent of its material
qualities.

The Sanskrit “Wal
[means] to cover, to fortify; [Latin] vallo,[x] valeo,[y]
vallus[z]: that which protects and
defends, valor is the power itself.” Hence
valeur, value. “Compare Wal with the
German walle, walte[aa] and English wall,
wield” [op. cit., p. 70].)

Hodgskin now turns to fixed capital. It is
productive power which has been produced and, in its
development in large-scale industry, it is an instrument
which social labour has created.

As far as fixed capital is concerned:

“… all instruments and
machines are the produce of labour. […] As long
as they are merely the result of previous labour, and
are not applied to their respective uses by labourers, they
do not repay the expense of making them. […]
most of them diminish in value from being kept.
[…] Fixed capital does not derive its utility from
previous, but present labour; and does not bring its
owner a profit because it has been stored up, but
because it is a means of obtaining command over
labour” ([Thomas Hodgskin,] Labour
Defended etc., pp. 14-15).

Here at last, the nature of capital is understood
correctly.

“After any instruments have been made, what do
they effect? Nothing. On the contrary,
they begin to rust or decay unless used or applied by
labour.” “Whether an instrument shall be
regarded as productive capital or not, depends entirely on
its being used, or not, by some productive
labourer” (loc. cit., pp. 15-16).

“One easily comprehends why
[…] the road-maker should receive some of the
benefits, accruing only to the road-user; but I do not
comprehend why all these benefits should go to the road
itself, and be appropriated by a set of persons
who neither make nor use it, under the name of profit for
their capital” (loc. cit., p. 16).

“Its vast utility does[bb] not depend on
stored up iron and wood, but on that practical and living
knowledge of the powers of nature which enables some men
to construct it, and others to guide it” (loc. cit.,
p. 17).

“Without knowledge they” (the
machines) “could not be invented, without manual skill
and dexterity they could not be made, and without skill and
labour they could not be productively used. But there
is nothing more than knowledge, skill, and labour requisite,
on which the capitalist can found a claim to any share of
the produce” (loc. cit., p. 18).

“After he” (man) “has
inherited the knowledge of several generations, and when
he lives congregated in great masses, he is enabled by
his mental faculties to complete […] the work of
nature…” (loc. cit., p. 18).

“… it is not […] the
quantity but the quality of the fixed capital
on which the productive industry of a country depends.
[…] fixed capital as a means of nourishing and
supporting men, depends for its efficiency, altogether on
the skill of the labourers, and consequently the productive
industry of a country, as far as fixed capital is concerned,
is in proportion to the knowledge and skill of the
people” (loc. cit., pp. 19-20).

### [e)] Compound Interest: Fall in the Rate of Profit Based
on This

“A mere glance must satisfy every
mind that simple profit does not decrease but
increase in the progress of society—that is, the same
quantity of labour which at any former period produced 100
quarters of wheat, and 100 steam-engines, will now produce
somewhat more [… ] In fact, also, we find that
a much greater number of persons now live in opulence on
profit in this country than formerly. It is clear,
however, that no labour, no productive power, no
ingenuity, and no art can answer the overwhelming demands
of compound interest. But all saving is made
from the revenue” (that is from simple profit)
“of the capitalist, so that actually these
demands are constantly made, and as constantly the
productive power of labour refuses to satisfy them. A
sort of balance is, therefore, constantly struck”
(loc. cit., p. 23).

For example, if the profit were always accumulated, a
capital of 100 at 10 per cent would amount to something like
673, or—since a little more or less makes no
difference here—say 700, in 20 years. Thus the
capital will have multiplied itself sevenfold over a period
of 20 years. According to this yardstick, if only
simple interest were paid, it would have to be 30 per cent
per annum instead of 10 per cent, that is, three times as
much profit, and the more we increase the number of years
that elapse, the more the rate of interest or the rate of
profit calculated at simple interest per annum will
increase, and this increase is the more rapid, the larger
the capital becomes.

In fact, however, capitalist accumulation is nothing but
the reconversion of interest into capital (since interest
and profit for our purpose, i.e., for the purpose of our
calculation, are identical). Thus it is compound
interest. First there is a capital of 100; it yields
10 per cent profit (or interest). This is added to the
capital which is now 110. This now becomes the
capital. The interest on this amount is therefore not
simply interest on a capital of 100 but interest on 100
capital plus 10 interest. That is compound
interest. Thus, at the end of the second year, we have
(100 capital + 10 interest) +10 interest+1 interest=(100
capital+
10 interest)+11 interest=121. This is the
capital at the beginning of the third year. In
the third year we get (100 capital+10 interest)+11 interest+
121/10 interest, so that at the end
of it the capital is 1331/10

| We have:

Capital

Interest

Total

First year 100

10

110

Second year 100 + 10 = 110

10 + 1’*

121

Third year 100 + 20 + 1 = 121

10 + 2’ + 1/10’

1331/10

Fourth year 100 + 30 + 3 1/10 = 1331/10

10 + 331/100’

14641/100

Fifth year 100 + 40 + 641/100 =14641/100

10 + 4641/1,000’

16151/1,000

etc.

Inthesecondyearthecapitalcomprises10 interest (simple)

""third""""21 interest

""fourth""""311/10 interest

""fifth""""4641/100interest

""sixth""""6151/1,000"

""seventh""""771,561/10,000"

""eighth""""9487,171/100,000"

[Intheninthyearthecapitalcomprises114358,881/1,000,000interest]

*The sign ‘ indicates interest on interest.

In other words, more than half the capital is made up of
interest in the ninth year and the portion of capital
consisting of interest thus increases in geometrical
progression.

We have seen that over 20 years, capital increased
sevenfold, whereas, even according to the “most
extreme” assumption of Malthus, the population can
only double itself every twenty-five years. But let us
assume that it doubles itself in twenty years, and therefore
the working population as well. Taking one year with
another, the interest would have to be 30 per cent—three times greater than it is. If one assumes,
however, that the rate of exploitation remained unchanged,
in 20 years the doubled population would only be able to
produce twice as much labour as it did previously (and [the
new generation] would be unfit for work during a
considerable part of these 20 years, scarcely during half
this period would it be able to work, in spite of the
employment of children); it would therefore produce only
twice as much surplus labour, but not three times as
much.

The rate of profit (and consequently the rate of
interest) is determined:

1) If the rate of exploitation is assumed to be
constant—by the number of workers in employment, by
the absolute mass of workers employed, that is, by the
growth of the population. Although this number
increases, its ratio to the total amount of capital employed
declines with the accumulation of capital and with
industrial development (consequently the rate of profit
declines if the rate of exploitation remains the
same). Likewise the population does not by any means
[increase] in the same geometrical progression as the
computed compound interest. The growth of the
population at a given stage of industrial development is the
explanation for the increase in the amount of surplus-value
and of profit, but also for the fall in the rate of
profit.

2) [By] the absolute length of the “normal”
working-day, that is, by increasing the rate of
surplus-value. Thus the rate of profit can increase as
a result of the extension of labour-time beyond the normal
working-day. However, this has its physical
and—by and large—its social limits. That
in the same measure as workers set more capital in motion,
the same capital commands more absolute labour-time | is out of the question.

3) If the normal working-day remains the same, surplus
labour can be increased relatively by reducing the necessary
labour-time and reducing the prices of the necessaries which
the worker consumes, in comparison with the development of
the productive power of labour. But this very
development of productive power reduces variable capital
relative to constant. It is physically impossible that
the surplus labour-time of, say, two men who displace
twenty, can, by any conceivable increase of the absolute or
relative [surplus] labour-time, equal that of the
twenty. If each of the twenty men only work 2 hours of
surplus labour a day, the total will be 40 hours of surplus
labour, whereas the total life span of the two men amounts
only to 48 hours in one day.

The value of labour-power does not fall in the same
degree as the productivity of labour or of capital
increases. This increase in productive power likewise
increases the ratio between constant and variable capital in
all branches of industry which do not produce necessaries
(either directly or indirectly) without giving rise to any
kind of alteration in the value of labour. The
development of productive power is not even. It is in
the nature of capitalist production that it develops
industry more rapidly
than agriculture. This is not due to the nature of
the land, but to the fact that, in order to be exploited
really in accordance with its nature, land requires
different social relations. Capitalist production
turns towards the land only after its influence has
exhausted it and after it has devastated its natural
qualities. An additional factor is that, as a
consequence of landownership, agricultural products are
expensive compared with other commodities, because they are
sold at their value and are not reduced to their
cost-price. They form, however, the principal
constituent of the necessaries. Furthermore, if
one-tenth of the land is dearer to exploit than the other
nine-tenths, these latter are likewise hit
“artificially” by this relative barrenness, as a
result of the law of competition.

The rate of profit would in fact have to grow if it is to
remain constant while accumulation of capital is taking
place. The same worker as long as capital
yields 10 of surplus labour must, as soon as interest
accumulates on interest and thus increases the capital
employed, produce threefold, fourfold, fivefold in
progression of compound interest, which is nonsense.

The amount of capital which the worker sets in
motion, and whose value is maintained and reproduced by his
labour, is something quite different from the value
which he adds, and therefore from the surplus-value.
If the amount of capital is 1,000 and the labour added
equals 100, then the capital reproduced amounts to
1,100. If the capital is 100 and the labour added is
20, then the capital reproduced is 120. The rate of
profit in the first case is 10 per cent and in the second,
it is 20 per cent. Nevertheless, more can be
accumulated from 100 than from 20. Thus the flow of
capital or its “accumulation” continues (apart
from the reduction in its value as a result of the increase
in productive power) in proportion to the force it already
possesses, but not in proportion to the size of the rate of
profit. This explains that accumulation—its
amount—may increase in spite of a falling rate of
profit, apart from the fact that, while productivity rises,
a larger portion of the revenue can be accumulated, even
when the rate of profit declines, than when there is a
higher rate of profit together with lower
productivity. A high rate of profit—insofar as
it is based on a high rate of surplus-value—is
possible if very long hours are worked, although the labour
is unproductive. It is possible because the workers’
needs, and therefore the minimum wage, are small,
although the labour is unproductive. The lack of
energy with which the labour is performed will
correspond to the low level of the minimum wage.
Capital is accumulated slowly in both cases despite the high
rate of profit. The population is stagnant and the
labour-time which the product costs is high, although the
wages received by the workers are small.

| I have explained the
decline in the rate of profit in spite of the fact that the
rate of surplus-value remains the same or even rises, by the
decrease of the variable capital in relation to the
constant, that is, of the living, present labour in relation
to the past labour which is employed and reproduced.
Hodgskin and the man who wrote The Source and Remedy of
the National Difficulties explain it by the fact that it
is impossible for the worker to fulfil the demands of
capital which accumulates like compound interest.

“… no labour, no productive
power, no ingenuity, and no art can answer the overwhelming
demands of compound interest. But all saving is made
from the revenue of the capitalist” (that is from
simple profit) “so that actually these demands are
constantly made, and as constantly the productive power of
labour refuses to satisfy them. A sort of balance is,
therefore, constantly struck” (op. cit., p. 23).

In its general sense, this amounts to the same
thing. If I say that, as capital accumulates, the rate
of profit declines because constant capital increases in
relation to variable capital, it means that, disregarding
the specific form of the different portions of capital, the
capital employed increases in relation to the labour
employed. [The rate of] profit falls not because the
worker is exploited less, but because altogether less labour
is employed in relation to the capital employed.

For example, let us assume that the ratio of variable to
constant capital is 1:1. Then, if the total capital
amounts to 1,000, c [constant capital] will be 500,
and v [variable capital] likewise 500. If the
rate of surplus-value is 50 per cent, then 50 per cent of
500 is 50×5, or 250. Thus the rate of profit on
1,000 yields a profit of 250, or
250/1,000 or
25/100 or 1/4
which is 25 per cent. If the total capital is 1,000
and if c equals 750 and v 250, then at 50 per
cent [the rate of surplus-value] 250 will yield 125.

But 125/1,000 comes to
1/8, or 121/2
per cent.

But in comparison with the first case [less] living
labour is employed in the second case. If we assume
that the annual wage of the worker is £25, then in the
first case £500 [wages] will
employ 20 workers; in the second case £250 wages
will employ 10 workers. The same capital
[£1,000] employs 20 workers in one case and only 10 in
the other. In the first case, the ratio of total
capital to the number of working-days is as 1,000:20; in the
second as 1,000:10. In the first case, for each of the
20 workers £50 capital (constant and variable) is used
(for 20×50=500×2=1,000). In the second case, the
capital employed per individual worker is £100 (for
100×10=1,000). Nevertheless, in both cases, the
capital which is allocated to wages is, pro rata, the
same.

The formula I have given provides a new ground for
explaining why, with accumulation, less workers are employed
by the same amount of capital or, what amounts to the same
thing, why a greater amount of capital has to be used for
the same amount of labour. It comes to the same
thing if I say that one worker is employed for a capital
outlay of 50 in the one case, and one worker for a capital
outlay of 100 in the other, that therefore only half the
number of workers is employed by a capital of 50; in other
words, if I say that in one case there is one worker for 50
capital and only half a worker for 50 capital in the other,
or if I say that in one case 50 capital is used by one
worker and in the other case 50x2 capital is used by one
worker.

This latter formula is the one used by Hodgskin and
others. According to them, accumulation means in
general the demand for compound interest; in other words,
that more capital is expended on one worker and that
he has therefore to produce more surplus labour
proportionally to the amount of capital expended on
him. Since the capital expended on him increases at
the same rate as compound interest, but on the other hand,
his labour-time has very definite limits which even
relatively no [development of the] productive powers can
reduce in accordance with the demands of this compound
interest “a sort of balance is constantly
struck”. “Simple profit” remains the
same, or rather it grows. (This is in fact the surplus
labour or surplus-value.) But as the result of the
accumulation of capital it is compound interest which is
disguised in the form of simple interest.

| It is clear
furthermore that if compound interest equals accumulation,
then, apart from the absolute limits of accumulation, the
growth of this interest depends on the extent, the
intensity, etc., of the accumulation process itself, that
is, on the mode of production. Otherwise
compound interest is nothing
but appropriation of the Capital (property) of
others in the form of interest as was the case in
Rome and in general with usurers.

Hodgskin’s view is as follows: Originally £50
capital, for example, falls to the share of one worker, on
which he produces, let us say, a profit of
[£]25. Later, as a result of the conversion of a
part of the interest into capital and of the fact that this
process repeats itself again and again, a capital of
£200 is allocated to the worker. If the entire
interest of 50 per cent received per annum was always
capitalised, the process would be complete in less than four
years. Just as the worker produced [a profit of] 25 on
[a capital of] 50, he is now expected to produce [a profit
of] 100 on a capital of 200, or four times as much.
But that is impossible. To do that either the worker
would have to work four times as long, that is, 48 hours a
day if he worked 12 hours previously, or the value of labour
would have to fall by 75 per cent as a result of increased
productivity of labour.

If the working-day is 12 hours, £25 the [annual]
wage, and the worker produces £25 profit [per annum],
then he has to work as much for the capitalist as he does
for himself. That is for 6 hours or half the
working-day. In order to produce 100, he would have to
work 4×6 hours for the capitalist in a 12-hour
working-day—which is nonsense. Let us assume
that the working-day is lengthened to 15 hours, then the
worker still cannot produce 24 hours work in 15 hours.
And still less can he work for 30 hours, which is what would
be necessary, since [he would have to work] 24 hours for the
capitalist and 6 for himself. If he worked the whole
of his working-time for the capitalist, he would be able to
produce only £50; he would only double the amount of
interest, that is, he would produce 50 profit on a capital
of 200, whereas he produced £25 for £50
capital. The rate of profit is 50 per cent in the
second case and 25 per cent in the first. But even
this is impossible, since the worker must live. No
matter how much productive power increases, if, as in the
above example, the value of 12 hours is 75, then that of 24
hours adds up to 2×75, or 150. And since the worker
must live, he can never produce 150 profit, still less
200. His surplus labour is always a part of his
working-day, from which it does not at all follow, as
Mr. Rodbertus thinks, that profit can never reach 100 per
cent. It can never be 100 per cent if it is calculated
on the working-day as a whole (for it is itself
included in it). But it can most certainly be 100 per
cent in relation to that part of the working-day which is
paid for.

Let us take the above example of 50 per cent.

Capital

Surplus-value

Rate of surplus-value

Rate of Profit

constant

variable

25

25

25

100 per cent

50 percent

Here the profit, half a working-day, is equal whole
[product].

| If the worker worked
three-quarters day for the capitalist then:

Capital

Surplus-value

Rate of surplus-value

Rate of Profit

constant

variable

25

121/2

371/2

300 per cent

100 percent

Total capital 371/2

[calculated on a capital] of 100

Capital

Surplus-value

Rate of surplus-value

Rate of Profit

constant

variable

66 2/3

33 1/3

100

300 per cent

100 percent

Total capital 100

Let us examine this a little more closely and see what is
implied by the view that [the rate of] profit falls
because, in consequence of progressive accumulation, it does
not constitute simple profit (consequently the rate
of exploitation of the worker does not decline but, as
Hodgskin says, increases) but compound profit and it
is impossible for labour to keep pace with the demands of
compound interest.

It has to be noted first of all that this has to be
defined in more detail if it is to make any sense at
all. Regarded as a product of accumulation (that is,
of the appropriation of surplus labour)—and this
approach is necessary if one considers reproduction as a
whole—all capital is made up of profit (or of
interest, if this word is considered to be synonymous with
profit and not with interest in the strict sense). If
the rate of profit is 10 per cent, then this is
“compound interest”, compound profit. And
it would be impossible to see how 10 to 100 could—in
economic terms—differ from 11 to 110. So what
emerges is that “simple profit” too is
impossible, or at least that simple profit must also
decline, because, in fact, simple profit is made up in
exactly the same way as compound profit. If one
narrows the problem, that is, considers solely
interest-bearing capital, then compound interest would
swallow up profit and more than profit; and the fact that
the producer (capitalist or not) has to pay the lender
compound
interest means that sooner or later, in addition to
profit he has to pay him part of his capital as well.

Thus it should be noted first of all that Hodgskin’s view
only has meaning if it is assumed that capital grows more
rapidly than population, that is, than the working
population. (Even this latter is a relative
growth. It is in the nature of capitalism to overwork
one section of the working population while it turns another
into paupers.) If the population grows at the same
rate as capital, then there is no reason whatsoever why I
should not be able to extract from 8x workers with
£800 the [same rate of] surplus labour that I can
extract from x workers with £100. | Eight times 100 C makes
no greater demand on 8 times x workers than 100
C on x workers. Thus
“Hodgskin’s” argument becomes
groundless. (In reality, things turn out
differently. Even if the population grows at the same
rate as capital, capitalist development nevertheless results
in one part of the population being made redundant, because
constant capital develops at the expense of variable
capital.)

<“…it is very material,
with reference to labour, whether you distribute
them” (goods) “so as to induce a
greater supply of labour or a less: whether you
distribute them where they will be conditions for labour, or
where they will be opportunities for idleness” (An
Inquiry into those Principles, respecting the Nature of
Demand and the Necessity of Consumption, lately advocated by
Mr. Malthus etc., London, 1821, p. 57).

“… that increased supply of
labour is promoted by the increased numbers of
mankind…”(loc. cit., p. 58).

“The not being able to command so
much labour as before, too, is only important where
that[cc] labour would
produce no more than before. If labour has been
rendered more productive, production will not be checked,
though the existing mass of commodities should command
less labour than before”(loc. cit., p. 60).

(This is directed against Malthus. True, production
would not be checked, but the rate of profit would.
These cynical propositions stating that a “mass of
commodities commands labour”, reflect the same
cynicism which finds expression in Malthus’s explanation of
value[dd]; command
of the commodity over labour is very good and is
absolutely characteristic of the nature of capital.)

The same author makes the following correct observation
directed against West:

“The author of
the Essay […] observes[ee] […] that more will be given
for labour when there is most increase of stock, and
that […] will be when profits on stock are
highest. ‘The greater the profits of
stock’, he adds, ‘the higher will be the wages
of labour.’ The fault of this is, that a word or
two is left out. ‘The greater have been
the profits of stock’ … ‘the higher
will be the wages of labour’… The
high profits and the high wages are not simultaneous;
they do not occur in the same bargain; the one
counteracts the other, and reduces it to a level. It
might as well be argued, ‘the supply of a commodity is
most rapid when the price is highest, therefore, large
supply and high price go together’. It is a
mixing up of cause and effect” (op. cit.,
pp. 100-01).>

Hodgskin’s proposition, therefore, has meaning only if,
as a result of the process of accumulation, more
capital is set in motion by the same workers, or if the
capital grows in relation to labour. That is, if, for
example, the capital was 100 and becomes 110 by
accumulation, and if the same worker who produced a
surplus-value of 10, is to produce a surplus-value of 11,
corresponding to the growth of capital, i.e., compound
interest. So that it is not simply the same capital he
set in motion previously which, after its reproduction, is
to yield the same profit (simple profit) but this capital
has been increased by his surplus labour [so that] he has to
provide surplus labour for the original capital (or its
value) and also for his own accumulated (i.e. capitalised)
surplus labour. And since this capital increases every
year, the same worker would constantly have to furnish more
labour.

It is however only [under the following conditions]
possible for more capital to be applied per worker:

First. If the productive power of labour
remains the same, then this is only possible if the worker
prolongs his working-time absolutely, i.e., for example, if
he works 15 hours instead of 12 hours, or if he works more
intensively and performs 15 hours’ labour in 12 hours, does
5 hours’ labour in 4 hours or 1 hour’s labour in
4/5 of an hour. Since he
reproduces his means of subsistence in a definite number of
hours, then, in this case, three hours of labour are won for
the capitalist in the same way as if the productive power of
labour had been increased, while, in fact, it is labour
which has been increased, not its productive power. If
the intensification of labour were to become general, then
the value of commodities would fall in proportion to the
reduced labour-time which they cost. The degree of
intensity would become the average [intensity of labour],
its natural quality. If,
however | , this only
occurs in particular spheres, then it amounts to more
complex labour, simple labour raised to a higher
power. Less than an hour of more intensive labour then
counts as much—and creates as much value—[as an
hour of] the more extensive labour. For example, in
the above case, 4/5 of an hour
[produces] as much as 5/5, or an
hour.

Both the extension of labour-time and the increase of
labour through its greater intensification by means of the
compression of the pores of Labour as it were, have their
limits (although the London bakers, for example, regularly
work 17 hours [a day] if not more), very definite, physical,
limitations, and it is when encountering these that compound
interest—composite profit—ceases.

Within these limitations the following
applies:

If the capitalist pays nothing for the extension or
intensification of labour, then his surplus-value
(his profit as well, provided there is no change in the
value of the constant capital, for we assume that the
mode of production remains the same)—and, in
accordance with the proviso, his profit—increases more
rapidly than his capital. He pays no necessary labour
for the capital which has been added.

If he pays for the surplus labour at the same rate as
previously, then the growth of the surplus-value is
proportionate to the increase in capital. The profit
grows more rapidly. For there is a more rapid turnover
of fixed capital, while the more intensive use of the
machinery does not cause the wear and tear to increase at
the same rate. There is a reduction of expenditure on
fixed capital, for less machinery, workshops etc. are
required for 100 workers who work longer hours than for 200
workers employed simultaneously. Likewise fewer
overseers, etc. (This gives rise to a most
satisfactory situation for the capitalist, who is able to
expand or contract his production without hindrance, in
accordance with the market conditions. In addition,
his power grows, since that portion of labour which is
over-employed, has its counterpart in an unemployed or
semi-employed reserve army, so that competition amongst the
workers increases.)

Although there is in this case no change in the purely
numerical ratio between necessary labour and surplus
labour—this is however the only case where both can
simultaneously increase in the same proportion—the
exploitation of labour has nevertheless grown, both by means
of an extension of the working-day and by its
intensification (condensation) provided the working-day
is not shortened at the same time (as with the 10 Hours
Bill). The period for which the worker is fit to work
is reduced and his labour-power is exhausted in a much
greater measure than his wages increase and he becomes even
more of a work machine. But disregarding the latter
aspect, if he lives for 20 years working a normal
working-day and only 15 years when his working-day is
extended and intensified, then he sells the value of his
labour-power in 15 years in the latter case and in 20 years
in the former. In one case it has to be replaced in 15
years, in the other, in 20 years.

A value of 100 which lasts for 20 years is replaced if 5
per cent is paid on it annually, for 5×20=100. A
value of 100 which lasts 15 years is replaced if
610/15 or 62/3
per cent is paid on it annually. But in the given
case, the worker receives for 3 hours of additional labour
only an amount equivalent to the daily value of his labour
calculated over 20 years. Assuming that he works 8
hours necessary labour and 4 hours surplus labour, then he
receives two-thirds of each hour for
12×2/3=8 And in the same way he
receives 2 out of the 3 hours over-time that he works.
Or two-thirds of each hour. But this is only the value
of his hourly labour-power on the assumption that it will
last for 20 years. If he uses it up in 15 years, its
value [per hour] increases.

Anticipation of the future—real
anticipation—occurs in the production of wealth only
in relation to the worker and to the land. The future
can indeed be anticipated and ruined in both cases by
premature over-exertion and exhaustion, and by the
disturbance of the balance between expenditure and
income. In capitalist production this happens to both
the worker and the land. As far as so-called
anticipation is concerned, in relation to the national debt
for example, Ravenstone remarks with justice:

| “In pretending
to stave off the expenses of the present hour to a future
day, in contending that you can burthen posterity to supply
the wants of the existing generation, they in reality assert
the monstrous proposition[ff] that you can consume what does not
yet exist, that you can feed on provisions before their
seeds have been sown in the earth” (Piercy Ravenstone,
[Thoughts on the Funding System, and Its Effects,
London, 1824], p. 8.)

“All the wisdom of our statesmen will
have ended in a great transfer of property from one class of
persons to another, in creating an enormous fund for the
reward of jobs and peculation” (loc. cit., p. 9).

It is different in the case of the worker and the
land. What is expended here exists as
δίναμις[gg] and the life span of this
δίναμις is shortened as a
result of accelerated expenditure.

Finally, if the capitalist is forced to pay more for
over-time than for normal working-time, then, according to
the facts outlined above, this is by no means an increase in
wages, but only compensation for the increased value of
over-time—and in reality over-time pay is rarely
sufficient to cover this. In fact, in order to pay for
the increased wear and tear of the labour-power, when
over-time is worked, a higher rate ought to be paid for
every working hour not merely for the additional hours.

Thus there is in any case an increased exploitation of
labour. At the same time, as a result of the
accumulation of capital, a reduction in surplus-value takes
place at all events and also a decline in the rate of
profit, insofar as this is not counteracted by saving on
constant capital. |

| This is therefore a
situation where, in consequence of the accumulation of
capital—of the appearance of compound profit—the
rate of profit must decline. If on a capital of
[£] 300 (the original amount) the rate of profit was
10 per cent (that is profit came to [£] 30), and if
for an additional [£] 100 it is 6 per cent, then
profit is [£] 36 for [£] 400. Thus on the
whole it is 9 for 100. And the rate of profit has
fallen from 10 per cent to 9 per cent.

But, as has been stated, on this basis (if the
productivity of labour remains the same) not only must the
profit on additional capital fall, but at a certain point it
must cease altogether, thus the whole accumulation based on
this compound profit would be stopped. In this case,
the decline in profit is linked with increased exploitation
of labour and the cessation of profit at a certain point is
not due to the worker or someone else receiving the whole
product of his labour, but to the fact that it is physically
impossible to work over and above a certain amount of
labour-time or to increase the intensity of labour beyond a
certain degree.

Secondly. The only other case, where, with
the number of workers remaining constant, more capital is
applied per worker, and therefore the additional capital can
be laid out and used for the increased exploitation of the
same number | of workers,
occurs when the productivity of labour increases,
i.e. the method
of production is changed. This presupposes a
change in the organic ratio between constant and variable
capital. In other words, the increase in the capital
in relation to labour is here identical with the increase of
constant capital as compared with variable capital and, in
general, with the amount of living labour employed.

This is where Hodgskin’s view merges with the general law
which I have outlined.

The surplus-value, i.e. the exploitation of the worker,
increases, but, at the same time, the rate of profit falls
because the variable capital declines as against the
constant capital, because in general, the amount of living
labour falls relatively in comparison with the amount of
capital which sets it in motion. A larger portion of
the annual product of labour is appropriated by the
capitalist under the signboard of capital, and a smaller
portion under the signboard of profit.

<Hence the phantasy of the Rev. Thomas
Chalmers to the effect that the smaller the amount of
the annual product laid out by the capitalists as capital,
the larger the profit they pocket. The Established
Church then comes to their assistance and sees to it that a
large part of the surplus product is consumed instead of
being capitalised. The miserable priest confuses cause
with effect. Moreover, with a smaller rate [of profit]
the amount of profit increases as the size of the capital
laid out grows. In addition, the quantity of use-value
which this smaller proportion represents, increases.
At the same time, however, this leads to the centralisation
of capital, since the conditions of production now demand
the application of capital on a mass scale. It brings
about the swallowing up of the smaller capitalists by the
bigger ones and the “decapitalisation” of the
former. This is once again, only in a different
form, the separation of the conditions of labour from labour
(for there is still a great deal of self-employment amongst
the smaller capitalists; in general the labour done by the
capitalist stands in inverse proportion to the size of his
capital, that is, to the degree in which he is a
capitalist. This process would soon bring capitalist
production to a head if it were not for the fact that,
alongside the centripetal forces, counteracting tendencies
exist, which continuously exert a decentralising influence;
this need not be described here, for it belongs to the
chapter dealing with the competition of capitals). It
is this separation which constitutes the concept of capital
and of primitive accumulation, which then appears as
a continual process
in the accumulation of capital and here finally
takes the form of the centralisation of already existing
capitals in a few hands and of many being divested of
capital.>

The fact that the (proportionally) declining quantity of
labour is not fully offset by increased productivity, or
that the ratio of surplus labour to the capital expended
does not increase at the same rate as the relative
amount of labour employed declines, is due partly to
the fact that the development of the productive power of
labour reduces the value of labour, the necessary labour,
only in certain capital investment spheres, and that, even
in these spheres, it does not develop uniformly, and that
factors exist which nullify this effect; for example, the
workers themselves, although they cannot prevent reductions
in (real) wages, will not permit them to be reduced to the
absolute minimum; on the contrary, they achieve a certain
quantitative participation in the general growth of
wealth.

But this growth of surplus labour too is relative, [and
is only possible] within certain limits. In order to
make this growth correspond to the demands of compound
interest, the necessary labour-time in this case would have
to be reduced to zero in the same way as [the surplus
labour-time] had to be extended endlessly in the case
considered previously.

The rise and fall in the rate of profit—insofar as
it is determined by the rise or fall of wages resulting from
the conditions of demand and supply [in the labour market],
or caused by the temporary rise or fall in the prices of
necessaries compared with those of luxuries, as a result of
the changes in demand and supply and the rise or fall in
wages to which this leads—has as little to do with the
general law of | the rise
or fall in the profit rate as the rise or fall in the market
prices of commodities has to do with the determination of
value in general. This has to be analysed in the
chapter on the real movement of wages. If the
conditions of demand and supply are favourable to the
workers and wages rise, then it is possible (but by
no means certain) that the prices of certain necessaries,
especially food, will rise correspondingly for a time.
The author of the Inquiry into Those Principles
etc. rightly remarks in this connection:

In this case there will be “…
an increase of demand for necessaries, in proportion to that
for superfluities, as compared with what would have been the
proportion between these two sorts of demand, if he had
exerted that command” (i.e., the capitalist, his
command over commodities) “to procure things for his
own consumption. Necessaries will thereby exchange for more of things in
general… And, in part, at least, these
necessaries will be food” (op. cit., p. 22).

He then correctly expresses the Ricardian view as
follows:

“At all events, then, the increased
price of corn was not the original cause of that rise
of wages which made profits fall, but, on the contrary, the
rise of wages was the cause of the increased price of corn
at first, and the nature of land, yielding less and less
proportional returns to increased tillage, made part of that
increase of price permanent, prevented a complete
reaction from taking place through the principle of
population” (loc. cit., p. 23).

Hodgskin and the author of The Source and Remedy
etc. since they explain the fall of profits by the
impossibility of living labour to fulfil the demands of
compound interest, and although they do not analyse this,
are much nearer the truth than Smith and Ricardo, who
explain the fall of profits by the rise in wages, one of
them, [by the rise in] real and nominal wages, the other [by
the rise in] nominal wages, with rather a decrease of real
wages. Hodgskin and all the other proletarian
opponents have enough common sense to emphasise the fact
that the proportional number of those who live on profit has
increased with the development of capital.

### [f) Hodgskin on the Social Character of Labour and on
the Relation of Capital to Labour]

Now a few concluding passages from Hodgskin’s Labour
Defended etc.

The treatment of the exchange-value of the product,
hence of the labour embodied in the commodity, as social
labour.

“Almost every product of art and
skill is the result of joint and combined
labour… ”

(This is the result of capitalist production.)

“… So dependent is man on man,
and so much does this dependence increase as society
advances, that hardly any labour of any single individual
… is of the least value but as forming part of the
great social task…”

<This passage has to be quoted, and in doing so [it
is necessary to emphasise] that it is only on the basis of
capitalism that commodity production or the
production of products as commodities becomes all-embracing
and affects the nature of the products themselves.>

“Wherever the division of labour is
introduced […] the judgement of other men intervenes
before the labourer can realise his earnings, and there is
no longer any thing which we can call natural reward of
individual labour. Each labourer produces only some
part of a whole, and each part, having no value or utility
of itself, there is nothing on which the labourer can seize
and say, ‘this is my product, this I will keep to
myself’. Between the commencement of any joint
operation, such as that of making cloth, and the division of
its product among the different persons whose combined
exertions have produced it, the judgement of men must
intervene several times, and the question is, how much of
this joint product should go to each of the individuals
whose united labour produced it?” ( [Thomas Hodgskin,
Labour Defended etc., London, 1825,] p. 25.)

“… I know no way | of deciding this but by
leaving it to be settled by the unfettered judgements of the
labourers themselves” (loc. cit., p. 25).

“I must [… ] add that it
is doubtful whether one species of labour is more valuable
than another; certainly it is not more necessary”
(loc. cit., p. 26).

Finally Hodgskin writes about the relation of
capital [and labour]:

“Masters […] are labourers as
well as their journeymen. In this character their
interest is precisely the same as that of their men.
But they are also either capitalists or the agents of the
capitalist, and in this respect their interest is decidedly
opposed to the interest of their workmen” (loc. cit.,
p. 27).

“The wide spread of education among
the journeymen mechanics of this country, diminishes daily
the value of the labour and skill of almost all masters and
employers, by increasing the numbers of persons who possess
their peculiar knowledge” (loc. cit., p. 30).

“But put the capitalist, the
oppressive middleman out of view”[hh] then “… it is plain
that capital, or the power to employ labour,
and coexisting labour, are one; and […]
productive capital and skilled labour are also
one; consequently capital and a labouring population
are precisely synonymous. In the system of nature,
mouths are united with hands and with intelligence”
(loc. cit., p. 33).

The capitalist mode of production disappears with the
form of alienation which the various aspects of social
labour bear to one another and which is represented in
capital. This is the conclusion arrived at by
Hodgskin.

The primitive accumulation of capital.
Includes the centralisation of the conditions of
labour. It means that the conditions of labour acquire
an independent existence in relation to the
worker and to labour itself. This historical act is
the historical genesis of capital, the historical
process of separation which transforms the conditions of
labour into capital and labour into wage-labour. This
provides the basis for capitalist production.

Accumulation of capital on the basis of capital
itself, and therefore also on the basis of the relationship
of capital and wage-labour, reproduces the separation and
the independent existence of material wealth as against
labour on an ever increasing scale.

Concentration of capital. Accumulation of
large amounts of capital by the destruction of the smaller
capitals. Attraction. Decapitalisation of the
intermediate links between capital and labour. This is
only the last degree and the final form of the process which
transforms the conditions of labour into capital, then
reproduces capital and the separate capitals on a larger
scale and finally separates from their owners the various
capitals which have come. into existence at many
points of society, and centralises them in the hands of big
capitalists. It is in this extreme form of the
contradiction and conflict that production—even
though in alienated form—is transformed into social
production. There is social labour, and in the real
labour process the instruments of production are used in
common. As functionaries of the process which
at the same time accelerates this social production
and thereby also the development of the productive forces,
the capitalists become superfluous in the measure that they,
on behalf of society, enjoy the usufruct and that they
become overbearing as owners of this social wealth
and commanders of social labour. Their position
is similar to that of the feudal lords whose exactions in
the measure that their services became
superfluous with the rise of bourgeois society, became mere
outdated and inappropriate privileges and who therefore
rushed headlong to destruction. |XV-890||

### [g) Hodgskin’s Basic Propositions as Formulated in His
Book—“Popular Political Economy”]

||XVIII-1084| Thomas
Hodgskin, Popular Political Economy. Four Lectures
delivered at the London Mechanics’ Institution, London,
1827.

“Easy labour is only transmitted
skill” (p. 48).

“But as all the advantages derived
from the division of labour naturally centre in, and
[…] belong to the labourers, if they are deprived of
them, and in the progress of society those only are enriched
by their
improved skill who never labour,—this must arise
from unjust appropriation; from usurpation and plunder in
the party enriched, and from consenting submission in the
party impoverished” (op. cit., pp. 108-09).

| “The
labourers, to be sure, multiply too rapidly when that
multiplication is only compared with the want of the
capitalist for their services…”[ii] (op. cit.,
p. 120).

“Mr. Malthus points out the effects
which an increase in the number of labourers has in
lessening the share which each one receives of the annual
produce—the portion of that distributed amongst
them being a definite and determinate quantity, not
regulated in any degree by what they annually create”
(op. cit., p. 126).

“… labour […] the
exclusive standard of value,” but “labour, the
creator of all wealth” [is] “not a
commodity” (op. cit., p. 186, note).

Regarding the influence of money on the expansion of
wealth, Hodgskin remarks correctly:

“As a man can dispose of small
portions of produce that is corruptible, for what is
incorruptible, he is under no temptation to throw it away;
and thus the use of money adds to wealth, by preventing
waste” (op. cit., p. 197).

The chief advantage of retail trade derives from the fact
that the quantity in which commodities are best produced is
not that in which they are best distributed[jj] (op. cit., p. 146).

“Both the theory relative to capital,
and the practice of stopping labour at that point where it
can produce, in addition to the subsistence of the labourer,
a profit for the capitalist, seem opposed to the natural
laws which regulate production” (op. cit.,
p. 238).

With regard to the accumulation of capital,
Hodgskin advances roughly the same ideas as those contained
in his first book. Nevertheless—for the sake of
completeness—we will reproduce the main passages.

“Taking only fixed capital into
consideration […] the subject most favourable to the
idea of capital aiding production [… ] For this
purpose we may distinguish three classes of circumstances
under which the effects of an accumulation of capital will
be very different. First, if it is made and used by
the same persons […][kk] every accumulation in his
possession of
the instruments he makes and uses, facilitates his
labour. The limit to such an accumulation is
[…] the power of the labourer to make and use the
instruments in question.”

“… second, if it be[ll] made and used by
different […] persons, who share between them in
just proportion the produce of their combined
labour.[… ] Capital may be made by one labourer
and used by another […] both may[mm] divide the commodity […] in
proportion as each has contributed by his labour to produce
it… I should rather express this fact, however,
by saying that a part of the society employed in making
instruments, while another part uses them, is a branch of
division of labour which aids productive power and adds
to the general wealth. As long as the produce of the
two […] classes of labourers.-be[nn] divided between them, the
accumulation or[oo]
increase of such instruments as they can make and use, is as
beneficial as if they were made and used by one
person.”

Third, “if it be owned by a class of persons who
neither make nor use it [… ] The capitalist
being the mere owner of the instruments, is not, as
such, a labourer. He in no manner assists
production.”

<In other words, production is assisted by the
instrument, but not by the title which A holds to the
instrument, i.e. not by the circumstance that the
instrument is owned by a non-labourer.>

“He acquires
possession of the produce of one labourer, which he
makes over to another, either for a time—as is the
case with most kinds of fixed capital, or for ever, as is
the case with wages—whenever he thinks it can be used
or consumed for his advantage. He never does
allow the produce of one labourer, when it comes into his
possession, to be either used or consumed by another, unless
it is for his benefit. He employs or lends his property
to shore the produce, or natural revenue, of
labourers; and every accumulation of such
property in his hands is a mere extension of his
power over the produce of labour, and retards the
progress of national wealth, […] this [is] at present
the case… When the capitalist, being. the
owner of all the produce, will allow labourers neither to
make nor use instruments, unless he obtains a profit
over and above the subsistence of the labourer, it is plain
that bounds are set to productive labour much within what
Nature prescribes. In proportion as capital in the
hands of a third party is accumulated, so the whole
amount of profit required by the capitalist increases,
and so there arises an artificial check to production and
population… In the present state of society, the
labourers being la no case the owners of capital, every
accumulation of it adds to the amount of profit demanded
from them, and extinguishes all that labour which would
only procure the labourer his comfortable
subsistence… when it is admitted that labour
produces all things, even capital, it is nonsense to
attribute productive power to the instruments labour makes
and uses…”

“…wages do not, like instruments,
facilitate production.[pp] […] labour,
not capital, pays all wages” (op. cit.,
pp. 243-47).

| “…the
greater part of […] the advances of
capitalists consists of such promises.”[qq]

“…the invention and employment of
paper-money had done nothing else but show [the
incorrectness of the notion] that capital is something
saved[rr]
[… ] As long as the capitalist, to realise his
wealth, or command over other people’s labour, was obliged
to have in his possession an actual accumulation of the
precious metals or of commodities, we might have continued
to suppose,[ss] that
accumulation of capital was the result of an actual saving,
and that on it depended the progress of society. But
when paper-money and parchment securities were
invented—when the possessor of nothing but such a
piece of parchment received an annual revenue in pieces of
paper with which he obtained whatever was necessary for his
own use and consumption, and not giving away all the pieces
of paper, was richer at the end of the year than at the
beginning, or was entitled next year to receive a still
greater number of pieces of paper, obtaining a still greater
command over the produce of labour, it became evident
[…] that capital was not any thing saved; and that
the individual capitalist did not grow rich by an
actual and material saving, but by doing something
which enabled him … to obtain more of the produce of
other men’s[tt]
labour” (loc. cit., p. 248, note).

“The master manufacturer has either
money or paper with which he pays wages; those wages his
labourer exchanges for the produce of other labourers, who
will not keep the wages, whether money or paper; and it is
returned to the manufacturer, who gives in exchange for it
the cloth which his own labourers have made. With it
he again pays wages, and the money or paper again goes the
same round …”

“It ascribes to his” (the
capitalist’s) “property merely, whether he
employ it to pay wages, or whether it consist in
useful instruments, all that vast assistance, which
knowledge and skill, when realised in machinery, give
to labour. […] the united labours of the
miner, the smelter, the smith, the engineer, the stoker, and
of numberless other persons, and not the lifeless machines,
perform whatever is done by steam engines…
By the common mode of speaking, the productive power of
this skill is attributed to its visible products, the
instruments, the mere owners of which, who neither
make nor use them, imagine themselves to be very productive
persons…” (loc. cit., pp. 248-51).

With regard to his polemic against “the danger
of forcing […] capital out of the
country” [loc. cit., p. 253], and against the
interest of capital as a necessary stimulus for [the
development
of] industry, or concerning the savings theory, see IX,
47. To be included in the chapter on the vulgar
economists.

“As their numbers are increased,[uu] both increased
production and consumption take place, which is all that is
ever meant by the terms accumulation or increase of national
wealth” (op. cit., p. 257). |XVIII-1086||

### [h) Hodgskin on the Power of Capital and on the
Upheaval in the Right of Property]

|XIII-670a| [Hodgskin,] The Natural and Artificial
Right of Property Contrasted, London, 1832.

“At present, all the wealth of
society goes first into the possession of the
capitalist, and even most of the land has been
purchased by him; he pays the landowner his rent, the
labourer his wages, the tax and tithe gatherer their claims,
and keeps a large, indeed the largest and continually
augmenting share, of the annual produce of labour for
himself. The capitalist may now be said to be the
first owner of all the wealth of the community;
though no law has conferred on him the right to this
property” (p. 98).

“… this change has been
effected by the taking of interest on capital, and by
the process of compound interest; and it is not a little
curious, that all the lawgivers of Europe, endeavoured to
prevent this by statutes, viz., statutes against
usury” (loc. cit., p. 98, note).

“… the power of the capitalist
over all the wealth of the country, is a complete change
in the right of property, and by what law, or series of
laws, was it effected?” (loc. cit., p. 99).
|XIII-670a||

## [4.] Bray as an Opponent of the Economists

|X-441| J. F. Bray,
Labour’s Wrongs and Labour’s Remedy, etc., Leeds,
1839.

Since human existence is determined by labour, and labour
presupposes instruments of labour … “the great
field for all exertion and the raw material of all
wealth—the earth—is[vv] the common property of all its
inhabitants” (p. 28).

“… life is dependent upon
food, […] food […] upon labour […],
those dependencies are absolute […] therefore, if
labour be evaded by any human being, it can be thus evaded
by individuals only on the condition of increased labour by
the mass” (loc. cit., p. 31).

“… all the wrongs and the woes
which man has ever committed or endured, may be
traced to the assumption of a right in the soil, by certain
individuals and classes, to the exclusion of other
individuals and classes… The next step which man
has ever taken, after having claimed property in land, has
been to claim property in man…”
(loc. cit., p. 34).

Bray declares that his purpose is:

“…fighting them” (the
economists) “upon their own ground, and with their own
weapons” (loc. cit., p. 41) (in order to prove that
poverty need not be the lot of the workers under every
social system). “Before the conclusions arrived
at by such a course of proceeding can be overthrown, the
economists must unsay or disprove those established truths
and principles on which their arguments are founded”
(loc. cit., p. 41).

According to the economists the production of wealth
requires: 1) labour, 2) accumulation of previous labour, or
capital, and 3) exchange.[ww] These are, according to the
economists themselves, the universal conditions of
production.

“They are applied to society at
large, and, from their nature, cannot exempt any individual
or any class from their operation” (loc. cit.,
p. 42).

“The ban—‘Thou shalt
babour’—rests alike on all created
beings… Man only can escape this law; and, from
its nature, it can be evaded by one man only at the expense
of another” (loc. cit., p. 43).

“From the very nature of labour and
exchange, strict justice not only requires” <in
this context, Bray refers to the economic definitions of the
exchange-value of commodities> “that all
exchangers should be mutually, but that they should
likewise be equally, benefited… If a
just system of exchanges were acted upon, the value of all
articles would he determined by the entire cost of
production; and equal values should always exchange for
equal values… the workmen have given the
capitalist the labour of a whole year, in exchange for the
value of only half a year—and from this […] has
arisen the inequality of wealth and power which at present
exists around us. It is an inevitable condition of
inequality of exchanges—of buying at one price and
selling at another—that capitalists shall continue to
be capitalists, and working men be working men—the one
a class of tyrants and the other a class of slaves—to
eternity” (op. cit., pp. 48-49).

“By the present […] system,
exchanges are not only not mutually beneficial to all
parties, as the political economists have asserted, but it
is plain […] that there is, in most transactions
between the capitalist and the producer, […] no
exchange whatever … what is it that the capitalist,
whether he be manufacturer or landed proprietor gives
[…] for the labour of the working man? The
capitalist gives no labour, for he does not work—he
gives no capital, for his store of wealth is being
perpetually augmented… the capitalist […]
cannot […] make an exchange with anything that
belongs to himself. The whole transaction, therefore,
plainly skews that the capitalists and proprietors do no
more than give the working man, for his labour of one week,
a part of the wealth which they obtained from him the week
before!—which just amounts to giving him
nothing for something… The wealth which the
capitalist appears to give in exchange for the workmen’s
labour was generated neither by the labour nor the riches of
the capitalist, but it was originally obtained by the labour
of the workman; and it is still daily taken from him, by a
fraudulent system of unequal exchanges” (loc. cit.,
pp. 49-50). “The whole transaction […]
between the producer and the capitalist, is a palpable
deception, a mere farce” (loc. cit., p. 50).

“…the law which says
‘There shall be accumulation’, is only half
fulfilled, and is made to subserve the interests of a
particular class, to the detriment of all the rest of the
community…” (loc. cit., p. 50).

“Under the present social system, the
whole of the working class are dependent upon the capitalist
or employer for the means of labour; and where one class, by
its position in society, is thus dependent upon another
class for the means of labour, it is dependent,
likewise, for the means of life; and this is a
condition so contrary to the very intention of
society—so revolting to reason … that it cannot
for one moment be palliated or defended. It confers on
man a power which ought to be vested in nothing
mortal” (loc. cit., p. 52).

“Our daily experience teaches us,
that if we take a slice from a loaf, the slice never grows
on again: the loaf is but an accumulation of slices, and the
more we eat of it, the less will there remain to be
eaten. Such is the |
case with the loaf of the working man; but that of the
capitalist follows not this rule. His loaf continually
increases instead of diminishing: with him, it is cut and
come again, for ever. … if exchanges were equal,
would the wealth of the present capitalists gradually go
from them to the working classes: every shilling that the
rich man spent, would leave him a shilling less rich”
(loc. cit., pp. 54-55).

Bray also shows in his work that:

“… it is […] impossible
that any capitalist can have derived even one thousand
pounds sterling from the actual hoarded labour of his
working-class progenitors” (loc. cit., p. 55).

It follows from the teachings of the economists
themselves that “…there can be no exchanges
without accumulations—no accumulations with-out
labour” (loc. cit., p. 55).

“…under the present system,
every working man gives to an employer at least six days’
labour for an equivalent worth only four or five days’
labour, the gains of the last man are necessarily the losses
of the first man” (loc. cit., p. 56).

“Thus, in whatever light” [the
genesis of wealth is] “examined—whether as a
gift, […] individual accumulation, […]
exchange, […] inheritance—there is proof upon
proof that there is a flaw in the rich man’s title which
takes away at once its very show of justice, and its
value” (loc. cit., pp. 56-57).

“… this wealth has all been
derived from the bones and sinews of the working classes
during successive ages, and it has been taken from them by
the fraudulent and slavery-creating system of unequal
exchanges” (loc. cit., p. 57).

If “a working man under the present
system […] would become wealthy, he […]
instead of exchanging his own labour, must become a
capitalist, or exchanger of the labour of other people; and
thus, by plundering others in the same manner as he was
plundered, through the medium of unequal exchanges, he will
be enabled to acquire great gains from the small losses of
other people” (loc. cit., p. 57).

“The political economists and
capitalists have written and printed many books to impress
upon the working man the fallacy that ‘the gain of the
capitalist is not the loss of the
producer’. We are told that Labour cannot move
one step without Capital—that Capital is as a shovel
to the man who digs—that Capital is just as necessary
to production as Labour
itself is… this mutual dependency between
Capital and Labour has nothing to do with the relative
position of the capitalist and the working man; nor does it
show that the former should be maintained by the
latter… It is the capital, and not the
capitalist, that is essential to the operations of the
producer; and there is as much difference between the two,
as there is between the actual cargo and the bill of
lading” (loc. cit., p. 59).

“From the relation which capital and
labour bear to each other, it is evident that the more
capital or accumulated produce there is in a country, the
greater will be the facilities for production, and the less
labour will it require to obtain a given result. Thus
the people of Great Britain, with the aid of their present
vast accumulations of capital—their buildings,
machinery, ships, canals and railways—can produce more
manufactured wealth in one week, than their ancestors of a
thousand years since could have created in half a
century. It is not our superior physical powers,[xx] but our capital,
which enables us to do this; for, wherever there is a
deficiency of capital, production will progress slowly and
laboriously, and vice versa. From these
considerations, then, it is apparent, that whatever is
gained to Capital, is likewise gained to Labour—that
every increase of the former tends to diminish the toil of
the latter—and that, therefore, every loss to Capital
must also be a loss to Labour. This truth, though long
since observed by the political economists, has never yet
been fairly stated by them” [loc. cit., pp.
59-60].

<In fact, the fellows argue in the following
way:

Accumulated products of labour, i.e., products not
consumed, lighten labour and make it more productive.
As a consequence, the fruits of this lightening and so on
must go not to labour itself but to accumulation.
Consequently, it is not accumulation which must be the
property of labour but labour must be the property of
accumulation—[that is, it must be the property 1 of
its own products. Consequently, the worker must not
accumulate for himself but for someone else, and the
accumulation must confront him as capital.

For the economists, the material element of capital is so
integrated with its social form as capital—with its
antagonistic character as the product of labour dominating
labour—that they cannot write a single sentence
without contradicting themselves.>

“They have even identified Capital
with one class of the community, and Labour with another
class—although the two powers have naturally, and
should have artificially, no such connection. The
economists always attempt to make the prosperity, if not the
very existence, of the working man dependent upon the
condition of maintaining the capitalist in luxury and
idleness. They would not have the working man to eat a
meal until he has produced two—one for himself and the
other for his master—the batter receiving his portion
indirectly, by unequal exchanges” (ibid., p. 60).

“When the workman has produced a
thing, it is his no longer—it belongs to the
capitalist—it has been conveyed from the one to the
other by the unseen magic of unequal exchanges”
(loc. cit., p. 61).

“Under the present social system,
Capital and Labour—the shovel and the digger—are
two separate and antagonistic powers” (loc. cit.,
p. 60).

| “But even if
all the land and the machinery and the houses did belong to
the capitalists, and the working class were not in being,
the former would not thereby be enabled to evade the great
condition ‘that there shall be labour’.
Their wealth would leave them in the choice only of working
or starving. They cannot eat the land and the houses;
and the land will not yield sustenance, nor the machinery
make clothing, without the application of human
labour. Therefore, when the capitalists and
proprietors say that the working class must support them,
they likewise say, in effect, that the producers belong to
them as well as the houses and bands do—that the
working man was created only for the rich man’s use!”
(op. cit., p. 68).

“… the producer […]
receives, in exchange for what he gives to the
capitalist—not the labour nor the produce of the
labour of the capitalist, but—work! Through the
instrumentality of money, the working class are not only
compelled to perform the labour which the preservation of
existence naturally imposes upon them, but they are likewise
saddled with the labour of other classes. It matters
not whether the producers now receive gold, or silver, or
other commodities from a non-producing class: it all amounts
to this—that the working class perform their own
labour, and support them-selves, and likewise perform the
labour of the capitalist, and maintain him into the
bargain! Whatever may be the nominal receipts
which the producers receive from the capitalists, their
actual receipts are—the transfer of that labour
which ought to be rendered by the capitalists”
(op. cit., pp. 153-54).

“… we will suppose the
population of the United Kingdom […] to be […
] 25,000,000 of human beings. […] we may
[…] estimate the entire maintenance of the
twenty-five millions of people to be worth,[yy] on the average, at least £15
per head annually. This gives £375,000,000 as
the yearly value of the maintenance of the whole people of
the United Kingdom. We do not, however, employ
ourselves merely in producing articles of subsistence, for
our labour creates, likewise, many unconsumable
articles. We every year add to our stock of
accumulations, or capital, by increasing the number of our
houses, ships, implements, machines, roads, and other
assistants to further production, beside making good all
wear and tear. Thus, although our subsistence may be
worth but three hundred and seventy-five millions sterling a
year, the total annual value of the wealth created by the
people […] will not be less than five hundred
millions sterling” (op. cit., p. 81).

“… we cannot calculate upon
having above one-fourth of our population, or about six
millions of men—that is, those between the ages of
fourteen and fifty—as effective producers. Of
this number […] scarcely five millions can be said,
under the present arrangements […] to assist in
production;” (Bray writes later on that only four
millions are directly employed
in actual production) “for thousands of able-bodied
men […] are compelled to stand idle while the work
which they ought to do is being performed by women and
children; and hundreds of thousands of men in Ireland can
obtain no employment whatever. Thus less than five
millions of men, assisted by a few thousands of women and
children, have […] to create produce for […]
twenty-five millions…” (loc. cit.,
pp. 81-82).

“… the present number of
working men, if unassisted by machinery, could not support
themselves and the present number of idlers and unprofitable
labourers [… ] The agricultural and
manufacturing machinery of every kind which we bring to our
aid in the business of productions, has been computed to
perform the labour of about one hundred millions of
effective men… this machinery—and its
application under the present system, which has generated
the hundreds of thousands of idlers and livers on profit who
now press the working class into the earth” (loc.
cit., p. 82).

“The present constitution of society
has been fertilised by machinery, and by machinery will it
be destroyed… The machinery itself is
good—is indispensable; it is the application of
it—the circumstance of its being possessed by
individuals instead of by the nation—that is
bad” (loc. cit., pp. 82-83).

“The five millions of men already
enumerated as assisting in production will include all who
labour little or much. Some […] do not work
five hours a day, while others again toil on fifteen
hours;[zz] and when
to this is added the time lost by the compulsory idleness of
great numbers in times of depression in trade, it will be
found that our annual production is created and distributed
by less than one-fifth of the community, working, on the
average, ten hours a day” (loc. cit., p. 83).

“… we suppose that the wealthy non-producers of
every description, with their families, and dependents,
amount only to two millions of persons, yet this number
alone would cost the working classes 230,000,000 annually,
if their maintenance were averaged, like that of the latter,
at £15 per head… therefore,[aaa] upon the most
moderate computation their maintenance will cost not less
than £50 per head. This gives a total of
£100,000,000 as the annual cost of the mere drones of
society—the utterly unproductive…”
(loc. cit., pp. 83-84).

“… likewise[bbb] the double and quadruple
allowance received by the various classes of small
proprietors, manufacturers, and tradesmen, in the shape of
profit and interest, |
Upon the most moderate computation, the share of wealth
enjoyed by this extensive portion of the community will
amount to not less than £140,000,000 annually,
above the average of what is received by an equal
number of the best paid of the working class. Thus,
along with their government, the two classes of idlers and
livers on profit—comprising perhaps one-fourth of the
entire population—absorb about £300,000,000
annually, or above one half of the entire wealth produced
[…] an average loss of above £50 per head to
every working man in the empire!—This leaves
no more than an average of £11 per head per
annum, to be divided amongst the remaining three-fourths
of the nation. From calculations made in 1815, it
appears that the annual income of the whole people of the
United Kingdom amounted to about £430,000,000; of
which the working class received £99,742,547, and the
rent, pension, and profit class £330,778,825!
The whole property of the country was at the same time
calculated to be worth nearby three thousand millions of
pounds sterling” (loc. cit., pp. 84-85).

Cf. the list of Gregory King etc.

England, 1844. Population: Nobility and
gentry—1,181,000. Trades men, farmers,
etc.—4,221,000 (combined
total—5,402,000). Labourers, paupers,
etc.—9,567,000. Banfleld (T.C.), The
Organisation of Industry, second ed., London,
1848. |X-444||

[a] In the
manuscript “i.e.” instead of “that is to
say”.—Ed.

[b] In
the manuscript “Consequently, if” instead of
“If then”.—Ed.

[c] In
the manuscript “But this is” instead of
“that it is”.—Ed.

* ||XV-862a| Because surplus-value and
surplus labour are identical, a qualitative limit is
set to the accumulation of capital, [it is determined by]
the total working-day (the period in the 24 hours
during which labour-power can be active), the given stage of
development of the productive forces and the
population, which limits the total number of
working-days that can be utilised simultaneously at a given
time. If, on the contrary, surplus yield is understood
in the abstract form of interest, that is, as the
proportion in which capital increases itself by means of a
mythical “sleight of hand”, then the limit is
purely quantitative and it is absolutely impossible
to see why capital does not daily add to itself interest as
capital every morning, thus creating interest on interest in
infinite progression. |XV-862a||

[d] See
Theories of Surplus-Value, Part II, pp. 541-42 and
this volume, pp. 114-15.—Ed.

[e] In the
manuscript “for”.—Ed.

[f] Instead of
“this surplus labour must”, the manuscript has
“This surplus labour, that is an even larger amount,
must”.—Ed.

[g] Instead of
“which is the same thing”, the manuscript has
“which comes to the same thing”.—Ed.

[h] The following
sentence is Marx’s paraphrase (written in German) of the
ideas the author sets forth in the pamphlet.—Ed.

[i] The first part
of the sentence up to the words: “are worked” is
not a quotation but a paraphrase by Marx (in
German).—Ed.

[j] The Source and
Remedy of the National Difficulties, deduced from Principles
of Political Economy, etc.—Ed.

[k] In the
manuscript “The”—Ed.

[l] In the
manuscript “The entire war against the French
Revolution” instead of “the history of the last
thirty years”.—Ed.

[m] The Source
and Remedy of the National Difficulties, published
anonymously.—Ed.

[n] Ravenstone,
Thoughts on the Funding System, and its
Effects.—Ed.

[o] Labour
Defended against the Claims of Capital; or, the
Unproductiveness of Capital Proved, which Hodgskin
published anonymously.—Ed.

[p] In the
manuscript “Wealth is nothing but disposable
time”.—Ed.

[q]
Activity.—Ed.

[r] In the
manuscript this reads: “The conviction of the worker
employed by the cotton
spinner… ”—Ed.

[s] In the nascent
state.—Ed.

[t] A mode of
expression, a figure of speech.—Ed.

[u] In kind, in
this context it means: within the framework of a natural
economy.—Ed.

[v] This is not a
quotation from Chavée but a free summary of some of
his ideas.—Ed.

[w]
Virtue.—Ed.

[x] To surround
with a wall, to fortify, to defend.—Ed.

[y] To be strong,
vigorous.—Ed.

[z]
Wall.—Ed.

[aa] Rule, govern,
control.—Ed.

[bb] In the
manuscript “the vast utility of the steam-engine
does”.—Ed.

[cc] In the
manuscript “the”.—Ed.

[dd] See this
volume, pp. 16-17 and 31-32.—Ed.

[ee] In the
manuscript “The Author of An Essay on the
Application of Capital to Land
says”.—Ed.

[ff] Instead of
the phrase: “they in reality assert the monstrous
proposition” Marx wrote in the manuscript in German:
they assert the absurd proposition.—Ed.

[gg]
Power—Ed.

[hh] In the
manuscript “The capitalist is the
oppressive middleman between the different
labourers. If he is put out of
view…”.—Ed.

[ii] The
words up to “rapidly” represent Marx’s own
synopsis of Hodgskin’s argument and have been translated
here from the German. The rest of the sentence is
quoted directly from Hodgskin.—Ed.

[jj] Marx
paraphrases this proposition of Hodgskin in German (apart
from the words “retail trade” and
“quantity”) and his rendering has been
translated here.—Ed.

[kk] This part of
the quotation is slightly condensed and partly translated
into German in the manuscript; rendered in English it reads:
“If one considers for example fixed capital, the most
favourable position for the idea of capital aiding
production, three classes of circumstances are to be
distinguished under which [the results of] accumulation of
capital are very different.”

1. When it is made and used by the same
person. It is obvious [that]”.—Ed.

[ll] In the
manuscript “when” instead of “if it
be”.—Ed.

[mm] In the
manuscript “they” instead of “both
may”.—Ed.

[nn] In the
manuscript “is”.-Ed.

[oo] In the
manuscript “and”.-Ed.

[pp] In the
manuscript “wages do not facilitate production,
like instruments”.—Ed.

[qq] In the
manuscript “consists of promises to
pay”.—Ed.

[rr] In the
manuscript “The invention and employment of
paper-money has revealed that capital is by no means
something saved”.—Ed.

[ss] In the
manuscript “one could suppose”.—Ed.

[tt] In the
manuscript “people”.—Ed.

[uu] In the
manuscript “As the population
increases.”—Ed.

[vv] In the
manuscript “must be”.—Ed.

[ww] Marx here
summarises Bray’s ideas and presents them in German.—Ed.

[xx] In the
manuscript “forces”.—Ed.

[yy] Instead of
“we may estimate the entire maintenance of the 25
millions of people to be worth”, in the manuscript
“We assume that their maintenance
is”.—Ed.

[zz] In the
manuscript the two sentences, which are translated into
German, are condensed to read as follows: “Of the five
million men who at present assist in production some work
only five hours a day, others
fifteen.”—Ed.

[aaa] In the
manuscript “But”.—Ed.

[bbb] In the
manuscript “Add to this”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XXII] Ramsay

## [1. The Attempt to Distinguish Between Constant
and Variable Capital. The View that Capital Is Not an
Essential Social Form]

||XVIII-086| Ramsay, George
(of Trinity College, Cambridge), An Essay on the
Distribution of Wealth, Edinburgh, 1836.

With Ramsay we return again to the political
economists.

<In order to find a place for commercial capital, he
calls it “the transport of commodities from one place
to another” (op. cit., p. 19). He thus
confuses trade with the carrying industry.>

Ramsay’s chief contribution:

First: That he does in fact make the distinction
between constant and variable capital. True,
this occurs in such a manner, that the distinction between
fixed and circulating capital which he takes from the
circulation process is the only one which he
nominally retains, but he defines fixed capital in
such a way that it includes all the elements of constant
capital. He therefore regards as fixed capital
not only machinery and instruments, buildings in which
labour is carried on or in which the results of labour are
stored, draught and breeding animals, but also all raw
materials (semi-manufactures, etc.) “the seed of
the agriculturist, and the raw material of the
manufacturer” (op. cit., p. 22). Moreover
“manure of all kinds, fences […] for
agriculture, and the fuel consumed in manufactories”
(loc. cit., p. 23) are fixed capital.

“Circulating capital consists
exclusively of subsistence and other necessaries advanced to
the workmen, previous to the completion of the produce of
their labour” (loc. cit., p. 23).

It can be seen therefore that by “circulating
capital” he understands nothing | but that part of capital
which constitutes wages, and by fixed capital, that part
which constitutes the objective conditions—means and
materials—of labour.

The mistake here, however, is the identification of this
division of capital, which is directly derived from the
production process, with the distinction which arises from
the circulation process. This is due to his adherence
to the economic tradition.

On the other hand, Ramsay again confuses the purely
material element of the fixed capital thus defined with its
existence as “capital”. Circulating capital
(i.e., variable capital) does not enter into the real labour
process, but what does enter, is living labour, which is
bought with circulating capital, and which replaces
it. What enters in addition into the labour process is
constant capital, that is, labour embodied in the objective
conditions of labour, in the materials and means of
labour. Ramsay therefore writes:

“… fixed capital alone, not
circulating, is properly speaking a source of national
wealth” (loc. cit., p. 23).
“…labour and fixed capital are the only
elements of expense of production” (op. cit.,
p. 28).

What is really expended in the production of a commodity
are raw materials, machinery, etc., and the living labour
which sets them in motion.

“Circulating” capital is
superfluous, extraneous to the process of production.

“… were we to suppose the
labourers not to be paid until the completion of the
product, there would be no occasion whatever for circulating
capital. […] industry would be carried on on a
scale quite as great[a]
[…] Nothing can prove more strongly[b] that circulating capital is not an
immediate agent in[c] production, nor even essential to
it at all, but merely a convenience rendered
necessary by the deplorable poverty of the mass of the
people” (op. cit., p. 24).

“…fixed capital […]
alone constitutes an element of cost of production in a
national point of view”… (loc. cit.,
p. 26).

In other words: the labour materialised in the conditions
of labour—materials and means of labour—which we
call “fixed capital”, and the living labour, in
short, embodied, materialised labour and living labour, are
necessary conditions of production, elements of the national
wealth. On the other hand, [according to Ramsay], it
is a mere “convenience” due to the
“deplorable poverty of the mass of the people”
that the means of subsistence of the workers at all assume
the form of “circulating capital”. Labour
is a condition of production, but wage-labour
is not, and neither, therefore, is it necessary
that the workers’ means of subsistence confront them as
“capital”, as an “advance by the
capitalist”. What Ramsay overlooks is that if
the means of subsistence of the workers did not confront
them as “capital” (as “circulating
capital”, as he calls it), neither would the objective
conditions of labour confront them as “capital”,
as “fixed capital”, as he calls it. Ramsay
attempts in earnest, and not merely in words as the other
economists do, to reduce capital to “a portion of the
national wealth, employed, or meant to be employed, in
favouring reproduction” (op. cit., p. 21); he
therefore declares wage-labour and consequently
capital—that is the social form which the means of
reproduction assume on the basis of wage-labour—to
be unimportant and due merely to the poverty of the mass of
the people.

Thus we have arrived at the point where political economy
itself—on the basis of its analysis—declares the
capitalist form of production, and consequently
capital, to be not an absolute, but merely an
“accidental”, historical condition of
production.

Ramsay’s analysis, however, does not go far enough to
draw the correct conclusions from his premises, from the new
definition which he has given to capital in the immediate
production process.

## [2. Ramsay’s Views on Surplus-Value and on
Value. Reduction of Surplus-Value to Profit. The
Influence Which Changes in the Value of Constant and
Variable Capital Exert on the Rate and Amount of
Profit]

Ramsay comes indeed close to the correct definition of
surplus-value.

“… a circulating capital will
always maintain more labour than that formerly bestowed upon
itself. Because, could it employ no more than had been
previously bestowed upon itself, what advantage could arise
to the owner from the use of it as such?” (op. cit.,
p. 49). “There is no possible way of escaping
this conclusion, except by asserting[d] that the quantity of labour
which any circulating capital will employ is no more than
equal to that previously bestowed upon it.
[… ] This would be [… ] to say, that
the value of the capital expended is[e] equal to that of the product”
(loc. cit., p. 52).

This means, therefore, that the capitalist exchanges less
materialised labour for more living labour and that this
surplus of unpaid living labour constitutes the excess of
the value of the product over the value of the capital
consumed in its production, in other words, the
surplus-value (profit, etc.). If the amount of
labour for which the capitalist pays wages were equal to the
amount which he receives back from the worker in the
product, then the value of the product would be no greater
than that of the capital and there would be no profit.
Although Ramsay is very close here to the real origin of
surplus-value, he is nevertheless too bound up in the
tradition of the economists not to begin immediately
straying again along false paths. First of all, the
way he explains this exchange between variable capital | and labour is
ambiguous. If he had been quite clear about this, then
further misunderstanding would have been impossible.
He says:

“… circulating capital”,
for instance, “raised by the labour of 100 men, will
[…] employ a greater number, say 150.[f] Therefore the product at the
end of the […] year, will, in this case, be the
result of the labour of 150 men” (loc. cit.,
p. 50).

Under what circumstances can the product of 100 men buy
[the labour of] 150 men?

If the wages received by a worker for 12 hours’ labour
were equal to the value of 12 hours’ labour, then only one
working-day could be bought back with the product of his
labour and only 100 working-days with the product of 100
working-days. But if the value of the daily product of
his labour is equal to 12 labour hours and the value of the
daily wage he receives is equal to 8 labour hours, then 1
1/2 working-days or the labour of
1/2 men can be paid for, bought back,
for the value of his daily product. And 100
(1+1/2 men or working-days) = 100+50
or 150 men can be employed with the product of 100
working-days. Thus, the condition in which the product
of 100 men sets 150 in motion is that each of the 100 men
and, in general, every worker, spends half as much time
working gratis for the capitalist as he works for himself,
or that he spends a third of the working-day working
gratis. Ramsay does not make this clear. The
ambiguity appears in the conclusion: “Therefore the
product at the end of the … year, will, in this case,
be the result of the labour of 150 men” [loc. cit.,
p. 50]. It will indeed be
the result of the labour of 150 men in the same way as
the product of 100 men was the result of the labour of 100
men. The ambiguity (and certainly the lack of clarity,
more or less derived from Malthus) is to be found in this:
It appears as if the profit arises merely from the fact that
150 men are now employed instead of 100. Just as if
the profit derived from the 150 workers arose from the fact
that 225 workers can now be set in motion by the product of
the 150 [in the ratio of] 100:150= 150:225 [or] 20:30=30:45
[or] 4:6=6:9. But that is not the point.

The labour which the 100 men supply amounts to x, if x
equals their total working-day. The wages they receive
will then equal 2/3x.
Hence the value of their product equals x, the value of
their wages equals x–1/3x, and
the surplus-value made on them is
1/3x.

If the entire product of the labour of 100 men is again
laid out in wages, then 150 men can be employed with it and
their product will be equal to the wages of 225 men.
The labour-time of 100 men is the labour-time of 100
men. But the labour they are paid for is the
product of 66 2/3 men, that is, only
2/3 of the value embodied in their
product. The ambiguity [arises] because it appears as
if the 100 men or the 100 working-days (it makes no
difference whether they are days calculated over a year or
separate days) produce 150 working-days—a product
embodying the value of 150 working-days; while, conversely,
the value of 100 working-days suffices to pay for 150
working-days. If the capitalist continues to employ
100 men as he did previously, then his profit remains the
same. He will continue to pay the 100 men a product
equal to the labour-time of 66 2/3 men
and pocket the rest as he did before. If, on the other
hand, he bays out the whole product of the 100 men in wages
once again, then he accumulates and appropriates a
new amount of surplus labour equal to 50 working-days
instead of only 33 1/3 as he did
previously.

It is immediately apparent that Ramsay is not clear on
the point, since he once again advances against the
determination of value by labour-time the otherwise
“inexplicable” phenomenon that the rates of
profit are equal for capitals which exploit different
masses of labour-power.

“The use of fixed capital modifies to
a considerable extent the principle that value depends upon
quantity of labour. For some commodities on which the
same quantity of labour has been expended, require very
different
periods before they are fit for consumption.
But as during this time the capital brings no return, in
order that the employment in question should not be less
lucrative than others in which the product is sooner
ready for use, it is necessary that the commodity, when at
last brought to market, should be increased in value by
all the amount of the profit withheld. This shews
[…] how capital may regulate value independently of
labour” (op. cit., p. 43).

It shows rather that capital regulates average prices
independently of the value of the particular product
and that it exchanges commodities not according to their
value, but in such a way that one employment of capital
“should not be less | lucrative than
others”. Since empty tradition is more powerful
in political economy than in any other science, Ramsay does
not fail either to reproduce the “wine in the
cellar”[g]
argument which has been notorious since the time of [James]
Mill. And he therefore concludes that “capital
is a source of value independent of labour” (op. cit.,
p. 55), whereas the most he would have been justified in
concluding was that the surplus-value realised by capital in
a particular branch of production does not depend on the
quantity of labour employed by that particular
capital. |

| This false
conception of Ramsay’s in this case is all the more
surprising since, on the one hand, he grasps the natural
basis, so to speak, of surplus-value, and, on the other
hand, he affirms with regard to one instance that the
distribution of surplus-value—its equalisation
to the general rate of profit—does not increase the
surplus-value itself.

[Ramsay says firstly:]

“… profits owe their existence
to a[h] law of the
material world, whereby the beneficence of nature when aided
and directed by the labour and skill of man, gives so ample
a return to national industry as to leave a surplus
of products over and above what is absolutely necessary for
replacing in kind the fixed capital consumed, and for
perpetuating the race of labourers employed”
[op. cit., p. 205].

<“Perpetuating the race of
labourers” | is a
fine result of capitalist production. Of course, if
labour only sufficed to reproduce the conditions of labour
and to keep the workers alive, no surplus would be
possible, hence no profit and no capital. But that
nature has nothing whatever to do with it and
that the race of labourers perpetuates itself despite
this surplus and that the surplus assumes the form of
profit and on this basis, the race of capitalists
perpetuates itself has been admitted by Ramsay himself since
he declares that “circulating capital”, by which
he means wages, wage-labour, is not an essential condition
of production, but is due merely to the “deplorable
poverty of the mass of the people”. He does not
draw the conclusion that it is capitalist production which
“perpetuates” this “deplorable
poverty”, although he admits it when he says that it
“perpetuates the race of labourers” and leaves
them only as much as is necessary for that
perpetuation. In the sense indicated above it can be
said that surplus-value etc. rests on a natural law,
that is, on the productivity of human labour in its exchange
with nature. But Ramsay himself states that a source
of surplus-value is the absolute lengthening of
labour-time (p. 102) as well as the increased
productivity of labour brought about by industry.>

“… let the gross produce be
ever so little more than is strictly essential for the above
purposes, and the separation of a distinct revenue from the
general mass, under the appellation of profit, and belonging
to another class of men, becomes possible” (loc. cit.,
p. 205). “… the very existence of the
former[i] as a
distinct class is dependent on the productiveness of
industry” (loc. cit., p. 206).

Secondly, with regard to the equalisation of the
rate of profit as a result of the rise in prices in some
branches caused by increases in wages, Ramsay observes:

The rise in prices in some branches of industry resulting
from increases in wages “… by no means exempted
the master-capitalists from suffering in their profits, nor
even at all diminished their total loss, but only
served to distribute it more equally among the different
orders composing that body” (op. cit.,
p. 163).

And if the capitalist whose wine is the product of 100
men (Ramsay’s example) sells it for the same price as a
capitalist whose commodity is the product of 150 men, in
order that “… the employment [of capital] in
question should not be less lucrative than others”
[p. 43], then it is clear that thereby the surplus-value
embodied in the wine and in the other commodity is not
increased, but only distributed equally between different
orders of capitalists |.

| He also brings up
again Ricardo’s exceptions [to the
determination of value by labour-time]. These
latter will have to be discussed in that part of our
text where we speak of the conversion of value into price
of production. That is, very briefly, as
follows. Provided that in the different branches of
production the length of the working—day (insofar as
this is not compensated by the intensity of labour, the
unpleasantness of the work, etc.) is the same, or rather the
surplus labour is the same [as well as] the rate of
exploitation, the rate of surplus-value can change only if
wages rise or fall. Such variations in the rate of
surplus-value, like the rise or fall in wages, will affect
the production prices of commodities in different ways
according to the organic composition of capital.
Capital in which the variable part is large compared to the
constant part, would acquire more surplus labour as a result
of a fall in wages and would appropriate less surplus labour
as a result of a rise in wages than capital with a larger
proportion of the constant part to the variable part.
A rise or fall in wages would therefore have opposite
effects on the rate of profit in the two branches or on the
general rate of profit. In order to maintain the
general rate of profit, if wages rise, the prices of the
first kind of commodities will rise, and those of the second
kind will fall. (Either type of capital will of course
be directly affected by variations in wages only in
proportion to the greater or less quantity of living labour
it employs in comparison with the total capital
expended.) Conversely, if wages fall, the prices of
the first kind of commodities will fall and those of the
second kind will rise.

Strictly speaking, all this hardly belongs to the
discussion of the original conversion of values into
production prices and the original establishment of the
general rate of profit, since it is much more a question of
how a general rise or fall in wages will affect
production prices regulated by the general rate of
profit.

This problem has even less to do with the difference
between fixed and circulating capital. Bankers and
merchants employ almost exclusively circulating capital and
hardly any variable capital; that is, they lay out
relatively small amounts of capital on living labour.
Contrariwise, a mine-owner employs incomparably more fixed
capital than a capitalist engaged in tailoring. But it
is very questionable whether he employs relatively as much
living labour. It is merely because Ricardo advanced
this special, relatively insignificant case as the only
instance of a divergence between production price and
value (or, as he incorrectly put it, [as] an exception to
the determination
of value by labour-time) and presented it in the form of
a difference between fixed and circulating capital, that
this blunder—and in an incorrect form at
that—has survived as an important dogma in all
subsequent political economy. (The mine-owner should
be counterposed not to the tailor but to the banker and the
merchant.)

[Ramsay writes:]

“… the rise of wages […] is limited by the productiveness of industry. In
other words, … a man can never receive more for the
labour of a day or year than with the aid of all the other
sources of wealth, he can produce in the same time.
… his pay must be less than this, for a portion of
the gross produce always goes to replace fixed
capital” (i.e., constant capital, raw materials
and machinery, according to Ramsay) “with its
profit” (op. cit., p. 119).

Here Ramsay confuses two things. The amount of
“fixed capital” embodied in the daily product is
not the product of the day’s labour of the worker; in other
words, this portion of the value of the product
represented by a portion of the product in kind is not the
product of this day’s labour. On the other hand,
profit is indeed a deduction from the daily product of the
worker or from the value of this daily product.

Although Ramsay has not clearly elaborated the nature of
surplus-value and although in particular he remains firmly
rooted in the old prejudices with regard to the relation of
value and production price and the conversion of
surplus-value into average profit, he has on the other hand
drawn another, correct |
conclusion from his conception of fixed and circulating
capital.

Before coming to this, [here is another passage
about “value”]:

“… value must be in
proportion not merely to the capital truly consumed, but to
that also which continues unaltered, in a word,[j] to the total capital
employed” (op. cit., p. 74).

By this he means that profit, and therefore also the
production price, must be in proportion [to the total
capital employed] whereas the value obviously cannot be
altered by that part of the capital which does not enter
into the value of the product.

[Ramsay drew the following conclusion from his conception
of fixed and circulating capital.]

With the advance of society (i.e., of capitalist
production) the fixed portion of capital increases at the
expense of the circulating capital, i.e., that laid out in
labour. Therefore the demand for labour declines
relatively as wealth increases or capital is
accumulated. In manufacture, the “evils”
which the development of the productive forces generate for
the workers are temporary, but reappear constantly. In
agriculture, they are continuous, especially in connection
with the conversion of arable land into pasture. The
general result is: with the advance of society, i.e., with
the development of capital, here with that of national
wealth, the condition of the workers is affected less and
less by this development, in other words, it worsens
relatively in the same ratio as the general wealth
increases, i.e., as capital is accumulated, or, what amounts
to the same thing, as the scale of reproduction
increases. One can see that it is a far cry from this
conclusion to the naive conceptions of Adam Smith or the
apologetics of vulgar political economy. For Adam
Smith, the accumulation of capital is identical with growing
demand for labour, continual rise of wages, and
consequently with a fall of profits. In his
time, the demand for labour did in fact grow at least in the
same proportion in which capital was accumulated, because
manufacture still predominated at that time and large-scale
industry was only in its infancy.

[Ramsay says:]

“… that demand[k] must depend”
(directly, immediately) “upon the amount of the latter
species of capital alone”[l] (op. cit., p. 87). (This is
tautology on Ramsay’s part, since he equates circulating
capital with capital laid out in wages.) “At
every change of this kind,[m] the fixed capital of the country is
increased at the expense of the circulating”
(loc. cit., p. 89). “… the demand for
labour will generally increase as capital augments, still it
by no means follows that it will do so in the same
proportion”[n]
(loc. cit., p. 88). “It is not, until, in the
progress of industry, favoured by the new inventions,
circulating capital shall have become increased beyond what
it formerly was,”

<here again the wrong assumption creeps in that an
increase of necessaries in general and increase of that
portion of necessaries intended for the workers are the same
thing>

“that a greater demand for labour
will spring up. Demand will then rise, but not in
proportion to the accumulation of the general capital.
In countries where industry has much advanced, fixed capital
comes gradually to bear a greater and greater proportion to
circulating. Every augmentation, therefore, in the
national stock destined for reproduction, comes, in the
progress of society, to hove a less and less influence upon
the condition of the labourer” (loc. cit.,
pp. 90-91). “Every addition to fixed capital, is
made […] at the expense of the circulating”,
i.e., at the expense of the demand for labour (loc. cit.,
p. 91).

“The evils resulting from the
invention of machinery, to the labouring population employed
in the latter,[o]
will probably be but temporary, liable to be perpetually
renewed however, as fresh improvements are constantly
making for economising labour” [loc. cit., p. 91].

And for the following reasons. [Firstly:]
The capitalists who use the new machinery obtain
extraordinary profits; consequently their capacity to save
and to increase their capital grows. A portion of this
is also used as circulating capital. Secondly, the
price of the manufactured commodities falls in proportion to
the diminished cost of production; thus the consumers save,
and this facilitates the accumulation of capital, a portion
of which may find its way to the manufacturing industry in
question. Thirdly: the fall in the price of these
products increases the demand for them.

“Thus […] though […]
it[p] may throw out
of employment a considerable body of persons,
“this” will yet probably be followed, after a
longer or shorter period, by the re-engagement of the same,
or even a much greater number of labourers”
(loc. cit., pp. 92-93).

“… in agriculture the case is
widely different. The demand for raw produce cannot
increase in that rapid way in which it may for manufactured
goods… But the change of all others most
fatal[q] to the
country people is the conversion of arable land into
pasture… Almost all the funds which formerly
supported men, are now vested in cattle, sheep and other
elements of fixed capital” (loc. cit., p. 93).

| Ramsay remarks
correctly:

“Wages … as well as
profits, are to be considered each of them as really
a portion of the finished product, totally distinct
in the national point of view from the cost of raising
it” (op. cit., p. 142).

“Independent of its results,
it” (fixed capital) “is a pure
loss… But, besides this, labour … not
what is paid for it, ought to be reckoned as[r]
another element of cost of production, Labour is
[…] a sacrifice […] The more of it is expended
in one employment, the less … for another, and
therefore if[s]
applied to unprofitable undertakings … the nation
suffers from the waste of the principal source of
wealth… the reward of labour ought not
to be considered as[t] an element of cost” … (loc. cit.,
pp. 142-43).

(This is quite right: labour, and not paid
labour or wages, must be considered as an element of
value.)

Ramsay describes the real reproduction process
correctly:

“In what manner is a comparison to be
instituted between[u]
the product and the stock expended upon it?… With
regard to a whole nation… It is evident that
all the various elements of the stock expended must
be reproduced in some employment or another,
otherwise the industry of the country could not go on as
formerly. The raw material of manufactures, the
implements used in them, as also in agriculture, the
extensive machinery engaged in the former, the buildings
necessary for fabricating or storing the produce, must all
be parts of the total return of a country, as well as of the
advances of all its master-capitalists. Therefore, the
quantity of the former may be compared with that of the
latter, each article being supposed placed as it were beside
that of a similar kind” (loc. cit., pp. 137-39).

As regards the individual capitalist

<this is a false abstraction. The nation does
not exist, or exists only as the capitalist class, and the
whole class operates in exactly the same way as the
individual capitalist. The two methods of approach
differ from one another only in that one clings to and
isolates use-value, the other exchange-value>

since the stock expended by him is not
replaced in kind, because “the greater number
[of its elements] must be obtained by exchange, a certain
portion of the product being necessary for this
purpose. Hence each individual master-capitalist comes
to look much more to the exchangeable value of his product
than to its quantity” (loc. cit., pp. 145-46).[v]

“… the more the value of the[w] product exceeds
the value of the capital advanced, the greater will be his
profit. Thus, then, will he estimate it, by
comparing value with value, not quantity with
quantity. This is the first difference to be remarked
in the mode of reckoning profits between nations and
individuals” (loc. cit., p. 146).

<The nation too—if it is not supposed to be
identical with the body of capitalists—can so far
compare value with value. It can calculate the total
labour-time which it has to expend to replace the used-up
part of its constant capital and the part
of the product consumed individually, and the time of
labour spent in producing a surplus designed to enlarge the
scale of reproduction.>

“The second is, that, since the
master-capitalist always makes an advance of wages to
the labourers, instead of paying them out of the finished
commodity, he considers this as well as the fixed
capital consumed, a part of his expenses, though […]
nationally speaking, it is not[x] an element of cost”
(loc. cit., p. 146).

<This difference too disappears in fact in the
process of reproduction as a whole. The capitalist
always pays out of the finished commodity, that is to
say, out of the commodity finished by the labourer yesterday
he pays his wages tomorrow, or in point of fact, he gives
him, in the form of wages, only an assignation of products
to be finished in future or almost produced,
i.e., finally produced by the time they are
bought. The advance disappears as a mere
illusion in reproduction, i.e., in the continuity of the
process of production.>

“Hence his rate of profit will depend
upon the excess in the value of his product over and above
the value of the capital advanced, both fixed and
circulating” (loc. cit., p. 146).

<This is likewise true in a “national point of
view”. His profit always depends on what he
himself pays for the product, whether finished or not, when
he pays wages.>

Ramsay has the merit, firstly, that he contradicts the
false notion—current since Adam Smith—of the
value of the whole product dissolving into revenue under
different names; secondly, that he defines the rate of
profit in two ways, [once] by the rate of wages, i.e., the
rate of surplus-value, and a second time, by the value of
the constant capital. But he transgresses in the
opposite direction to Ricardo. Ricardo arbitrarily
seeks to equalise the rate of profit and the rate of
surplus-value. On the other hand, the twofold
determination of the rate of profit—1) by the rate of
surplus-value (hence by the rate of wages) and 2) by the
ratio of this surplus-value to the total capital advanced,
that is, in fact determined by the ratio of the constant
capital to the total capital—is irrationally presented
by Ramsay as two parallel circumstances which determine the
rate of profit. He does not grasp the transformation
which surplus-value undergoes before it becomes
profit. Whereas therefore Ricardo arbitrarily
seeks to reduce the rate of profit to the rate of
surplus-value in order to work out the theory of value
consistently, Ramsay seeks to reduce surplus-value to
profit. We shall see later that the way he describes
the influence of the value of constant capital on the rate
of profit is very inadequate, and even incorrect.

[Ramsay writes:]

“Profit […] must rise or fall
exactly as the proportion of the gross produce, or of
its value, required to replace necessary advances,
falls or rises… Therefore, the rate of profit
must depend […] upon two circumstances; first, the
proportion of the whole produce which goes to the labourers;
secondly, the proportion which must be set apart for
replacing, either in kind or by exchange, the fixed
capital” (loc. cit., pp. 147-48).

In other words, therefore, the rate of profit depends on
the excess of the value of the product over the sum of
circulating and fixed capital; hence on the proportion
which, firstly, the circulating capital, and, secondly, the
fixed capital bear to the value of the whole produce.
If we know where this surplus comes from, then the
whole matter is very simple. But if we only know that
the profit depends on the ratio of the surplus to
these outlays, then we can acquire the most inaccurate
notions about the origin of this surplus, for example we
can, like Ramsay, imagine that it originates in part in
fixed (constant) capital.

| “To me it
seems certain,[y]
that an increased facility of raising the various objects
which enter into the composition of fixed capital, tends, by
diminishing this proportion,[z] to raise the rate of profit, just
as in the former case of an augmented return of the elements
of circulating capital, which serves to maintain
labour” (op. cit., p. 164).

With regard to the tenant farmer, for example:

“… be the [amount of gross]
return small or great, the quantity of it required for
replacing what has been consumed in these different forms,
can undergo no alteration whatsoever, This quantity must be
considered as constant, so long as production is carried
on on the some scale. Consequently, the larger
the total return, the less must be the proportion of the
whole which the farmer must set aside for the above
purposes” (loc. cit., p. 166).

The more easily the farmer who produces food and raw
materials such as flax, hemp, wood, can reproduce them, [the
more] his profit will increase.[aa]

The farmer’s profit [increases] as a result of the
increase in the quantity of his produce, the total
value of which remains the same, but “a
smaller
proportion of this sum total, and consequently of its
value, is required for restoring the various elements of
fixed capital, with which the farmer can supply
himself;” while the manufacturer would benefit
because his product would have a greater purchasing power
(loc. cit., pp. 166-67).

Let us assume that the harvest amounts to 100 quarters
and the seed corn to 20, that is, a fifth of the
harvest. Let us assume further that the harvest is
doubled the following year (with the expenditure of the same
amount of labour) and now comes to 200 quarters. If
the scale of production remains the same, then the amount of
seed corn remains 20 quarters as previously, but this is now
only one-tenth of the harvest. One has to take into
account however that the value of the 100 quarters
[previously harvested] is equal to that of the 200 quarters
[now obtained], therefore one quarter of the first harvest
is equal to two quarters of the second. 80 quarters
remain over in the first case, 180 in the second.
Since wages are irrelevant to the present problem, which
concerns the influence that a change in the value of
constant capital exerts on the rate of profit, let us assume
that the value of wages remains unchanged. Then, if
wages were 20 quarters in the first case, they are 40 in the
second. Finally, let us assume that the value of the
other ingredients of constant capital which the farmer does
not reproduce in kind amounted to 20 quarters in the first
case and therefore to 40 in the second.

We now have the following calculation:

1) The product amounts to 100 quarters.
The seed corn to 20 quarters. The other
elements of constant capital come to 20 quarters,
wages to 20 quarters, profit to 40
quarters.

2) The product amounts to 200 quarters. The
seed corn to 20 quarters. The other elements
of constant capital come to 40 quarters, wages to
40 quarters and profit to 100 quarters; i.e., its
value is equal to 50 quarters in the first case. There
would therefore be a surplus profit of 10 quarters [in the
second case].

Thus not [only] the rate of profit, but also the amount
of profit, would have increased here, as a result of a
change in the value of constant capital. Although
wages remained the same in both 1 and 2, the ratio of profit
to wages, that is, the rate of surplus-value, would have
risen. But this is only an illusion. The profit
would consist firstly of 80 quarters, equal to 40 quarters
in case 1, and the ratio to wages would remain the same;
secondly, [in case] 2, of 20 quarters, equal only to 10
quarters in the first case, which would have been converted
into revenue from constant capital.

But is this calculation correct? We must assume
that the result in the second case was due to a successful
harvest which came about although work was carried on in the
same conditions as prevailed in the first case. In
order to clarify the matter, let us assume that 1 quarter
equals £2 in the first case. This means that for
the harvest which has yielded him 200 quarters, the farmer
has laid out: 20 quarters for seed corn (or £40), 20
quarters for other elements of constant capital (or
£40), 20 quarters for wages (or £40). A
total of £120, and the product amounts to 200
quarters. In the first case he likewise laid out only
£120 (60 quarters) and the product amounting to 100
quarters was worth £200. The profit remaining
was £80, or 40 quarters. Since the 200 quarters
[in case 2] are the product of the same amount of labour [as
the 100 quarters in case 1], then once again they are
likewise equal to only £200. Thus, only
£80 profit remains, which is now, however, equal to
140 quarters. Consequently, a quarter now [costs the
farmer] only £ 4/7 and not
£1. In other words, the value of a quarter has
fallen from £2 to £4/7,
that is, by £13/7, and not from
[£2] to [£1], that is, by a half as we assumed
above in [case] 2 as opposed to [case] 1.

The farmer’s total product amounts to 200 quarters, that
is, £200. But £120 out of this £200
replaces the 60 quarters which he has expended, each one of
which cost him £2. There thus remains a profit
of £80 which is equal to the remaining 140
quarters. How does this happen? The quarter is
now worth £1, but each of the 60 quarters expended in
production cost £2. They cost the farmer as much
as if he had expended 120 of the new quarters. The
remaining 140 quarters are worth £80, or no more than
the remaining 40 were worth previously. It is true
that he sells each of the 200 quarters for £1 (if he
sells his total product) and receives £200 for
them. But of the 200 quarters, 60 have cost him
£2 each, the remaining quarters therefore only yield
him £4/7 each.

If he now again lays out 20 quarters [for seed] (equal
to £10 [if one reckons 10s. for a quarter]), 40
quarters for wages (equal to £20), and 40 quarters for
the other elements of constant capital (equal to £20),
that is, a total of 100 quarters instead of 60 as previously
and he harvests 180 quarters, then these 180 quarters have
not the same value as did the 100 previously [if one reckons
£1 for a quarter]. True, he has employed as
much living labour as he did previously, and consequently
the | value of the
variable capital has remained the same and so has
the value of the surplus product. But he has laid
out less materialised labour, since the 20 quarters, which
were worth £20 previously, are now worth only
£10.

The account will therefore work out as follows:

Constant capital

Variable capital

Surplus-value

1)

20 qrs. seed corn=£20

20 qrs. (£20)

40 qrs. (£40)

20 qrs. implements, etc. = £20

2)

20 qrs. [seed corn] = £10

40 qrs. (£20)

80 qrs. (£40)

40 qrs. [implements, etc.] = £20

In the first case the product comes to 100 qrs., or
£100. In the second case the product comes to
180 qrs., or £90.

Nevertheless the rate of profit would have risen [despite
the fall in the value of the product], for in the first case
the return on an outlay of £60 was £40 and in
the second it was £40 for an outlay of
£50. In the first case it amounted to 66
2/3 per cent, in the second to 80 per
cent.

Anyhow, the rise in the rate of profit is not due
to the value remaining unchanged, as Ramsay
supposes. Since one part of the labour expended, i.e.,
the part contained in the constant capital (in seeds in this
case), has diminished, the value of the product falls if
production continues on the same scale, just
as the value of 100 lbs. of twist falls if the cotton
it is made of becomes cheaper. But the ratio of
variable to constant capital increases (without the
value of the variable capital increasing). In
other words, the ratio of the total capital outlay declines
in relation to the surplus. Hence the rate of profit
rises.

If what Ramsay says were correct, if the value remained
the same, then the profit, the amount of profit, and
consequently also the rate of profit, would rise.
There can be no question of a rise merely in the rate of
profit.

The question [of the influence of a change in the value
of constant capital on the rate of profit] is not however
disposed of for the special case [where a part of the
constant capital is replaced in kind]. In agriculture
this special case takes the following form.

A certain amount of seed corn at the old price of the
product figures in the harvest, this part is
incorporated in the harvest in kind. The other
expenses are defrayed by the sale of the corn at its old
price. The old outlay yields a product which is twice
as big as before. Thus, in the above-mentioned case,
for example, where 20 quarters are used as seed corn (equal
to £40) and
the other outlays amount to 40 quarters, equalling
£80, the harvest yields 200 quarters and not, as the
previous harvest, 100 quarters (worth £200), of which
40 quarters, equalling £80, were profit on an outlay
of 60 quarters costing £120. The outlay in
connection with this second harvest is absolutely the same
as it was in the first—60 quarters, the value of which
is £120, but instead of a surplus of 40 quarters, the
surplus is now 140 quarters. The surplus in kind has
in this case increased considerably. But because the
labour expended is the same in both cases, the 200 quarters
have no greater value than did the 100, that is,
£200. In other words the value of the quarter
has fallen from £2 to £1. But since there
was a surplus of 140 quarters, it seemed that it had to come
to £140, for one quarter is worth just as much as any
other.

The matter would be simplified if we considered it first
of all without regard to the reproduction process, that is
if we assumed that the tenant farmer was withdrawing from
the business and selling his whole product. Then he
would indeed have to sell 120 quarters to recover his outlay
of £120 (to reimburse himself). In this way he
would recover his capital outlay. Thus a surplus of 80
quarters would remain, and not of 140, and since these 80
quarters are equal to £80, they are worth in absolute
terms as much as the surplus in the first case.

In the course of the reproduction process,
however, the matter is altered to a certain extent.
For the farmer replaces the 20 quarters of seed corn in kind
out of his own product. [As far as their value is
concerned] they are replaced by 40 quarters in the [new]
product. But in the reproduction process he only needs
to replace them with 20 quarters in kind, as was the case
previously. The rest of his expenditure [expressed in
quarters] increases in the same ratio as the quarter is
devalued (provided wages do not fall). To replace the
remaining portion of constant capital, the farmer now needs
40 quarters and not 20 as previously, and to replace wages
he also needs 40 quarters instead of 20. Altogether he
must now lay out 100 quarters, compared to 60 quarters
previously; but he need not lay out 120 quarters, the amount
corresponding to the depreciation of the corn, because the
20 quarters used [as seed] which were worth £40, are
replaced by 20 [quarters] (since in this context only their
use-value matters) which are worth [£] 20. So
evidently he has made a gain | of these 20 qrs., now worth
£20. His surplus is therefore not £80 but
£100, not 80 qrs., but 100. (Expressed
in quarters of the old value, not 40 quarters but
50.) This is an unquestionable fact, and if the market
price does not fall as a result of abundance, the farmer can
sell 20 quarters more at the new value, thus gaining
£20.

In the course of reproduction, moreover, the
farmer obtains this surplus of £20 on the same outlay,
because labour has become more productive without the rate
of surplus-value having risen or the workers having
performed more surplus labour than previously or having
received a smaller portion of the reproduced part of
the product (which represents living labour). On the
contrary, it is assumed that in the reproduction process the
worker receives 40 quarters, whereas he received only 20
previously. This then is a rather peculiar
phenomenon. It does not occur without reproduction,
but it takes place in connection with it and it takes place
[moreover] because the farmer replaces a part of his
advances in kind. Not only the rate of profit could
increase in this case, but the amount of profit as
well. (With regard to the reproduction process itself,
the farmer can either carry on on the old scale, in which
case the price of the product will fall if he again obtains
as good a harvest, because a portion of the constant capital
has cost less, but the rate of profit will rise; or the
farmer can increase the scale of production, sow more with
the same outlay, and then both the rate of profit and the
amount of profit will rise.)

Let us [now] consider the manufacturer. Let us
assume that he has laid out £100 in cotton twist and
made a profit of £20. The product therefore
amounts to £120. It is assumed that £80
out of the outlay of £100 has been paid for
cotton. If the price of cotton falls by half, he will
now need to spend only £40 on the cotton and £20
on the rest, that is £60 in all (instead of
£100) and the profit will be £20 as previously,
the total product will amount to £80 (if he does not
increase the scale of his production). £40 thus
remains in his pocket. He can either spend it or
invest it as additional capital. If he invests it, he
will lay out [an additional] £26
2/3 on cotton and £13
1/2 on labour, etc., on the new
scale. The profit [will amount to] £13
1/3. The total product will now
be 60+40+33 1/3, or £133
1/3.

Thus it is not the fact that the farmer replaces his seed
corn in kind which is the key, for the manufacturer buys his
cotton and does not replace it out of his own product.
What this phenomenon amounts to is this: release of a
portion of the capital previously tied up in constant
capital, or the conversion of a
portion of the capital into revenue. If exactly the
same amount of capital is laid out in the reproduction
process as previously, then it is the same as if additional
capital had been employed on the old scale of
production. This is therefore a kind of accumulation
which arises from the increased productivity of those
branches of industry which supply the productive ingredients
of capital. However, such a fall in the [price of] raw
materials, if due to the seasons, is counteracted by
unfavourable seasons, in which the prices of raw materials
rise. The capital released in this way in one or
several seasons is, therefore, to a certain extent, reserve
capital for the other seasons. For instance, the
manufacturer whose [fixed capital] turns over once every
twelve years, must arrange things in such a way that he can
continue to produce—at least on the same scale
throughout the twelve years. One has therefore to take
into account that the prices [of the raw materials]
he has to replace fluctuate and even themselves out
to a certain extent over a long period of years.

A rise in prices of the ingredients [of constant capital]
has the opposite effect to a fall of the prices. (We
are leaving variable capital out of account here, although
if wages fall, less variable capital—in terms of
value—will need to be laid out, and if they rise
more.) If production is to be continued on the old
scale, then a greater outlay of capital is necessary.
Therefore, apart from a fall in the rate of profit, extra
capital must be employed or a part of the revenue must be
converted into capital, although it will not have the effect
of additional capital.

Accumulation has taken place in the one case
although the value of the capital advanced has remained the
same (but its material elements have been increased).
The rate of creating surplus-value increases, and the
absolute magnitude of profit increases, because the effect
is the same as if additional capital had been advanced on
the old scale. Accumulation has taken place in
the other case insofar as the value of the capital advanced,
i.e., that part of the value of the total output which
functions as capital, has increased, But the material
elements have not been increased. The rate of
profit falls. (The amount of profit only falls if
either a different number of workers is employed or if their
wages rise as well.)

This phenomenon of the conversion of capital into revenue
should be noted, because it creates the illusion that
the amount of profit grows (or in the opposite case
decreases) independently of the amount of
surplus-value. We have seen that, under |
certain circumstances, a part of rent can be explained by
this phenomenon.

In the way mentioned above (that is, if the remaining 20
quarters worth £20 are not used immediately to extend
the scale of production, i.e., if they are not accumulated),
a money capital of £20 is set free. This is an
example of how redundant money capital can be
extracted from the reproduction process although the
aggregate value of commodities remains the same, namely, by
a portion of the capital which existed previously in the
form of fixed (constant) capital being converted into money
capital.

How little the above phenomenon [conversion of a portion
of the capital into revenue] has to do with Ramsay’s
determination of the rate of profit, becomes clear if
one considers the case of a farmer (or manufacturer) who
enters business under the new conditions of
production. Formerly he needed £120 to enter the
business: £40 to buy 20 quarters of seeds, £40
to buy the other ingredients of constant capital, and
£40 to pay wages. And his profit was
£80. 80 on 120 is equal to 8 on 12, or 2 on 3,
or 66 2/3 per cent.

He now has to advance £20 to buy 20 quarters of
seed, £40 as previously [to buy the other elements of
constant capital], £40 to pay wages, so that his
outlay of capital amounts to £100. His profit is
[£]80, that is, 80 per cent. The amount of
profit has remained the same, but the rate of
profit has increased by 20 per cent. Thus one can see
that the fall in the value of seed (or of the price which
has to be paid to replace the seed) has in itself
nothing to do with the increase in [the amount of] profit,
but implies merely an increase in the rate of profit.

Moreover, the farmer in the one case—or the
manufacturer in the other—will not consider that he
has obtained a larger profit, but that a portion of the
capital previously tied up in production has been
freed. And his view will be based on the following
simple calculation. Previously, the amount of capital
advanced in production was £120; now it is £100,
and £20 is now in the hands of the farmer as free
capital, money which can be invested in any way he
likes. But in either case the capital amounts to
£120 only, its size has therefore not been
increased. The fact, however, that a sixth of the
capital has been divested of the form in which it is
inseparable from the production process does indeed have the
same effect as an additional investment of
capital.

Ramsay has not got to the bottom of this matter because
he has not at all clearly worked out the relationship
between value, surplus-value and profit.

Ramsay correctly expounds to what extent machinery, etc.,
insofar as it affects variable capital, influences profit
and the rate of profit. That is to say, he shows that
this influence results from the depreciation of
labour-power, the increase of relative surplus labour or, if
the production process is considered as a whole, also the
reduction of the part of the gross return which goes to
replace wages.

“… an increased or diminished
productiveness of the industry employed in raising
commodities which do not enter into the composition of fixed
capital, can have no influence on the rate of profit, except
by affecting the proportion of the gross amount which goes
to maintain labour” (op. cit., p. 168).

If[bb] the
manufacturer has doubled his output as a result of
improvements in machinery, the value of his goods must, in
the end, fall in the same proportion as their quantity has
increased.

<It is assumed that in fact, taking the wear and
tear of the machinery into account, twice the quantity costs
no more than half did previously. If this is not the
case, the value of the commodity falls, but not in
proportion to its quantity. Its quantity may
double and, whereas the value of the aggregate product
rises, the value of a unit of the commodity, may drop only
from 2 to 1 1/4, etc., instead of from
2 to 1.>

…the manufacturer benefits only insofar as he is
able to clothe the worker more cheaply so that a smaller
portion of the gross return goes to the worker…
The farmer too benefits <as a result of the increased
industrial productivity> only insofar as n portion of
his outlay is expended on clothing for the labourers and he
can buy this more cheaply now; that is, [he benefits] in the
same way as the manufacturer (loc. cit., pp. 168-69).

A fall [or rise] in the value of the elements of constant
capital affects the rate of profit by altering the ratio
of surplus-value
to the total capital outlay. A fall (or rise) in
wages, on the other hand, affects the rate of profit by
influencing the rate of surplus-value directly.

Supposing for example, that, in the above-mentioned case,
the price of the seed (assuming the farmer grows flax)
remains the same, that is, £40 (20 quarters) and the
rest of the constant capital costs £40 (20 quarters)
as before, but that wages—that is, wages for
the same number of workers—fall from £40
to £20 (from 20 quarters to 10 quarters). In
this case, the total value, which is equal to the
wages plus surplus-value, remains unchanged. Since the
number of workers remains the same, their labour is embodied
in a value of £40+£80, i.e., £120, as it
was previously. But from this £120, £20
now goes to the workers and the surplus-value now amounts to
£100. <It is assumed that no improvements
have taken place which affect the number of labourers
employed in this branch.>

The capital advanced is now £100 instead of
£120 just as in the case where the value of the seed
fell by half. But the profit is now £100, i.e.,
100 per cent, whereas in the other case, where the capital
advanced was likewise reduced from £120 to £100,
it was 80 per cent. And as in that other case
£20, or a sixth of the capital |, is set free. But in
the former case, the surplus-value remained unchanged—£80—(and since £40 was paid as
wages, [the rate of surplus-value] was 200 per cent).
In the latter case, the surplus-value rises to £100
(and, since wages now come to £20, [the rate of
surplus-value increases] to 500 per cent).

In this case, not only has the rate of profit risen but
the profit itself, because the rate of surplus-value
has risen and consequently the surplus-value itself.
This differentiates this case from the other, something
which Ramsay does not grasp. This always takes place
when the increase in profit is not nullified by a
corresponding reduction in the rate of profit resulting from
a simultaneous change in the value of constant
capital. In the above-mentioned case for example, the
capital outlay is £120 and the profit £80, that
is, 66 2/3 per cent. In the
present case, the capital outlay is £100 and the
profit £100, which works out at 100 per cent.
If, however, the capital outlay had risen from £100 to
£150 as a result of a change in the price of constant
capital, then the profit—which has increased from
£80 to £100—would only give a rate of 66
2/3 per cent.

[Ramsay continues]

Because these commodities “help to make up neither
fixed capital nor circulating, it follows that profit can in
no way be affected by any alteration in the facilities for
raising these. Such are luxuries of all kinds”
(loc. cit., pp. 169-70).

“Master-capitalists gain by the
abundance” (of luxuries) “because their profits
will command a greater quantity for their private
consumption; but the rate of this profit is in no degree
affected either by their plenty or scarcity”
(loc. cit., p. 171).

First of all, a portion of the luxuries can be used as
one of the elements of constant capital. Grapes, for
example, in [the production of] wine, gold in luxury
articles, diamonds in glass cutting, etc. But Ramsay
excludes this case insofar as he says: commodities which do
not enter into fixed capital. In that case, however,
the concluding sentence—“Such are luxuries of
all kinds”, is incorrect.

However, productivity in the luxury industries can only
increase in the same way as it does in all
others—either because natural resources such as the
land, mines, etc., from which the raw materials for the
luxury industries are procured, become more productive, or
new, more productive sources are discovered; or again by
application of the division of labour, or, especially, by
the use of machinery (or of better tools) and of natural
forces. <The improvement of tools, as well as the
production of more specialised ones, belongs to the
division of labour.> ( One should not forget
chemical processes.)

Let us now assume that the production time for luxuries
is reduced due to machinery (or chemical processes), that
less labour is required to produce them. This cannot
have the slightest influence on wages, on the value
of labour-power, since these articles do not enter into the
consumption of the workers (at least never into that part of
their consumption which determines the value of their
labour-power). (It can influence the market
price of labour, if workers are thrown onto the streets
as a result of these developments and the supply of
labour-power is thereby increased.) Increased
productivity in the luxury industries, therefore, has no
influence on the rate of surplus-value nor, consequently, on
the rate of profit insofar as this is determined by the rate
of surplus-value. Nevertheless, it can influence the
rate of profit insofar as it affects either the
amount of surplus-value or the ratio of variable
capital to constant capital and to the total capital.

If for example, [in the production of luxury articles]
machinery makes it possible to employ 10 workers where 20
were previously employed, then, indeed the rate of
surplus-value is not modified in any way. The
cheapening of luxury articles does not enable the worker to
live more cheaply. He requires the same amount of
labour-time to reproduce his labour-power as he did
previously.

<In practice, therefore, the manufacturer of luxury
articles seeks to depress the wages of labour below its
value, [below] its minimum. This he is able to do
because of the relative surplus population engendered
by increasing productivity in other branches of industry,
for example among knitters. Or—as likewise
happens in these branches—he seeks to extend the
absolute labour-time, thus, in fact, producing
absolute surplus-value. It is correct, however,
that productivity in the luxury industries cannot
reduce the value of labour-power, it cannot produce
any relative surplus-value and, in general, cannot produce
that form of surplus-value which results from the
growing productivity of industry as
such.>

The amount of surplus-value is determined in two
ways. [First,] by the rate of surplus-value, that is,
the surplus labour (absolute or relative) of the individual
workers. Secondly, by the number of workers
simultaneously employed. Insofar therefore as
increasing productivity in the luxury industry reduces the
number of workers which a certain quantity of capital
employs, it reduced the amount of surplus-value,
hence all other circumstances remaining unchanged, it
reduces also the rate of profit. The same thing
occurs if the number of workers is reduced, or remains the
same, but the capital laid out on machinery and raw
materials is increased; in other words, it occurs wherever
there is any diminution in the ratio of variable capital to
the total capital which [according to our assumption]
is not balanced or partially offset by a reduction in
wages. But since the rate of profit in this sphere
| enters into the
equalisation process of the general rate of profit just as
much as that in any other sphere, increased productivity in
the luxury industry would, in the case under consideration,
bring about a fall in the general rate of profit.

Conversely: If the increased productivity in the luxury
industry was [due to improvements carried out not in that
industry itself, but] in those branches of industry which
provide it with constant capital, then the rate of profit
would rise in the luxury industry.

<Surplus-value (that is, its size, its
quantity, its total amount) is
determined by the rate of surplus-value multiplied by the
number of workers employed. Certain circumstances may
affect both factors simultaneously either in the same
direction or in opposite directions, or they may affect only
one of the factors. Apart from the absolute
lengthening of the working-day, increased productivity in
the luxury industry can affect only the number [of workers
employed]. The inevitable consequence therefore is a
reduction in the amount of surplus-value and hence in the
rate of profit, even if no increase in constant capital
takes place. If the constant capital increases,
however, a reduced amount of surplus-value is calculated on
an increased total capital.>

Ramsay comes closer to a correct understanding of the
rate of profit than the others. The shortcomings too
are therefore more conspicuous in his exposition. He
brings out all the factors involved, but he does it
one-sidedly and therefore incorrectly.

Ramsay sums up his view of profit in the following
passage:

“… the causes which regulate
the rate of profit in individual cases […] we
have found to be,[cc] 1) The Productiveness of the Industry engaged in
raising those articles of primary[dd] necessity which are required by
the Labourer for Food, Clothing, etc. 2) The
Productiveness of the Industry employed in raising those[ee] objects which enter
into the composition of Fixed Capital. 3) The rate
of Real Wages”

<here this must mean the quantity of necessaries,
etc., which the worker receives, irrespective of the price
of the commodities which that quantity comprises>.

“A variation in the first and third
of these causes, acts upon profit by altering the proportion
of the gross produce which goes to the labourer: a change in
the second affects the same, by modifying the
proportion necessary for replacing, either directly
or by means of exchange, the fixed capital consumed
in production; for […] profit is essentially a
question of proportion” (loc. cit., p. 172).

He rightly reproaches Ricardo (although Ramsay’s own
presentation is also inadequate):

“Mr. Ricardo […] seems
always to consider the whole produce as divided between
wages and profits, forgetting the part necessary for
replacing fixed capital”[ff] (loc. cit., p. 174, note).

<It can already be noted in the first description of
accumulation, i.e., of the conversion of surplus-value into
capital, that the entire surplus labour takes the form of
capital (constant and variable) and of surplus
labour (profit, interest, rent). For this
conversion reveals that surplus labour itself assumes the
form of capital and that the unpaid labour of the worker
confronts him as the totality of the objective conditions
of labour. In this form it confronts him as alien
property with the result that the capital which is
antecedent to his labour, appears to be independent of
it. [It appears] as a ready-made value of a given
magnitude, whose value the worker merely has to
augment. It is never the product of his past labour
(nor any circumstances which, independently of the
particular labour process into which the past labour of
his enters, affect or increase its value) which, or the
replacement of which, appears as exploitation, but it is
always merely the manner and the rate in which his present
labour is exploited. As long as the individual
capitalist continues to operate on the same scale of
production (or on an expanding one), the replacement of
capital appears as an operation which does not affect the
worker, since, if the means of production belonged to the
worker, he would likewise have to replace them out of the
gross product in order to continue reproduction on the same
scale or on an expanded scale (and the latter too is
necessary because of the natural increase of
population). But this affects the worker in three
respects. 1) The perpetuation of the means of
production as property alien to him, as capital, perpetuates
his condition as wage-worker and hence his fate of always
having to work part of his labour-time for a third person
for nothing. 2) The extension of these means of
production, alias accumulation of capital, increases the
extent and the size of the classes who live on the surplus
labour of the worker; it worsens his position
relatively by augmenting the relative wealth of the
capitalist and his co-partners, by further
increasing his relative surplus labour through the
division of labour, etc., and reduces that part of the gross
product which is used to pay wages; finally, since the
conditions of labour confront the individual worker in an
ever more gigantic form and increasingly as social forces,
the chance of his taking possession of them himself as is
the case in small-scale industry, disappears.>

## [3. Ramsay on the Division of “Gross
Profit” into “Net Profit” (Interest) and
“Profit of Enterprise”.
Apologetic Elements in His Views on the “Labour of
superintendence”, “Insurance Covering the Risk
Involved” and “Excess Profit”]

| Ramsay uses the term
gross profit for what I call simply profit. He
divides this gross profit into net profit
(interest) and profit of enterprise (industrial
profit).*

Ramsay, like Ricardo, takes issue with Adam Smith on the
question of the fall in the general rate of
profit. Refuting Smith, he writes:

“Competition of the
master-capitalists” can indeed even out profits which
rise considerably above “the ordinary level”
(this levelling is by no means a sufficient explanation for
the formation of a general rate of profit) but it is wrong
to say that this ordinary level itself is lowered.[gg]

“… could we suppose it[hh] possible that the
Price of every commodity, both raw and fabricated, should
fall in consequence of the competition among the producers,
yet this could not in any way affect profit. Each
master-capitalist would sell his produce for less money, but
on the other hand, every article of his expenses, whether
belonging to fixed capital or to circulating, would cost him
a proportionally smaller sum” (op. cit.,
pp. 180-81).

The following passage is directed against
Malthus:

“The idea of profits being p aid by
the consumers, is, assuredly, very absurd. Who are the
consumers? They must be either landlords, capitalists,
masters, labourers, or else people who receive a
salary…” (loc. cit., p. 183).

“The only competition which
can affect the general rate of gross profits, is that
between master-capitalists and labourers…”
(op. cit., p. 206).

The last sentence expresses the true gist of Ricardo’s
proposition. The rate of profit can fall independently
of the competition between capital and labour, but
this is the only kind of competition which can
bring about its decrease. Ramsay himself, however,
does not advance any reasons why the general
rate of profit has a tendency to fall. The only thing
he says—and which is correct—is that the rate
of interest can fall quite independently of the rate of
gross profits in a given country, namely:

“But were we even to suppose, that
capital was never borrowed with any view but to productive
employment [I think] it very possible that interest might
vary without any change in the rate of gross profits.
For, as a nation advances in the career of wealth, a class
of men springs up and increases more and more, who by the
labours” (exploitation, robbery) “of their
ancestors find themselves in the possession of funds
sufficiently ample to afford a handsome maintenance from the
interest alone. Very many also who during youth and
middle age were actively engaged in business, retire in
their latter days to live quietly on the interest of the
sums they have themselves accumulated. This class[ii] […] has a
tendency to increase with the increasing riches of the
country, for those who begin with a tolerable stock are
likely to make an independence sooner than they who commence
with little. Thus it comes to pass, that[jj] in old and rich
countries, the amount of national capital belonging to those
who are unwilling to take the trouble of employing it
themselves, bears a larger proportion to the whole
productive stock of the society, than in newly settled and
poorer districts.[kk]
How […] numerous [is] the class of rentiers […] in England [… ] As the class of
rentiers increases, so also does that of lenders of
capital, for they are one and the same. Therefore,
from this cause interest must have a tendency to fall in old
countries…” (loc. cit., pp. 201-02).

Ramsay says the following about the rate of net
profit (interest):

“The rate of these” [profits]
“must depend,[ll] partly upon the rate of gross
profits […] partly on the proportion in which these
are separated into profits of capital and those of
enterprise.[mm] This
proportion […] depends upon the competition between
the lenders of capital and […] borrowers […],
which competition[nn]
is influenced, though by no means entirely
regulated, by the rate of gross profit expected
to be realised, And the […] competition is not
exclusively regulated by this cause […] because on
the one hand many borrow without any view to productive
employment; and […] because the proportion of the
whole national capital to be lent, varies with the riches of
the country independently of any change in gross
profits” (loc. cit., pp. 206-07).
“The profits of enterprise depend upon the net
profits of capital not the latter upon the former”
(loc. cit., p. 214).

| Apart from the
circumstance mentioned earlier, Ramsay
says—rightly:

Interest is only a measure of net profits where the level
of civilisation is such that the “want of
certainty” of repayment is not a factor which enters
into the calculation.[oo] “In England, for instance,
at the present day, we cannot, I think, consider[pp] compensation for
risk as at all entering into the interest received from
funds lent on what would be called good security”
(op. cit., p. 199, note).

Speaking of the industrial capitalist, whom he
calls the master-capitalist, Ramsay remarks:

“He is the general distributor of the
national revenue; the person who undertakes to pay[qq] […] to the
labourers, the wages, […]—to the capitalist,
the interest […]—to the proprietor, the rent
[… ] On the one hand are masters, on the other,
labourers, capitalists and landlords [… ] The
interests of these two grand classes are diametrically
opposed to each other. It is the master who
hires labour, capital, and land, and of course tries
to get the use of them on as low terms as possible; while
the owners of these sources of wealth do their best to
let them as high as they can” (op. cit.,
pp. 218-19).

Industrial profit. (Labour of
superintendence.)

What Ramsay writes about industrial profit (and
especially, about the labour of superintendence) is on the
whole the most reasonable part of his book, although part of
his demonstration is borrowed from Storch.

The exploitation of labour costs labour. Insofar as
the labour performed by the industrial capitalist is
rendered necessary only because of the contradiction between
capital and labour, it enters into the cost of his overseers
(the industrial non-commissioned officers) and is already
included in the category of wages in the same way as costs
caused by the slave overseer and his whip are included in
the production costs of the slave-owner. These costs,
like the greater part of the trading expenses, belong to
the
incidental expenses of capitalist production. As
far as the general rate of profit is concerned, the
labour of the capitalists arising from their competition
with one another and their attempts to ruin one another
counts just as little as the greater or lesser skill of one
industrial capitalist compared to another in extracting the
largest amount of surplus labour from his workers for the
smallest expenditure and making the best use of this
extracted surplus labour in the process of
circulation. These matters should be dealt with in the
analysis of the competition of capitals. Such an
analysis deals in general with the struggle of the
capitalists and their effort to acquire the greatest
possible amount of surplus labour and it is concerned only
with the division of the surplus labour amongst the
different individual capitalists, and not with the origin of
surplus labour or its general extent.

All that remains for the labour of superintendence is the
general function of organising the division of labour and
the cooperation of certain individuals. This labour is
fully taken into account in the wages of the general manager
in the larger capitalist enterprises. It has already
been deducted from the general rate of profit. The
best practical proof of this is provided by the co-operative
factories set up by the English workers, for these, despite
the higher rate of interest they have to pay, yield profits
higher than average, although the wages of the general
manager, which are naturally determined by the market price
for this kind of labour, are deducted. The industrial
capitalists who are their own general managers save one item
of the production costs, pay wages to themselves, and
consequently receive a rate of profit above the
average. If this assertion of the apologists [that
profit of enterprise constitutes wages for the labour of
superintendence] were taken literally tomorrow, and the
profit of the industrial capitalist limited to the wages
of management and direction, then capitalist production,
the appropriation of the surplus labour of others and its
transformation into capital would come to an end the day
after tomorrow.

However, if we consider this [payment of the] labour of
superintendence as wages concealed in the general rate of
profit, then the law established by Ramsay and others
applies, namely, that while profit (industrial profit as
well as gross profit [including interest]) is proportional
to the amount of capital invested, this portion of the
profit stands in inverse ratio to the size of the
capital, it is infinitesimally small in the ease of large
capital and enormously large where the capital is small,
i.e., where the capitalist
production is purely nominal. Whereas the
small capitalist, who does almost all the work himself,
seems to obtain a very high rate of profit in proportion to
his capital, what happens in fact is that, if he does not
employ a few workers whose surplus labour he appropriates,
he actually makes no profit at all and his enterprise
is only nominally a capitalist one. (whether he
is engaged in industry or in commerce). What
distinguishes him from the wage-worker is that, because of
his nominal capital he is indeed the master and owner of his
own conditions of labour and consequently has no master over
him; | and hence he
appropriates his whole labour-time himself instead of it
being appropriated by someone else. What appears to be
profit here, is merely the excess [of his income] over
ordinary wages, an excess which results from the fact that
he appropriates his own surplus labour. However, this
phenomenon belongs exclusively to those spheres which have
not as yet been really conquered by the capitalist mode of
production.

[Ramsay says:]

“The profits of enterprise may
… be considered as made up of 3 parts: one…
the salary of … the master; another an insurance for
risk; the remainder … his surplus gains”
(op. cit., p. 226).

As regards point 2, it is quite irrelevant here.
Corbet (and Ramsay himself) has stated that the
insurance which covers the risk only distributes the
losses of the capitalists uniformly or distributes them more
generally amongst the whole class. The profits of the
insurance companies—that is, of the capitals which are
employed in the business of insurance, and take over this
distribution—must be deducted from these uniformly
distributed losses. These companies receive a part of
the surplus-value in the same way as mercantile or moneyed
capitalists do, without participating in its direct
production. This is a question of the distribution of
the surplus-value amongst the different sorts of capitalists
and of the deductions which are consequently made from [the
surplus-value accruing to] the individual capitalists.
It has nothing to do either with the nature or with the
magnitude of the surplus. The worker obviously cannot
provide any more than his surplus labour. He cannot
make an additional payment to the capitalist so that the
latter may insure the fruits of this surplus labour against
loss. At most one could say that, even apart from
capitalist production, the producers themselves might have
certain expenses, that is, they would have to spend a part
of their labour, or of the products of their labour in order
to insure their
products, their wealth, or the elements of their wealth,
against accidents, etc. Instead of each capitalist
insuring himself, it is safer as well as cheaper for him if
one section of capital is entrusted with this job.
Insurance is paid out of a portion of surplus-value, its
protection and distribution between the capitalists has
nothing to do with its origin and magnitude.

What is left is 1) the salary and 2) the surplus gains,
as Ramsay calls that part of surplus-value which falls to
the industrial capitalist as opposed to the interest-grabber
and which, consequently, is determined by the ratio of
interest to industrial profit; the two parts into which the
surplus-value accruing to capital (in contrast to landed
property) is divided.

As far as 1), the salary, is concerned, it is first of
all self-evident that in capitalist production, the function
of capital as lord over labour falls to the capitalist, or a
clerk or a representative paid by him. Even this
function would disappear together with the capitalist mode
of production, insofar as it does not arise from the nature
of co-operative labour but from the domination of the
conditions of labour over labour itself. Ramsay
himself however sweeps away this element or reduces it to
such an extent that it is not worth speaking of.

The salary [of the employer], like the work [of
superintendence], remains roughly the same, be the concern
large or small (loc. cit., pp. 227-29). A worker will
never be able to say that he can do the same amount of work
as two, three or more of his workmates. But one
industrial capitalist or farmer can take the place of ten or
more[rr] (p.
255).

The third part [of the profits of enterprise], the
surplus gains, includes [compensation for]
risks—which are only possible risks, nothing
but the possibility of losing the gains and the
capital—it in fact however takes the form of
insurance and therefore of a share which certain capitals in
a particular branch receive in the total surplus-value.

“These surplus gains,” Ramsay
writes, “do truly represent […] the revenue
derived from the power of commanding the use of
capital” (in other words from the power of
commanding other people’s labour) “whether belonging
to the person himself or borrowed from others…
these[ss] net
profits” (interest) “vary exactly as the amount
of capital […] on the contrary […] the larger
the capital, the greater the proportion they bear[tt] to the stock
employed” (loc. cit., p. 230).

In other words, this means nothing more than that the
salaries of masters stand in inverse ratio to the size of
the capital. The larger the scale on which the capital
operates, the more capitalist the mode of production,
the more negligible is the element of industrial profit
which is reducible to salary, and the more clearly appears
the real character of industrial profit, namely, that it is
a part of the surplus gains, i.e., of surplus-value, i.e.,
of unpaid surplus labour.

The whole contradiction between industrial profit and
interest only has meaning as a contradiction between the
rentier and the industrial capitalist, but it has not the
slightest bearing on the relationship of the worker to
capital, the nature of capital, or the origin of the profit
capital yields.

With regard to rent not derived from corn, Ramsay
says:

“In this manner the rent paid for one
species of produce becomes the cause of the high value of
others” (op. cit., p. 279).

“Revenue,” says Ramsay
in the final chapter, “differs from the annual gross
produce, simply by the absence of all those objects which go
to keep up fixed capital” (by which he means
constant capital, raw materials in all stages of
production, auxiliary materials and machinery, etc.)
(op. cit., p. 471).

| Ramsay has already
said[uu] and repeats
in the final chapter that

“circulating
capital”—that is his term for capital laid out
in wages—is superfluous, it is “… not[vv] an
immediate agent in production, nor even
essential to it at all…” (loc. cit.,
p. 468).

But he does not draw the obvious conclusion that by
denying that wage-labour and capital laid out in wages are
essential, the necessity for capitalist production in
general is denied and the conditions of labour consequently
cease to confront the workers as “capital” or,
to use Ramsay’s term, as “fixed capital”.
One part of the conditions of labour appears as fixed
capital only because the other part appears as
circulating capital. But once capitalist
production is presupposed as a fact, Ramsay declares that
wages and gross profits of capital (industrial
profit or, as he calls it, profit of enterprise included)
are necessary forms of revenue (loc. cit., pp. 478,
475).

These are naturally the two forms of revenue which, in
their simplicity and generality, indeed epitomise the
essence of the
capitalist mode of production and of the two classes on
which it is based. On the other hand, Ramsay declares
that rent, in other words landed property, is a
superfluous form of capitalist production (l.c., p. 472),
but forgets that it is a necessary product of this mode of
production. The same applies to his statement that the
“net profit of capital”, that is, interest, is
not a necessary form.

[In case of a sharp reduction in gross profits] it would
only be necessary for the rentiers to become industrial
capitalists. As regards national wealth this makes no
difference… The gross profit need certainly not
be so high as to afford separate incomes to the owner and
the employer[ww]
(pp. 476-77).

Here Ramsay again forgets what he has said himself,
namely that, as a necessary consequence of the development
of capital, a constantly growing class of rentiers comes
into being.[xx]

“… gross profit [of capital
and enterprise] is […] essential in order that
production should go on at all…” (loc. cit.,
p. 475).

Naturally. Without profit, no capital and without
capital, no capitalist production.

Thus, the conclusion at which Ramsay arrives is, on the
one hand, that the capitalist mode of production based on
wage-labour is not really a necessary, i.e., not an absolute
form of social production (which Ramsay himself expresses
only in a rather limited form by stating that
“circulating capital” and “wages”
[would be] superfluous if the mass of the people were not so
poor that they had to receive their share of the product in
advance, before it was completed). On the other hand,
he concludes that interest (in contrast to industrial
profit) and rent (that is the form of landed property
created by capitalist production itself) are superfetations
which are not essential to capitalist production and of
which it can rid itself. If this bourgeois ideal were
actually realisable, the only result would be that the whole
of the surplus-value would go to the industrial capitalist
directly, and society would be reduced (economically) to the
simple contradiction between capital and wage-labour, a
simplification which would indeed accelerate the dissolution
of this mode of production. |

| <In the
Morning Star (December 1, 1862), a manufacturer
moans:

“Deduct from the gross
produce the wages of labour, the rent of land, the
interest on capital, the cost of raw material, and the
gains of the agent, merchant, or dealer, and what
remained was the profit of the manufacturer, the
Lancashire resident, the occupier, on whom the burden of
maintaining the workmen for so many partakers in the
distribution of the gross produce is thrown.”

If one disregards the value and considers the gross
produce in kind, it is clear that after the replacement of
the constant capital and the capital laid out in wages, that
portion of the product which remains constitutes the
surplus-value. From this however has to be deducted a
portion for rent and the gains of the agents, merchants or
dealers, all of whom, whether they use capital of their own
or not, also share in that part of the gross product which
constitutes surplus-value. All these therefore are
deductions for the manufacturer. His profit
itself is subdivided into industrial profit and
interest—if he has borrowed capital.>

<With regard to differential rent: The work
of the labourer working on more fertile soil is more
productive than that of a man working on less fertile
soil. If, therefore, he were to be paid in kind, he
would receive a smaller share of the gross product than the
labourer working on less fertile soil. Or, what
amounts to the same thing, his relative surplus labour would
be greater than that of the other labourer, although he
worked the same number of hours per day. But the value
of the wage of the one is equal to that of the other.
Hence the profit of his employer is no greater [than that of
the other employer]. The surplus-value contained in
the additional amount of his product, the greater relative
productivity of his labour, or the differential surplus
labour performed by him, is pocketed by the landlord.>

* | (The reason
Mr. Senior—whose Outline appeared at
approximately the same time as Ramsay’s Essay on the
Distribution of Wealth, in which latter work the
division of profit into profit of enterprise and into
“net profits of capital or interest” (Chapter
IV) is dealt with at length—is supposed to have
discovered this division, which was already known in 1821
and 1822, can be explained only by the fact that
Senior—a mere apologist of the existing order and
consequently a vulgar economist—is very congenial to
Herr Roscher.) |

[a] The manuscript
has “Production would be just as
great.”—Ed.

[b] The manuscript
has “This proves”.—Ed.

[c] The manuscript
has “of”.—Ed.

[d] Marx translated
the first part of this passage and condensed it to:
“or will people assert”.—Ed.

[e] The manuscript
has “was”.—Ed.

[f] In the
manuscript “will employ 150 men”.—Ed.

[g] See this volume,
pp. 86, 87, 177, 229.—Ed.

[h] Instead of
“profits owe their existence to a”, the
manuscript has: “The source of profits is
the”.—Ed.

[i] In the
manuscript “master-capitalists”.—Ed.

[j] The manuscript
has “viz.”—Ed.

[k] The manuscript
has “The demand for labour”.—Ed.

[l] The manuscript
has “amount of circulating capital
alone”.—Ed.

[m] The manuscript
has “With the progress of
civilisation”.—Ed.

[n] The manuscript
has “The demand for labour will not therefore
generally increase as capital augments, at least not in the
same proportion.”—Ed.

[o] The manuscript
has “manufactures”.—Ed.

[p] The manuscript
has “the machinery”.—Ed.

[q] Instead of
“But the change of all others most fatal”, the
manuscript has “the most fatal”.—Ed.

[r] Instead of
“labour […] not what is paid for it, ought to
be reckoned as”, the manuscript has “Only
labour, not wages, not what is paid for it
is”.—Ed.

[s] The manuscript
has “when”.—Ed.

[t] The manuscript
has “does not constitute”.—Ed.

[u] The manuscript
has “How is it possible to
compare”.—Ed.

[v] The first part
of the passage starting with “As regards” and
ending with “because” is a free summary (mainly
in German), not a quotation.—Ed.

[w] The manuscript
has “his”.—Ed.

[x] The manuscript
has “though they, nationally speaking, are
not”.—Ed.

[y] The manuscript
has “It is certain”.—Ed.

[z] That is,
diminishing the part of the gross product which is required
to replace the fixed capital.—Ed.

[aa] This
paragraph and part of the next are summaries (in German) by
Marx of the ideas developed by Ramsay.—Ed.

[bb] This
paragraph and the one after the next beginning with the
words: “the manufacturer benefits…” are
not a quotation, but a paraphrase by Marx of the ideas
expressed by Ramsay on pp. 168-69 of his book. They
are written in German but interspersed with many English
words and phrases.—Ed.

[cc] The
manuscript has “The rate of profit in individual
cases is therefore determined by the following
causes”.—Ed.

[dd] The
manuscript has “the articles of
first”.—Ed.

[ee] The
manuscript has “the”.—Ed.

[ff] The
manuscript has “Ricardo forgets that the whole
product is divided not only between wages and profits, but
that a part of it is also necessary for replacing fixed
capital.”—Ed.

[gg] This is not a
quotation but Marx’s rendering (mainly in German) of the
ideas developed by Ramsay on pp. 179-80 of his
book.—Ed.

[hh] Instead of
“Could we suppose it”, the manuscript has
“If it were”.—Ed.

[ii] The
manuscript has “These two
classes”.—Ed.

[jj] Instead of
“Thus it comes to pass, that”, the manuscript
has “Therefore”.—Ed.

[kk] The
manuscript has “poor countries”.—Ed.

[ll] The
manuscript has “it depends”.—Ed.

[mm] The
manuscript has “separated into interest and
industrial profit”.—Ed.

[nn] The
manuscript has “borrowers of capital. This
competition is influenced, but not
entirely”.—Ed.

[oo] This sentence
is a paraphrase of Ramsay by Marx.—Ed.

[pp] The
manuscript has “We cannot
consider.”—Ed.

[qq] The
manuscript has “The industrial capitalist is the
general distributor of the revenue; he
pays”.—Ed.

[rr] This is
Marx’s summing up of the arguments advanced by
Ramsay.—Ed.

[ss] The
manuscript has “the”.—Ed.

[tt] The
manuscript has “the larger the capital, the larger
the proportion of the surplus gains”.—Ed.

[uu] See this
volume, p. 327.—Ed.

[vv] The
manuscript has “neither”.—Ed.

[ww] This is in
part Marx’s paraphrase of Ramsay’s argument.—Ed.

[xx] See this
volume, p. 354.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XXIII] Cherbuliez

| Cherbuliez,
Richesse au pauvreté, Paris, 1841 (Reprint of the
Geneva edition) [published under the title Riche ou
pauvre].

(It is questionable whether we should specially include
this fellow in this group [of economists] since most of
what he writes is based on Sismondi, or whether we should on
occasion insert his pertinent remarks in the form of
quotations. |

## [1. Distinction Between Two Parts of
Capital—the Part Consisting of Machinery and Raw
Materials and the Part Consisting of “Means of
Subsistence” for the Workers]

| Capital, says
Cherbuliez, consists of “the raw materials, the tools,
the means of subsistence” (op. cit., p. 16).
“There is no difference between a capital and any
other part of wealth. It is only the way in which it
is employed which determines whether a thing becomes
capital, that is, if it is employed in a production
as raw material, as tools, or as means of subsistence”
(loc. cit., p. 18).

This is the standard way of reducing capital to the
material elements in which it presents itself in the labour
process, i.e., means of production and means of
subsistence. The latter category, moreover, is not
accurate since, though means of subsistence are indeed a
condition for the producer, a prerequisite enabling him to
exist during production, they themselves do not enter into
the labour process, into which nothing enters but the object
of labour, the means of production and labour itself.
Thus the objective factors of the labour process—which
are common to all forms of production—are here called
capital, although the means of subsistence (in
which wages are already included) tacitly implies the
capitalist form of these conditions of
production.

Cherbuliez, like Ramsay, [assumes] that the means of
subsistence—which Ramsay calls circulating
capital—diminish (relatively, at any rate, to the
total amount of capital and absolutely insofar as machinery
continually throws workers out of employment). But
both he and Ramsay appear to think that there is an
inevitable reduction in the amount of means of subsistence,
of necessaries, which can be employed as productive
capital. But this is by no means the case. In
this context, people always confuse that part of the gross
product which replaces capital and is employed as capital,
with that part which represents the surplus product.
The means of subsistence decrease because a large portion of
capital, that is, the part of the gross product employed as
capital, is reproduced as constant capital instead of as
variable capital. A larger portion of the surplus
product, consisting of means of subsistence, is consumed by
unproductive workers or idlers or exchanged for
luxuries. That’s all.

True, the fact that a constantly smaller part of the
total capital is converted into variable capital can also be
expressed in other ways. The part of capital which
consists of variable capital is equal to that part of the
total product which the worker himself appropriates,
produces for himself. Therefore, the smaller this part
is the smaller accordingly is the portion of the total
number of workers which is required to reproduce it (just as
in the case of the individual worker, who works
correspondingly less labour-time for himself). The
total product, like the total labour of the workers, falls
into two parts. One part the workers produce for
themselves; the other part, they produce for the
capitalist. Just as the [labour-] time of the
individual worker can be divided into two parts, so can the
[labour-] time of the whole working class. If the
surplus labour is equal to half a day, it is the same as if
half the working class produces means of subsistence for the
working class and the other half produces raw materials,
machinery and finished products for the capitalists, partly
as producers and partly as consumers.

It is ridiculous that Cherbuliez and Ramsay believe that
the part of the gross product which can be consumed by the
workers and can enter into their consumption in kind has
been reduced of necessity or reduced at all. Only that
part has been reduced which is consumed in this form and
therefore as variable capital. On the other
hand, a larger portion is eaten up by servants, soldiers,
etc., or exported and exchanged for more sumptuous means of
subsistence.

The only important thing in both Ramsay and Cherbuliez is
that they counterpose constant and variable
capital and do not confine themselves to the distinction
between fixed and circulating capital derived from
circulation. For Cherbuliez counterposes that part of
capital which goes on means of subsistence to that which
consists of raw materials, auxiliary materials and means of
labour, i.e., instruments, machines. Although two
constituent elements of constant capital—raw material
and auxiliary material—belong to circulating capital
as far as the mode of circulation is concerned.

The important thing in variations in the constituent
elements of capital is not that relatively more workers are
occupied in the production of raw materials and machinery
than in that of direct means of subsistence—this
concerns only the division of labour— but the
proportion of the product which has to be used to replace
past labour (i.e., to replace constant capital) to that
which has to be used to pay living labour. The larger
the scale of capitalist production, and hence the greater
the accumulation of capital—the greater is the share
in the value of the product falling to the machinery and raw
material of which the capital employed in the production of
machinery and raw material consists. A correspondingly
larger portion of the product must therefore be returned to
production either in kind or by the producers of constant
capital exchanging some of their products amongst
themselves. The part of the product which belongs to
production becomes larger, and the part which represents
living, newly added labour becomes relatively smaller.
Although, this part grows in terms of
commodities—use-values—the development described
is synonymous with increased productivity of labour.
But the portion of this part which the worker receives falls
relatively all the more. And the same process gives
rise to a continuous relative redundancy of the working
population.

## [2. On the Progressive Decline in the Number of
Workers in Relation to the Amount of Constant Capital]

| <It is an
incontrovertible fact that, as capitalist production
develops, the portion of capital invested in machinery and
raw materials grows, and the portion laid out in wages
declines. This is the only question with which both
Ramsay and Cherbuliez are concerned. For us, however,
the main thing is:
does this fact explain the decline in the rate of
profit? (A decline, incidentally, which is far smaller
than it is said to be.) Here it is not simply a
question of the quantitative ratio but of the value
ratio.

If one worker can spin as much cotton as 100 [workers
spun previously], then the supply of raw material must be
increased a hundredfold, and this is moreover brought about
only by the spinning-machine which enables one worker to
control 100 spindles. But if simultaneously, one
worker produces as much cotton as 100 workers did previously
and one worker produces a spinning-machine whereas
previously he produced only a spindle, then the ratio of
value remains the same, that is, the labour expended in the
spinning, [in the production of] the cotton and the
spinning-machine remains the same as that expended
previously in spinning, the cotton and the spindle.

As far as the machinery is concerned, its cost is
not as great as that of the labour it displaces, although
the spinning-machine is much more expensive than the
spindle. The individual capitalist who owns a
spinning-machine must possess a greater amount of capital
than the individual spinner who buys a spinning-wheel.
But the spinning-machine is cheaper than the spinning-wheel
in relation to the number of workers it employs.
Otherwise it would not have displaced the
spinning-wheel. The place of the spinner is taken by a
capitalist. But the capital which the former laid out
on the spinning-wheel was larger relative to the size
of the product, than that which the capitalist lays out on
the spinning-machine.>

The increasing productivity of labour (insofar as it is
connected with machinery) is identical with the decreasing
number of workers relatively to the number and extent of the
machinery employed. Instead of a simple and cheap
instrument a collection of such instruments (even though
they are modified) is used, and to that collection has to be
added the whole part of the machinery which consists of the
moving and transmitting parts; and also the materials used
(like coal, etc.) to produce the motive power (such as
steam). Finally, the buildings. If one worker is
in charge of 1,800 spindles instead of driving a
spinning-wheel, it would be quite ridiculous to ask why
these 1,800 spindles are not as cheap as the single
spinning-wheel. The productivity in this case is
brought about precisely by the amount of capital employed as
machinery. The ratio of the wear and tear of the
machinery affects only the commodity; the worker confronts
the total amount
of machinery and similarly the value of the capital laid
out in labour confronts the value of the capital laid out in
machinery.

There can be no doubt that machinery becomes cheaper, and
this for two reasons: [1] The application of machinery to
the production of raw materials from which the machinery is
made. [2] The application of machinery in the
transformation of these materials into machinery. In
saying this, we already say two things.
Firstly, that in both these branches, compared with
the instruments required in the manufacturing industry, the
value of the capital laid out in machinery also grows as
compared with that laid out in wages. Secondly,
what becomes cheaper is the individual machine and its
component parts, but a system of machinery develops; the
tool is not simply replaced by a single machine, but by a
whole system, and the tools which perhaps played the major
part previously, the needle for example (in the case of a
stocking-loom or a similar machine), are now assembled in
thousands. Each individual machine confronting the
worker is in itself a colossal assembly of instruments which
he formerly used singly, e.g. 1,800 spindles instead of
one. But in addition, the machine contains elements
which the old instrument did not have. Despite the
cheapening of individual elements, the price of the whole
aggregate increases enormously and the [increase in]
productivity consists in the continuous expansion of the
machinery.

Further, one factor in the cheapening of machinery apart
from that of its elements, is the cheapening of the source
of the motive power (the steam-boiler, for example) and of
the transmission mechanism. Economy of power.
But this results precisely from the fact that to an
increasing extent the same motor can drive a larger system
of machines. The motor becomes relatively cheaper (or
its cost does not grow in the same ratio as the increase in
the size of the system in which it is employed; the motor
becomes more expensive as its power grows, but not in the
same degree in which it grows); even when its cost increases
absolutely, it declines relatively. This is therefore
a new and important motive, quite apart from the price of
the individual machine, for increasing the capital that is
laid out in machinery and confronts labour. One
element—the increasing speed of
machinery—increases productivity enormously but it
does not affect the value of the machinery itself in any
way.

It is therefore self-evident or a tautological
proposition that the increasing productivity of labour
caused by machinery corresponds
to increased value of the machinery relative to
the amount of labour employed (consequently to the value of
labour, the variable capital).

| All circumstances
which result in the use of machinery leading to a reduction
in the price of commodities can be attributed, firstly, to a
decrease in the amount of labour embodied in each individual
commodity, secondly, however, to a decrease in the wear and
tear of the machinery whose value enters into the individual
commodity. The less rapid the wear and tear of the
machinery, the less labour is required for its
reproduction. This therefore increases the amount and
the value of the capital existing as machinery as compared
with that existing in labour.

Only the question of raw material therefore remains to be
dealt with. It is obvious that the quantity of raw
material must increase proportionally with the productivity
of labour; that is, the amount of raw material must be
proportionate to that of labour. This relationship is
closer than it appears.

Let us assume, for example, that 10,000 lbs. of cotton
are consumed weekly. Calculating 50 weeks to the year,
this would amount to 10,000×50, that is, 500,000 lbs.
Let us also assume that the amount paid out in wages is
£5,000 over the year. And if a pound of cotton is
assumed to cost 6d. this comes to 250,000 shillings or
£12,500. Let us assume that the capital turns over 5
times during the year. This means that in the course
of a fifth of a year, 100,000 pounds of raw
material—cotton—is used, equal to a value of
£2,500. And £1,000 goes on wages in the same fifth of
a year. This is more than a third of the value of the
capital laid out on the cotton. This does not alter
the ratio. If the value of the cotton amounts to
£10,000 every fifth of a year and that of the labour to
£1,000, then it amounts to one-tenth. (If one
considers the product of the whole year, £50,000 on one side
and £5,000 on the other—it is also one-tenth.)

<The value of a commodity, as far as machinery is
concerned, is determined by the wear and tear of the
machinery, that is, solely by the value of the machinery
insofar as it enters into the process of the formation of
value, in other words, insofar as it is used up in the
labour process. Profit, on the contrary, is determined
(leaving raw materials out of account) by the value of the
whole of the machinery which enters into the labour process
irrespective of the degree to which it is used up.
Profit must therefore decline as the total amount of labour
employed declines compared with the part of capital laid out
in machinery. It does
not decline in the same proportion because surplus labour
increases.>

One may ask with regard to raw material: If, for example,
productivity in spinning increases tenfold, that is, a
single worker spins as much as ten did previously, why
should not one Negro produce ten times as much cotton as ten
did previously, that is, why should the value ratio
not remain the same? The spinner uses ten times as
much cotton in the same time, but the Negro produces ten
times as much cotton in the same time. The ten times
larger amount of cotton therefore costs no more than a tenth
of this amount cost previously. This means that
despite the increase in the amount of the raw material, its
value ratio to variable capital remains the same. In
fact it was only the large fall in the price of cotton which
enabled the cotton industry to develop in the way it did.* The dearer the material (gold and silver, for
example) the less are machinery and the division of labour
applied in transforming it into articles of luxury.
This is because too much capital has been advanced for the
raw materials and the demand for these products is limited
owing to the expensive raw materials.

To this it is quite easy to answer that some kinds of raw
materials, such as wool, silk, leather, are produced by
animal organic processes, while cotton, linen,
etc., are produced by vegetable organic processes and
capitalist production has not yet succeeded, and never will
succeed in mastering these processes in the same way as it
has mastered purely mechanical or inorganic chemical
processes. Raw materials such as skins, etc., and
other animal products become dearer partly because the
insipid law of rent increases the value of these products as
civilisation advances. As far as coal and metal (wood)
are concerned, they become much cheaper with the advance of
production; this will however become more difficult as mines
are exhausted, etc.

<While it can be said with regard to corn-rent and
mine-rent that they do not increase the value of the product
(only its market price) but are rather the expression of the
value of the product (the excess of its value over
the production price), there is, on the other hand, no doubt
that animal rent, house rent, etc., are not consequences but
causes of the increasing values of these
things.>

The cheapening of raw materials, and of auxiliary
materials; etc., checks but does not cancel the growth in
the value of this part of capital. It checks it to the
degree that it brings about a fall in profit.

This rubbish is herewith disposed of | .

| <In considering
profit, surplus-value is assumed as given. And only
the variations in constant capital and their influence on
the rate of profit are considered. There is only one
way in which surplus-value directly affects constant
capital, namely through absolute surplus labour,
lengthening of the working-day, as a result of which the
relative value of constant capital is reduced.
Relative surplus labour—where the working-day remains
unaltered (apart from the greater intensification of
labour)—increases the value ratio of profit to total
capital by increasing the surplus itself. Absolute
surplus labour-time reduces the cost of constant capital
relatively.>

## [3. Cherbuliez’s Inkling that the Organic
Composition of Capital Is Decisive for the Rate of
Profit. His Confusion on This Question.
Cherbuliez on the “Law of Appropriation” in
Capitalist Economy]

| Let us return to
Cherbuliez.

The formulas he uses for the rate of profit are either
mathematical expressions for profit as it is commonly
understood, without involving any kind of law, or they are
quite wrong, although he has an inkling of the
matter, approaches close to it.

“… commercial profit is
determined by the value of the products compared with
the value of the different elements of productive
capital”[op. cit., p. 70].

<In point of fact, profit is the relationship of the
surplus-value of the product to the value of the total
capital outlay regardless of the differences in its
elements. But the surplus-value is itself determined
by the size of the variable capital and the rate at which it
produces surplus-value, and the ratio of this
surplus-value to the total capital is again determined by
the ratio of the variable to the constant capital and also
by changes in the value of constant capital.>

“Evidently the two chief elements in
this determination are the price of the raw materials and
amount of means of subsistence required to work them up
[…] the economic progress of society affects these
two elements in an opposite way […] it tends
to make raw materials dearer by increasing
the value of all the products of the extractive
industries, which are carried out on land that is privately
owned and limited in extent” (loc. cit., p. 70).
On the other hand, the means of subsistence decrease
(relatively), a matter to which we shall return
presently.

“The total amount of products, less
the total amount of capital expended in producing them,
provides us with the total amount of profit gained during a
definite period of time. The growth in the
total amount of products is proportionate to the capital
advanced and not the capital used up. The rate
of profit, or the ratio of profit to capital, is
therefore the result of the combination of two other ratios,
namely, the ratio between the capital laid out and that
used up, and the ratio between the capital used up
and the product” (loc. cit., p. 70).

Cherbuliez first states correctly that profit is
determined by the value of the product in relation to
the “different elements” of productive
capital. Then he flies off suddenly to the product
itself, to the total amount of products. But the
amount of products may increase without its value
increasing. Secondly, a comparison between the amount
of the product and the quantity of products of which the
capital—used up and not used up—consisted, can
at best only be made in the way Ramsay does, by comparing
the aggregate national product with the constituent elements
expended in kind during its production.[a] But as regards capital, the
form taken by the product is different from its ingredients
in every sphere of production (even in those branches of
industry in which, as in agriculture, one part of the
product is used in kind as a production element of the
product). Why does Cherbuliez stray on to this false
path? Because, despite his vague idea that the organic
composition of capital is decisive for the rate of profit,
he in no way uses the contradiction between variable capital
and the other part of capital in order to explain
surplus-value—which, like value itself, he does not
explain at all. He has not shown how surplus-value
arises and therefore has recourse to surplus product,
i.e., to use-value.

Although all surplus-value takes the form of surplus
product, surplus product as such does not represent
surplus-value. <A product may contain no
surplus-value, as, for example, in the case of a peasant who
owns his own implements as well as his own land and only
works exactly the same amount of time as any wage-worker
does to reproduce his own wages, say six hours. In a
good year, he might produce twice as much [as usual].
But the value would remain the same. There would be no
surplus-value, although there would be surplus
product.>

In itself it was already a mistake on the part of
Cherbuliez to represent variable capital in the
“passive” and purely material form of means of
subsistence, that is, as use-value, a form which it obtains
in the hands of the workers. If, on the other hand, he
had considered it in the form in which it actually appears,
namely, as money (as the form in which exchange-value, i.e.,
a certain amount of social labour-time as such, exists),
then [he would have seen that] for the capitalist it
represents the labour which he exchanges for it (and, as a
result of this exchange of materialised labour for living
labour, the variable capital would be set in motion and
would grow); variable capital in the shape of
labour—but not if it is regarded as means of
subsistence—becomes an element of productive
capital. Means of subsistence, on the other hand, are
the use-value, the material existence of the variable
capital when it becomes the revenue of the worker.
Variable capital regarded as means of subsistence is,
therefore, just as “passive” an element
as both the other parts of capital which Cherbuliez
describes as “passive”.*

The same distortion of views prevents him from
elaborating the rate of profit out of the
relationship of this active element to the passive
element, and from showing that it declines as society
advances. Cherbuliez in fact reaches no other
conclusion but that the means of subsistence | decline as a consequence of
the development of productivity while the working population
grows, that is, as a result of the redundant population,
wages are consequently pushed down below their value.
None of his explanations are based on the exchange of
[equal] values—or the payment of labour-power at its
value—and profit thus actually appears to be a
deduction from wages (although he doesn’t say
so). This deduction may indeed occasionally constitute
a part of real profits, but it can never serve as the
foundation for the elaboration of the category of
profit.

Let us first of all reduce the first proposition to its
correct formulation.

“The value of the total amount
of products, less the value of the total amount of
capital used up in its production, provides us with the
total amount of profit gained during a definite period of
time.”

This is the primary (usual) form in which profit appears
and
it is likewise the form in which it appears in the
consciousness of capitalists. In other words, [profit
is] the excess of the value of the product gained during a
definite period of time over the value of the capital
expended. Or the excess of the value of the product
over the cost-price of the product. Even the
“definite period of time” in Cherbuliez’s
statement appears like a bolt from the blue, since he has
not dealt with the circulation process of capital. The
first proposition, therefore, is nothing but the usual
definition of profit, of the immediate form in which it
appears.

The second proposition:

“The growth in the total amount of
products is proportionate to the capital employed and
not to the capital used up.”

Paraphrased again, it would read thus:

“the growth in the
value of the total amount of products is
proportionate to the capital advanced” (whether used
up or not).

The only purpose of this is the surreptitious
introduction of the completely unproven and, in the way
it is formulated, quite false proposition (for it already
presupposes equalisation to the general rate of profit) that
the amount of profit depends on the amount of capital
employed. But an apparent causal nexus is to be
introduced because “the growth in the total amount
of products is proportionate to the capital
employed and not to the capital used up”.

Let us take this sentence in both its
formulations—that in which it is written and that in
which it ought to have been written. In this
context—and in accordance with the conclusion which it
is intended to serve as intermediate clause—it should
be written as follows:

“The growth in the
value of the total amount of products is
proportionate to the capital employed and not to the capital
used up.”

Here, evidently, surplus-value is to be evolved on the
basis of the fact that the excess of the capital employed
over that used up creates the excess value of the
products. But the capital which is not used up
(machinery, etc.) retains its value (for the fact that
it is not used up means precisely that its value has not
been used up); it retains the same value after the
conclusion of the production process as it had before this
process started. If any change in value has
taken place, it can only have happened in that part of the
capital which has been used up, and which therefore entered
into the process of the formation of value. In
point
of fact it is also wrong to say that, for example, a
capital of which a third is not used up and two-thirds are
used up in production, would inevitably yield a higher
profit than one in which two-thirds are not used up and
one-third is used up, provided the rate of exploitation
is the same (and disregarding the equalisation of the
rate of profit). For obviously, the second capital
contains more machinery, etc., and other elements of
constant capital, while the first capital contains less of
these elements and sets more living labour in motion, and
therefore produces more surplus labour as well.

If we take the proposition as formulated by Cherbuliez
himself, then it must be said first that it is of no use to
him, because the amount of products or the amount of
use-values as such by no means determines either the value
or the surplus-value or the profit. But what is behind
all this? A part of constant capital consisting of
machinery, etc., enters into the labour process without
entering into the formation of value, it helps to increase
the volume of products without adding anything to its
value. (For insofar as its wear and tear adds value to
the product, it belongs to the capital used up and
not to the capital employed as opposed to that used
up.) But, by itself, this unconsumed part of constant
capital does not bring about a growth in the amount of
products. It helps to produce a greater output in
a given labour-time. Therefore, if only the same
amount of labour-time were expended as is contained in the
means of subsistence, the same amount of products would be
produced. The excess of products is therefore due to a
change which takes place in this part of the capital used
up and not to the excess of the capital employed over
that consumed (assuming that it is not a matter of branches
of industry in which—as in agriculture—the
volume of products is, or can be, independent of the
amount of capital laid out, [because] the productivity of
labour is, in part, dependent on uncontrollable natural
conditions).

If however he considers constant capital—used up or
otherwise—as independent of the labour-time,
independent of the change in the variable capital which
takes place in the realisation process, then he might just
as well say:

“The growth in the total amount | of products” (at least
in manufacturing industry) “is proportionate to the
growth of the part of capital consisting of raw materials
which is used up.”

For the increase of products is physically identical with
the growth of this part of capital. In agriculture on
the other hand
(and likewise in the extractive industries), where only a
small proportion of the capital invested is not [annually]
used up (i.e., constant capital) and a relatively large
proportion of capital is used up (as wages for example), the
amount of products, provided the land is fairly fertile, can
be much larger than in the advanced countries where the
ratio of capital invested to capital used up is infinitely
greater.

The second proposition thus amounts to an attempt to
bring in surreptitiously surplus-value (the indispensable
basis of profit).

[Cherbuliez’s conclusion:]

“The rate of profit or the
ratio of the profit to capital is therefore the
result of the combination of two other ratios, namely the
ratio between the capital laid out and that
used up, and the ratio between the capital used up
and the product” (op. cit., p.
70).

Previously, profit ought to have been
explained. But nothing emerged except a definition of
it which merely states the form in which it appears, i.e.,
the fact that profit is equal to the excess of the value of
the total product over the cost-price of the product or over
the value of the capital used up, which is the vulgar
definition of profit.

Now the rate of profit ought to be
explained. But once again nothing emerges except the
vulgar definition. The rate of profit is equal to the
ratio of profit to the total capital, or, what amounts to
the same thing, it is equal to the ratio of the excess of
the value of the product over its cost-price to the total
capital advanced for production. The distorted
conception and bungling application of the approximately
correct distinction between the elements of capital, and the
vague idea that profit and rate of profit are directly
connected with the ratio of these elements to one another,
only lead to a repetition of the generally known phrases in
a rather doctrinaire fashion, in fact merely to a statement
that profit and rate of profit exist without, however,
anything being said about their nature.

The matter is not improved by the fact that Cherbuliez
expresses his doctrinaire formulae in algebraic
language:

“Let P be the aggregate
product of a given period of time, C the capital
invested, π the profit, r the ratio of
profit to capital (rate), c the capital used up, then
P–c=π, r=π/C therefore
Cr=π. Therefore P–c=Cr; therefore
r=P–c/C” (loc. cit., p. 70, Note 1).

Which means nothing more than that the rate of profit
equals the ratio of profit to capital and that profit equals
the excess of the value of the product over its
cost-price.

In general, when Cherbuliez speaks about consumed and
unconsumed capital he has at the back of his mind the
difference between fixed and circulating capital, and not
the distinction which he himself has drawn, namely, that
between the different types of capital based on the
production process. Surplus-value is antecedent to
circulation and no matter how much the differences arising
out of circulation affect the rate of profit, they have
nothing to do with the origin of profit.

“Productive capital […] is
composed of a consumable part […] and a
non-consumable part [… ] The more wealth and
population increase, the more the consumable part tends to
increase, because the extractive industries demand an ever
greater supply of labour. On the other hand, this same
progress […] causes the amount of capital
invested to increase at a much faster rate than the amount
of capital consumed. Thus although the total
mass of capital consumed tends to increase […] the
effect is neutralised, because the mass of products grows in
more rapid progression and the total amount of profit
must be considered as growing at a rate at least as high as
that at which the total amount of capital invested
grows” (loc. cit., p. 71).

“The amount of profit grows, not the
rate, which is the ratio of this amount to the capital
invested, r=P–c/C. It is clear that P–c or
the profit, since P–c=π can grow although r
declines, if C grows more rapidly than P–c”
(p. 71, note).

Here the reason for the decline in the rate of profit is
touched on, but in view of the preceding distortions, it can
only lead to confusion and contradictions which cancel each
other out. First the amount of capital consumed grows
but the amount of products grows even more rapidly (i.e.,
the excess of the value of the products over their
cost-price in this case), for it grows in proportion to the
capital invested and this grows more rapidly than the
capital consumed. Why the fixed capital grows more
rapidly than the mass of raw materials, for example, is not
explained anywhere. But never mind, the amount of
profit grows in proportion to the capital
invested, to the total capital, but || the rate of profit
is nevertheless supposed to fall, because the total capital
grows more rapidly than the mass of products or rather than
the amount of profit.

First the amount of profit grows at a rate at
least as great as that at which “the total amount of
the capital invested” grows, and then the rate of
profit falls, because the total amount of capital
invested grows more rapidly than the amount of profit.
First P-c grows “at least”
proportionally to C, and then P-c/C falls,
because C increases even more rapidly than
P-c, which increases at least as rapidly as
C. If we throw aside all this confusion, then
all that remains is the tautology that P-c/C can fall
again although P-c increases, that is, that the rate
of profit can fall although profit increases when the rate
falls. The rate of profit simply signifies the ratio
of P-c to C, [and this ratio declines] when
capital increases more rapidly than the amount of
profit.

Thus the final pearl of wisdom is that the rate of profit
can fall, that is, the ratio of an increasing amount of
profit to capital can fall when the capital increases more
rapidly than the amount of profit, or if the amount of
profit, despite the absolute growth, declines relatively in
comparison with the capital. This is nothing but a
different expression for the decline in the rate of
profit. But that this phenomenon is within the bounds
of possibility, and even its existence, has never been
called to question. The sole point at issue was
precisely to explain the cause of this phenomenon, and
Cherbuliez explains the decline in the rate of profit, the
decline in the amount of profit in relation to the total
capital, by the relative increase in the amount of profit
which is at least proportionate to the growth of the
capital. He obviously surmises that the mass of living
labour employed declines relatively to past labour, although
it increases absolutely, and that therefore the rate
of profit must decline. But he never arrives at a
clear understanding. The closer one comes to the
threshold of understanding, the more distorted the
statements become, unless the threshold is actually crossed
and [the greater is] the illusion of having crossed it.

On the other hand, what he says about the equalisation
of the general rate of profit is very much to the
point. |

| “After the
deduction of rent, what remains of the amount of
profit, that is, of the excess of products over the
capital consumed, is divided between the capitalist
producers in proportion to the capital each has
invested, whereas the portion of the product which
corresponds to the capital used up and is intended to
replace it, is divided in proportion with the capital
actually used up. This dual law of division
comes about as a result of competition, which tends
to equalise the advantages of the different investments of
capital. Finally, this dual law of division determines
the respective values and prices of the
different kinds of products” (loc. cit.,
pp. 71-72).

This is very good. Only the
concluding words are wrong, namely, that the formation of
the general rate of profit determines the values and
prices (it should be prices of production) of
commodities. On the contrary, the determination of the
value is the primary factor, antecedent to the rate of
profit and to the establishment of production prices.
How can any kind of division of the “amount of
profit”, i.e., of the surplus-value |—which is itself only a
part of the total value of commodities—determine the
“amount of profit”, that is, the
surplus-value, that is, the value of the commodities?
This is only correct if, by relative values of commodities,
one means their production prices, The whole lopsidedness of
Cherbuliez’s presentation arises from the fact that he does
not examine the origin and the laws of value and
surplus-value independently.

In other respects, he describes the relation between
wage-labour and capital more or less correctly.

People who neither receive anything by devolution (legal
transfer, inheritance, etc.), nor have any possessions they
can exchange, can[b]
“obtain what they need only by offering their
labour to the capitalist. They only acquire the
right to the things which are allocated to them as the
price of labour, but they have no right to the
product of their labour, nor to the value
which they have added” (op. cit., pp. 55-56).
“By exchanging his labour for a certain volume
of means of subsistence, […] the worker completely
renounces all right to the other portions of capital
[…] The distribution of these products remains
the same as it was previously; it is not modified in any way
by the above-mentioned convention. The products
continue to belong exclusively to the capitalist who has
provided the raw materials and the means of
subsistence. This is an inescapable sequence of the
law of appropriation, the fundamental principle of which
was, conversely, the exclusive right of every worker to
the product of his labour” (p. 58).

This fundamental principle, according to Cherbuliez, is
as follows:

“The worker has an exclusive right to
the value resulting from his labour” (p. 48).

Cherbuliez does not understand nor does he explain how
the law of commodities, according to which commodities are
equivalents and exchange with one another in proportion to
their value, i.e., to the labour-time embodied in them,
unexpectedly leads to the result that on the contrary
capitalist production—and only on the basis of
capitalist production is it essential for the product to be
produced as a commodity—depends on the fact that
one portion of labour is appropriated without
exchange. He only senses that a transformation
has suddenly taken place.

This fundamental principle is a pure fiction. It
arises from the surface appearance of commodity
circulation. Commodities are exchanged with one
another according to their value, that is, according to the
labour embodied in them. Individuals confront one
another only as commodity owners and can therefore only
acquire other individuals’ commodities by alienating their
own. It therefore appears as if they exchanged
only their own labour since the exchange of commodities
which contain other people’s labour, insofar as they
themselves were not acquired by the individuals in exchange
for their own commodities, presupposes different relations
between people than those of [simple] commodity owners, of
buyers d of sellers. In capitalist production this
appearance, which its surface displays, disappears.
What does not disappear, however, is the illusion that
originally men confront one another only as commodity owners
and that, consequently, a person is only a property owner
insofar as he is a worker. As has been stated, this
“originally” is a delusion arising from the
surface appearance of capitalist production and has never
existed historically. In general, man (isolated or
social) always comes on to the stage as a property owner
before he appears as a worker, even if the property is only
what he procures for himself from nature (or what he as a
member of the family, tribe, communal organisation, procures
partly from nature, partly from the means of production
which have already been produced in common). And as
soon as the first animal state is left behind, man’s
property in nature is mediated by his existence as a member
of a communal body, family, tribe, etc., by his relationship
to other men, which determines his relationship to
nature. The “propertyless labourer” as a
“fundamental principle” is rather a creature of
civilisation and, on the historical scale, of
“capitalist production”. This is a law of
“expropriation” not of
“appropriation”, at least not simply of
appropriation in the way Cherbuliez imagines it, but a kind
of appropriation which corresponds to a definite, specific
mode of production. |

| Cherbuliez says:

“The products are appropriated before
they are converted into capital; and this conversion does
not eliminate such appropriation” (op. cit.,
p. 54).

But this applies not only to the products, but also to
labour. Raw materials, etc., and instruments belong to
the capitalist.
They are the converted form of his money. On
the other hand, when he has bought labour-power or the daily
(say 12 hours) use of labour-power, with a sum of money
equal to the product of six hours of labour, then the labour
of 12 hours belongs to him; it is appropriated by him
before it is carried out. The process of production
itself turns labour into capital. But this
transformation is an act which takes place later than its
appropriation.

The “products” are converted into capital,
physically converted insofar as in the process of
production they function as conditions of labour, conditions
of production, objects and instruments of labour, and
formally converted insofar as not only their
value is perpetuated but as they become means for
absorbing labour and surplus labour, insofar as they
actually function as absorbers of labour. | On the other hand: the
labour-power appropriated before the [production]
process is turned directly into capital in the course
of the process by being converted into the conditions of
labour and into surplus-value, [since] as a result of its
embodiment in the product, it not only preserves the
constant capital but replaces the variable capital and adds
surplus-value. |

## [4. On Accumulation as Extended
Reproduction]

[Cherbuliez writes:]

| “Every
accumulation of wealth provides the means for accelerating
further accumulation” (op. cit., p. 29).

{Ricardo’s view (derived from Smith) that all
accumulation can be reduced to expenditure on wages, would
be incorrect even if no accumulation in kind took
place—which is the case, for example, when the farmer
sows more seed, the stock-breeder increases his stock of
cattle for breeding or for fattening, the owner of
engineering works uses part of his surplus-value in the form
of machine tools—and even if all producers who produce
the elements of some part of capital did not over-produce
regularly, counting on the fact of annual accumulation,
i.e., the expansion of the general scale of
production. Moreover, the peasant can exchange part of
his surplus corn with the stock-breeder, who may convert
this corn into variable capital while the peasant converts
his corn into constant capital [by means of this
exchange]. The flax-grower | sells part of his surplus
product to the spinner, who converts it into constant
capital. With this money
the flax-grower can buy tools and the tool-maker can then
buy iron, etc., so that all these elements are turned
directly into constant capital.

But disregarding all this, let us assume that a
manufacturer of machines wants to convert an additional
capital of £1,000 into elements of production.
He will of course lay out part of it on wages, say
£200. But he buys iron, coal, etc., with the
remaining £800. Let us assume that this iron,
coal, etc., has first to be produced. Then, if the
iron or coal producers either have no excess (accumulated)
stocks of their commodities, and likewise have no additional
machinery and are unable to buy it immediately (for in this
case too constant capital would be exchanged for constant
capital), they can only produce the required iron and coal
if they work their old machinery longer. As a result,
they would have to replace it more rapidly, but a part of
its value would enter into the new product.
Irrespective of this, however, the iron manufacturer needs
more coal in any case and must therefore transform at least
part of his share in the £800 into constant
capital. Both coal and iron producers sell their wares
in such a way that they contain unpaid surplus labour.
And if this amounts to a quarter, then this alone means that
£200 out of the £800 is not converted into
wages, not to mention the part which has to make good the
wear and tear of the old machinery.

The surplus consists always of the articles produced by
the particular capital, i.e., coal, iron, etc. Part of
the surplus is converted directly into constant capital when
the producers whose commodities serve as elements of
production for other producers exchange these commodities
with one another. That part of the surplus value,
however, which is exchanged against the products of those
who produce means of subsistence and replaces the constant
capital in these branches, provides the necessary variable
capital. The producers of means of subsistence that
can no longer enter as elements into their production
(except as variable capital) acquire additional constant
capital through the same process which provides the other
producers with additional variable capital.

The following features distinguish
reproduction—insofar as it constitutes accumulation
—from simple reproduction.

Firstly: Both the constant and variable elements
of production which are accumulated consist of newly added
labour. They are not used as revenue, although they
arise from profit. They consist of profit or surplus
labour, whereas in the case of simple reproduction
part of the product represents past labour
(i.e., in this context, labour which has not been performed
in the current year).

Secondly: If the labour-time in certain branches
is lengthened, that is, if no additional instruments or
machines are employed, the new product must indeed, to a
certain extent, pay for the more rapid wear and tear of the
old [tools or machines], and this accelerated consumption of
the old constant capital is likewise an aspect of
accumulation.

Thirdly: As a result of the additional money
capital which arises in the process of [extended]
reproduction—partly through the freeing of capital,
partly through the conversion of part of the product into
money, partly because, as a result of the money collected by
the producer, the demand for other [commodities], e.g.,
[those offered by the] sellers of luxury goods, is
reduced—the systematic replacement of the elements [of
production] is by no means a necessity, as it is in the case
of simple reproduction.

With the additional money anyone can buy or command
products, although the producer from whom the purchase is
made may neither expend his revenue on the product of the
purchaser nor replace his capital with it}.
<Additional capital (constant or variable) must appear
in the form of money capital on one side, even if this only
exists in the form of outstanding claims, whenever it is not
balanced by a corresponding addition on the other
side.>

## [5. Elements of Sismondism in Cherbuliez. On
the Organic Composition of Capital Fixed and Circulating
Capital]

For the rest, Cherbuliez presents a remarkable amalgam of
Sismondian and Ricardian contradictory views. |

Sismondian.

“The hypothesis […] that an
invariable ratio exists between the different
elements of capital is not substantiated at any stage of the
development of society. The relationship is
essentially variable and for two reasons: a)the
division of labour, and b) the replacement of human labour
by natural agents. These two factors tend to reduce
the ratio of the means of subsistence to the other
two elements of capital” (op. cit., pp. 61-62).

In this situation, “the increase in productive
capital does not necessarily lead to an increase in the
amount of means of subsistence intended to constitute the
price of labour; it can be accompanied—at least for a
time—by
an absolute diminution of this element of capital, and
consequently by a reduction in the price of
labour” (loc. cit., p. 63).

<This is Sismondian; the effect on the wage
level is the only aspect considered by Cherbuliez.
This problem does not arise at all in an investigation where
labour is always supposed to be paid at its value and the
fluctuations of the market price of labour above or below
that point (the value [of labour]) are not taken into
consideration.>

“The producer who wishes to introduce
a new division of labour in his enterprise or to exploit
some natural force, will not wait until he has accumulated
sufficient capital to be able to employ in this new way
all the workers he needed previously. In the
case of division of labour, he will perhaps be satisfied to
produce with five workers what he previously produced with
ten. In the case of the exploitation of a natural
force, he will perhaps use only one machine and two
workers. The means of subsistence will, in
consequence, be reduced to 1,500 in the first case and to
600 in the second. But since the number of workers
remains the same, their corn petition will soon force
the price of labour below its original level”
(loc. cit., pp. 63-64). “This is one of the
most astonishing results of the law of
appropriation. The absolute increase in wealth,
that is, in the products of labour, does not give rise to a
proportional increase and may lead to a diminution in the
means of subsistence for the workers, in the portion they
receive of all kinds of products” (p. 64).
“The factors determining the price of
labour”<in this context it is always a
question only of the market price of labour>
“are the absolute amount of productive capital and the
ratio between the different elements of capital, two social
facts on which the will of the workers can exercise no
influence” (p. 64). “Nearly all the odds
are against the worker” (loc. cit.).

The ratio between the different elements of productive
capital is determined in two ways:

First: By the organic composition of productive
capital. By this we mean the technological
composition. With a given productivity of
labour, which can be taken as constant so long as no change
occurs, the amount of raw material and means of labour, that
is, the amount of constant capital—in terms of its
material elements—which corresponds to a
definite quantity of living labour (paid or unpaid),
that is, to the material elements of variable
capital, is determined in every sphere of production.

If the proportion of the materialised labour to the
living labour employed is small, then the portion of the
product that represents living labour will be large
regardless of how this portion is divided between capitalist
and worker. If the reverse is the case, the portion
will be small. With a given rate of exploitation of
labour, the surplus labour too will be large in the former
case
and small in the latter. This can only change as a
result of a change in the mode of production which alters
the technological relationship between the two parts of
capital. Even in this case, the absolute amount of
living labour employed by the capital which uses a greater
proportion of constant capital may be equal or even larger
if capitals of different size are compared. But
it must be smaller relatively. For capitals of
the same size, or calculated in proportion to the total
capital—100 for example—it must be smaller both
relatively and absolutely. All changes arising from
the development (not the decline) of the productive power of
labour, reduce that part of the product which represents
living labour, that is, they reduce variable capital.
Regarding capital invested in different branches of
production | , one can
say [that these changes] reduce the variable capital
absolutely in those branches which have reached a higher
level of production, since wages are assumed to be
equal.

So much with regard to the changes arising from changes
in the mode of production.

Secondly, however, if one assumes that the organic
composition of capitals is given and likewise the
differences which arise from the differences in their
organic composition, then the value ratio can change
although the technological composition remains the
same. What can happen is: a) a change in the value of
constant capital; b) a change in the value of the variable
capital; c) a change in both, in equal or unequal
proportions.

a) If the technological composition remains the same and
a change in the value of constant capital takes place, its
value will either fall or rise. If it falls, and only
the same amount of living labour is employed as previously,
i.e., if the scale or level of production
remains the same, if, for example, 100 men are employed as
previously, then in physical terms, the same amount of raw
material and means of labour is required as
previously. But the surplus labour bears a greater
proportion to the total capital advanced. The rate of
profit rises. In the opposite case it declines.
In the former case, for the capitals already employed in
that sphere (not those newly invested in it after the change
of value in the elements of constant capital has taken
place), the total sum of the capital employed diminishes,
that is, some portion of the capital is set free, although
production continues to be carried on on the same scale; or
the capital thus liberated is again employed in the same
sphere of production and has then the same effect as an
accumulation of capital. The scale of production is
enlarged,
and the absolute amount of surplus labour is increased
proportionally. With a given method of
production, every accumulation of capital results in an
increase in the total amount of surplus-value whatever the
rate of surplus-value may be.

Conversely, if the value of the elements of constant
capital increases, then either the scale of
production (hence the mass of the total capital
advanced) must increase to employ the same quantity
of labour (the same variable capital the value of which has
remained unchanged) as before; and then although the
absolute amount of surplus-value—and the rate of
surplus-value—remains the same, its proportion to the
total capital advanced decreases, and hence the rate of
profit falls. Or the scale of production and the total
capital advanced is not enlarged, then in all circumstances,
the variable capital must decrease.

If the same sum as previously is laid out in constant
capital, it now represents a smaller amount of material
elements and since the technological conditions
remain the same, less labour will be employed. The
total capital advanced therefore decreases by [an amount
corresponding to] the labour dismissed; the total value of
the capital advanced thus decreases, but a greater
proportion of the diminished capital is laid out in constant
capital (in terms of value). The surplus-value
decreases absolutely, because less labour is employed, and
the ratio of the remaining surplus-value to the total
capital advanced falls, because variable capital bears a
smaller proportion to constant capital.

On the other hand, if the same total capital is employed
as before—the reduced value of the variable capital
(representing a smaller quantity of labour, living labour,
employed), being counterbalanced by the increased value of
the constant capital; the one being diminished in the same
proportion as the other is augmented, then the absolute
quantity of surplus-value falls; because less labour is
employed, and at the same time, the proportion of this
surplus-value to the total capital advanced falls.
Thus the rate of profit falls for two reasons, the
diminution in the amount of surplus labour, and the
decreasing proportion of that surplus labour to the total
capital advanced.

In the first case where (with decreasing value of the
elements of constant capital) the rate of profit
rises in all circumstances, the
scale of production must be extended if the amount
of profit is to increase. Let us assume that the
capital is 600—half constant, half variable. If
the constant capital were to lose half its value, it would
only amount to 150, although the variable capital would remain 300.
The total capital employed would be only 450, 150 being
freed. If the 150 are added to the capital again, then
100 of the 150 will now be laid out in variable
capital. | Thus the
scale of production is expanded and more labour
employed, if the same capital continues to be used in the
production process.

In the opposite case, where with rising value of the
elements of constant capital the rate of profit falls
in all circumstances, the scale of production, and
therefore the capital advanced, must be increased if the
amount of profit is not to decrease and the
amount of labour employed (and therefore
surplus-value) is to remain the same. If this is not
done, if only the old or less than the old capital is
employed, then not only does the rate of profit decline, but
also the amount of profit.

The rate of surplus-value remains unchanged in both
cases; it changes, however, if any change in the
technological composition of capital takes place: it
increases if the constant capital increases (because labour
is then more productive) and declines when it falls (because
labour is then less productive).

b) If there is any change in the value of variable
capital independent of the organic composition, it
can only occur because of a fall or a rise in the price of
means of subsistence that are not produced in the sphere of
production under consideration but enter into it as
commodities from outside.

If the value of variable capital falls, it
nevertheless represents the same amount of living labour as
before. The same quantity of labour merely costs
less. If therefore the scale of production
remains the same (since the value of constant capital is
unchanged), then the part of the total capital used for the
purchase of labour is diminished. Less capital needs
to be laid out in order to pay the same number of
workers. Thus, in this case, if the scale of
production remains the same, the amount of capital laid
out diminishes. The rate of profit increases, and this
for two reasons. The [amount of]
surplus-value has increased; the ratio of living
labour to materialised labour has remained the same, but the
increased surplus-value correlates with a smaller total
capital. If, on the other hand, the capital freed is
again invested, then this amounts to
accumulation.

If the value of the variable capital increases,
then a greater total capital must also be laid out in order
to employ the same number of workers as before, because the
value of the constant capital remains the same and that of
the variable capital has risen.
The amount of labour remains the same, but a smaller part of
it is surplus labour, and this smaller part corresponds to a
larger capital. This takes place when the scale of
production remains the same, while the value of the
total capital increases. If the value of the total
capital does not increase, the scale of production
must be reduced. The amount of labour declines and a
smaller portion of this reduced amount constitutes surplus
labour, which, too, bears a smaller proportion to the total
capital advanced.

The organic changes and those brought about by changes of
value can have a similar effect on the rate of profit in
certain circumstances. They differ however in the
following way. If the latter are not due simply to
fluctuations of market prices and are therefore not
temporary, they are invariably caused by an organic change
in the spheres that provide the elements of constant or of
variable capital.

[c)] It is not necessary here to examine case 3 in
detail.

In the case of capitals of equal size—or if the
calculation is based on equal amounts of the total capital,
100, for example— the organic composition may
be the same in different spheres of
production, but the value ratio of the primary
component parts of constant and variable capital may be
different according to the different values of the
amount of instruments and raw materials used. For
example, copper instead of iron, iron instead of lead, wool
instead of cotton, etc.

On the other hand, is it possible for the organic
composition to be different if the value ratio
remains the same? If the organic composition is the
same, the relative amounts which constitute constant capital
and living labour are the same per 100. The
quantitative proportions are the same. The value of
the constant capital may be the same, although the relative
amounts of labour set in motion are different. If the
machinery or raw materials are dearer (or cheaper), less
labour, for example, may be required, but in this case the
value of the variable capital is also relatively smaller or
vice versa.

| Let us take A and
B. c’ and v’ are the component parts (in
terms of value) of A, and c and v those of B
(again in terms of value). If c’:v’ is equal to
c:v then c’v equals v’c.
Consequently likewise c’/c equals v’/v.

Since the value ratios [of constant to variable
capital] are equal, only the following variations are
possible. If in one sphere more surplus labour is
carried out than in another sphere, <for
example, night work is impossible in agriculture, and
although the individual agricultural labourer can be
over-worked, nevertheless the total amount of labour which
can be expended on a given area of land is limited by the
object being produced (corn), whereas in a factory of a
given size the amount produced depends
(δυνάμει[c]) on the hours of
labour worked—that is to say, it is due to the
different kinds of production that more surplus labour can
be employed in one sphere at a given level of production
than in another> then, even if the value ratio of
constant and variable capital is the same, the amount of
labour employed in proportion to the total capital will
nevertheless be different.

Or, let us assume that the raw material is dearer and
labour (of greater skill) is dearer, in the same
proportion. In this case [capitalist] A employs 5
workers, where [capitalist] B employs 25, and they cost him
£100—as much as the 25 workers, because their
labour is dearer (their surplus labour is therefore also
worth more). These 5 workers work up 100 lbs. of raw
material, y, worth [£] 500 and B’s workers work
up 1,000 lbs. of raw material, x, worth [£]
500, because the raw material is dearer and the productive
power of the workers is less highly developed in the case of
A. The value ratio here—£100 v to
[£] 500 c is he same in both cases, but the
organic composition is different.

The value ratio is the same: The value of constant
capital in A is the same as in B, and proportionately A lays
out the same amount of capital in, wages as B. But the
quantity of his products will be smaller. Although he
employs the same absolute quantity of labour as B, he uses
more relatively, because his constant capital is
dearer. He processes less raw material, etc., in the
same time, but this smaller quantity costs him as much as
the larger quantity processed by B. The value
ratio in this case is the same, the organic composition
is different. In the other case the value ratio being
assumed to be the same, this can occur only if the amounts
of the surplus labour are different or if the value of the
different kinds of labour are different.

The organic composition can be taken to mean the
following: Different ratios in which it is necessary to
expend constant capital in the different spheres of
production in order to absorb the same amount of
labour. The combination of the same amount of
labour with the object of labour requires either that
both
more raw material and more machinery are used in one case
than in the other, or that more of only one of these is
used.

{Where the ratios between fixed and circulating capital
are very different, those between constant and
variable capital can be the same, consequently
the surplus-value can be the same although the values
produced annually must be different. Let us assume
that in the coal industry—where no raw materials are
used (apart from auxiliary materials), the fixed capital
constitutes half the total capital and variable capital the
other half. Let us assume that in tailoring the fixed
capital is zero (as in the previous case we disregard
auxiliary materials), that the raw materials constitute half
and the variable capital the other half of the total
capital. Given the same degree of exploitation of
labour, both will realise the same amount of
surplus-value, since both employ the same amount of
labour in proportion to capital, i.e., per 100. But
let us assume that fixed capital in the coal industry turns
over once every 10 years while there is no difference in the
rate of turnover of circulating capital in both cases.
At the end of the year (we will assume that the variable
capital turns over once a year in both cases) the tailor’s
capital will have produced va1ues amounting to 150 if the
surplus-value is 50. The coal producer, on the other
hand, will have produced values amounting to 105 at the end
of the first year (consisting of 5 for fixed capital, 50 for
variable and 50 for surplus labour). As in the case of
the tailor, the total value of his product plus the fixed
capital will amount to 150, that is, the product, 105, plus
45 for the remaining fixed capital. The production of
different magnitudes of value therefore does not preclude
the production of the same amount of
surplus-value.

In the second year, the fixed capital of the coal
producer would amount to 45, variable capital to 50 and
surplus-value to 50, that is, the capital advanced would be
95 and the profit would be 50. The rate of profit
would have risen, because the value of the fixed
| capital would have
declined by one tenth as a result of wear and tear during
the first year. Thus there can be no doubt that in the
case of all capitals employing a great deal of fixed
capital—provided the scale of production remains
unchanged—the rate of profit must rise in
proportion as the value of the machinery, the fixed capital,
declines annually, because wear and tear has already been
taken into account. If the coal producer sells his
coal at the same price throughout the ten years, then his
rate of profit must be higher in the second
year than it was in the first and so forth. Or
one would have to assume that the maintenance work, etc.,
stands in direct proportion to the depreciation, so that the
total sum advanced annually under the heading of fixed
capital remains the same. This extra profit may be
equalised also as a result of the fact that—apart from
wear and tear—the value of fixed capital alls in the
course of time, because it has to compete with new, more
recently invented, better machinery. On the other hand
this rising rate of profit, which results naturally from
wear and tear, makes it possible for the declining value of
the fixed capital to compete with newer, better machinery,
the full value of which has still to be taken into
account. Finally, the coal producer sold his coal more
cheaply [at the end of the second year], on the basis of the
following calculation: 50 on 100 means 50 per cent profit,
50 per cent on 95 comes to 47 1/2; if
therefore he sold the same quantity of coal [not for 105
but] for 102 1/2—then he would
have sold it more cheaply than the man whose machinery, for
example, began to operate only in the current year.
Large installations of fixed capital presuppose possession
of large amounts of capital. And since these big
owners of capital dominate the market, it appears that only
for this reason their enterprises yield surplus profit
(rent). In the case of agriculture, this rent derives
from working relatively fertile land, but here we are
dealing with a case where relatively cheaper machinery is
utilised.}

<A large number of instances which are adduced in
connection with the relation of fixed to circulating
capital, refer to the difference between variable and
constant capital. First of all, the proportion of
constant to variable capital can be the same although the
proportion of fixed to circulating capital is
different. Secondly, in the case of constant and
variable capital it is a question of the primary division of
capital between living and materialised labour,
not of the modification of this relationship by the
circulation process or the influence of this latter on
reproduction.

It is clear first of all that the difference between
fixed and circulating capital can affect surplus-value
(apart from the differences in the mass of living labour
employed, i.e., differences which are related to the ratio
of variable to constant capital) only insofar as it affects
the turnover of the total capital. It is
therefore necessary to investigate how the turnover
affects surplus-value. Two factors are obviously
closely connected with it: 1)
surplus-value cannot be accumulated, reconverted into
capital, so rapidly (so often); 2) the capital
advanced must increase both to continue to employ the
same number of workers, etc., and because the advances of
money which the capitalist makes to himself to cover his own
consumption costs must extend over a longer period.
These factors are important in connection with
profit. Here, however, it is, to begin, with,
only necessary to examine how they affect
surplus-value. One must moreover always clearly
distinguish between these two factors.>

<Everything which increases the capital
outlay without proportionally increasing the
surplus-value, reduces the rate of profit even if the
surplus-value remains the same; the opposite is the case
with everything which reduces the outlay. Insofar,
therefore, as a large amount of fixed capital in proportion
to circulating capital—or different turnover periods
of capital— affects the size of the capital outlay, it
affects the rate of profit even if it does not at all affect
the surplus-value.>

<The rate of profit is not simply the surplus-value
calculated on the capital advanced, but the mass of
surplus-value realised within a given period, that is, in a
definite period of circulation. Insofar as the
difference between fixed and circulating capital affects the
mass of surplus-value which a particular capital yields
within a given period, it affects the rate of
profit. Two aspects must be taken into consideration:
firstly, the difference in the size of the capital
advanced (relative to the surplus-value realised) and
secondly, the difference in the length of time for
which these advances have to be made before they are
returned with a surplus.>

| {The reproduction
time, or rather, the number of reproductions taking place in
a definite period of time, is substantially affected by two
circumstances.

1)The product remains longer in the sphere of
production, in the strict sense of the term.

It is possible firstly that, in order to be
produced, one product requires a longer period of time than
another; it may require a larger part of a year, a whole
year or even more than a year.(The latter is the case for
example with buildings, in stock-breeding and the production
of certain luxuries.) In this case, the product
continually absorbs labour—often a great deal of
labour is absorbed (for instance by luxury articles and
buildings) in relation to the constant capital—the
amount depending
on the composition of the productive capital, its
division into constant and variable capital. Thus in
the measure as the time required for the production of the
commodity increases and the labour process continues
uniformly, a continuous absorption of labour and of surplus
labour takes place. This happens for example with
cattle or buildings if the latter require more than a year’s
work. The product can enter the sphere of circulation,
that is, it can be sold, be thrown on the market, only when
the work is completed. The surplus labour expended in
the first year is embodied with the rest of the labour in
the unfinished product of the first year. It is
neither greater nor smaller than in other branches of
production where constant and variable capital are used in
the same proportions. But the value of the product
cannot be realised, that is, in the sense that it
cannot be converted into money, and neither can the
surplus-value. The latter cannot therefore be
accumulated as capital nor used for consumption. The
capital advanced, and also the surplus-value, serve, so to
speak, as foundations for further production. They are
a precondition for it and enter, to some extent, as
semi-finished products, or, in one way or another, as raw
material into the production process of the second year.

Let us assume that the capital is [£] 500, labour
[£] 100 and surplus-value [£] 50, so that the
capital advanced in production amounts to [£] 550 plus
[£] 500 which is advanced in the second year.
The surplus-value is again [£] 50. The value of
the product is therefore [£] 1,100, of which [£]
100 is surplus-value. In this case, the surplus-value
is the same as if the capital had been reproduced in the
first year and [£] 500 had been invested again in the
second year. In each year the variable capital
employed is [£] 100 and the surplus-value [£]
50. But the rate of profit is different.
In the first year it is 50/500, or 10
per cent. But in the second year the capital outlay
amounts to [£] 550 plus [£] 500, that is,
[£] 1,050, and a tenth of this is [£] 105.
If one adds the same rate of profit, then the value of the
product comes to: [£] 550 in the first year; [£]
550+ [£]500+ [£] 55 + [£] 50=
[£]1,155 in the second year. At the end of the
second year, the value of the product is [£]
1,155. Otherwise it would have been only [£]
1,100. In this case, the profit is greater than the
surplus-value produced, for this only amounts to [£]
100. If one includes the consumption costs which the
capitalist has to advance over two years, then the capital
laid out
is even greater in proportion to the surplus-value.
On the other hand, it is true that the entire
surplus-value gained in the first year has been converted
into capital in the second. Furthermore, the capital
laid out in wages is greater, because the £100 is not
reproduced at the end of the first year, so that in the
second year £200 must be advanced for the same labour
for which £100 would have been sufficient if it had
been reproduced in the first year.

Secondly. After the labour process has been
completed, the product must continue to remain in the
production sphere in order to undergo natural processes
which require either no labour or relatively quite
insignificant amounts of it, like wine in the cellar.
Only when this period has elapsed can the capital be
reproduced. It is obvious that in this case quite
irrespective of what the ratio of variable to constant
capital may have been, the effect is the same as if more
constant and less variable capital had been laid out.
The surplus labour, as well as the total amount of labour
employed during a de finite period of time, is
smaller. If the rate of profit is the same,
this is due to equalisation, not to the amount of
surplus-value produced in this sphere. More capital
must be advanced beforehand to maintain the reproduction
process—the continuity of production. And for
this very reason the surplus-value declines in
proportion to the capital advanced.

Thirdly. Interruptions in the labour
process while the product is in the production process,
as in agriculture or in processes such as tanning, etc.,
where chemical processes involve intervals before the
product can proceed from one stage to the next, higher
one. If in such cases, the interval is reduced by
chemical discoveries, the productivity of labour rises, the
surplus-value is increased and materialised labour has to be
advanced for a shorter period of time. In all these
cases, the surplus-value is smaller and the capital outlay
larger.

2) The same thing happens if the rate of turnover of the
circulating capital is lower than the average because of
distant markets, In this case, too, the capital outlay is
greater, the surplus-value smaller and its proportion
to the capital advanced is also smaller.} <In the
latter case [the capital] is retained longer in the
circulation sphere, in the former case, in the production
sphere.>

| {Let us assume that
the capital advanced in some branch or other of the
transport industry is [£] 1,000—fixed capital [£] 500, which will be
worn out in five years. The variable capital, which
amounts to [£] 500, turns over four times during the
year. The annual value of the product will thus be
[£] 100 + [£] 2,000 + [£] 100, if the
[annual] rate of surplus-value is 20 per cent, a total of
[£] 2,200. On the other hand, let us assume that
in a branch of tailoring the constant capital, which
consists only of circulating capital since fixed capital is
assumed to be zero, amounts to 500 and the variable capital
to 500, surplus-value is 100. [The capital] turns over
four times a year. Then the (annual) value of the
product will be 4(500+500)+100, that is, 4,100. The
surplus-value is the same in both cases. In the
last-mentioned case, the entire capital turns over four
times a year or once a quarter. Of the other capital
[£] 600 turn over in the course of a year [of which
£ 500 turn over four times], therefore [£] 500 +
100/4 = [£] 525 in a quarter of
a year. That is, 175 in a month, [£] 350 in two
months, and [£] 1,400 in eight months. The whole
capital requires 5 5/7 months in order
to turn over. It turns over only
21/10 times a year.

Now it will be said that in order to make a profit of 10
per cent, less is added per quarter on a value of
[£]1,000 in the case of the first capital than in that
of the other. But here it is not a question of
addition. One makes more surplus-value on the capital
used up but not on the capital employed. The
difference here arises from the surplus-value, not from the
addition of profit. The difference here lies in the
value not in the surplus-value. In both cases the
variable capital amounting to 500 turns over four times in a
year. Both capitals yield a surplus-value of
[£]100 in a year, the [annual] rate of surplus-value
amounts to 20 per cent. But £25 in a quarter,
therefore a higher percentage? [£]25 on
[£]500 each quarter is 5 per cent a quarter, that is,
20 per cent per annum.

The first [capitalist] turns over half his capital 4
times a year and only a fifth of the remaining half once
during the year. A half of four times is
twice. Thus he turns his capital over 2
1/10 times during the year. The
entire capital of the second capitalist turns over four
times a year. But this makes absolutely no difference
to the surplus-value. If the second capitalist
continues the reproduction process uninterruptedly, then he
must constantly convert [£] 500 into raw materials,
etc., and must always use [£] 500 for labour, while
the other capitalist likewise
uses [£] 500 for labour and has invested the
remaining [£]500 once and for all (that is, for five
years) in such a form that he does not need to reconvert it
again. This applies however only when the ratio of
variable to constant capital is the same [in both capitals]
despite the difference between fixed and circulating
capital.

If in both cases, one half consists of constant and the
other half of variable capital, then it is only possible for
one half [in one case] to consist of fixed capital if the
circulating constant capital amounts to zero, and [in the
other case], one half can consist of circulating constant
capital only if the fixed capital amounts to zero.
Although the circulating constant capital can amount to
zero, as in the extractive and transport industries where,
however, the auxiliary materials rather than the raw
materials constitute the circulating constant capital, the
fixed capital can never be zero (except in banking,
etc.). This is however immaterial so long as the ratio
of constant capital to variable capital is the same in both
cases, even though in one case there may be more fixed and
less circulating constant capital than in the other, or vice
versa. The only difference here is the time of
reproduction required by one half of the capital and by the
total capital. One capitalist must invest a capital of
£500 for five years before it is returned to him, the
other, for a quarter of a year or a whole year. The
ability to dispose of the capital is different. The
amount advanced is the same but the time for which it is
advanced is different. This difference does not
concern us here. When one considers the total capital
outlay, surplus-value and profit are the
same—£100 in the first year on the £1,000
advanced. In the second year, it is rather the fixed
capital that has a higher rate of profit, since the variable
capital has remained the same, whereas the value of the
fixed capital has declined. The capitalist only
advances [£] 400 fixed and [£] 500 variable
capital in the second year and receives a profit of
[£] 100 as he did before. But 100 on 900 amounts
to 11 1/9 per cent, while the other
capitalist, if he continues to reproduce his capital,
advances [£] 1,000 as he did previously and makes a
profit of [£]100, that is, 10 per cent.

The position is different, of course, if, along with the
fixed capital, the constant capital as a whole increases as
compared with the variable, or if altogether more capital
must be advanced in order to set the same amount of labour
in motion. In the case discussed above, the question
is not how often the total
capital is returned or how large the advance is, but how
often that portion is returned which is sufficient to set
the same amount of productive labour in motion as that used
in the other instance, in order to renew the process of
production. However, if in the case cited above, the
fixed capital were [not £500 but £] 1,000 and
the circulating capital only [£] 500 [as previously],
then matters would be different. This, however, would
not be due to the fact that it is fixed capital. For
if the circulating part of the constant capital in the
second case were to amount to [£]1,000 instead of
[£] 500 (because of the dearness of raw materials, for
example), then the result would be the same. Because
in the first examples [of the two cases] the larger the
fixed capital, the greater the relative size of the capital
outlay as a whole to the variable capital, these two factors
are often confused. Moreover, the whole business of
the turnover was in fact originally derived from merchant
capital, where it is determined by different laws. In
the case of merchant capital, as I have demonstrated, the
rate of profit is indeed determined by the average number of
turnovers, regardless of the composition of this type of
capital which, incidentally, consists mainly of circulating
capital. For in the case of merchant capital, profit
is determined by the general rate of profit.}

| <(The point is
this. If the fixed capital equals x, and it turns over
only once every 15 years, then 1/15 of
it is turned over in a single year, but likewise only
1/15 needs to be replaced each
year. It would make no difference at all if it were
replaced 15 times in a year. Its mass would still be
the same as before. The product would only become
dearer as a result. But it is more difficult to
dispose of it and the risk of depreciation is greater than
if the same amount of capital were advanced in the form of
circulating capital. But this does not affect the
surplus [-value] in any way, although it does enter
into the capitalists calculation of the rate of
profit since this risk is included in the calculation of
the depreciation.

As far as the other part of capital is concerned, let us
assume that the circulating part of constant
capital—raw materials and auxiliary
materials—amounts to [£] 25,000 a year and wages
to [£] 5,000. If it were returned only once
during the year £30,000 would have to be advanced
during the whole year, and if the surplus-value were at the
rate of 100 per cent it would amount to £5,000, and
profit at the end of the year would be 5,000 on 30,000, or
16 2/3 per cent.
If, on the other hand, [the capital turns over] five
times during the year, then a capital outlay of only
[£] 5,000 for constant circulating capital and
[£] 1,000 for wages will be sufficient. Profit
will be [£] l ,000, and for five-fifths of a year
[£] 5,000. But this surplus-value is made on a
capital of £6,000, because more than this amount is
never advanced. Profit would therefore be 5,000 on
6,000, or 5/6, five times as much [as
previously], that is, 83 1/3 per
cent. (Disregarding fixed capital.) There is
thus a very considerable difference in the rate of profit
because, in fact, labour worth [£] 5,000 is bought
with a capital of [£] 1,000 and raw materials, etc.,
worth [£] 25,000 with a capital of [£]
5,000. If the amounts of capital were equal in these
cases of different rates of turnover, then only [£]
6,000 need have been advanced in the first case, that is
only [£] 500 a month, five-sixths of which would have
consisted of constant capital and one-sixth of variable
capital. This sixth would amount to [£] 83
1/3, on which surplus-value at 100
per cent would be £83 1/3, and
this would amount in a year to
(83+1/3)12 =
12/3(or 4)+996= [£]1,000.
But 1,000 on 6,000=16 2/3 per
cent.>

## [6. Cherbuliez Eclectically Combines Mutually
Exclusive Propositions of Ricardo and Sismondi]

To return to Cherbuliez.

[The following is] Sismondian:

“Insofar as the economic progress of
society is characterised by an absolute growth of productive
capital and by a change in the proportions between
the different elements of capital, it offers the workers
some advantages [… ] First, productivity[d] of labour […],
resulting especially from the use of machinery, brings about
such a rapid growth of productive capital that despite the
change that takes place in the proportion of the means of
subsistence to the other elements of capital, this
element nevertheless increases absolutely, which makes it
possible not only to employ the same number of workers as
before, but also an additional number, so that for the
workers the result of progress […] apart from some
interruptions means an increase in productive capital
and in the demand for labour. Secondly, the[e] greater productivity
of capital tends to diminish the value of the whole mass of
products considerably, thus placing them within reach of
the workers, thereby increasing the range of enjoyments
they are able to obtain” (op. cit., p. 65).

On the other hand:

“First, however
impermanent, however partial the temporary diminution of the
means of subsistence which constitute the price of labour
may be, it produces harmful effects
nevertheless… Second, the factors tending to
promote the economic advance of society are for the most
part accidental, independent of the will of the producing
capitalist. The effects of these causes are therefore
not permanent…” etc. (p. 66).
“Third, it is not so much the absolute as the
relative amount consumed by the worker which makes
his lot happy or unhappy. What does it matter to the
worker if he is able to obtain a few more products which
formerly were inaccessible to him if the number of
products inaccessible to him has grown in even greater
proportion, if the distance which separates him from the
capitalist has only increased, if his social position
has deteriorated and become more disadvantageous?
Apart from the consumption strictly necessary for the
maintenance of our strength, the value of our enjoyments
is essentially relative” (loc. cit., p. 67).

“People frequently forget […]
that the wage-labourer is a thinking man, endowed with the
same capacities, impelled by the same motives as the working
capitalist” (p. 67).

| “Whatever
advantages a rapid growth in social wealth may bring to the
wage-workers, it does not cure the causes of their
poverty… They continue to be deprived of
all rights to capital and are consequently obliged to sell
their labour and to renounce all claims to the products of
their labour” (loc. cit., p. 68).
“This is the principal error of the law of
appropriation… The evil lies in this
absolute lack of any bond between the wage-worker and
the capital which is set in motion by his industry”
(p. 69).

This last phrase about “bond” is
written in the typical Sismondian manner and is quite silly
to boot.

About the normal man [who is] equated with
capitalist, etc., see op. cit., pp. 74 to 76.

About the concentration of capitals and the
elimination of the smaller capitalists (l.c.,
pp. 85-88).

“If in present circumstances real pro
fit derives from the thrift of the capitalists, it could
derive just as well from that of the wage earners”
(loc. cit., p. 89).

[On the other hand] Cherbuliez shares:

1). [James] Mill’s view that all taxes should be
imposed only on rent (p. 128), but since it is impossible
“to impose a tax which is levied only on rent and
affects nothing but rent”, since it is difficult to
separate profit from rent and impossible when the landowner
is himself the cultivator, Cherbuliez proceeds to

2). the real conclusion of the Ricardian
theory:

“Why do people not take a step
further and abolish private ownership of land?”
(p. 129) “The landowners are idlers who are
maintained at the public expense without any kind of benefit
to industry or to the general welfare of society”
(p. 129). “What makes land productive is the
capital
employed in agriculture. The landowner contributes
nothing to it. He only exists to pocket rent, which
does not constitute a part of the profit on his capital,
neither is it the product of labour nor that of the
productive power of the soil, but the effect of the price of
the agricultural products, which is increased by the
competition of the consumers…” etc. (p.
129). “Since the elimination of the private
ownership of land would in no way change the causes
responsible for rent, rent would continue to exist, but the
state would receive it, for all the land would belong to it
and it would lease out arable sections of the land to
private persons owning sufficient capital to exploit
them” (p. 130). Rent would replace all state
revenues. “Finally industry, liberated, released
from all fetters, would take an unprecedented leap
forward…” (p. 130).

But how does this Ricardian conclusion agree with the
pious Sismondian wish to place “bonds” on
capital and capitalist production? How does it agree
with the lamentation:

“Capital will ultimately rule the
world if an upheaval does not halt the course which the
development of our society is taking under the domination of
the law of appropriation” (op. cit., p. 152).
“Capital will eliminate the old social distinctions
everywhere in order to replace them by this simple
classification of men into rich and poor, the rich, who
enjoy themselves and rule, and the poor who work and
obey” (p. 153). “The general appropriation
of productive wealth and of the products has always
reduced the numerous class of proletarians to a position of
subjugation and political impotence, but this appropriation
was once combined with a system of restrictive laws which,
by impeding the development of industryand the
accumulation of capital | , placed limits on the growth
of the class of the disinherited, restricted their civil
rights within narrow bounds and thus in different ways
rendered this class harmless. Today, capital has
broken part of these fetters. It is preparing to break
all of them” (pp. 155-56).

“The demoralisation of the
proletarians is the second result of the distribution of
wealth” (p. 156).

* | < If tomorrow the price
of cotton were to drop by 90 per cent, the spinning industry
would develop even more rapidly the day after
tomorrow.> |

[a] See this volume,
p. 337.—Ed.

* | On page 59, Cherbuliez calls
raw materials and machinery, etc., “the two
passive elements of capital” in contrast to
the means of subsistence. |

[b] In this phrase
Marx summarises (in German) a lengthy paragraph from
Riche ou pauvre and then quotes from the
book.—Ed.

[c]
Potentially.—Ed.

[d] The manuscript
has “1). the greater productivity”.—Ed.

[e] The manuscript
has “2). the”.—Ed.

Theories of Surplus Value, Marx 1861-3

## [Chapter XXIV] Richard Jones

## 1. Reverend Richard Jones, “An Essay on the
Distribution of Wealth, and on the Sources of
Taxation,” London, 1831, Part I, Rent [Elements of a
Historical Interpretation of Rent. Jones’s Superiority over
Ricardo in particular Questions of the Theory of Rent and
His Mistakes in This Field]

Even this first work on rent is distinguished by
what has been lacking in all English economists since Sir
James Steuart, namely, a sense of the historical
differences in modes of production. (Such a correct
distinction of historical forms generally speaking is not
contradicted by the very important archaeological,
philological and historical blunders attributed to
Jones. See, for example, The Edinburgh Review,
Vol. LIV, Article IV.

He found that the modern economists after Ricardo define
rent as surplus profit, a definition which
presupposes that the farmer is a capitalist (or a farming
capitalist who exploits the land), who expects average
profit on the capital which he invests in this particular
sphere, and that agriculture itself has been subordinated to
the capitalist mode of production. In short, landed
property is conceived only in its modern bourgeois form,
that is, in the modified form which it has been given by
capital, the dominant relation of production in
society. Jones by no means shares the illusion that
capital has been in existence since the beginning of the
world.

His views on the origin of rent in general are summarised
in the following passages:

“The power of the earth to yield,
even to the rudest labours of mankind, more than is
necessary for the subsistence of the cultivator himself,
enables him to pay […] a tribute: hence the origin of
rent” ([Richard Jones, An Essay on the Distribution
of Wealth,] p. 4).

“… rent has usually originated
in the appropriation of the soil, at a time when the
bulk of the people must cultivate it on such terms as they
can obtain, or starve; and when their scanty capital of
implements, seeds, etc., being utterly insufficient to
secure their maintenance in any other occupation than that
of agriculture, is chained with themselves to the land by an
overpowering necessity” (op. cit., p. 11).

Jones traces rent throughout all its changes, from its
crudest form, performance of labour services, to modern
farmer’s rent. He finds that everywhere a specific
form of rent, i.e., of landed property, corresponds to a
definite form of labour and of the conditions of
labour. Thus, labour rents or serf rents, the change
from labour rent to produce rent, metayer rents, ryot rents,
etc., are examined in turn, a development the details of
which do not concern us here. In all previous forms,
it is the landed proprietor, not the capitalist, who
directly appropriates the surplus labour of other
people. Rent (as the Physiocrats conceive it by
reminiscence [of feudal conditions]) appears
historically (and still on the largest scale among the
Asiatic peoples) as the general form of surplus
labour, of labour performed without payment in
return. The appropriation of this surplus labour is
here not mediated by exchange, as is the case in capitalist
society, but its basis is the forcible domination of one
section of society over the other. (There is,
accordingly, direct slavery, serfdom or political
dependence.)

Since we are only considering landed property here
insofar as an understanding of it contributes to an
understanding of capital, we shall leave Jones’s analysis
and proceed directly to his result—which distinguishes
him from, and shows his superiority over, all his
predecessors.

But first a few incidental remarks.

In discussing forced labour and the forms of
serfdom (or slavery) which correspond to it more or less
| , Jones
unconsciously emphasises the two forms to which all
surplus-value (surplus labour) can be reduced. It is
characteristic that, in general, real forced labour
displays in the most brutal form, most clearly the
essential features of wage-labour.

Under these conditions <where there is serf
labour> rent can only be increased either by the
more skilful and effective utilisation of the labour of the
tenantry <relative surplus labour>, this however
is hampered by the inability of the proprietors to advance
the science of agriculture, or by an increase in the total
quantity of the labour exacted, and in this case,
while the lands of the proprietors will be better tilled,
those of the serfs, from which labour has been withdrawn,
all the Worse.[a] (Op.
cit., Chapter II.)

What distinguishes this book on rent by Jones from
his Syllabus to be mentioned in section
2—is this: in the first work
he proceeds from the various forms of landed property as
a given fact; in the second, from the Various forms of
labour to which they correspond.

Jones also shows how different stages in the development
of the productive power of social labour correspond to these
different production relations.

Serf-labour (just as slave-labour) has this in common
with wage-labour, in respect of rent, that the latter is
paid in labour not in products, still less in
money.

As far as metayer rent is concerned “…
the advance of stock by the proprietor, and the
abandonment of the management of cultivation to
the actual laborers, indicate[b] the continued absence of an
intermediate class of capitalists…” (op. cit.,
p. 74).

“Ryot rents are […] produce
rents paid by a laborer, raising his own wages from the
soil, to the sovereign as its proprietor”
(op. cit., Chapter IV, [p. 109]). (In Asia especially)
“… Ryot rents […] are sometimes mixed up
with […] labor rents and metayer rents” (p.
136 et seq.). [Under this system] the sovereign is the
chief landlord. “… the prosperity, or
rather the existence, of the towns of Asia, proceeds
from[c] the local
expenditure of the government”
(p. 138).

“Under cottier rents we may
include all rents contracted to be paid in money, by
peasant tenants, extracting their own maintenance from the
soil” (p. 143). (Ireland.) Over the
greater part of the globe, no money rents are paid[d] [loc. cit.].

“All the forms”[e] (serf, ryot, metayer, cottier, etc.,
in short, peasant rents) prevent “the full development
of the productive powers of the earth” [p. 157].

“… the difference which
exists in the productiveness of the industry”
[depends] “first, on the quantity of
contrivance used in applying manual labour: secondly,
on the extent to which the mere physical exertions
[…] are assisted by the accumulated results of
past labour: in other words, on the different quantities
of skill, knowledge, and capital, brought to the task of
production….” [pp. 157-58].

“Small Numbers of the
Non-Agricultural Classes. It is obvious, that the
relative numbers of those persons who can be maintained
without agricultural labor, must be measured wholly by
the productive powers of the cultivators” (Chapter
VI [pp. 159-60]).

“In England, the tenants who on the
disuse of the labor of the serf tenantry, took charge of the
cultivation of the domains of the proprietors, were found on
the land; they were yeomen”
(op. cit. [p. 166]).

We now come finally to the point which is of decisive
interest to us here—farmers’ rents. It is
here that Jones’s superiority
is most striking, for he shows that what Ricardo and
others regard as the eternal form of landed property, is its
bourgeois form, which, after all, only develops, firstly,
when landed property has ceased to be the dominant relation
in production and, consequently, in society; secondly, when
agriculture itself is carried on in a capitalist way, which
presupposes the development of large-scale industry (at
least of manufacture) in the towns. Jones shows that
rent in the Ricardian sense only exists in a | society the basis of which is
the capitalist mode of production. As a consequence of
the transformation of rent into surplus profit, the
direct influence of landed property on wages ceases,
which, in other words, merely means that the landed
proprietor ceases to be the direct appropriator of
surplus labour, this role being now assumed by the
capitalist. The relative size of the rent affects only
the division of surplus-value between capitalist and
proprietor, not the exaction of that surplus labour
itself. This conclusion in fact emerges from Jones’s
analysis, though it is not explicitly stated.

Jones marks a substantial advance on Ricardo, in his
historical explanation as well as in the economic
details. We shall follow his theory step by
step. Blunders, of course, occur.

In the following passages, Jones correctly explains the
historical and economic conditions under which rent is
equivalent to surplus profit, that is the expression of
modern landed property.

“Farmers’ Rents […] can
only exist when the most important relations of
the different classes of society have ceased to originate
in the ownership and occupation of the soil” (op.
cit., p. 185).

The capitalist mode of production begins with manufacture
and only later subjugates agriculture.

“… it is the artizans and the
handicraftsmen who first range themselves under the
management of capitalists…”
(p. 187).

“One of the immediate consequences of
this change[f] is the
power of moving at pleasure the labor and capital
employed in agriculture, to other occupations.”

<And only with this power can there be any question
of equalisation of agricultural and industrial
profit.>

“While the tenant was himself a
laboring peasant, forced, in the absence of other funds for
his maintenance, to extract it himself from the soil, he was
chained to that soil by necessity; […] the little
stock he might possess, since it was not sufficient to
procure him a maintenance unless used for the
single purposes of cultivation, was virtually chained to
the soil with its master.” [With the capitalist
master] “this dependance on the soil is broken: and
unless as much can be gained by employing the working
class on the land, as from their exertions in various other
employments, which in such a state of society abound,
the business of cultivation will be abandoned. Rent,
in such a case, necessarily consists merely of surplus
profits…” (loc. cit., p. 188). Rent
ceases to have any influence on wages. “When the
engagement of the laborer is with a capitalist, this
dependance on the landlord is
dissolved…” (p. 189).

As we shall see later, Jones does not really explain how
surplus profit arises, or rather, he explains it only
in Ricardian fashion, i.e., by the difference in the degrees
of natural fertility of different soils.

“When rents consist of
surplus profits, there are three causes from which the
rent of a particular spot of ground may increase:

“First, an increase of the produce
from the accumulation of larger quantities of capital in its
cultivation;

“Secondly, the more efficient
application of capital already employed;

“Thirdly, (the capital and produce
remaining the same) the diminution of the share of the
producing classes in that produce, and a corresponding
increase of the share of the landlord.

“These causes may combine in
different proportions…” (p. 189).

We shall see what is involved by these different
causes. First of all they all presuppose that rent
consists of surplus profit; and then there is not the
slightest doubt that the first cause to which Ricardo
alludes only once and then only incidentally, is
correct. When the capital employed in agriculture
increases, the amount of rent increases as well, even though
the price of corn, etc., does not rise and no other
change whatever takes place. It is clear that, in this
case, the price of land rises, although corn prices
do not and no change whatever takes place in them.

Jones declares rent on the worst soil to be
monopoly price. He therefore restricts the real
source of rent either to monopoly price (in the same
way as Buchanan, Sismondi, Hopkins, and others) if it is
absolute rent (not arising from differences in the
fertility of the different kinds of soil) or to
differential rent (in the Ricardian sense).

<As regards absolute rent, let us take a
gold mine. We assume that the capital employed
is £100, the average profit £10, rent £10,
and that half the capital consists of constant capital (in
this case, machinery and auxiliary materials) and half of
variable capital. The £50 of constant capital
means nothing more than that it contains the same amount of
labour-time as |
is embodied in £50 worth of gold. That part
of the product which is worth £50 therefore replaces
this constant capital. If the rest of the product is
worth £70 and if 50 workers are set to work with the
£50 of variable capital (assuming a working-day of 12
hours), then the labour of these 50 workers must be
expressed in £70 worth of gold, of which £50
goes to pay wages and £20 represents unpaid
labour. The value of the products of all capitals of
the same composition will then be 120; the product will then
consist of 50c and 70, [the 70] corresponding to 50
working-days, that is, 50v plus 20s. A capital of 100,
utilising more constant capital and a smaller number of
workers, would produce a product of less value.
However, all ordinary industrial capitals, although the
value of their products would, in these circumstances,
amount to 120, would only sell them at their production
price of 110. But in the case of the gold mine, this
is impossible quite apart from the ownership of land,
because in this case the value is expressed in the product
in kind. A rent of £10 would therefore of
necessity arise.>

“Corn may he selling […] at a
monopoly price, that is, at a price which more than
pays the costs and profits of those who grow it under the
least favourable circumstances; or at such a price as
will only repay their[g] common profits.” In the
first case “abstracting from all difference of
fertility in the soils cultivated”, (the)
“increased produce obtained by increased
capital (prices remaining the same) may increase the
rents, in proportion to the increased capital laid
out.” “Let[h] 10 per cent be the ordinary rate of
profit. If the corn produced […] by £100
sold for £115, the rent would be £5. If in
the progress of improvement the capital employed on the same
land were doubled, and the produce doubled, then £200
would yield £230 and […] £10 would be
rent and the rent will be doubled” (op. cit.,
p. 191).

<This applies to absolute rent as well as to
differential rent.>

“In small communities corn may be
constantly at a monopoly price… In
larger countries too […] corn may […] he at a
monopoly price,[i]
provided the increase of population keeps steadily ahead of
the increase of tillage [… ] however […]
monopoly price of corn is […] unusual in countries of
considerable extent and great variety of soil. In such
countries, if the produce of the soils in cultivation sells
for more than will realise the usual rate of profit on the
capital employed, other[j] lands are cultivated; or more capital laid out on
the old lands, till the cultivator finds he can barely get
the ordinary profit on his outlay. Then […]
tillage will stop, and in such countries
[…] corn is usually sold at a price not more
than sufficient to replace the capital employed under the
least favorable circumstances, and the ordinary rate of
profit on it: and the rent paid on the better soils is then
measured by the excess of their produce over that of the
poorest soil cultivated by similar capitals”
(loc. cit., pp. 191-92).

“All […] that is necessary to
effect a rise of rents over the surface of a country
possessing soils of unequal goodness, is this: that the
better soils should yield to the additional capital employed
upon them in the progress of cultivation, something more
than the soils confessedly inferior to them; for then while
the means can be found of employing fresh capital on any
soil between the extremes A and Z, at the ordinary rate of
profit, rents will rise on all the soils superior to that
particular soil” (p. 195).

“Let A have been […]
cultivated with £100 yielding annually £110,
£10 being the ordinary profits […] and B with
£100 yielding £115: and C with £100
yielding £120: and so on to Z [… ] the
rent of B would be £5, and that of C £10
[… ] each of these qualities of soil be
cultivated with a capital of £200 […] A will
produce £220, B £230, C £240…
The rent of B, therefore, will have become £10, that
of C £20” (p. 193).

“… the general
accumulation of the capital employed in cultivation,
while it augments the produce of all gradations of soil,
somewhat in proportion to their original goodness, must
of itself raise rents; without reference to any progressive
diminution in the return to the labor and capital
employed, and, indeed, quite independently of any
other cause whatever” (p. 195).

It is one of Jones’s merits, that he is the first who
clearly brings out the fact that once rent has come into
being, its growth will on the whole <provided no
revolution in the mode of production takes place>
result from the increase of agricultural capital, that is,
of capital employed on land. This may be the case not
only if prices remain the same but even when they
fall below their former level.

| In opposition to the
view that productivity [in agriculture] gradually
diminishes, Jones remarks:

“The average corn produce of England
at one time did not exceed 12 bushels per acre; it is now
about double” (p. 199).

“… every successive portion of
capital and labor concentrated on the land, may be more
economically and efficiently applied than the last”
(pp. 199-200).

Rent will double, triple and quadruple, and so on, if the
capital invested in the old land is doubled, tripled,
quadrupled,[k]
“without a diminished return, and without altering the
relative fertility of the soils cultivated”
p. 204).

This is therefore the first point on which Jones is in
advance of Ricardo. Once rent exists, it may increase
as a result of the mere increase in the amount of capital
employed on the land, irrespective of
any change either in the relative fertility of the soils, or
in the returns yielded by the successive doses of capital
employed, or any alteration whatever in the price of
agricultural produce.

Jones’s next point is this:

“… it is not essential to the
rise that the proportion between the fertility of the
soils should be exactly stationary”
(p. 205).

<Here Jones overlooks the fact that conversely, an
increasing disparity, even when the whole
agricultural capital is more productively employed, must and
will increase the amount of the differential rent. On
the other hand, a diminution in the differences of
the fertility of the various soils must diminish
differential rent, i.e., rent arising from those
differences. By taking away the cause you take
away the effect. Nevertheless, rent (apart from
absolute rent) may increase, but in that case only in
consequence of an increase of the agricultural capital
employed.>

“… Mr. Ricardo […] had
[…] overlooked the necessarily unequal effects of
additional capital on soils of unequal fertility”
(l.c., [p. 205]).

(This means nothing more than that the employment of
additional capital adds to the differences of relative
fertility, and, in that way, to differential rent.)

“If […] numbers, bearing a
certain proportion to each other, are multiplied by the same
number […] the proportion […] will be the same
as those of the original numbers; yet the difference
between[l] the
amounts of the several products, will increase at each
step of the process. If 10, 15, 20, be multiplied by 2
or 4, and become 20, 30, 40, or 40, 60, 80, their relative
proportions will not be disturbed: 80 and 60 bear the same
proportion to 40, as 20 and 15 to 10: but the differences
between the amounts of their products will have
increased at each operation, and from being 5 and 10, become
10 and 20, and then 20 and 40” (pp. 206-07).

This law works out simply as follows:

5

10

1.
10,

15,

20.
The difference
5 [and 10].
Sum of the differences15.

10

20

2.
20,

30,

40.
" "
10 [and 20].
" "
30.

20

40

3.
40,

60,

80.
" "
20 [and 40].
" "
60.

4.
80,

120,

160.
[" "
40 and 80.
" "
120.]

The difference between the terms is doubled in 2 and
quadrupled in 3. The sum of the differences is likewise
doubled in 2 and quadrupled in 3.

This therefore is the second law.

The first law (applied by Jones only to
differential rent) is that the amount of rent increases with
the increase of the amount of capital employed. If
rent is 5 for 100, then it is 10 for 200.

| The second
law. All other circumstances remaining the same,
and the proportional difference between the capitals
employed on different soils remaining the same, the
amount of that difference, and hence the amount of
the aggregate rent or the sum of those differences
increases, as the absolute quantity of that
difference—resulting from the increase of the capitals
employed—increases. Hence the second law
is: the amount of differential rent increases in proportion
as the differences of the products increase when the
relative fertility remains the same, but capital employed on
the different soils is increased uniformly.

Further: “If £100 be employed on classes A, B
and C, with a produce of £110, £115, £120,
and subsequently £200, with returns of £220,
£228 and £235, the relative differences of the
products will have diminished, and the soils will have
approximated in fertility; still the difference of
the amounts of their products will be increased from
£5 and £10 to £8 and £15, and rents
will have risen accordingly. Improvements, therefore,
which tend to approximate the degrees of fertility of the
cultivated soils, may very well raise rents, and that
without the co-operation of any other cause”
(loc. cit., p.208).

“The turnip and sheep husbandry, and
the fresh capital employed to carry it on, produced a
greater alteration in the fertility of the poor soils than
in that of the better; still it increased the absolute
produce of each, and, therefore, it raised rents, while
it diminished the differences in the fertility of the soils
cultivated” (loc. cit.).

With regard to Ricardo’s view that improvements may cause
rents to fall , “it is only necessary to remember the
slowly progressive manner in which agricultural improvements
are practically discovered, completed, and
spread…” (p. 211).

<This last passage is only of practical interest and
does not affect the problem as such, but refers only to the
fact that improvements do not proceed so rapidly as to
considerably augment supply in regard to demand and thus to
reduce market prices.>

Originally we have:

a
b
c

1.
10
15
20

The capital employed in each class amounts to 100; the
product to 110, 115, 120. The difference
amounts to 5+10=15.

As a result of improvements made, twice as much capital
is employed, that is, [£]200
instead of [£]100 in each of the classes a, b and
c. But the capital has a different effect in the
different classes and the products yielded are 220 (that is,
double that of a), 228 and 235. Thus:

a
b
c

2.
20
28
35

£200 capital is employed in each class. The
products amount to [£]220, [£] 228 and
[£]235. The difference amounts to
[£] 8+ [£]15=[£]23. But the rate of
difference has been reduced. 5:10 (i.e., [the ratio of
the differences] b-a [to a] in the first
case)=1/2 and 10:10=1, whereas 8:20 is
only 8/20 or 2/5
and 15:20= 15/20 or
3/4. The rate of difference has
declined but its amount has increased. This does not,
however, constitute a new law, but only shows that the
increase of capital employed leads to an increase in rent as
in the first law, although the increase in a, b and c is not
proportional to their original differences of
fertility. If prices were to fall as a consequence of
this increased fertility (which is however [relatively]
diminished fertility for b and c, for otherwise their
product would have to be 230 and 240 respectively), it would
by no means be necessary for the rent to rise or even to
remain stationary.

| As a consequence, a
sequel, of the second law, a further application of it can
be considered:

The third law—if “improvements in the
efficiency of the capital employed in cultivation”
increase the surplus profits realised on particular
spots of land, they increase rent.

The following passages (together with the earlier ones)
refer to this.

“…the[m] first source […] of a rise
of farmers’ rents, namely,[n] the progressive
accumulation and unequal effects of capital on all
gradations of soils” (p. 234).

<This, however, can only refer to improvements which
relate directly to the fertility of the soil as, for
instance, manures, rotation of crops, etc.>

“Improvements […] in the
efficiency of the capital employed in cultivation, raise
rents by increasing the surplus profits realised on
particular spots of land. They invariably produce
this increase of surplus profits, unless they augment the
mass of raw produce so rapidly as to outstrip the progress
of demand […] Such improvements in the efficiency
of the capital
employed, do usually occur in the progress of
agricultural skill, and of the accumulation of greater
masses of auxiliary capital” (constant
capital). “A rise of rents from this cause, is
generally followed by the spread of tillage to inferior
soils, without any diminution[o] in the returns to agricultural
capital on the worst spots reclaimed” (p. 244).

<Jones very correctly declares that a fall in
profits does not prove decreasing efficiency of
agricultural industry. But he himself explains most
inadequately how such a fall can come about.
[According to him] either the amount produced or its
division between labourers and capitalists may change.
Jones has as yet not the faintest notion of the real law of
declining rate of profit.

“A fall of Profits is no Proof of the
decreasing Efficiency of agricultural Industry”
(p. 257).

“… profits depend partly on
the amount of the produce of labor, partly on the
division of that produce between the laborers and
capitalists; and […] their amount, therefore, might
vary from a change in either of these particulars”
(p. 260).

This is the reason for the incorrect law which he
elaborates:

“When, abstracting from the effects
of taxation, an apparent diminution takes place in the
revenues of the producing classes considered jointly”
(what revenue means is not explained here, [whether ] value
in use or value in exchange, amount of profit or rate [of
profit]), “when there is a fall in the rote of
profits, not compensated by a rise of wages, or a fall
of wages not compensated by a rise in the rate of
profits”,[p]
(that is precisely what Ricardo’s law says, and it is wrong)
“there has been, it may be argued, some decrease in
the productive power of labor and capital”… (p.
273).>

Jones correctly grasps that a relative increase
[in the value] of agricultural produce as compared to [that
of] industrial produce may take place in the progress of
society although in point of fact, agriculture is
progressing absolutely.

“In the progress of nations, an
increase of manufacturing power and skill usually occurs,
greater than that which can be expected in the
agriculture of an increasing people. This is an
unquestionable […] truth. A rise in the
relative value of raw produce may, therefore, be
expected in the advance of nations, and this from a cause
quite distinct from[q] any positive decrease in the
efficiency of agriculture” (p. 265).

But this does not explain the positive rise in the
money prices of raw produce,
unless a fall in the value of gold takes place which in
manufacture is balanced and more than balanced by a still
greater fall in the [value of] commodities produced, while
in agriculture it is not balanced in this way. This
may happen, even | if no
general fall in the value of gold (money) takes place, but
when a particular nation, for instance, buys more money with
a day’s work than the competing nations do.

Jones explains his reasons for not believing that in
England the Ricardian law operates, the abstract possibility
of which he does admit however.

“If rents […] should ever rise
from that cause alone, which has been so confidently stated
by Mr. Ricardo […] ‘the employment of an
additional quantity of labor with a proportionally less
return’, and a consequent transfer to the landlords of
a part of the produce […] obtained on the better
soils; then the average proportion of the gross
produce taken by the landlords as rent, will necessarily
increase.” Secondly, “the industry of a larger
proportion of the population must be devoted to
agriculture” (pp. 280 and 281).

(This last statement is not quite correct. It is
possible that a greater portion of indirect labour is
employed—i.e., more commodities provided by industry
and commerce enter the agricultural process, without
increasing the gross product proportionally, and without the
employment of more immediate labour. There may be even
less employed.)

“The statistical history of England
presents to us […] three facts […] a spread of
tillage accompanied by a rise in the general rental of the
country […] a diminution of the proportion of people
employed in agriculture […] a decrease in the
landlord’s proportion of the produce” (p. 282).

(This last development, just as the decline in the rate
of profit, is due to the increase in that part of the
product which replaces constant capital. At the same
time, rent can increase in both amount and value.)

“Adam Smith […] goes on to say
[…] ‘In the progress of improvement, rent,
though it increases in proportion to the extent, diminishes
in proportion to the produce of the land’”
(p. 284).

Jones calls constant capital “auxiliary
capital”.

“It appears from various returns made
at different times to the Board of Agriculture, that the
whole capital agriculturally employed in England, is to that
applied to the support of labourers, as 5 to 1; that is,
there are four times as much auxiliary capital used, as
there is of capital applied to the maintenance of the labor
used directly in tillage. In France, […] more
than twice” (p. 223).

“… when a given quantity of
additional capital is applied in the shape of the results
of past labor, to assist the laborers actually employed,
a less
annual return will suffice to make the employment
of such capital profitable, and, therefore, permanently
practicable, than if the same quantity of fresh capital were
expended in the support of additional
laborers…” (p. 224).

“Let us suppose £100 employed
upon the soil[r] in
the maintenance of three men, producing their own wages, and
10 per cent profit on them, or £110. Let the
capital employed […] be doubled. And first let
the fresh capital support three additional laborers.
In that case, the increased produce must consist of the full
amount of their wages, and the ordinary rate of profit on
them. It must consist, therefore, of the whole
£100, and the profit on it; or of £110.
Next let the same additional capital of £100 be
applied in the shape of implements, manures, or any results
of past labor, while the number of actual laborers remains
the same […] this auxiliary capital to last on the
average for five years: the annual return to repay the
capitalist must now consist of £10 his profit, and of
£20 the annual wear and tear of his capital: or
£30 will be the annual return, necessary to make the
continuous employment of the second £100 profitable,
instead of £110, the amount necessary when direct
labor was employed by it. It will be obvious,
therefore, that the accumulation of auxiliary capital in
cultivation, will be practicable when the employment of the
same amount of capital in the support of additional labor
has ceased to he so: and that the accumulation of such
capital […] may go on for an indefinite
period…” (pp. 224-25).

“… the progress[s] of auxiliary
capital both increases the command of man over the powers of
the soil, relatively to the | amount of labor directly or
indirectly employed upon it; and diminishes the annual
return necessary to make the progressive employment of
given quantities of fresh capital profitable…”
(p. 227).

“If we suppose any capital
(£100 for instance) employed upon the soil, wholly in
paying the wages of labor, and yielding 10 per cent profit,
the revenue of the farmer will […] be one-tenth that
of the laborers. If the capital be doubled[t] […] then the
revenue of the farmers will continue to bear the same
proportion to that of the laborers. But if the number
of laborers remaining the same, the amount of capital is
doubled, profits […] become £20, or one-fifth
of the revenue [… ] If the capital be
quadrupled, profits become £40, or two-fifths of the
revenue of the laborers: if the capital be increased to
£500, profits would become £50, or half the
revenue of the laborers. And the wealth, the
influence, and probably to some extent, the numbers of the
capitalists in the community, would be proportionably
increased… A great increase of capital
[…] usually makes the employment of some
additional direct labor necessary. This
circumstance, however, will not prevent the steady
progress of the relative increase of the auxiliary
capital” (pp. 231-32).

The first important point in this passage is that, with
the increase in capital, the auxiliary capital increases in
comparison to the variable capital, in other words, that the
latter declines relatively in comparison with the
constant capital.

The fact that the annual returns decline in
proportion to the capital advanced if there is an increase
in that part of the auxiliary capital which consists of
fixed capital, that is, if its turnover period extends over
several years—its value only entering into the product
annually in the form of depreciation—is not a
phenomenon peculiar to agriculture, but a general one.
Although, in industry, the raw material worked up during the
year increases even more rapidly than the size of the fixed
capital. Compare, for example, the amount of raw
cotton which a spinning-jenny consumes weekly or annually
with that used up by a spinning-wheel. But suppose,
for example, that in (large-scale) tailoring the same amount
of raw material in terms of value is worked up
(although not the same physical amount, the raw material
being dearer than that used in spinning), then the annual
return in tailoring will be considerably larger than in
spinning, because a greater part of the (fixed) capital laid
out in the latter only enters into the product as annual
depreciation.

The value of the annual return in agriculture
(where what one can regard as the raw material, the seed,
does not increase in the same proportion as the other
elements of constant capital, especially fixed capital) is
naturally smaller if the capital increases as a result of an
increase in the constant capital only and not in the
variable. For the variable capital must be entirely
replaced in the product, the other [constant capital] only
insofar as it is consumed annually. If it is assumed
that the price of grain is given, when a quarter is
equal to l0s., 220 quarters are required to replace a
capital of £100 at a profit of 10 per cent, whereas
only 60 quarters (£30) are required to replace a wear
and tear amounting to £20 and a profit of
£10. A smaller absolute return yields the same
profit (as is the case in industry in similar
circumstances). Jones’s reasoning, however, contains
several fallacies.

First of all, it cannot be asserted (on the assumptions
made) that the productive powers of the soil have
increased. They have increased in comparison with the
labour employed directly, but not compared with the total
capital employed. All that can be said is that less
gross produce is necessary in order to yield the same
net produce, i.e., the same profit as before.

| Further, the
increase in the farmer’s revenue in comparison to that of
the labourers, is important in this special
sphere insofar as here the part of the total product which
constitutes
profit increases, and goes on increasing,
relatively to that part which goes to the labourers.
As a result, the wealth and influence of the farming
capitalist as compared to his labourers undoubtedly grow and
expand. But Jones seems to make the following
calculation: [£]10 on [£]100 is
1/10. £20 on £120
(i.e., £100 expended in labour and £20
depreciation) is 1/6 and the £20
is 1/5 of the sum paid out to the
workers, etc. But nothing is more fallacious than
that, generally speaking, the rate of profit can increase
while the amount of capital laid out on labour
declines. Exactly the opposite takes place.
Proportionally less surplus-value is produced, and the rate
of profit therefore falls. As regards the farmer
specifically (and also each particular enterprise taken in
isolation) the rate of profit may remain the same whether he
employs three workers or six workers with a capital of
£200.

The fact that rent is equal to surplus profit, i.e., to
the excess over and above the average profit, presupposes
not only that agriculture is formally subordinated to
capitalist production, but also that equalisation of rates
of profit takes place in the various spheres of production,
specifically also between agriculture and industry. If
this is not the case rent (like profit) may be equal to the
surplus over wages. It may even represent a
part of profit or be a deduction from wages.

## 2. Richard Jones, “An Introductory
Lecture on Political Economy etc.” [The Concept of the
“Economical Structure of Nations”. Jones’s
Confusion with regard to the “Labor Fund”]

Richard Jones, An Introductory Lecture on Political
Economy, delivered at King’s College, London,
27th February, 1833. To which is added a
Syllabus of a Course of Lectures on the Wages of Labor,
London, 1833.

[In the Introductory Lecture, Jones says: ]

“… property in the soil almost
universally rests, at one time of a people’s career, either
in the general government, or in persons deriving their
interest from it” (p. 14).

“… by economical structure of
nations, I mean those relations between the different
classes which are established in the first instance by the
institution of property in the soil, and by the distribution
of its surplus produce; afterwards modified and changed (to
a greater or less extent) by the introduction of
capitalists as agents in producing and exchanging
wealth, and in feeding and employing the labouring
population” (pp. 21-22). |

| By “labour
fund” Jones understands:

“…the aggregate amount of the
revenues consumed by the laborers, whatever be the source of
those revenues” ([Syllabus,] p. 44).

The main point (the term “labor fund”
probably comes from Malthus?) in Jones’s work is that
the whole economic structure of society revolves around the
form of labour, in other words, the form in which the
worker appropriates his means of subsistence, or that part
of his product upon which he lives. This labour fund
has various forms and capital is merely one of them,
it is a form which arises rather late in the historical
development. It is only in Richard Jones’s work that
the important differentiation—between labour that is
paid out of capital and labour paid directly out of
revenue—made by Adam Smith receives the full
elaboration of which it is capable and becomes a major key
for understanding the various economic formations of
society. And with it disappears the absurd notion
that, because in capital the worker’s revenue first takes
the form of something appropriated, alias saved, by
the capitalist, this signifies more than a formal
difference.

“Even when we travel westward and
observe the more advanced European nations […] we can
[…] trace[u]
the effects of […] the social conformation which
results from the peculiar mode of distributing the produce
of their land and labor, established in the early period
| of the existence of
agricultural nations” (p. 10) (namely a class of
agricultural labourers, secondly landlords, thirdly menials,
retainers and artisans who participate in the consumption of
the revenue of the landlords either directly or
indirectly).

Capital, that is, accumulated wealth employed
for the purpose of obtaining profit is the great agent,
the motive power which causes the changes that take
place in this economic conformation.[v]

“Let me assure you […] that
… in analysing the respective productive powers of
different nations,[w]
you will find the distinct division of wealth here pointed
out, acting a most important part in modifying the ties
which connect the different classes of the community, and in
determining their productive power” [p. 17].

“In Asia, and in part of Europe, (it
was formerly the case throughout Europe,) the
non-agricultural classes are almost wholly maintained
from the incomes of the other classes; principally from the
incomes of the landholders. If you want the labour of
an artisan, you provide him with materials; he comes to your
house, you feed and pay him his wages. After a time,
the
capitalist steps in, he provides the materials, he
advances the wages of the workman, he becomes his
employer, and he is the owner of the article
produced, which he exchanges for your
money… An intermediate class appears between
the landowners and a portion of the
non-agriculturists, upon which intermediate class,
those non-agriculturists are dependent for employment and
subsistence. The ties which formerly bound the
community together are worn out and fall to pieces; other
bonds, other principles of cohesion, connect its different
classes: new economical relations spring into
being… Not only is the[x] great body of non-agriculturists
almost wholly in[y]
the pay of capitalists, but even the labouring cultivators
of the soil […] are their servants too”
(loc. cit., pp. 18-19).

The Syllabus of a Course of Lectures on the Wages of
Labor differs from the book on rent in this: the book
examines the different forms of landed property to which
different social forms of labour correspond. In the
Syllabus, these different forms of labour are the
point of departure and both the different forms of landed
property and capital are regarded as their offspring.
The determinate social form of the worker’s labour
corresponds to the form which the conditions of
labour—that is, in particular, the land, nature, since
this relationship embraces all others—assume in
respect of the worker. But the former is in fact
merely the objective expression of the latter.

We shall see, therefore, that the different forms of the
labour fund correspond to the different ways in which the
worker confronts his own conditions of production. The
manner in which he appropriates his product (or part of it)
depends on his relations to his conditions of
production.

The “Labor Fund,” says Jones, “may be
divided […] into three […] classes.

“1st.—Revenues which are
produced by the laborers who consume them, and never belong
to any other persons.” (In this case, quite
irrespective of the particular form, the worker must
in fact be the owner of his instruments of production.)

“2nd.—Revenues belonging to
classes distinct from the laborers, and expended by those
classes in the direct maintenance of labor.

“3rd.—Capital in its
[…] proper sense […]

“These distinct branches of the Labor
Fund may all be observed in our own country; but when we
look abroad, we see those parts of that Fund, which are the
most limited here, constituting elsewhere the main sources
of subsistence to the population […] and determining
the character and position of the majority of the
people…” (pp. 45-46).

To point 1. “… the wages of laboring
cultivators, or occupying peasants…
Laboring[z]
cultivators, or peasants, may be divided into three
groups[aa]—
hereditary occupiers, proprietors, tenants.
The […] tenants may be subdivided into[bb] serfs, me
layers, cottiers; the last […] peculiar to
Ireland. Something which may be called rent, or
something which may be called profit, is often[cc] mixed up with the
revenues of peasant cultivators of all classes; but when
‘their subsistence is essentially dependent on the
reward of their manual labor’, they come within
the limits of our present inquiry”[dd] (p. 46).

“Thus, among the labouring peasants
there are:

α) “Hereditary occupiers, who are laboring
cultivators; |
[…] ancient Greece, modern Asia, more especially
India” (p. 46).

β) [peasant] “… proprietors
[…] France, Germany, America, Australia […]
state of Ancient Palestine”.

γ) “cottiers” (pp. 46-48).

The characteristic feature of these groups is that the
worker reproduces the labour fund for himself. It
is not transformed into capital. Just as the
worker directly produces the labour fund, so he appropriates
it directly, although his surplus labour may be appropriated
either wholly or in part by him himself or may be
appropriated entirely by other classes, depending on the
particular form which his relation to his conditions of
production assumes. It is entirely due to economic
prejudice that Jones describes this category as
wage-labourers. Nothing which characterises
wage-labourers exists amongst them. It is a pretty
bourgeois economic fancy that, because that part of the
product which the worker appropriates to himself under
capitalism appears as wages, the part of his product
which the worker himself consumes must be wages.

With regard to point 2. “The laborers so maintained
are now limited in England to[ee] menial servants, soldiers
[…] sailors, and a few artizans working on their
own account, and paid out of the incomes of their
employers. Over a considerable portion of the
earth this branch of the General Labor Fund maintains nearly
the whole of the non-agricultural laborers
[… ] Former prevalence of this Fund in
England. Warwick the king-maker. The English
gentry. Present prevalence in the East.
Mechanics, menials. Large bodies of troops so
maintained. Consequences of the concentration of this
Fund throughout Asia in the hands of the sovereign.
Sudden rise of cities; sudden desertion. Samarcand;
Candahar, and others” (pp. 48-49).

Jones overlooks two main forms: the Asiatic communal
system with its unity of agriculture and industry. And
secondly, the urban craft guild system of the Middle Ages,
[which] also [existed] partially in the Ancient World.

With regard to point 3. Capital “should
never be confounded with the General Labor Fund of
the world—of which a large proportion consists of
[…] revenues [… ] All branches of a
nation’s revenues … contribute to the accumulations
by which capital is formed. They contribute in
different proportions in different countries and different
stages of society. When wages and rents contribute the
most” (p. 50).

Because surplus labour is converted into capital (instead
of being exchanged directly as revenue for labour), capital
seems to appear as something saved out of
revenue. Jones considers it mainly from this point of
view. And in the progress of society the great mass of
capital does, in fact, consist of revenue reconverted in
this way. But in the capitalist mode of production the
original labour fund itself likewise appears as something
saved by the capitalist. The reproduced labour
fund does not remain in the possession of the worker as in
case 1), but appears as the property of the capitalist and
confronts the worker as the property of someone
else. And this point is not elaborated by
Jones.

What Jones has to say about the rate of profits and its
influence on accumulation in the Course [of Lectures]
is rather inadequate:

“All other things being equal,
the power of a nation to save from its profits varies with
the rate of profits: is great when they are high,
less when low; but as the rate of profits decline, all
other things do not remain equal. The
quantities of capital employed relatively to the numbers
of the population may increase”
[p. 50].

<What Jones does not understand is how, as a result
of the “may” increase, the rate of
profits sinks because “the quantities of
capital employed relatively to the numbers of the
population have increased”. But he
approaches close to the correct view.>

“Inducements and facilities to
accumulate may increase… a low rate of
profits is ordinarily accompanied by a rapid rate of
accumulation, relatively to the numbers of the people,
as in England, and a high rate of profit by a slower
rate of accumulation, relatively to the numbers of
[…] people, | as
in Poland, Russia, India, etc…”
(pp. 50-51).

Where the rate of profit is high (apart from cases where,
as in North America, there is capitalist production on the
one hand and, on the other hand, the value of all
agricultural produce is low) it is generally due to
the fact that capital consists
mainly of variable capital, that is, direct labour
predominates. Assume a capital of 100, of which
1/5 is variable capital. And
assume further that the surplus labour amounts to a third of
a working-day. In this case, profit would amount to 10
per cent. Assume [on the other hand] that
4/5 of the capital consists of
variable capital and that surplus labour amounts to
1/6 of the working-day. In this
case, profit would amount to 16 per cent.

“Error of the doctrine, that
whenever, in the progress of nations, the rate of
profit declines, the means of providing subsistence for
an increasing population must be becoming less.
Foundations of this error: 1st. A mistaken notion, that
accumulation from profits must be slow where the rate of
profits is low, and rapid where it is high. 2d. A
mistaken belief that profits are the only source of
accumulation. 3d. A mistaken belief that all the
laborers of the earth subsist on accumulations and
savings from revenue, and never on revenue
itself” (p. 51).

[Jones speaks of]

“Alterations which take place in the
economical structure of nations when capital assumes the
task of advancing the wages of labour”. |

| Richard Jones sums
up correctly in the following passage: |

“The amount of capital devoted to
the maintenance of labour may vary, independently of any
changes in the whole amount of capital.” (This
proposition is important.) “Great fluctuations
in the amount of employment and great suffering […]
may sometimes be observed to become more frequent as
capital itself becomes more plentiful”
(p. 52). |

| The total amount of
capital may remain the same and a change
(decline especially) may take place in the variable
capital. A change in the proportion between the two
constituent parts of capital does not necessarily involve a
change in the size of the total [capital].

An increase in the total capital, on the other hand, may
be accompanied not only by a relative, but by an absolute
diminution of variable capital and is always connected with
violent fluctuations in the variable capital and
consequently with “fluctuations in the amount of
employment”. |

[Later on in the Syllabus, Jones writes: ]

| “Periods of
gradual transition of the laborers from dependence on one
fund to dependence on another… Transfer of the
laboring cultivators to the pay of capitalists…
Transfer of non-agricultural classes to the employ of
capitalists”… (pp. 52-53).

What Jones calls “transfer” here, is what I
call “primitive accumulation”. This is
merely a formal difference. It is also
in contradiction to the absurd notion of
“savings”.

Slavery: “Slaves may be divided into
pastoral—predial—domestic— slaves of a
mixed character, between predial and domestic…
We find them[ff] as
cultivating peasants;—as menials or artisans,
maintained from the incomes of the rich;—as
laborers maintained from capital” (p. 59).

But so long as slavery is predominant, the capital
relationship can only be sporadic and subordinate, never
dominant.

## 3. Richard Jones, “Text-book of Lectures on the
Political Economy of Nations”, Hertford, 1852

### [a) Jones’s Views Of Capital and the Problem of
Productive and Unproductive Labour]

[Jones writes in the Text-book of Lectures on the
Political Economy of Nations:]

“The productiveness of the industry
of nations really depends […] on two
circumstances. First, on the fertility or
barrenness of the original sources”(land and
water) “of the wealth they produce. Secondly, on
the efficiency of the labour they apply in dealing
with those sources, or fashioning the commodities they
obtained from them” (p. 4).

“… the efficiency of human
labor will depend—

“1st.—On the continuity
with which it is exerted.

“2ndly.—On the knowledge
and skill with which it is applied, to effect the
purpose of the producer.

“3rdly.—On the mechanical
power by which it is aided…” (p. 6).

“The power exerted by human
labourers in producing wealth … may be increased
[… ]

“1st.—By enlisting in their
service, motive forces greater than their
own…

“2ndly.—By employing any amount
or kind of motive |
forces at their command, with increased mechanical
advantage [… ] Let a steam-engine with a
motive force of 40 horses be attached to a loaded train on a
common turnpike road [and it will make but little way: level
the road perfectly… and it will move at a rapid
pace[gg]]”
(p. 8.)

“The best form of a plough […]
will do as much work, and as well, with two horses, as the
worst with four” (p. 9).

“The steam-engine is not a mere
tool, it gives additional motive force, not
merely the means of using forces the labourer already
possesses, with a greater mechanical advantage”
(p. 10, note).

This is, therefore, according to Jones, the difference
between a tool and machinery. The former provides the
worker with means for employing the power he possesses to a
greater mechanical advantage, the latter provides an
increase of motive force. (?)

“Capital … consists of
wealth saved from revenue, and used with a view to
profit” (p. 16). “The possible sources
of capital […] are obviously, all the revenues of all
the individuals composing a community, from which revenues
it is possible that any saving can be made. The
particular classes of income which yield the most abundantly
to the progress of national capital, change at different
stages of their progress, and are therefore found
entirely different in nations occupying different
positions in that progress” (p. 16).

Profit is therefore by no means the only source from
which capital is formed or augmented: it is even an
unimportant source of accumulation, compared with wages and
rents, in the earlier stages of society[hh] (p. 20).

“… when a considerable advance
in the powers of national industry has actually taken place,
profits rise into comparative importance as a source of
accumulation” (p. 21).

According to this, capital is a part of the wealth which
constitutes revenue, the part which is expended not as
revenue but for the purpose of producing profit.
Profit is already a form of surplus-value which specifically
presupposes capital. If the capitalist mode of
production, i.e., capital, is postulated, then the
explanation is correct; in other words, if one postulates
what has to be explained. But here Jones means all
revenue spent, not as revenue, but with the aim of
enrichment, that is, productively.

Two aspects are, however, important in this context.

First: To a certain extent accumulation of wealth
takes place in all stages of economic development, that is,
partly an expansion of the scale of production and partly,
the accumulation of treasure, etc. As long as wages
and rents predominate—that is, according to what was
said earlier, as long as the greater part of the surplus
labour and surplus product which does not accrue to the
worker himself, goes to the landowner (the State in Asia)
and, on the other hand, the worker reproduces his labour
fund himself, i.e., he not only produces his own wages
himself, but pays them to himself, usually, moreover,
(almost always in that state of society) he is also able to
appropriate at least a part of his surplus labour and his
surplus product—in this state of society, wages and
rent are the main sources of accumulation as well. (In
these circumstances profit is restricted to merchants,
etc.) Only when the capitalist mode of production has
become predominant, when it does not merely exist
sporadically, but has subordinated to itself the mode of
production of society; when in fact the capitalist directly
appropriates the whole surplus labour and surplus product in
the first instance,
although he has to hand over portions of it to the
landowner, etc.—only then does profit become the
principal source of capital, of accumulation, of wealth
saved from revenue and used with a view to profit.
This at the same time presupposes (as is implicit in the
domination of the capitalist mode of production) that
“a considerable advance in the power of national
industry has actually taken place”.

Jones thus answers those asses who imagine that no
accumulation can take place without the profit yielded by
capital or who justify profit by saying that the capitalist
makes a sacrifice in order to save from his revenue
for productive purposes, by pointing out that in this
particular (capitalist) mode of production the function
“of accumulating” devolves principally on the
capitalist whereas, in previous modes of production, it was
the labourer himself and, in part, the landlord who played
the chief roles in this process and profit played hardly any
part in it.

Naturally the function [of accumulating] always devolves
on those, 1) who pocket the surplus-value and, 2) among
those who pocket the surplus-value in particular on the
person who also acts as agent in the production process
itself. By saying, therefore, | that profit is justified
by the fact that the capitalist “saves”
his capital out of profit and that he fulfils the function
of accumulating, one merely says that the capitalist mode of
production is justified because it exists—this,
however, applies equally to the modes of production which
preceded it and those which will succeed it. If one
says that otherwise accumulation would be impossible, then
one forgets that this particular method of accumulation
through the agency of the capitalist has come into existence
at a certain historical stage and is moving towards the
historical date when it will cease to exist.

Secondly, once so much accumulated wealth has been
concentrated in the hands of capitalists per fas et
nefas[ii]
that they can dominate production, then the greater part of
existing capital—after a certain lapse of
time—can be considered as having been derived only
from profit (revenue), that is, from capitalised
surplus-value.

A point which Jones does not sufficiently emphasise, and
which he really only implies tacitly, is this: If the
labouring producer pays himself his own wages and if his
product does not at first assume the “shape” of
other people’s revenue from
which savings are made and then paid back by these people
to the labourer, it is necessary that the labourer be in
possession of his conditions of production (as property
owner, or tenant, or hereditary occupier, etc.). In
order that his wages and consequently the labour fund can
confront him as alien capital, these conditions of
production must have been lost to him and have assumed the
shape of alien property. Only after his conditions of
production together with his labour fund have been wrested
from him and when, as capital, they are rendered
independent in relation to him, does the further process
begin, which is not concerned with the mere reproduction of
these original conditions of production, but with their
further development so that both the conditions of
production and the labour fund confront the labourer as
something “saved” from other people’s revenue in
order to be converted into capital. By losing
possession of his conditions of production, and hence, of
his labour fund, the labourer also loses the function of
accumulating, and every addition he makes to wealth appears
in the shape of other people’s revenue which must first be
“saved” by these people, that is to say, it must
not be spent as revenue, if it is to perform the functions
of capital and labour fund for the labourer.

Since Jones himself describes a state of affairs in which
things have not yet reached this stage and where unity
prevails, he certainly should have described this
“separation” as the real generation
process of capital. Once this separation exists, this
process does indeed take place and it continues and extends,
since the surplus labour of the worker always confronts him
as the revenue of others, through the saving of which alone
wealth can be accumulated and the scale of production
extended.

The reconversion of revenue into capital. If
capital (i.e., the separation of the conditions of
production from the labourer) is the source of profit (i.e.,
of the fact that surplus labour appears as the revenue of
capital and not of labour) then profit becomes the source of
capital, of new capital formation, i.e., of the fact that
the additional conditions of production confront the worker
as capital, as a means for maintaining him as a worker and
of appropriating his surplus labour anew. The original
unity between the worker and the conditions of production
<abstracting from slavery, where the labourer himself
belongs to the objective conditions of production> has
two main forms: the Asiatic communal system (primitive
communism) and small-scale agriculture based on the family
(and linked
with domestic industry) in one form or another.
Both are embryonic forms and both are equally unfitted to
develop labour as social labour and the productive
power of social labour. Hence the necessity for the
separation, for the rupture, for the antithesis of labour
and property (by which property in the conditions of
production is to be understood). The most extreme form
of this rupture, and the one in which the productive forces
of social labour are also most powerfully developed, is
capital. The original unity can be reestablished only
on the material foundation which capital creates and by
means of the revolutions which, in the process of this
creation, the working class and the whole society
undergo.

Another point which Jones does not sufficiently emphasise
is this:

Revenue which is exchanged as such against
labour—if it is not the revenue of a labourer who
works himself and employs an additional workman—is the
revenue of the landowner, itself derived from the rent which
the labourer pays him, and which the landlord does not
entirely consume in kind, either by himself or together with
his menials and retainers, but a part of which he uses to
buy the products or services of additional workmen and so
on. This always presupposes the first
relationship.

| <In the same
way as part of the profit is classified as interest, even if
the industrial capitalist employs only his own capital,
because this form [of revenue] has a separate mode of
existence, so, given the capitalist mode of production, even
if the labourer—who does not employ any other
labourers—owns his means of production, they are
regarded as capital and the part of his own labour realised
by him over and above the ordinary wage appears to be profit
yielded by his capital. He himself is then divided up
into different economic categories. As his own
workman, he gets his wages, and as capitalist, he gets his
profits. This observation belongs to the chapter
“Revenue and Its Sources”.>

“… there is a difference
between the influence, on the productive powers of nations,
of that wealth which has been saved, and is
dispensed as wages with a view to profit; and of that
wealth which is advanced out of revenue for the support of
labour. With a view to this distinction, I use the
word capital to denote that portion of wealth
exclusively which has been saved from revenue, and is used
with a view to profit” (op. cit., pp. 36-37).

“We might … comprise, under
the […] term, capital, all the wealth devoted to
the maintenance of labour, whether it has gone through
any previous process of saving or not…
we must, then, in tracing the position of the labouring
classes and of their paymasters in different nations and
under
different circumstances, distinguish between
capital which has been saved, and capital which
has undergone no process of accumulation; between, in
short, capital which is revenue, and capital which is not
revenue…”(p. 36). “… in
every country[jj] of
the Old World, except England and Holland, the wages
of the agriculturists are not advanced out of funds which
have been saved and accumulated from revenues, but are
produced by the labourers themselves, and never
exist in any other shape than that of a stock for their
own immediate consumption” (p. 37).

What distinguishes Jones from the other economists
(except perhaps Sismondi) is that he emphasises that the
essential feature of capital is its socially determined
form, and that he reduces the whole difference between the
capitalist and other modes of production to this distinct
form. It is that labour is directly converted into
capital and that, on the other hand, this capital buys
labour not for the sake of its use-value, but in order to
increase its own value, to create surplus-value (i.e., a
larger amount of exchange-value) and to use it “with a
view to profit”.

This shows, however, at the same time that the saving of
revenue in order to convert it into capital and
“accumulation” are distinguished from other
methods only through the form in which “wealth
is devoted to the maintenance of labour.” The
agricultural labourers in England and Holland who receive
wages which are “advanced” by capital produce
“their wages themselves” just like the French
peasant or the self-supporting Russian serf. If the
production process is considered in its continuity, then the
capitalist advances the labourer as “wages”
today only a part of the product which the labourer
produced yesterday. Thus the difference [between the
capitalist and other modes of production] does not lie in
the fact that, in one case, the labourer produces his own
wages and in the other case he does not produce them.
The difference lies in the fact that [in one case] his
product appears as wages; that in this case, the
worker’s product (i.e., the part of the product produced by
the worker which makes up the labour fund) 1) appears as the
revenue of others; 2) that then, however, it is not
expended as revenue, and not spent on labour by means of
which revenue is directly consumed, but, 3) that it
confronts the worker as capital which returns to him
this portion of the product, in exchange not merely for an
equivalent but for more labour than the product he receives
contains. Thus his product appears in the first place
as revenue of others, secondly, as something which is
“saved” from revenue in
order to be employed in the purchase of labour with a view
to profit; in other words it is employed as
capital.

And this process in which his own product confronts him
as capital, is what is described as the labour fund,
which “has gone through a previous process of
saving”, which “…has undergone a process
of accumulation” prior to being converted into the
labourer’s means of subsistence, “…exists in
another shape” (here it is expressly stated
that merely a change of form takes place) “than
that of a stock for their” (the labourers’)
“immediate consumption”. The whole
difference lies in the transformation which the
labour fund produced by the worker undergoes before it comes
back to him in the form of wages. In the case of
peasants or independent artisans, it therefore never assumes
the form of “wages”.

| “Saving”
and “accumulation”—as far as the labour
fund is concerned—are mere names here for the
transformations which the worker’s product undergoes.
The labourer working on his own account consumes his product
just like the wage-labourer, or rather, the latter does so
just like the former. But in the case of the
wage-earner, his product appears to be something
saved or accumulated from the revenue of someone
else, i.e., from the revenue of the capitalist. In
fact, however, it is this process that makes it possible for
the capitalist to “save” or
“accumulate” the labourer’s surplus labour for
his own purposes, and this is the reason why Jones places
such great emphasis on the fact that, in non-capitalist
modes of production, accumulation does not arise from
profit, but from wages, in other words, from the income of
the self-supporting cultivator or the artisan who exchanges
his labour directly for revenue (otherwise how could the
middle class have arisen out of the latter?) and from the
rent of the landlord. But for the labour fund to
undergo these transformations, the conditions of production
must confront the labourer as capital, which is not the case
in the other modes of production. The expansion of
wealth does not appear to be due to the labourer in
the latter case [the capitalist mode of production ], but to
the saving of profit, the reconversion of surplus-value into
capital, in the same way as the labour fund itself (before
its expansion as a result of new accumulation) confronts the
labourer as capital.

“Saving”, taken literally, only
makes sense with regard to the capitalist who capitalises
his revenue, in contrast to the
capitalist who consumes his revenue, i.e., spends it as
revenue, but it is meaningless when applied to relations
between capitalist and labourer.

Two cardinal facts about capitalist production:

[First,] concentration of the means of production in a
few hands so that they no longer appear as the immediate
property of the individual labourer, but as factors of
social production, even though in the first instance they
appear as the property of the non-working capitalists, who
are their trustees in bourgeois society and enjoy all the
fruits of this trusteeship.

Second: Organisation of labour itself as social labour
brought about by co-operation, division of labour and the
linking of labour with the results of social domination over
natural forces.

In both these ways, capitalist production eliminates
private property and private labour, even though as yet in
antagonistic forms.

The main difference between productive and unproductive
labour noted by Adam Smith, is that the former is exchanged
directly for capital and the latter for revenue—and
the full meaning of this difference emerges first in
Jones. His work shows that the first kind of labour is
characteristic of the capitalist mode of production, and the
second—where it is predominant—belongs to
earlier modes of production, and, where it merely plays a
subordinate role, is restricted (or ought to be restricted)
to spheres which are not directly concerned with the
production of wealth.

“… capital is the
instrument through which all the causes which augment the
efficiency of human labour, and the productive powers of
nations, are brought into play… Capital is the
stored-up results of past labour used to produce some
effect in some part of the task of producing wealth”
(p. 35).

(In the note on page 35, he says:

“It will be convenient, and it is
reasonable, to consider the act of production as incomplete
till the commodity produced has been placed in the hands of
the person who is to consume it; all done previously has
that point in view. The grocer’s horse and cart which
brings up our tea from Hertford to the College, is as
essential to our possession of it for the purposes of
consumption, as the labour of the Chinese who picked and
dried the leaves.”)

“But … this capital
… does not perform in every community all the
tasks it is capable of performing. It takes them
up gradually and successively in all cases; and it is a
remarkable and an all-important fact, that the one special
function, the performance of which is essential
to the serious advance of the power of capital in all its
other functions, is exactly that which, in the case of
the greater portion of the labourers of mankind, capital
has never yet fulfilled at all” (pp. 35-36).

“I allude to the advance of the
wages of labour” (p. 36).

“The wages of labour are advanced by
capitalists in the case of less than one-fourth of the
labourers of the earth [….] this fact … of
vital importance in accounting for the comparative progress
of nations” (loc. cit.)

| “Capital, or
accumulated stock, after performing various other functions
in the production of wealth, only takes up late that of
advancing to the labourer his wages”
(p. 79).

In the last sentence on page 79, capital is indeed
described as a “relation”, not merely as
“accumulated stock” but as a quite definite
relation of production. The “stock” cannot
“take up the function of advancing wages”.
Jones, moreover, emphasises that it is the basic form of
capital—the form which gives the whole process of
social production its distinctive character, dominates it,
leads to a quite new development of the productive forces of
social labour, and revolutionises all social and political
relationships—that confronts wage-labour, and pays
wages. He emphasises that before capital performs this
function, which is of decisive importance, it fulfils other
functions and, appears in other, subordinate and
historically earlier forms, but that its “power in all
its functions” only develops fully when it steps forth
as industrial capital. On the other hand, in the third
lecture “On the gradual manner in which capital
or capitalists” <there’s the rub in this
“or”; accumulated stock becomes capital
only because of this personification> “undertake
successive functions in the production of wealth”,
Jones does not indicate what the previous functions
are. They can indeed only be those of capital engaged
in commerce or banking. But although Jones comes so
close to the correct concept and even expresses it in a
certain fashion, nevertheless, being an economist, he is so
enmeshed in bourgeois fetishism that not even the devil
could be certain that he does not mean that
“accumulated stock” as such, can perform
different functions.

The sentence:

“Capital, or accumulated
stock, after performing various other functions in the
production of wealth, only takes up late that of
advancing to the labourer his wages”
(p. 79)

is the most complete expression of the contradiction; on
the one hand, it expresses a correct historical conception
of capital, but, on the other hand, a shadow is cast over it
by the narrow-minded notion of the economist that
“stock” as such is capital. Hence
“the accumulated stock” becomes a person who
“performs the function of advancing wages” to
men. Jones is still rooted in economic prejudice when
he solves [the problem], a solution
becomes necessary as soon as the capitalist mode of
production is regarded as a determinate historical category
and no longer as an eternal natural relation of
production.

One can see what a great leap forward there was from
Ramsay to Jones. Ramsay regards precisely that
function of capital which makes it capital—the
advancing of wages—as accidental, due only to the
poverty of the people, and irrelevant to the production
process as such. In this narrow circumscribed manner,
Ramsay denies the necessity for the capitalist mode
of production. Jones, on the other hand, <strange
that they were both priests of the Established Church.
The ministers of the English Church seem to think more than
their continental brethren> demonstrates that it is
precisely this function that makes capital capital and gives
rise to the most characteristic features of the capitalist
mode of production. He shows how this form occurs only
at a certain level of development of the productive forces
and that it then creates an entirely new material
basis. Consequently, however, his comprehension of the
fact that this form “can be superseded” and of
the merely transitory historical necessity for this form, is
quite different from that of Ramsay and more profound.
He by no means regards capitalist relations as eternal.

“… a state of things may
hereafter exist, and parts of the world may be
approaching to it, under which the labourers and the
owners of accumulated stock, may be identical; but in the
progress of nations … this has never yet been
the case, and to trace and understand that progress,
we must observe the labourers gradually transferred from the
hands of a body of customers, who pay them out of their
revenues, to those of a body of employers, who pay them by
advances of capital out of the returns to which the owners
aim at realizing a distinct revenue. This may not be
as desirable a state of things as that in which labourers
and capitalists are identified, but we must still
accept it as constituting a stage in the march of
industry, which has hitherto marked the progress of
advancing nations. At that stage the people of Asia
have not yet arrived” (p. 73).

| Here Jones states
quite explicitly that capital and the capitalist mode of
production are to be “accepted” merely as a
transitional phase in the development of social production,
a phase which, if one considers the development of the
productive forces of social labour, constitutes a gigantic
advance on all preceding forms, but which is by no means the
end result; on the contrary, the necessity of its
destruction is contained in the antagonism between
“owners of accumulated wealth” and the
“actual labourers”.

Jones was a professor of political economy at Haileybury
and the successor to Malthus. One can see here
how the real science of political economy ends by regarding
the bourgeois production relations as merely
historical ones, leading to higher relations in which
the antagonism on which they are based is resolved. By
analysing them political economy breaks down the apparently
mutually independent forms in which wealth appears.
This analysis (even in Ricardo’s works) goes so far
that:

1) The independent, material form of wealth
disappears and wealth is shown to be simply the activity
of men. Everything which is not the result of human
activity, of labour, is nature and, as such, is not social
wealth. The phantom of the world of goods fades away
and it is seen to be simply a continually disappearing and
continually reproduced objectivisation of human
labour. All solid material wealth is only transitory
materialisation of social labour, crystallisation of the
production process whose measure is time, the measure of a
movement itself.

2) The manifold forms in which the various component
parts of wealth are distributed amongst different sections
of society lose their apparent independence. Interest
is merely a part of profit, rent is merely surplus
profit. Both are consequently merged in profit, which
itself can be reduced to surplus-value, that is, to
unpaid labour. The value of the commodity itself,
however, can only be reduced to labour-time. The
Ricardian school reaches the point where it rejects one of
the forms of appropriation of this
surplus-value—landed property (rent)—as useless,
insofar as it is pocketed by private individuals. It
rejects the idea that the landowner can play a part in
capitalist production. The antithesis is thus reduced
to that between capitalist and wage-labourer. This
relationship, however, is regarded by the Ricardian school
as given, as a natural law, on which the production process
itself is based. The later economists go one step
further and, like Jones, admit only the historical
justification for this relationship. But from the
moment that the bourgeois mode of production and the
conditions of production and distribution which correspond
to it are recognised as historical, the delusion of
regarding them as natural laws of production vanishes and
the prospect opens up of a new society, [a new] economic
social formation, to which capitalism is only the
transition. |

| We still have to
consider a number of things in Jones’s work.

1) In what way, in particular, the capitalist mode of
production—the advancing of wages by capital—alters the
form and the productive forces.

2) His observations regarding accumulation and the rate
of profit.

But, first of all, another point has to be
emphasised.

| “He[kk] has been but an
agent to give the labourers the benefit of the expenditure
of the revenues of the surrounding customers, in a new form
and under new circumstances…” (p. 79).

This refers to the non-agricultural labourers, whose
earnings previously came direct from the revenue of the
landowners, etc. Whereas previously they exchanged
their labour (or the product of their labour) directly for
that revenue, the capitalist exchanges the product of their
labour—collected and concentrated in his
hands—for that revenue, in other words, revenue is
transformed into, exchanged for capital, in that it
constitutes the returns on capital. Instead of being
direct returns for labour, it constitutes direct returns for
the capital that employs the labourers. |

| After describing
capital as a specific relation of production, the
essence of which is that accumulated wealth takes over the
function of advancing wages, and the labour fund itself
appears as “wealth saved from revenue and used with a
view to profit”, Jones outlines the changes in the
development of the productive forces characteristic of this
mode of production. How the (economic) relations and
consequently the social, moral and political state of
nations changes with the change in the material
powers of production, is very well explained.

“As communities change their
powers of production, they necessarily change their
habits too” (p. 48). “During their
progress in advance, all the different classes of the
community find that they are connected with other classes
by new relations, are assuming new positions,
and are surrounded by new moral and social dangers, and
new conditions of social and political
excellence” (loc. cit.).

He describes the influence of the capitalist form of
production on the development of the productive forces in
the following way. But before coming to this, a few
passages connected with those already quoted.

“Great political, social, moral and
intellectual changes, accompany changes in the economical
organization of communities, and the agencies and the
means, affluent or scanty, by which the tasks of industry
are carried on.
These changes necessarily exercise a commanding influence
over the different political and social elements to be found
in the populations where they take place; that influence
extends to the intellectual character, to the habits,
manners, morals, and happiness of nations”
(p. 45).

“England is the only great country
which has taken … the first step in advance
towards perfection as a producing machine; the only
country in which the population, agricultural as well as
non-agricultural, is ranged under the direction of
capitalists, and where the effects of their means and of the
peculiar functions they can alone perform, are extensively
felt, not only in the enormous growth of her wealth, but
also in all the economical relations and positions of her
population.

“Now England, I say it with regret,
but without the very slightest hesitation, is not to be
taken as a safe specimen | of the career of a people so
developing their productive forces” (pp. 48-49).

“The general labour fund
consists 1st.—Of wages which the labourers themselves
produce. 2ndly.—Of the revenues of other classes
expended in the maintenance of labour. 3rdly.—Of
capital, or of a portion of wealth saved from revenue and
employed in advancing wages with a view to profit.
Those maintained on the first division of the labour fund we
will call unhired labourers. Those on the
second, paid dependants. Those on the third,
hired workmen” (wage-labourers).
“The receipt of wages from any one of these divisions
of the labour fund determines the relations of the
labourer with the other classes of society, and so
determines sometimes directly, sometimes more or less
indirectly, the degree of continuity, skill, and power with
which the tasks of industry are carried on”
(pp. 51-52).

“The first division, self-produced
wages, maintains more than half, probably more than
two-thirds, of the labouring population of the earth.
These labourers consist everywhere of peasants who occupy
the soil and labour on it [… ] The second
division of the labour fund, revenue expended in
maintaining labour, supports by far the greater part of
the productive non-agricultural labourers of the
East. It is of some importance on the continent of
Europe; while in England, again, it comprises only a few
jobbing mechanics, the relics of a larger
body… The third division of the labour
fund, capital, is seen in England employing the great
majority of her labourers, while it maintains but a small
body of individuals in Asia: and in continental Europe,
maintains only the non-agricultural labourers; not
amounting, probably, on the whole, to a quarter of the
productive population” (p. 52).

“I have not … made any
distinction as to slave-labour… The
civil rights of labourers do not affect their
economical position. Slaves, as well as
freemen, may be observed subsisting on each branch of the
general fund” (p. 53).

Although the civil rights of the labourers do not affect
“their economical position”, their economical
position does affect their civil rights. Wage-labour
on a national scale—and consequently, the capitalist
mode of production as well—is only possible where the
workers are personally free. It is based on the
personal freedom of the workers.

Jones quite correctly reduces Smith’s productive and
nonproductive labour to its essence—capitalist and
non-capitalist
labour—by correctly applying the distinction made
by Smith between labourers paid by capital and those paid
out of revenue. Jones himself, however, apparently
understands by productive and unproductive
labour, labour which enters into the production of material
[wealth] and that which does not. This follows from
the passage quoted, where he speaks of the productive
labourers who depend on revenue expended to maintain
them [p. 52].

Further:

“The portion of the community which
is unproductive of material wealth may be
useful, or it may be useless”
(p. 42).

“… it is reasonable, to
consider the act of production as incomplete till the
commodity produced has been placed in the hands of
the person who is to consume it…” (p. 35,
note).

The distinction made between the labourers who live on
capital and those who live on revenue is concerned with the
form of labour. It expresses the whole difference
between capitalist and non-capitalist modes of
production. On the other hand, the terms productive
and unproductive labourers in the narrow sense [are
concerned with] labour which enters into the production of
commodities (production here embraces all operations
which the commodity has to undergo from the first producer
to the consumer) no matter what kind of labour is applied,
whether it is manual labour or not ([including] scientific
labour), and labour which does not enter into, and whose aim
and purpose is not, the production of commodities.
This difference must be kept in mind and the fact that all
other sorts of activity influence material production and
vice versa in no way affects the necessity for making this
distinction.

### [b) Jones on the Influence Which the Capitalist Mode
of Production Exerts on the Development of the Productive
Forces. Concerning the Conditions for the
Applicability of Additional Fixed Capital]

| We now come to the
development of the productive forces by the
capitalist mode of production.

[Jones writes:]

“It may be as well to point out here
how this fact” <of the wages being advanced by
capital> “affects their powers of
production, or the continuity, the
knowledge, and the power, with which labour is
exerted… The capitalist who pays a workman may
assist the continuity of his labour.
First, by making such continuity possible; secondly,
by superintending and enforcing it. Many
large bodies of workmen throughout the world ply the street
for customers, and depend for wages on the casual
wants of persons who happen at
the moment to require their services, or to want the
articles they can supply. The early missionaries found
this the case in China. ‘The artizans run about
the towns from morning to night to seek custom. The
greater part of Chinese workmen work in private
houses. Are clothes wanted, for example? The
tailor comes to you in the morning and goes home at
night. It is the same with all other artizans.
They are continually running about the streets in search of
work, even the smiths, who carry about their hammer and
their furnace for ordinary jobs. The barbers,
too… walk about the streets with an armchair on their
shoulders, and a basin and boiler for hot water in their
hands.’ This continues to be the case very generally
throughout the East, and partially in the Western World.

“Now these workmen cannot for any
length of time work continuously. They must ply
like a hackney coachman, and when no customer happens to
present himself they must be idle. If in the progress
of time a change takes place in their economical position,
if they become the workmen of a capitalist who advances
their wages beforehand, two things take place.
First, they can now labour continuously; and,
secondly, an agent is provided, whose office and whose
interest it will be, to see that they do labour
continuously… the capitalist […] has
resources … to wait for a customer…
Here, then, is an increased continuity in the labour
of all this class of persons. They labour daily
from morning to night, and are not interrupted by
waiting for or seeking the customer, who is ultimately to
consume the article they work on.

“But the continuity of their
labour, thus made possible, is secured and improved by
the superintendence of the capitalist. He
has advanced their wages; he is to receive the
products of their labour. It is his interest
and his privilege to see that they do not labour
interruptedly or dilatorily.

“The continuity of labour thus far
secured, the effect even of this change on the productive
power of labour is very great… the power is
doubled. Two workmen steadily employed from
morning to night, and from year’s and to year’s end,
will probably produce more than four desultory workmen, who
consume much of their time in running after customers, and
in recommencing suspended labour” (pp. 37-38).

[With regard to the passages quoted]

Firstly. The transition from labourers who
perform casual services—making clothes, coats,
trousers, etc., in the landowner’s house—to workers
employed by capital, is already very well described by
Turgot.

Second. Although continuity certainly
distinguishes capitalist labour from the form described by
Jones, it does not distinguish capitalist labour from slave
production carried on on a large scale.

Third. It is incorrect to describe the
increased amount of labour brought about by its long
duration and continuity as an increase in productive power
or the power of labour. This [occurs] only insofar as
the continuity augments the personal skill of the
labourers. By [increased] power, we understand the
greater
productivity of a given quantity of labour employed, not
any change in the quantity employed. The latter
belongs rather to the formal subordination of labour to
capital and it only evolves fully with the development of
fixed capital. (We shall deal with this soon.)

Jones correctly emphasises the fact that the capitalist
regards labour as his property, no part of which must be
wasted. With regard to labour which is maintained
directly by revenue, this is a matter of the use-value of
labour only.

| Furthermore, Jones
correctly emphasises that the continuous labour of the
non-agricultural labourers lasting from morning to night is
by no means something which arises spontaneously, but is
itself a product of economic development. In
contrast to the Asiatic form and to the Western form of
labour (prevailing in former times, partly even today) in
the countryside, the urban labour of the Middle Ages already
constitutes a great advance and serves as a preparatory
school for the capitalist mode of production, as regards the
continuity and steadiness of labour.

<About this continuity of labour:

“The capitalist, too, keeps, as it
were, an echo-office for labour; he insures
against the uncertainty of finding a vent for labour,
which uncertainty would, but for him, prevent the labour, in
many cases, from being undertaken. The trouble of
looking for a purchaser, and of going to a market, is
reduced, by his means, to a comparatively small
compass” (An Inquiry into those Principles,
respecting the Nature of Demand and the Necessity of
Consumption, lately advocated by Mr. Malthus etc.,
London, 1821, p. 102).

In the same work:

“… where the capital is in a
great degree fixed, or where it is sunk on
land… the trader is obliged to continue
to employ, much more nearly (than if there had been less
fixed capital) the same amount of circulating capital as he
did before, in order not to cease to derive any
profits from the part that is fixed” (op. cit.,
p. 73).>

“… of the state of manners to
which the dependence of the workmen on the revenues of their
customers has given birth in China, you would, perhaps, get
the most striking picture, in the Chinese Exhibition, so
long kept open by its American proprietor in London.
It is thronged with figures of artizans with their small
packs of tools, plying for customers, and idle when none
appear—painting vividly to the eye the necessary
absence, in their case, of that continuity of labour
which is one of the three great elements of its
productiveness, and indicating sufficiently, to any
well-informed observer, the absence also of fixed capital
and machinery, hardly less important elements of the
fruitfulness of industry” (Richard Jones,
[Text-book of Lectures on the Political Economy of
Nations, Hertford, 1852,] p. 73).

“In India,
where the admixture of Europeans has not changed the scene,
a like spectacle may be seen in the towns. The
artizans in rural districts are, however, provided for there
in a peculiar manner… Such handicraftsmen and
other non-agriculturists as were actually necessary in a
village were maintained by an assignment of a portion of the
joint revenues of the villagers, and throughout the country
bands of hereditary workmen existed on this fund, whose
industry supplied the simple wants and tastes which the
cultivators did not provide for by their own hands.
The position and rights of these rural artizans soon became,
like all rights in the East, hereditary. The band
found its customers in the other villagers. The
villagers were stationary and abiding, and so were their
handicraftsmen.

“The artizans of the towns
were and are in a very different position. They
received their wages from what was substantially the same
fund—surplus revenue from land—but modified in
its mode of distribution and its distributors, so as to
destroy their sedentary permanence, and produce
frequent and usually disastrous migrations…
such artizans are not confined to any location by
dependence on masses of fixed capital” (as in
Europe, for example, where cotton and other manufactories
are “fixed in districts in which water-power, or the
fuel which produces steam, are reasonably abundant, and
[…] considerable masses of wealth have been converted
into buildings and machinery” etc.).
“… the case is different when the | sole dependence of the
labourers is on the direct receipt of part of the
revenues of the persons who consume the commodities the
artizans produce… They are not confined to
the neighbourhood of any fixed capital. If their
customers change their location for long—nay,
sometimes for very short—periods, the non-agricultural
labourers must follow them, or starve”
(pp. 73-74).

“… the […] greater part
of that[ll]
fund” for the handicraftsmen in Asia is
“distributed by the State and its officers. The
capital was, necessarily, the principal centre of
distribution…” (p. 75).

“From Samarcand, southward to
Beejapoor and Seringapatam, we can trace the ruins of
vanishing capitals, of which the population left them
suddenly” (and not as in other countries [as a
result of a gradual] decline) “as soon as new
centres of distribution of the royal revenues, that is,
of the whole of the surplus revenues of the soil, were
established” (p. 76).

See Dr. Bernier, who compares the Indian towns to
army camps. This is due to the form of landed property
which exists in Asia.>

We now proceed from the continuity to the division
of labour, [the development of] knowledge, use of machinery,
etc.

[Jones writes:]

“But the effect of the change of
paymasters on the continuity of labour is by no
means yet exhausted. The different tasks of
industry may now be further divided… if
he” (the capitalist) “employ more than one man,
he can divide the task between them; he can keep each
individual steadily at work at the
portion of the common task which he performs the
best… if the capitalist be rich, and keep a
sufficient number of workmen, then the task may be
subdivided as far as it is capable of
subdivision. The continuity of labour is then
complete… Capital, by assuming the function of
advancing the wages of labour, has now, by successive steps,
perfected its continuity. It, at the same time,
increases the knowledge and skill by which
such labour is applied to produce any given effect.

“The class of capitalists are from
the first partially, and they become ultimately completely,
discharged from the necessity of manual labour.
Their interest is that the productive powers of the
labourers they employ should be the greatest
possible. On promoting that power their attention
is fixed, and almost exclusively fixed. More
thought is brought to bear on the best means of effecting
all the purposes of human industry; knowledge
extends, multiplies its fields of action, and assists
industry in almost every branch…

“But further still, as to
mechanical power. Capital employed not to
pay, but to assist labour, we will call
auxiliary capital.”

<He therefore means by this term the part of
constant capital which is not made up of raw
material.>

“The national mass of auxiliary
capital may, certain conditions being fulfilled, increase
indefinitely: the number of labourers remaining the
same. At every step of such increase, there is an
increase in the third element of the efficiency of human
labour, namely, its mechanical power…
auxiliary capital thus increases its mass relatively to
the population… What conditions, then, must
be fulfilled that the mass of auxiliary capital employed to
assist them” <the workers employed by the
capitalist> “may increase?

“There must concur three things
—

“1st. The means of saving the
additional mass of capital.

“2ndly. The will to save it.

“3rdly. Some invention by which it
may be made possible, through the use of such capital, that
the productive powers of labour may be increased; and
increased to an extent which will make it, in addition to
the wealth it before produced, reproduce the additional
auxiliary capital used, as fast as destroyed, and also some
profit on it…

“When the full amount of auxiliary
capital, that in the actual state of knowledge can be used
profitably, has already been supplied … an
increased range of knowledge can alone point out the
means of employing more. Further, such employment is
[…] only practicable if the means discovered
increase the power of labour sufficiently to reproduce
the additional capital in the time it wastes away.
If this be not the case, the capitalist must lose his
wealth. But the increased efficiency of the labourers
must, besides this, produce some profit, or he would
have no motive for employing his capital in production at
all…, all the while, that by employing fresh
masses of auxiliary capital these two objects can be
effected, there is no definite and final limit to the
progressive employment of such fresh masses of
capital. They may go on increasing co-extensively with
the increase of knowledge. But knowledge is
never stationary; and, as it extends itself from hour to
hour in all directions, from hour to hour some new
implement, some new machine, some new motive force may
present itself, which will enable the community profitably
to add something to the mass of auxiliary capital by which
it assists its industry,
and so increase the difference between the
productiveness of its labour and that of poorer and less
skilful nations” (loc. cit., pp. 38-41).

| First, with regard
to the statement that the inventions, or appliances or
contrivances must be of such a kind, “that the
productive powers of labour may be increased; and increased
to an extent which will make it,[mm] in addition to the wealth it
before produced, reproduce the additional auxiliary capital
used, as fast as it is destroyed…”, or
“reproduce the additional capital in the time it
wastes away”. This means nothing more than
that the wear and tear is replaced as it takes place, or,
that on the average the additional capital is replaced in
the same period during which it is consumed. A portion
of the value of the product, or, what amounts to the same
thing, a portion of the product, must replace the consumed
auxiliary capital, and, at such a rate that if, in a given
period of time, it is wholly consumed, it is reproduced
wholly, or that a new capital of the same kind takes the
place of the capital used up. But what is the
condition for this? The productivity of labour must
rise to such an extent through the application of the
additional auxiliary capital that a part of the product can
be deducted to replace this component part either in kind or
by exchange.

The reproduction of the auxiliary capital takes place if
the productivity is so great, in other words, if the
increased amount of output produced during the working-day
of the same length is such that a unit of a particular
commodity is cheaper than a unit produced by the
former method, although the aggregate price of the total
output covers (for example) the annual depreciation of
the machinery, that is, the amount of depreciation
calculated per unit of the commodity is insignificant.
If the part which replaces the depreciation, and secondly
the part which replaces the value of raw material, are
deducted from the total product, then there remains a part
which pays for the wages and a part which covers the profit
and even yields more surplus-value although the price [per
unit] remains the same as it was previously.

An increase in the product could take place
without fulfilling this condition. If, for example,
the numbers of pounds of twist were to increase tenfold
(instead of a hundredfold, etc.) and if the value of the
wear and tear of the machinery which has to be
added to the price were to drop from one-sixth to
one-tenth, then the twist spun by machinery would be dearer
than that produced by spindle. If an additional
£100 of capital in the form of guano were used in
agriculture and if this guano had to be replaced in a year,
and if the value of a quarter (produced by the old method)
were £2, then 50 additional quarters would have to be
produced merely to replace the depreciation. And
without this the guano could not be used (profit is here
disregarded).

Jones’s remark that the additional capital must be
“reproduced” (of course from the sale of the
product or in kind), “in the time it wastes
away” simply means that the commodity must replace the
wear and tear embodied in it. In order to begin
production anew, all the value elements contained in the
commodity must be replaced by the time when its reproduction
is to begin again. In agriculture, this reproduction
time is given as a result of natural conditions, and the
period of time in which the wear and tear must be replaced
is given, in exactly the same way as the time in which all
the other value elements of grain, for example, have to be
replaced.

In order that the reproduction process can begin, i.e.,
that the renewal of the real process of production can take
place, the commodity must pass through the process of
circulation, that is, the commodity must be sold (insofar as
it is not replaced in kind, like the seeds) and the money
for which it is sold converted into elements of production
again. In the case of grain and other agricultural
products, there are certain specific periods for this
reproduction dictated by the seasons, that is, extreme
limits, definite limits are set to the duration of
the process of circulation.

Second: Such definite limits to the circulation process
arise in general from the nature of commodities as
use-values. All commodities deteriorate sooner or
later, although the extreme limit of their existence
varies. If they are not consumed by people (either in
the production process or individually), then they are
consumed by elemental natural forces. They decay, and
finally they disintegrate. If their use-value is
destroyed, then their exchange-value goes down the drain and
that puts an end to their reproduction. The final
limits of their circulation time are therefore determined by
the natural times and periods of reproduction proper to them
as use-values.

Third: In order that the production process of the
commodities may be continuous, | that is, so that one part of
capital may be continuously in the production process and
the other continuously
in the process of circulation, very varied
divisions of capital must take place, in accordance with the
natural limits of the periods of reproduction, or the limits
[of existence] of the different use-values, or the different
spheres of operation of capital.

Fourth: This applies to all the value elements of the
commodity simultaneously. But, in the case of
commodities in the production of which a great deal of fixed
capital is employed, there is, in addition to the limits
which their own use-values impose on the circulation
process, another determining factor, namely, the use-value
of fixed capital. It wastes away in a certain time
and, therefore, must be reproduced in a given period.
Let us assume, for example, that a ship lasts ten years, or
a spinning-machine twelve. The freight carried during
the ten years, or the twist sold during the twelve years,
must be sufficient for a new ship to replace the old one
after ten years and for a new spinning-machine to replace
the old one after twelve. If the fixed capital is used
up in six months, then the product must be returned from
circulation in this period.

Besides the natural mortality periods for commodities as
use-values—periods which vary greatly amongst
different use-values— and besides the requirements of
the continuity of the production process, which set even
more varied final limits to the circulation time, according
to whether the commodities must remain in the production
sphere or can remain in the circulation sphere for a longer
or shorter period of time, a third factor is thus added,
namely, the different mortality periods, and therefore
different requirements of reproduction, of the auxiliary
capital used in the production of commodities.

Jones declares that the second condition [for the use of
auxiliary capital] is the “profit” which the
auxiliary capital must produce, and this is the conditio
sine qua non for all capitalist production, regardless
of the particular form in which the capital is
employed. Nowhere does Jones explain how he conceives
the genesis of this profit. But since he merely
derives it from labour, and the profit yielded by the
auxiliary capital simply from the increased efficiency of
the labour of the workmen, it must consist of absolute or
relative surplus labour. It arises in general from the
fact that after deducting the part of the product
which either in kind or by exchange replaces the constituent
parts of capital which consist either of raw materials or of
means of production, the capitalist, firstly, pays wages
from the remainder of the product, and secondly, appropriates a part of it
as surplus product, which he either sells or consumes
in kind. (This latter is not a significant factor in
capitalist production and occurs only in a few exceptional
cases, when the capitalist directly produces necessary means
of subsistence.) This surplus product, however, just
as the other parts of the product, consists of the workers’
materialised labour, but labour which is not paid for; this
product of labour is appropriated by the capitalist without
any equivalent.

What is new in Jones’s presentation is that the increase
in the auxiliary capital over and above a certain level is
contingent on an increase of knowledge. Jones
declares that the necessary conditions are: 1) the means to
save the additional capital, 2) the will to save it, 3) some
inventions by means of which the productive power of labour
is increased sufficiently to produce the additional capital
and to produce a profit on it.

What is necessary above all is that there should be a
surplus product, either in kind or converted into
money.

In the production of cotton, for example, the planters in
America (like those in India at the present time) were able
to plant large areas, but did not have the means for
converting the raw cotton into cotton by means of cleaning
at the right time. Part of the cotton rotted in the
fields. This kind of thing was ended by the invention
of the cotton gin. Part of the product is now
converted into cotton gin. But the cotton gin does not
merely replace its own cost; it also increases the surplus
product. New markets have the same effect; for
instance, furthering the conversion of skins into money
(likewise improved transport).

Each new machine which consumes coal is a means for
converting surplus product existing in the shape of coal
into capital. The conversion of a part of the surplus
product into auxiliary capital can take place in two ways:
[firstly,] increase in the auxiliary capital already in
existence, that is, its reproduction on a larger scale;
[secondly,] discovery of new use-values or of a new use for
well-known use-values, and new inventions of machinery or of
motive power leading to the creation of new kinds of
auxiliary capital. In this context, extension of
knowledge is obviously one of the conditions for increasing
the auxiliary capital or, what amounts to the same thing,
for the conversion of surplus product or surplus money
(foreign trade is important in this connection) into
additional auxiliary capital. For example, the
telegraph opens up a whole new field for the investment of
auxiliary
capital, so do the railways, etc., and so does the
whole gutta-percha and India rubber production.

| This point about the
extension of knowledge is important.

Consequently, accumulation does not have to set new
labour in motion, it may simply direct the labour previously
employed into new channels. For example, the same
machine workshop which previously made hand-looms now makes
power-looms, and some of the weavers are taken over by
[mills using] the changed methods of production while the
others are thrown on to the street.

When a machine replaces labour, it always demands less
new labour (for its own production) than it replaces.
Perhaps the old labour is simply given a new
direction. In any case, labour is freed, which after a
greater or lesser amount of trials and tribulations may be
used in other ways. The human material for a new
sphere of production is thus provided. As far as the
direct freeing of capital is concerned, it is not the
capital which buys the machine which becomes free, because
it is invested in it. And even assuming that the
machine is cheaper than the amount of wages it replaces,
more raw material, etc., will be required. If the
workers now dismissed previously cost £500 and the new
machine costs £500 too, then the capitalist previously
had an outlay of £500 every year, whereas the machine
may perhaps last ten years, so that in fact he now has an
outlay of only £50 a year. But what at any rate
becomes free (after deducting the [expenditure for] the
larger number of workers employed in the manufacture of the
machine and in auxiliary matters connected with it, such as
coal [production], etc.) is the capital which constituted
the income of the [dismissed] workers or that employed in
the production of commodities which these workers bought
with their wages. This continues to exist as it did
previously. If workers are simply replaced as motive
power without [the machinery] itself being substantially
altered, for example, if wind or water [now operate the
machinery] where this was done previously [by workers], two
lots of capital are freed, the capital previously spent on
paying the workers and the capital for which their money
income was exchanged. This is an example used by
Ricardo.

But one part of the product previously converted into
wages is now always reproduced as auxiliary capital.

A large part of the labour previously used directly in
the production of means of subsistence is now used in the
production of
auxiliary capital. This too is in contradiction to
Adam Smith’s view, according to which the accumulation of
capital is synonymous with the employment of more
productive labour. Apart from the examples considered
above, the result may be merely a change in the application
of labour and a withdrawal of labour from the direct
production of means of subsistence and its transfer to the
production of means of production, railways, bridges,
machinery, canals and so on.

<How important the existing amount of means of
production and the existing scale of production are for
accumulation [is described in the following]:

“The astonishing expedition with
which a great cotton factory, comprehending spinning
and weaving, can be erected in Lancashire, arises from the
vast collection of patterns of every variety
from those of gigantic steam engines, water wheels, iron
girders and joists, down to the smallest member of a
throstle or loom in possession of the engineers,
mill-wrights, and machine makers. In the course of
last year Mr. Fairbairn equipped water wheels equivalent to
700 horses power and steam engines to 400 horses power from
his engineer factory alone, independent of his mill-wright
and steam-boiler establishment. Hence, whenever
capital comes forward to take advantage of improved demand
for goods, the means of fructifying it are provided with
such rapidity, that it may realise its own amount in profit,
ere an analagous factory could be set a-going in France,
Belgium or Germany” (Andrew Ure, [Philosophy of
Manufactures, London, 1835, p. 39,] Philosophie des
Manufactures etc., tome I, Paris, 1836, pp. 61-62).[nn]

| With development,
machinery becomes cheaper, partly relatively—in
comparison with its power—and partly absolutely; at
the same time, however, a massive concentration of machinery
takes place in the workshop, so that its value increases in
proportion to the living labour employed, although the value
of its individual components declines:

The driving force—the machine which produces the
motive power—becomes cheaper as the machinery which
transmits the power and the machine which the power
operates, are improved, as friction is reduced, etc.

“The facilities resulting from the
employment of self-acting tools have not only improved
the accuracy and accelerated the construction of the
machinery of a mill, but have also lowered its cost
and increased its mobility in a remarkable
degree. At present a throstle frame, made in the
past manner, may be had complete at the rate of 9s. 6d. per
spindle, and a self-actor at about 8s. per spindle including
the patent licence for the latter. The spindles in
cotton factories move with so little friction that 1
horse power drives 500 on the fine hand mule, 300 on the
self-actor mule, and 180 on the throstle; which power
includes all the subsidiary preparation machines as carding,
roving, etc., a power of three horses is adequate to drive
30 large looms with their dressing machines” (Andrew
Ure, [Philosophy of Manufactures, p.40,]
Philosophie des Manufactures etc., tome I, Paris,
1836, pp. 62-63).>

[Jones says further:]

“Over by far the greater part of the
globe, the great majority of the labouring classes do not
even receive their wages from capitalists; they either
produce them themselves, or receive them from the revenue of
their customers. The great primary step has not been
taken which secures the continuity of their labour;
they are aided by such knowledge
only, and such an amount of mechanical
power as may be found in the possession of persons
labouring with their own hands for their
subsistence. The skill and science of more
advanced countries, the giant motive forces, the accumulated
tools and machines which those forces may set in motion, are
absent from the tasks of the industry which is carried on by
such agents alone” ([Richard Jones, Text-book of
Lectures on the Political Economy of Nations,] p.
43).

<In England herself:

“Take agriculture… A
knowledge of good farming is spread thinly, and with wide
intervals, over the country. A very small part of the
agricultural population is aided by all the capital which
… might be available in this branch of the national
industry… the working in these” (great
manufactories) “is the occupation of only a small
portion of our non-agricultural labourers. In country
workshops, in the case of all handicraftsmen and mechanics
who carry on their separate task with little combination,
there the division of labour is incomplete, and its
continuity consequently imperfect… Abandon the
great towns, observe the broad surface of the country, and
you will see what a large portion of the national industry
is lagging at a long distance from perfection, in either
continuity, skill, or power” (loc. cit., p. 44).

Capitalist production leads to separation of science
from labour and at the same time to the use of science
in material production.

With regard to rent, Jones remarks correctly:

Rent, in the modern sense of the term, which depends
entirely on profit, presupposes:

“… the power of moving
capital and labour from one occupation to others[oo]
… the ‘mobility’ of capital and
labour, and in countries where agricultural capital and
labour have no such mobility … we cannot expect to
observe any of the results which we see to arise here from
that mobility exclusively” (loc. cit., p.59.)

This “mobility of capital and labour” is, in
general, the real prerequisite for establishing the
average rate of profit. It presupposes indifference to
the specific form of labour. In reality
friction takes place (at the expense of the working class)
between the one-sided character which the division of labour
and machinery impose on labour-power on the one hand,
while on the other hand, it confronts capital <which is
thereby differentiated from its undeveloped form in
craft-guild industry> merely as the living potentiality
of any type of labour in general, which is given this or
that direction according to the profit that can be made in
this or that sphere of production, so that different masses
of labour are transferable from one sphere to another.

In Asia, etc., “the body of the population consists
[…] of labouring […] peasants; systems of
cultivation imperfectly developed, | afford long intervals of
leisure. As the peasant produces his own food
[…] he also produces most of the other primary
necessities which he consumes—his dress, his
implements, his furniture, even his buildings: for there
is in his class little division of occupations. The
fashions and habits of such a people do not change;
they are handed down from parents to children; there is
nothing to alter or disturb them” (p. 97).

On the other hand, the capitalist mode of production,
whose characteristic features are mobility of capital and
labour and continual revolutions in the methods of
production, and therefore in the relations of production and
commerce and the way of life, leads to great mobility in the
habits, modes of thinking, etc., of the people.

Compare the following with the above-quoted passage about
“the intervals of leisure” and the
“imperfectly developed systems of
cultivation”.

1. Where a steam engine is employed on a farm; it forms
part of a system which employs most labourers
in agriculture, and is in all cases [associated] with a
reduction [in the number] of horses[pp] (“On the Forces used in
Agriculture”. A Paper read by Mr. John C. Morton
at the Society of Arts on December 7, 1859).

2. “… the difference of time required
to complete the products of agriculture, and of other
species of labour,” is “the main cause of the
great dependence of the agriculturists. They cannot
bring their commodities to market
in less time than a year. For that whole period
they are obliged to borrow of the shoemaker, the tailor, the
smith, the wheelwright, and the various other labourers,
whose products they cannot dispense with, but which[qq] are completed in a
few days or weeks. Owing to this natural circumstance,
and owing to the more rapid increase of the wealth produced
by other labour than that of agriculture, the monopolizers
of all the land, though they have also monopolized
legislation, have not been able to save[rr] themselves and their servants, the
farmers, from becoming the most dependent class of men in
the community” (Thomas Hodgskin, Popular Political
Economy, London, 1827, p. 147, note).

The capitalist differs from capital in that he must live,
and therefore must consume part of the surplus-value as
revenue, daily and hourly. Thus, the longer the period
of production before the capitalist can bring his commodity
to market, or the longer the period of time before he
receives the proceeds from the sale of his commodities, the
longer he must live either on credit during the intervening
time—a matter we are not discussing here—or the
larger must be the stock of money in his possession which he
can expend as revenue. He must advance his own
revenue for a longer period. His capital must be
larger. He is obliged to leave a part of it always
unused, as a consumption fund.

<In small-scale farming, therefore, domestic
industry is combined with agriculture; supplies for the
year, etc.>

### [c) Jones on Accumulation and Rate of Profit.
On the Source of Surplus-value]

We now come to Jones’s teaching on
accumulation. His original contribution so far
has been that it is by no means necessary for accumulation
to arise from profit; and secondly, that the accumulation
of auxiliary capital depends upon the advance of
knowledge. He limits the latter to the discovery
of new mechanical appliances, motive forces, etc. But
it is true in general. For example, if corn is used as
raw material in the preparation of spirits, then a new
source of accumulation is opened up, because the surplus
product may be converted into new forms, satisfy new wants
and enter as a productive element into a new sphere of
production. The same applies if starch, etc., is
prepared from corn. The sphere of exchange of these
particular commodities and of all commodities is thereby
expanded. The same takes place when coal is used for
lighting, etc.

Foreign trade, too, is of course an important factor in
the process of accumulation, because it tends to increase
the variety of use-values and the volume of commodities.

What Jones says first of all is concerned with the,
connection between accumulation and the rate of
profit. (He is by no means very clear about the
origin of the latter.)

“The power of a nation to accumulate
capital from profits does not vary with the rate of
profit… on the contrary, the power to accumulate
capital from profits, ordinarily varies inversely as the
rate of profit, that is, it is great where the rate of
profit is low, and small where the rate of profit is
high” ([Jones, Text-book of Lectures,]
p. 21).

Adam Smith says: |
“Though that part of the revenue of the inhabitants
which is derived from the profits of stock is always much
greater in rich, than in poor, countries, it is because
the stock is much greater; in proportion to the
stock, the profits are generally much less” (Adam
Smith, Wealth of Nations, Vol. II, Chapter 3 [quoted
by Richard Jones in the Text-book of Lectures, p. 21,
note]).

“In England and Holland, the rate
of profit is lower than in any other part of
Europe” ([Jones, loc. cit.,] p. 21).

“… during the period in which
her” (England’s) “wealth and capital have
been increasing the most rapidly, the rate of profits
has been gradually declining…” (pp. 21-22).

“… the relative masses of
the profits produced … depend not alone on the
rate of profit … but on the rate of profit
taken in combination with the relative quantities of capital
employed” (p. 22).

“The increasing quantity of capital
of the richer nation … is also usually accompanied by
a decrease in the rate of profits, or a decrease in the
proportion, which the annual revenue derived from the
capital employed, bears to its gross amount”
(loc. cit.).

“If it be said that all other
things being equal, the rate of profit will determine the
power of accumulating from profit, the answer is, that
the case, if practically possible, is too rare to deserve
consideration. We know, from observation, that a
declining rate of profit is the usual accompaniment of
increasing differences in the mass of capital
employed by different nations, and that, therefore, while
the rate of profits in the richer nations declines, all
other things are not equal.

“If it be asserted that the decline
of profits may be great enough to make it impossible to
accumulate from profits at all, the answer […] is
that it would be foolish to argue on the assumption of such
a decline, because long before the rate of profits had
reached such a point, capital would go abroad to realize
greater profits elsewhere, and that the power of exporting
will always establish some limit below which profits will
never fall in any one country, while there are others in
which the rate of profit is greater”
(pp. 22-23).

Apart from the primary sources of accumulation,
there are derivative ones, such as, for example, the
owners of the national debt, officials, etc.[ss]

All this is fine and good.
It is quite correct that the amounts accumulated by
no means depend solely on the rate of profit, but on the
rate of profit multiplied by the capital employed, that is,
just as much on the size of the capital advanced. If
we call the capital employed C, and the rate of
profit r, then accumulation will be Cr, and it
is clear that this product can increase if C grows
more quickly than r declines. And this is
indeed a fact derived from observation. But this does
not explain the cause, the raison d’être
of this fact. Jones himself came very near to it when
he made the observation that the auxiliary capital
continuously increases relatively to the working population
by which it is put into motion.

Insofar as the decline in [the rate of] profit is due to
the cause mentioned by Ricardo—the rise of
rent—the ratio of the total surplus-value to the
capital employed remains unchanged. But one part of
it—rent—increases, at the expense of the other
part i.e., of profit; this leaves the proportion of the
total surplus-value, of which profit, interest and rent are
only categories, [to the total capital] unchanged.
Thus, in fact, Ricardo denies the phenomenon itself.

On the other hand, the mere decline in the rate of
interest proves nothing in itself, just as its rise proves
nothing, although it does indeed always indicate the minimum
rate below which profit cannot fall. For profit
must always be higher than the average rate of interest.

| Apart from the
terror which the law of the declining rate of profit
inspires in the economists, its most important corollary is
the presupposition of a constantly increasing concentration
of capitals, that is, a constantly increasing
decapitalisation of the smaller capitalists. This, on
the whole, is the result of all laws of capitalist
production. And if we strip this fact of the
contradictory character which, on the basis of capitalist
production, is typical of it, what does this fact, this
trend towards centralisation, indicate? Only that
production loses its private character and becomes a social
process, not formally—in the sense that all production
subject to exchange is social because of the absolute
dependence of the producers on one another and the necessity
for presenting their labour as abstract social labour ( [by
means of] money)—but in actual fact. For the
means of production are employed as communal, social means
of production and therefore not [determined] by [the fact
that they are] the property of an individual, but by their
relation to production, and the labour likewise is performed
on a social scale.

A separate section in Jones’s work is headed “On
the causes which determine the inclination to
accumulate”. [He mentions the
following]:

“… 1st.—Differences of
temperament and disposition in the people.

“2ndly.—Differences in the
proportions in which the national revenues are divided among
the different classes of the population.

“3rdly.—Different degrees of
security for the safe enjoyment of the capital saved.

“4thly.—Different degrees of
facility in investing profitably, as well as safely,
successive savings.

“5thly.—Differences in the
opportunities offered to the different ranks of the
population to better their position by means of
savings” (p. 24).

All these five causes, in fact, boil down to
this—that accumulation depends on the stage of the
capitalist mode of production reached by a particular
nation.

To begin with No. 2. Where capitalist
production exists in a developed form, profit constitutes
the chief source of accumulation, that is, the capitalists
have concentrated the greater part of the national revenue
in their hands and even a section of the landowners seeks to
capitalise [their revenue].

No. 3. Security (in the legal and police
sense) increases in proportion to the degree to which the
capitalists secure control of the State administration.

No. 4. As capital develops, the spheres of
production increase on the one hand, and, on the other hand,
the organisation of credit [develops] in order to collect
every farthing in the hands of the money-lenders
(bankers).

No. 5. In capitalist production, the
improvement of one’s position depends solely on money, and
everyone can delude himself into believing that he can
become a Rothschild.

There remains No. 1. All people do not have
the same predisposition towards capitalist production.
Some primitive peoples, such as the Turks, have neither the
temperament nor the inclination for it. But these are
exceptions. The development of capitalist production
creates an average level of bourgeois society and therefore
an average level of temperament and disposition amongst the
most varied peoples. It is as truly cosmopolitan as
Christianity. This is why Christianity is likewise the
special religion of capital. In both it is only men
who count. One man in the abstract is worth just as
much or as little as the next man. In the one case,
all depends on whether or not he has faith, in the other, on
whether or not he has credit. In addition, however, in
the one case, predestination has to
be added, and in the other case, the accident of whether or
not a man is born with a silver spoon in his mouth.

The source of surplus-value and primitive
rent:

“When land has been appropriated and
cultivated, such land yields, in almost every case, to the
labour employed on it, more than is necessary to
continue the kind of cultivation already bestowed upon
it. Whatever it produces beyond this, | we will call its surplus
produce. Now this surplus produce is the source
of primitive rents, and limits the extent of such
revenues, as can be continuously derived from the land by
its owners, as distinct from its
occupiers” (p. 19).

These primitive rents are the first social form in
which surplus-value is represented, and this is the obscure
conception which forms the foundation of the theory of the
Physiocrats.

Both absolute and relative surplus-value have this in
common that they presuppose a certain level of the
productive power of labour. If the entire working-day
(available labour-time) of a man (any man) were only
sufficient to feed himself (and at best his family as well),
then there would be no surplus labour, surplus-value and
surplus produce. This prerequisite of a certain level
of productivity is based on the natural productiveness of
land and water, the natural sources of wealth. It is
different in different countries, etc. Needs are
simple and crude in early times and the minimum produce
required for the maintenance of the producers themselves is
consequently small, and so is the surplus product. On
the other hand, the number of people who live off the
surplus product in those circumstances is likewise very
small, so that they receive the sum total of the small
amounts of surplus product obtained from a relatively large
number of producers.

The basis for absolute surplus-value—that is, the
real precondition for its existence—is the natural
fertility of the land, of nature, whereas relative
surplus-value depends on the development of the social
productive forces.

And with this we finish with Jones. |XVIII-1156||

[a] Marx is not
quoting here but paraphrasing.—mainly in
German—a paragraph from p.61 of Jones’s
book.—Ed.

[b] The manuscript
has “shows”.—Ed.

[c] The manuscript
has “proceeds entirely from”.—Ed.

[d]Marx here
paraphrases (in German) the idea developed by Jones on
p. 143 of his book.—Ed.

[e] The manuscript
has “All these forms”.—Ed.

[f] The manuscript
has “system”.—Ed.

[g] The manuscript
has “the”.—Ed.

[h] The manuscript
has “For example”.—Ed.

[i] The manuscript
has “This is possible in larger countries
too”.—Ed.

[j] In the
manuscript this part of the sentenc is condensed and reads:
“When prices rise steeply
more.”—Ed.

[k]The first part
of the sentence up to “quadrupled” is
not a quotation but Marx’s paraphrase of the
passage.—Ed.

[l] In the
manuscript, “of”.—Ed.

[m] The manuscript
has “Thus the”.—Ed.

[n] The manuscript
has “are”.—Ed.

[o] The manuscript
has “decrease”.—Ed.

[p] The manuscript
has “and vice versa” instead of “or a fall
of wages not compensated by a rise in the rate of
profits”.—Ed.

[q] The manuscript
has “without” instead of “and this
from a cause quite distinct from”.—Ed.

[r] In the
manuscript, “land”.—Ed.

[s] In the
manuscript, “thus the increase”.—Ed.

[t] In the
manuscript, “trebled and so on.”—Ed.

[u] In the
manuscript, “Even among the Western European nations
we still find.”—Ed.

[v] This is a
summary by Marx, in his own words (mostly in English), of a
much longer passage on pages 16-17 of Jones’s
book.—Ed.

[w] Instead of the
first part of the sentence, in the manuscript “Among
all nations”.—Ed.

[x] In the
manuscript, “Here in England not only
the”.—Ed.

[y] In the
manuscript, “depend on”.—Ed.

[z] In the
manuscript, “these laboring”.—Ed.

[aa] Instead of
“may be divided into three groups”, in the
manuscript “are”.—Ed.

[bb] Instead of
“may be subdivided into”, in the manuscript
“are”.—Ed.

[cc]The first part
of this sentence is shortened by Marx and reads in the
manuscript “Something resembling rent or profit is
often.”—Ed.

[dd] In the
manuscript, “they may be regarded as
wage-labourers”.—Ed.

[ee] In the
manuscript the first part of the sentence reads “In
England limited to”.—Ed.

[ff] In the
manuscript, “slaves”.—Ed

[gg] This part of
the sentence is summarised by Marx.—Ed.

[hh] This
paragraph represents a summary by Marx of the ideas
outlined by Jones on p. 20 of his book. It is written
almost entirely in English.—Ed.

[ii] By fair means
or foul.—Ed.

[jj] In the
manuscript, “nation.”—Ed.

[kk] In the
manuscript, “the capitalist”.—Ed.

[ll] In the
manuscript, “this”.—Ed.

[mm] In the
manuscript, “the productive powers of labour are
increased to such an extent as to make
it”.—Ed.

[nn] This and the
following quotation were taken by Marx from the French
edition of A. Ure’s work.—Ed.

[oo] In the
manuscript, “to another”.—Ed.

[pp] This is not a
quotation, but a summary of a passage from Morton’s paper,
which was published in the Journal of the Society of
Arts, December 9, 1859, pp. 53-61.—Ed.

[qq] In the
manuscript, “whose products they need, and
which”.—Ed.

[rr] In the
manuscript, “are unable to save”.—Ed.

[ss] This last
sentence is a summary by Marx of an idea outlined by Jones
on p. 23 of his book.—Ed.

Theories of Surplus Value, Marx 1861-3

## Addenda. Revenue and its Sources. Vulgar
Political Economy

## [1.] The Development of Interest-Bearing Capital on
the Basis of Capitalist Production. [Transformation of the
Relations of the Capitalist Mode of Production into a
Fetish. Interest-Bearing Capital as the Clearest
Expression of This Fetish. The Vulgar Economists and
the Vulgar Socialists Regarding Interest on Capital]

||XV-891| The form of
revenue and the sources of revenue are the most
fetishistic expression of the relations of capitalist
production. It is their form of existence as it
appears on the surface, divorced from the hidden connections
and the intermediate connecting links. Thus the
land becomes the source of rent, capital the
source of profit, and labour the source of
wages. The distorted form in which the real
inversion is expressed is naturally reproduced in the views
of the agents of this mode of production. It is a kind
of fiction without fantasy, a religion of the vulgar.
In fact, the vulgar economists—by no means to be
confused with the economic investigators we have been
criticising—translate the concepts, motives, etc., of
the representatives of the capitalist mode of production who
are held in thrall to this system of production and in whose
consciousness only its superficial appearance is
reflected. They translate them into a doctrinaire
language, but they do so from the standpoint of the ruling
section, i.e., the capitalists, and their treatment is
therefore not naïve and objective, but
apologetic. The narrow and pedantic expression of
vulgar conceptions which are bound to arise among those who
are the representatives of this mode of production is very
different from the urge of political economists like the
Physiocrats, Adam Smith and Ricardo to grasp the inner
connection of the phenomena.

However, of all these forms, the most complete fetish is
interest-bearing capital. This is the original
starting-point of capital—money—and the formula
M—C—M' is reduced to its two
extremes—M—M'—money which creates more
money. It is the original and general formula of
capital reduced to a meaningless résumé.

The land or nature as the source of
rent, i.e., landed property, is fetishistic
enough. But as a result of a convenient confusion of
use-value with exchange-value, the common imagination is
still able to have recourse to the productive power of
nature itself, which, by some kind of hocus-pocus, is
personified in the landlord.

Labour as the source of wages, that is, of
the worker’s share in his product, which is determined by
the specific social form of labour; labour as the cause of
the fact that the worker by means of his labour buys the
permission to produce from the product (i.e., from capital
considered in its material aspect) and has in labour the
source by which a part of his product is returned to him in
the form of payment made by this product as his
employer—this is pretty enough. But the common
conception is in so far in accord with the facts that, even
though labour is confused with wage-labour and,
consequently, wages, the product of wage-labour, with the
product of labour, it is nevertheless obvious to anybody who
has common sense that labour itself produces its own
wages.

Capital, insofar as it is considered in the
production process, still continues to a certain
extent to be regarded as an instrument for acquiring the
labour of others. This may be treated as
“right” or “wrong”, as justified or
not justified, but here the relation of the capitalist to
the worker is always presupposed and assumed.

Capital, insofar as it appears in the
circulation process, confronts the ordinary observer
mainly in the form of merchant capital, that is, a
kind of capital which is engaged only in this operation,
hence profit in this field is in part linked with a vague
notion of general swindling, or more specifically, with the
idea that the merchant swindles the industrial capitalist in
the same way as the industrial capitalist swindles the
worker, or again that the merchant swindles the consumer,
just as the producers swindle one another. In any
case, profit here is explained as a result of exchange, that
is, as arising from a social relation and not from a
thing.

On the other hand, interest-bearing capital is the
perfect fetish. It is capital in its finished
form—as such representing the unity of the production
process and the circulation process—and therefore
yields a definite profit in a definite period of time.
In the form of interest—bearing capital only this
function remains, without the mediation of either production
process or circulation process. Memories of the past
still remain in capital and profit,
although because of the divergence of profit from
surplus-value and the uniform profit yielded by all
capitals—that is, the general rate of
profit—capital becomes | very much obscured, something
dark and mysterious.

Interest-bearing capital is the consummate automatic
fetish, the self-expanding value, the money-making
money, and in this form it no longer bears any trace of its
origin. The social relation is consummated as a
relation of things (money, commodities) to themselves.

This is not the place for a more detailed examination of
interest and its relation to profit; nor is it the place for
an examination of the ratio in which profit is divided into
industrial profit and interest. It is clear that
capital, as the mysterious and automatically generating
source of interest, that is, source of its [own] increase,
finds its consummation in capital and interest. It is
therefore especially in this form that capital is
imagined. It is capital par excellence.

Since, on the basis of capitalist production, a certain
sum of values represented in money or
commodities—actually in money, the converted form of
the commodity—makes it possible to extract a certain
amount of labour gratis from the workers and to appropriate
a certain amount of surplus-value, surplus labour, surplus
product, it is obvious that money itself can be sold as
capital, that is, as a commodity sui generis, or that
capital can be bought in the form of commodities or of
money.

It can be sold as the source of profit. I enable
someone else by means of money, etc., to appropriate
surplus-value. Thus it is quite in order for me to
receive part of this surplus-value. Just as land has
value because it enables me to intercept a portion of
surplus-value, and I therefore pay for this land only the
surplus-value which can be intercepted thanks to it, so I
pay for capital the surplus-value which is created by means
of it. Since, in the capitalist production process,
the value of capital is perpetuated and reproduced in
addition to its surplus-value, it is therefore quite in
order that, when money or commodities are sold as capital,
they return to the seller after a period of time and he does
not alienate it [capital] in the same way as he would a
commodity but retains ownership of it. In this way,
money or commodities are not sold as money or commodities,
but in their second power, as capital, as
self-increasing money or commodities. Capital is not
only increased, but is preserved in the total process of
production. It therefore remains capital for the
seller and comes
back to him. The sale consists in the fact that
another person, who uses the capital as productive capital,
has to pay its owner a certain part of his profit, which he
only makes through this capital. Like land, it is
rented out as a value-creating thing which in this process
of generating value is preserved and continually returned,
and therefore can also be returned to the original
seller. It is only capital in virtue of its return to
him. Otherwise he would sell it as a commodity or buy
with it as money.

In any case, the form considered in itself (in fact, it
[money] is alienated periodically as a means for exploiting
labour, for making surplus-value) is this, that the thing
now appears as capital and capital appears as a mere thing;
the whole result of the capitalist production and
circulation process appears as a property inherent in a
thing, and it depends on the owner of money, i.e., of the
commodity in its constantly exchangeable form, whether he
expends it as money or rents it out as capital.

We have here the relation of capital as principal to
itself as yield, and the profit which it yields is measured
against its own value, which (in accordance with the nature
of capital) is not diminished in this process.

It is thus clear why superficial criticism—in
exactly the same way as it wants to maintain commodities and
combats money—now turns its wisdom and reforming zeal
against interest-bearing capital without touching upon real
capitalist production, but merely attacking one of its
consequences. This polemic against interest-bearing
capital, undertaken from the standpoint of capitalist
production, a polemic which today parades as
“socialism”, occurs, incidentally, as a phase in
the development of capital itself, for example, in the
seventeenth century, when the industrial capitalist had to
assert himself against the old-fashioned usurer who, at that
time, still [confronted] him as a superior power.

| The complete
objectification, inversion and derangement of
capital as interest-bearing capital—in which, however,
the inner nature of capitalist production, [its]
derangement, merely appears in its most palpable
form—is capital which yields “compound
interest”. It appears as a Moloch demanding the
whole world as a sacrifice belonging to it of right, whose
legitimate demands, arising from its very nature, are
however never met and are always frustrated by a mysterious
fate.

The characteristic movement of capital, both in the
production and in the circulation processes, is the return
of the money or
commodity to its starting-point—to the
capitalist. This expresses, on the one hand, the real
metamorphosis, the conversion of the commodity into its
conditions of production, and the conversion of the
conditions of production back into the form of the
commodity—i.e., reproduction, and, on the other hand,
the formal metamorphosis, the conversion of the commodity
into money and of the money back into the commodity.
Finally, the multiplication of value:
M—C—M'. The original value, which is
however increased during the process, always remains in the
possession of the same capitalist. Only the forms
change in which he possesses it: money, commodity, or the
form of the production process itself.

In the case of interest-bearing capital, this
return of capital to its starting-point acquires a
quite external aspect, divorced from the real
movement whose form it is. A spends his money not as
money but as capital. No change takes place here in
the money. It only changes hands. Its real
conversion into capital takes place only while it is in the
hands of B. But it has become capital for A as a
result of the transfer of the money from A’s hands into
those of B. The real return of capital from the
production and circulation process takes place for B.
But for A, the return takes place in the same way as the
alienation did. The money passes from B back again to
A. He lends the money instead of spending
it.

In the real production process of capital, each
particular movement of money expresses an aspect of
reproduction, whether it be the conversion of money into
labour, the conversion of the finished commodity into money
(the end of the act of production) or the reconversion of
the money into commodities (renewal of the production
process, recommencement of reproduction). The movement
of money when it is lent as capital, that is,
when it is not converted into capital but enters into
circulation as capital, expresses nothing more than the
transfer of the same money from one person to another.
The property rights remain with the lender, but the
possession is transferred to the industrial
capitalist. For the lender, however, the conversion of
the money into capital begins at the moment when he spends
it as capital instead of spending it as money, i.e., when he
hands it over to the industrial capitalist. (It
remains capital for him even if he does not lend it to the
industrial capitalist but to a spendthrift, or to a worker
who cannot pay his rent. The whole pawnshop business
[is based on this].) True, the other person converts
it into capital, but this
is an operation beyond that in which the lender and the
borrower are involved. This development is
effaced, is not visible, is not directly included in
it. Instead of the real conversion of money into
capital, there appears only the empty form of this
process. Just as in the case of labour-power, the
use-value of money here becomes that of creating
exchange-value, more exchange-value than it itself
contains. It is lent as self-expanding
value, as a commodity, but a commodity which, precisely
because of this quality, differs from commodities as such
and therefore also possesses a specific form of
alienation.

The starting-point of capital is the commodity owner, the
owner of money, in short, the capitalist. Since in the
case of capital both starting-point and point of return
coincide, it returns to the capitalist. But the
capitalist exists here in a dual form, as the owner of
capital and as the industrial capitalist who really converts
money into capital. The capital actually issues | from him [the industrial
capitalist] and returns again to him. But only as
possessor. The capitalist exists in a dual
form—juridically and economically. The capital
as property consequently returns to the juridical capitalist
the left-handed Sam. But the return of the capital,
which includes the maintenance of its value and establishes
it as a self-maintaining and self-perpetuating value, is
indeed brought about by intermediate steps for capitalist II
but not for capitalist I. In this case therefore, the
return is not the consequence and result of a series of
economic processes but is effected by a particular juridical
transaction between buyer and seller, by the fact that it is
lent instead of being sold, and therefore it is alienated
only temporarily. What is sold is, in fact,
its use-value, whose function in this case is
to produce exchange-value, to yield profit, in other
words to produce more value than it itself contains.
As money it does not change through being used. It is
however expended as money and it flows back as money.

The form in which it returns depends on the mode of
reproduction of the capital. If it is loaned as money,
then it comes back in the form of circulating capital, that
is, its whole value is returned plus surplus-value, in this
case, that part of surplus-value or of profit which consists
of interest; the sum of money loaned plus the additional
amount which has arisen from it.

If it is loaned out in the form of machinery, buildings,
etc., in short, in a material form in which it functions as
fixed capital in the process of production, then it returns
in the form of fixed capital, as an annuity, that is, for
example, as an annual amount
equal to the replacement of the wear and tear, i.e.,
equal to that part of the value which has entered the
circulation process, plus that part of the surplus-value
which is calculated as profit (in this case a part of the
profit, interest) on the fixed capital (not insofar as it is
fixed capital, but insofar as in general it is capital of a
definite amount).

In profit as such, surplus-value, and consequently its
real source, is already obscured and mystified:

1) Because, considered from the formal standpoint, profit
is surplus-value calculated on the whole of the
capital advanced, so that each part of capital—fixed
and circulating—laid out on raw materials, machinery
or labour, yields an equal amount of profit.

2) Because, just as in the case of a single given capital
of 500, for example, every fifth part yields 10 per cent, if
the surplus-value amounts to 50, so now, as a result
of the establishment of the general rate of profit,
every capital of 500 or 100, no matter which sphere it
operates in, irrespective of the relative proportions of
variable and constant capital, no matter how varied the
periods of turnover, etc., will yield the same average
profit—say 10 per cent—in the same period of
time as any other capital under quite different organic
conditions. Because, therefore, the profit of
individual capitals regarded in isolation and the
surplus-value which is produced by them in their own
sphere of production become in fact different
magnitudes.

It is true that point 2 merely develops further what has
already been implied in point 1.

The basis of interest however is this already
externalised form of surplus-value, i.e., its existence as
profit. This form differs from its first simple
aspect, in which it still reveals the umbilical cord of its
birth, and is, at first sight, by no means recognisable as a
form of surplus-value. Interest directly presupposes
not sur-plus-value, but profit, of which it is merely
a part placed in a special category or division. It is
therefore much more difficult to recognise surplus-value in
interest than in profit, since interest is directly
connected with surplus-value only in the form of profit.

The time needed for the return of capital depends on the
real production process; in the case of interest-bearing
capital, its return as capital appears to depend
merely on the agreement between lender and borrower.
So that the return of the capital in this transaction no
longer appears to be a result determined
by the production process, but it seems that the capital
never loses the form of money for a single instant.
These transactions are nevertheless determined by the real
returns. But this is not evident in the
transaction.

| Interest, as distinct
from profit, represents the value of mere ownership of
capital—i.e., it transforms the ownership of
money (of a sum of values, commodities, whatever the
form may be) in itself, into ownership of capital, and
consequently commodities or money as such into
self-expanding values. The conditions of labour are of
course capital, only insofar as they confront the labourer
as his non-property and consequently function as someone
else’s property. But they can function in this way
only in contradiction to labour. The antagonistic
existence of these conditions in relation to labour makes
their owners capitalists, and turns these conditions
owned by them into capital. But capital in the hands
of moneyed capitalist A does not have this contradictory
character which turns it into capital and which therefore
makes ownership of money appear as ownership of
capital. The concrete distinct form by means of
which money or a commodity is converted into capital is
obliterated. Moneyed [capitalist] A does not
confront the worker at all, but only another
capitalist—capitalist B. What he sells him is
actually the “use” of the money, the results it
will produce when converted into productive capital.
But in fact it is not the use which he sells directly.
If I sell a commodity, then I sell a specific
use-value. If I buy money with commodities, then I buy
the functional use-value which money, as the converted form
of commodities, possesses. I do not sell the use-value
of the commodity along with its exchange-value, nor do I buy
the particular use-value of the money along with the money
itself. But money as money—before its conversion
into and its function as capital, a function which it does
not perform while it is in the hands of the
moneylender—has no other use-value than that which it
possesses as a commodity (gold, silver, its material
substance) or as money which is the converted form of a
commodity. What the moneylender sells in actual fact
to the industrial capitalist, what really happens in the
transaction, is simply this: he transfers the ownership of
the money to the industrial capitalist for a certain period
of time. He disposes of his ownership title for a
certain term, and as a result the industrial capitalist has
bought the ownership for a certain period. Thus his
money appears to be capital before it is sold and the mere
ownership of money or a commodity—separated from the capitalist production process—is
regarded as capital.

The fact that it becomes capital only after it has been
disposed of, makes no difference, any more than the
use-value of cotton is altered by the fact that its
use-value only emerges after it has been disposed of to the
spinner or that the use-value of meat only becomes apparent
after it has been transferred from the butcher’s shop to the
consumer’s table. Hence money, once it is not spent on
consumption, and commodities, once they are not used as
means of consumption by their owners, transform those who
possess them into capitalists and are in
themselves—separated from the capitalist production
process and even before their conversion into
“productive” capital—capital, that is,
they are self-expanding, self-maintaining and self-increasing
value. It is their immanent attribute to create value,
to yield interest, just as the attribute of the pear tree is
to produce pears. And it is as such an
interest-bearing thing that the money-lender sells his money
to the industrial capitalist. Because money preserves
itself, i.e., is value which preserves itself, the
industrial capitalist can return it at any time fixed by
contract. Since it produces a definite amount of
surplus-value, interest, annually, or rather since value
accrues to it over any period of time, he can also pay back
this surplus-value to the lender annually or in any other
conventionally established period of time. Money as
capital yields surplus-value daily in exactly the same way
as wage-labour. While interest is simply a part
of the profit established under a special name, it
appears here as [the surplus-value specifically
created by] capital as such, separated from the production
process, and consequently [due] only to the mere ownership
of capital, the ownership of money and commodities,
separated from the relations which give rise to the
contradiction between this property and labour, thus turning
it into capitalist property. [Interest seems to be] a
specific kind of surplus-value the generation
of which is due to the mere ownership of capital and
therefore to an intrinsic characteristic of capital; whereas
on the contrary, industrial profit appears to be a
mere addition which the borrower obtains by employing
capital productively, that is, by exploiting the workers
with the help of the capital borrowed (or, as people also
say, by his work as a capitalist, the function of the
capitalist being equated here with labour, and even
identified with wage-labour, since the industrial
capitalist, by really taking part in the | production process, appears in
fact as an active agent
in production, as a worker, in contrast to the idle,
inactive moneylender whose function of property owner is
separate from and outside the production process).

Thus it is interest, not profit, which
appears to be the creation of value arising from
capital as such and therefore from the mere ownership of
capital; consequently it is regarded as the specific revenue
created by capital. This is also the form in which it
is conceived by the vulgar economists. In this form
all intermediate links are obliterated, and the
fetishistic feature of capital, as also the concept
of the capital-fetish, is complete. This form
arises necessarily, because the juridical aspect of property
is separated from its economic aspect and one part of the
profit under the name of interest accrues to capital
which is completely separated from the production process,
or to the owner of this capital.

To the vulgar economist who desires to represent capital
as an independent source of value, a source which creates
value, this form is of course a godsend, a form in which the
source of profit is no longer recognisable and the result of
the capitalist process—separated from the process
itself—acquires an independent existence. In
M—C—M' an intermediate link is still
retained. In M—M' we have the incomprehensible
form of capital, the most extreme inversion and
materialisation of production relations.

A general rate of interest corresponds naturally
to the general rate of profit. It is not our
intention to discuss this further here, since the analysis
of interest-bearing capital does not belong to this general
section but to that dealing with credit. However the
observation that the average rate of profit appears much
less as a palpable, solid fact than does the rate of
interest is important for the elaboration of this aspect
of capital. True, the rate of interest fluctuates
continuously. [It may be] 2 per cent today (on the
money market for the industrial capitalist—and this is
all we are discussing), 3 per cent tomorrow, and 5 per cent
the day after. But it is 2 per cent, 3 per cent, 5 per
cent for all borrowers. It is a general condition that
every sum of money of £100 yields 2 per cent, 3 per
cent or 5 per cent, while the same value in its real
function as capital yields very different amounts of real
profit in the different spheres of production. The
real profit deviates from the ideal average level, which is
established only by a continuous process, a reaction, and
this only takes place during long periods of circulation of
capital. The rate of profit is in certain spheres
higher in some years, while it is lower in succeeding
years. Taking the years together, or taking a series
of such evolutions,
one will in general obtain the average
profit. Thus it never appears as something directly
given, but only as the average result of contradictory
oscillations. It is different with the rate of
interest. In its generality, it is a fact which
is established daily, a fact which the industrial capitalist
regards as a pre-condition and an item of calculation in his
operations. The average rate of profit exists indeed
only as an ideal average figure, insofar as it serves
to estimate the real profit; it exists only as an average
figure, as an abstraction, insofar as it is established as
something which is in itself complete, definite,
given. In reality, however, it exists only as the
determining tendency in the movement of equalisation of the
real, different rates of profit, whether of individual
capitals in the same sphere or of different capitals in the
different spheres of production.

| What the lender
demands of the capitalist is calculated on the
general (average) rate of profit, not on
individual deviations from it. Here the average
becomes the pre-condition. The rate of interest
itself varies, but does so for all
borrowers.

A definite, equal rate of interest, on the other hand,
exists not only on the average but in actual fact (even
though it is accompanied by variations between minimum and
maximum rates according to whether or not the borrower is
first-rate) and the deviations appear rather as exceptions
brought about by special circumstances. The
meteorological bulletins do not indicate the state of the
barometer more exactly than stock-exchange bulletins do the
state of interest rates, not for this or that capital, but
for the capital available on the money market, that
is, capital available for lending.

This is not the place to go into the reasons for this
greater stability and equality of the rate of interest on
loan capital in contradistinction to the less tangible form
of the general rate of profit. Such a discussion
belongs to the section on credit. But this much is
obvious: the fluctuations in the rate of profit in
every sphere—quite apart from the special advantages
which individual capitalists in the same sphere of
production may enjoy—depend on the existing level of
market prices and their fluctuations around
cost-prices. The difference in the rates of
profit in the various spheres can only be
discerned by comparison of the market prices in the
different spheres, that is, the market prices of the
different commodities, with the cost-prices of these
commodities. A decline in the rate of profit below the
ideal average in any particular sphere, if prolonged,
suffices to bring about a withdrawal
of capital from this sphere, or to prevent the
entry of the average amount of new capital into it.
For it is the inflow of new, additional capital, even more
than the redistribution of capital already invested, that
equalises the distribution of capital in the different
spheres. The surplus profit in the different
spheres, on the other hand, is discernible only by
comparison of the market prices with cost-prices. As
soon as any difference becomes apparent in one way or
another, then an outflow or inflow of capital from or to the
particular spheres [begins]. Apart from the fact that
this act of equalisation requires time, the average profit
in each sphere becomes evident only in the average profit
rates obtained, for example, over a cycle of seven years,
etc., according to the nature of the capital. Mere
fluctuations—below and above [the general rate
of profit]—if they do not exceed the average extent
and do not assume extraordinary forms, are therefore not
sufficient to bring about a transfer of capital, and in
addition the transfer of fixed capital presents certain
difficulties. Momentary booms can only have a limited
effect, and are more likely to attract or repel additional
capital than to bring about a redistribution of the capital
invested in the different spheres.

One can see that all this involves a very complex
movement in which, on the one hand, the market prices in
each particular sphere, the relative cost-prices of the
different commodities, the position with regard to demand
and supply within each individual sphere, and, on the other
hand, competition among the capitalists in the different
spheres, play a part, and, in addition, the speed of the
equalisation process, whether it is quicker or slower,
depends on the particular organic composition of the
different capitals (more fixed or circulating capital, for
example) and on the particular nature of their commodities,
that is, whether their nature as use-values facilitates
rapid withdrawal from the market and the diminution or
increase of supply, in accordance with the level of the
market prices.

In the case of money capital on the other hand, only two
sorts of buyers and sellers, only two types of demand and
supply, confront each other on the money market. On
the one side, the borrowing class of capitalists—on
the other, the money-lenders. The commodity has only
one form—money. All the different forms assumed
by capital according to the different spheres of production
or circulation in which it is invested, are obliterated
here. It exists here in the undifferentiated, always
identical form, that of independent exchange-value, i.e., of
money. Here competition
between the different spheres ceases; they are all lumped
together as borrowers of money, and capital too confronts
them all in a form in which it is still indifferent to the
way it is utilised. Whereas productive capital | emerges only in the
movement of competition between the different spheres as the
joint capital of the whole class, capital here
actually—as regards the pressure exerted—acts as
such in the demand for capital. On the other hand,
money capital (the capital on the money market) really
possesses the form which enables it as a common element,
irrespective of its particular employment, to be distributed
amongst the different spheres, amongst the capitalist class,
according to the production needs of each separate
sphere. With the development of large-scale industry,
moreover, money capital, insofar as it appears on the
market, is represented less and less by the individual
capitalist, the owner of this or that parcel of capital
available on the market, but is concentrated, organised and
is [subject] in quite a different way from real production
to the control of a banker who represents the capital.
So that insofar as the form of the demand is concerned, the
pressure of a class confronts it [loan capital]; and as far
as supply is concerned, it appears as loan capital en
masse, the loan capital of society, concentrated in a
few reservoirs.

These are some of the reasons why the general rate of
profit appears as a hazy mirage in contrast to the
fixed rate of interest which, although it fluctuates
in magnitude, nevertheless fluctuates in the same measure
for all borrowers and therefore always confronts them as
something fixed, given; just as money despite the changes in
its value has the same value for all commodities. Just
as the market prices of commodities fluctuate daily, which
does not prevent them from being quoted daily, so it
is with the rate of interest, which is likewise quoted
regularly as the price of money. This is the
established price of capital, for capital is here offered as
a special kind of commodity—money—and
consequently its market price is established in the
same way as that of all other commodities. The rate of
interest is therefore always expressed as the general
rate of interest, as a fixed amount [to be paid] for a
certain amount of money; whereas the rate of profit within a
particular sphere may vary although the market prices
of commodities are the same (depending on the conditions
under which individual capitals produce the same
commodities; since the individual rate of profit does not
depend on the market price of the commodity but on the
difference between the market price
and the cost-price) and it is equalised in the different
spheres in the course of operations only as a result of
constant fluctuations. In short, only in moneyed
capital, the capital which can be lent, does capital become
a commodity, whose quality of self-expansion has a
fixed price, which is quoted as the prevailing rate
of interest.

Thus capital acquires its pure fetish form in
interest-bearing capital, and indeed in its direct
form of interest-bearing money capital (the other
forms of interest-bearing capital, which do not concern us
here, are in turn derived from this form and presuppose
it). Firstly, as a result of its continuous
existence as money, a form in which all its
determining features are obliterated and its real elements
invisible; in this form it represents merely independent
exchange-value, value which has become independent.
The money form is a transient form in the real process of
capital. On the money market capital always exists in
this form. Secondly, the surplus-value it
produces, which [here] again assumes the form of money,
seems to accrue to capital as such, consequently to the mere
owner of money capital, i.e., of capital separated from its
process. Here M—C—M' becomes M—M',
and just as its form here is the undifferentiated money form
(for money is precisely the form in which the differences
between commodities as use-values are obliterated,
consequently also the differences between productive
capitals, which are made up of the conditions of existence
of these commodities, the particular forms of the productive
capitals themselves are obliterated) so the
surplus-value it produces, the surplus money which it is or
which it becomes, appears as a definite rate measured by the
amount of the money. If the rate of interest is 5 per
cent, then £100 used as capital becomes
£105. This is the quite tangible form of
self-expanding value or of money-making money, and at the
same time the quite irrational form, the incomprehensible,
mystified form. In the discussion of capital we
started from M—C—M, of which M—M' was only
the result. We now find M—M' as the
subject. Just as growth is characteristic of
trees, so money-bearing
(ιόχος)[a] is characteristic of capital in
this, its pure form as money [capital]. The
incomprehensible superficial form we encounter and which has
therefore constituted the starting-point of our analysis, is
found again as the result of the process in which the form
of
capital is gradually more and more alienated and rendered
independent of its inner substance.

| We started with money
as the converted form of the commodity. What we arrive
at is money as the converted form of capital, just as
we have perceived that the commodity is the pre-condition
and the result of the production process of capital.

This aspect of capital, which is the most fantastic and
at the same time comes nearest to the popular notion of it,
is both regarded as the “basic form” by the
vulgar economists and made the first point of attack by
superficial critics; the former, partly because the inner
connections are least apparent here and capital emerges in a
form in which it appears to be an independent source
of value, partly because its contradictory character
is totally concealed and effaced in this form and no
contradiction to labour [is evident]. On the other
hand, [capital is subjected to] attack because it is the
form in which it is at its most irrational and provides the
easiest point of attack for the vulgar socialists.

The polemic waged by the bourgeois economists of the
seventeenth century (Child, Culpeper and others) against
interest as an independent form of surplus-value merely
reflects the struggle of the rising industrial bourgeoisie
against the old-fashioned usurers, who monopolised the
pecuniary resources at that time. Interest-bearing
capital in this case is still an antediluvian form of
capital which has yet to be subordinated to industrial
capital and to acquire the dependent position which it must
assume—theoretically and practically—on the
basis of capitalist production. The bourgeoisie did
not hesitate to accept State aid in this as in other cases,
where it was a question of making the traditional production
relations which it found, adequate to its own.

It is clear that any other kind of division of profit
between various kinds of capitalists, that is, increasing
the industrial profit by reducing the rate of interest and
vice versa, does not affect the essence of capitalist
production in any way. The kind of socialism which
attacks interest-bearing capital as the “basic
form” of capital not only remains completely within
the bounds of the bourgeois horizon. Insofar as its
polemic is not a misconceived attack and criticism prompted
by a vague notion and directed against capital itself,
though identifying it with one of its derived forms, it is
nothing but a drive, disguised as socialism, for the
development of bourgeois credit and consequently only
expresses the low-level of development of the existing
conditions in a country where such a polemic can masquerade
as
socialist and is itself only a theoretical symptom of
capitalist development although this bourgeois striving can
assume quite startling forms such as that of
“crédit gratuit”[b] for example. The
same applies to Saint-Simonism with its glorification of
banking (Crédit mobilier later).

### [2.] Interest-Bearing Capital and Commercial
Capital in Relation to Industrial Capital. Older
Forms. Derived Forms

The commercial and interest-bearing forms of capital are
older than industrial capital, which, in the capitalist mode
of production, is the basic form of the capital
relations dominating bourgeois society—and all other
forms are only derived from it or secondary: derived as is
the case with interest-bearing capital; secondary means that
the capital fulfils a special function (which belongs to the
circulation process) as for instance commercial
capital. In the course of its evolution, industrial
capital must therefore subjugate these forms and transform
them into derived or special functions of itself. It
encounters these older forms in the epoch of its formation
and development. It encounters them as
antecedents, but not as antecedents established by
itself, not as forms of its own life-process. In the
same way as it originally finds the commodity already in
existence, but not as its own product, and likewise finds
money circulation, but not as an element in its own
reproduction. Where capitalist production has
developed all its manifold forms and has become the dominant
mode of production, interest-bearing capital is dominated by
industrial capital, and commercial capital becomes merely a
form of industrial capital, derived from the circulation
process. But both of them must first be destroyed as
independent forms | and
subordinated to industrial capital. Violence (the
State) is used against interest-bearing capital by means of
compulsory reduction of interest rates, so that it is no
longer able to dictate terms to industrial capital.
But this is a method characteristic of the least developed
stages of capitalist production. The real way in which
industrial capital subjugates interest-bearing capital is
the creation of a procedure specific to itself—the
credit system. The compulsory reduction of
interest rates
is a measure which industrial capital itself borrows from
the methods of an earlier mode of production and which it
rejects as useless and inexpedient as soon as it becomes
strong and conquers its territory. The credit
system is its own creation, and is itself a form of
industrial capital which begins with manufacture and
develops further with large-scale industry. The credit
system originally is a polemical form directed
against the old-fashioned usurers (goldsmiths in England,
Jews, Lombards, and others). The seventeenth-century
writings in which its first mysteries are discussed are all
produced in this polemical form.

Commercial capital is subordinated to industrial
capital in various ways or, what amounts to the same thing,
[it becomes] a function of the latter, it is industrial
capital engaged in a special function. The
merchant, instead of buying commodities, buys
wage-labour with which he produces the commodities which he
intends to sell on the market. But commercial capital
thereby loses the fixed form which it previously possessed
in contrast to production. This was the way the
medieval guilds were undermined by manufacture and the
handicrafts confined to a narrower sphere. The
merchant in the Middle Ages was simply a dealer in
commodities produced either by the town guilds or by the
peasants (apart from sporadic areas where manufacture
developed, for instance in Italy and Spain).

The transformation of the merchant into an industrial
capitalist is at the same time the transformation of
commercial capital into a mere form of industrial
capital. The producer, conversely, becomes a
merchant. For example, the cloth producer himself buys
material in accordance with the size of his capital, etc.,
instead of gradually obtaining his material in small amounts
from the merchant and working for him. The conditions
of production enter into the process [of production] as
commodities which he himself has bought. And instead
of producing for individual merchants or for particular
customers, he now produces for the world of commerce.

In the first form, the merchant dominates production and
commercial capital dominates the handicrafts and rural
domestic industry which it sets in motion. The crafts
are subordinated to him. In the second form,
production becomes capitalist production. The producer
is himself a merchant, merchant capital now acts as an
intermediary only in the circulation process, thus
fulfilling a definite function in the reproduction process
of capital. These are the two forms. The
merchant as such becomes
a producer, an industrialist. The industrialist,
the producer, becomes a merchant.

Originally, trade is the pre-condition for the
transformation of guild, rural domestic and feudal
agricultural production into capitalist production. It
develops the product into a commodity, partly by creating a
market for it, partly by giving rise to new commodity
equivalents and partly by supplying production with new
materials and thereby initiating new kinds of production
which are based on trade from the very beginning because
they depend both on production for the market and on
elements of production derived from the world market.

As soon as manufacture gains strength (and this applies
to an even greater extent to large-scale industry), it in
turn creates the market, conquers it, opens up, partly by
force, markets which it conquers, however, by means of its
commodities. From now on, trade is merely a
servant of industrial production for which a constantly
expanding market has become a very condition of existence,
since constantly expanding mass production, circumscribed
not by the existing limits of trade (insofar as trade is
only an expression of the existing level of demand), but
solely by the amount of capital available and the level of
productivity of the workers, always floods the existing
market and consequently seeks constantly to expand and
remove its boundaries. Trade is now the servant of
industrial capital, and carries out one of the functions
emanating from the conditions of production of industrial
capital.

During its first stages of development, industrial
capital seeks to secure a market and markets by force, by
the colonial system (together with the prohibition
system). The industrial capitalist faces the world
market; [he] therefore compares | and must constantly compare
his own cost-prices with market prices not only at home, but
also on the whole market of the world. He always
produces taking this into account. In the earlier
period this comparison is carried out only by the merchants,
thus enabling merchant capital to dominate over productive
[capital]. |

| Interest is
therefore nothing but a part of the profit (which, in its
turn, is itself nothing but surplus-value, unpaid labour),
which the industrial capitalist pays to the owner of the
borrowed capital with which he “works”, either
exclusively
or partially. Interest is a part of profit—of
surplus-value—which, established as a special
category, is separated from the total profit under its own
name, a separation which is by no means based on its origin,
but only on the manner in which it is paid out or
appropriated. Instead of being appropriated by the
industrial capitalist himself—although he is the
person who at first holds the whole surplus-value in his
hands no matter how it may be distributed between himself
and other people under the names of rent, industrial profit
and interest—this part of the profit is deducted by
the industrial capitalist from his own revenue and paid to
the owner of capital.

If the rate of profit is given, then the relative level
of the rate of interest depends on the ratio in which profit
is divided between interest and industrial profit. If
the ratio of this division is given, then the absolute level
of the rate of interest (that is, the ratio of interest to
capital) depends on the rate of profit. It is not
intended to investigate here how this ratio is
determined. This belongs to the section dealing with
the real movement of capital, i.e., of capitals, while we
are concerned here with the general forms of capital.

The formation of interest-bearing capital, its separation
from industrial capital, is a necessary product of
the development of industrial capital, of the capitalist
mode of production itself. Money (a sum of value,
which is always convertible into the conditions of
production) or the conditions of production into which it
can be converted at any time and of which it is only the
converted form—money employed as capital, commands a
definite quantity of other people’s labour, more labour than
it itself contains. It not only preserves its value in
exchange with labour, but increases it, produces
surplus-value. The value of money or of commodities as
capital is not determined by the value they possess
as money or as commodities, but by the amount of
surplus-value which they “produce” for
their owners. The product of capital is profit.
On the basis of capitalist production, whether money is
spent as money or as capital depends only on the different
ways in which money is employed. Money (a
commodity) in itself is capital on the basis of
capitalist production (just as labour-power in itself
is labour) since, first, it can be converted into the
conditions of production and is, as it exists, only an
abstract expression of them, their existence as
value; and secondly, the material elements of wealth
in themselves possess the property of being capital because
their opposite—wage-labour—which
turns them into capital—is present as
the basis for social production.

Rent is likewise simply a name for a part of the
surplus-value which the industrialist has to pay out, in the
same way as interest is another part of surplus-value
which, although it accrues to him (like rent), has to be
handed over to someone else. But the great difference
here is the following: through landed property, the
landowner prevents capital from making the value of
agricultural products equal to their cost-price.
Monopoly of landed property enables the landowner to do
this. It enables him to pocket the difference between
value and cost-price. On the other hand—as far
as differential rent is concerned—this monopoly
enables the landowner to pocket the excess of the market
value over the individual value of the product of a
particular piece of land; in contrast to the other spheres
of production, where this difference in the form of surplus
profit flows into the pockets of the capitalists who operate
under more favourable conditions than the average conditions
which satisfy the greater part of demand, thus determining
the bulk of production and consequently regulating the
market value of each particular sphere of production.

Landed property is a means for grabbing a part of
the surplus-value produced by industrial capital. On
the other hand, loan capital—to the extent that
the capitalist operates with borrowed capital—is a
means for producing the whole of the | surplus-value. That
money (commodities) can be loaned out as capital means
nothing more than that it is itself capital.
The abolition of landed property in the Ricardian sense,
that is, its conversion into State property so that rent is
paid to the State instead of to the landlord, is the ideal,
the heart’s desire, which springs from the deepest, inmost
essence of capital. Capital cannot abolish landed
property. But by converting it into rent [which is
paid to the State] the capitalists as a class
appropriate it and use it to defray their State expenses,
thus appropriating in a roundabout way what cannot be
retained directly. Abolition of interest and of
interest-bearing capital, on the other hand, means the
abolition of capital and of capitalist production
itself. As long as money (commodities) can serve as
capital, it can be sold as capital. It is therefore
quite in keeping with the views of the petty-bourgeois
Utopians that they want to keep commodities but not money,
industrial capital but not interest-bearing capital, profit
but not interest.

There are not two different kinds of
capital—interest-bearing and profit-yielding—but
the selfsame capital which operates in the process of
production as capital, produces a profit which is divided
between two different capitalists—one standing outside
the process, and, as owner, representing capital as
such <but it is an essential condition of this
capital that it is represented by a private owner;
without this it does not become capital as opposed to
wage-labour>, and the other representing operating
capital, capital which takes part in the production
process.

### [3. The Separation of Individual Parts of
Surplus-Value in the Form of Different Revenues. The
Relation of Interest to Industrial Profit. The
Irrationality of the Fetishised Forms of Revenue]

The further “ossification” or transformation
of the division of profit into something independent
appears in such a way that the profit on every single
capital—and therefore also the average profit
based on the equalisation of capitals—is split or
divided into two component parts separated from, or
independent of, each other, namely, interest and industrial
profit, which is now sometimes called simply profit
or acquires new names such as wages of labour of
superintendence, etc. If the rate of profit
(average profit) is 15 per cent and the rate of
interest (which, as we have seen, is always established
in the general form) is 5 per cent (the general rate
being always quoted in the money market as the
“value” or “price” of money), then
the capitalist—even when he is the owner of the
capital and has not borrowed any part of it, so that
the profit does not have to be divided between two
capitalists—considers that 5 per cent of the 15 per
cent represents interest on his capital, and only 10
per cent represents the profit he makes by the productive
employment of the capital. This 5 per cent interest,
which he as an “industrial capitalist” owes to
himself as “owner” of the capital, is due to his
capital as such, and consequently it is due to him as
owner of the capital as such (which is at one and the
same time the existence of capital in itself, or the
existence of capital as the capitalist, as property which
debars other people from owning it), capital abstracted from
the production process as opposed to operating capital,
capital involved in the production process, and to the
“industrial capitalist” as representative of
this operating, “working” capital.

“Interest” is the fruit of capital insofar as
it does not “work” or operate, and profit is the
fruit of “working”, operating capital.
This is similar to the way in which the farming
capitalist—who is at the same time also a landowner,
the owner of the soil which he exploits in capitalist
fashion—assigns that part of his profit which
constitutes rent, this surplus profit, to himself not
as capitalist but as landowner, attributing it not to
capital but to landed property so that he, the capitalist,
owes himself “rent” as a landowner. Thus
one aspect of capital confronts another aspect of the same
capital just as rigidly as do landed property and capital
which, in fact, constitute the separate claims to
appropriation of other people’s labour which are based on
two essentially different means of production.

If, on the one hand, five partners own a cotton mill
which represents a capital of £100,000 and yields a
profit of 10 per cent, that is, £10,000, then each of
them gets a fifth of the profit or £2,000. On
the other hand, if a single capitalist invested the same
amount of capital in a mill and made the same amount of
profit—£10,000—he would not consider that
he received £2,000 profit as a partner and the other
£8,000 company profit for the nonexistent four
partners. Consequently, in itself the mere division
of profit between different | capitalists who have different
legal claims on the same capital and who are in one way or
another joint owners of the same capital, does not by
any means establish different categories for the separate
portions. Why then should the accidental division
between lender and borrower of capital do so?

Prima facie it is simply a question of the
division of profit when there are two owners of the capital
with different titles—a prima facie legal, but
not economic aspect. In itself it makes no difference
at all whether a capitalist produces with his own or with
other people’s capital or in what proportion he uses his own
capital to that of other people. How does it happen
that this division of profit into [industrial] profit and
interest does not appear as an accidental division,
dependent on the accident whether or not the capitalist
really has a share with someone else, or on whether
he by chance is operating with his own or with someone
else’s capital, but that, on the contrary, even when he
operates exclusively with his own capital, he in any case
splits himself into two—into a mere owner of capital
and into a user of capital, into capital which is outside
the production process and capital which takes part in the
production process,
into capital which as such yields interest and
capital which yields profit because it is used in the
production process?

There is a real reason at the root of this. Money
(as an expression of the value of commodities in general) in
the [production] process appropriates surplus-value, no
matter what name it bears or whatever parts it is split
into, because it is already presupposed as capital
before the production process. It maintains,
produces and reproduces itself as capital in the
process [of production] and moreover on a continually
expanding scale. Once the capitalist mode of
production is given and work is undertaken on this basis and
within the social relations which correspond to it, that is,
when it is not a question of the process of formation of
capital, then even before the [production] process
begins money as such is capital by its very nature,
which, however, is only realised in the process and indeed
only becomes a reality in the process itself. If it
did not enter into the process as capital it would not
emerge from it as capital, that is, as profit-yielding
money, as self-expanding value, as value which produces
surplus-value.

It is the same as with money. For example, this
coin is nothing but a piece of metal. It is only money
in virtue of its function in the circulation process.
But if the existence of the circulation process of
commodities is presupposed, the coin not only functions as
money, but as such it is in every single case a
pre-condition for the circulation process before it enters
into it. Capital is not only the result of, but the
pre-condition for, capitalist production. Money and
commodities as such are therefore latent capital, potential
capital; this applies to all commodities insofar as they are
convertible into money, and to money insofar as it is
convertible into those commodities which constitute the
elements of the capitalist process of production. Thus
money—as the pure expression of the value of
commodities and of the conditions of labour—is itself
as capital antecedent to capitalist production. What
is capital regarded not as the result of, but as the
prerequisite for, the process [of production]? What
makes it capital before it enters the process so that the
latter merely develops its immanent character? The
social framework in which it exists. The fact that
living labour is confronted by past labour, activity is
confronted by the product, man is confronted by things,
labour is confronted by its own materialised conditions as
alien, independent, self-contained subjects,
personifications, in short, as someone else’s
property and, in this form, as “employers”
and “commanders” of labour itself, which they
appropriate instead
of being appropriated by it. The fact that
value—whether it exists as money or as
commodities—and in the further development the
conditions of labour confront the worker as the property
of other people, as independent properties, means simply
that they confront him as the property of the
non-worker or, at any rate, that, as a capitalist, he
confronts them [the conditions of labour] not as a worker
but as the owner of value, etc., as the
subject in which these things possess their own will,
belong to themselves and are personified as independent
forces. Capital as the prerequisite of
production, capital, not in the form in which it emerges
from the production process, but as it is before it enters
it, [is] the contradiction in which it is confronted by
labour as the labour of other people and in which capital
itself, as the property of other people, confronts
labour. It is the contradictory social framework which
is expressed in it and which, separated from the
[production] process itself, | expresses itself in
capitalist property as such.

This aspect—separated from the capitalist
production process itself of which it is the constant
result, and as its constant result it is also its constant
prerequisite—manifests itself in the fact that money
[and] commodities are as such, latently, capital,
that they can be sold as capital, and that in this
form they represent the mere ownership of capital,
and the capitalist as the mere owner, apart from his
capitalist functions. Money and commodities considered
as such constitute command over other people’s labour, and
therefore self-expanding value and a claim to the
appropriation of other people’s labour.

It is thus quite obvious that the title to and the means
for the appropriation of other people’s labour is this
relationship and not some kind of labour or
equivalent supplied by the capitalist.

Interest therefore appears as the
surplus-value due to capital as capital, to the mere
ownership of capital, as the surplus-value derived by
capital from the production process because it enters it as
capital, and therefore due to capital as such
independently of the production process, although it is only
realised in the production process; capital thus
already contains the surplus-value in a latent form.
On the other hand, industrial profit [appears] as the
portion of surplus-value accruing to the capitalist not as
the owner of capital, but as the operating owner
representing the operating capital. In the same way as
everything in this mode of production appears to be upside
down, so likewise does the final reversal in the relation of
interest to profit, so that the portion
of profit separated under a special heading [interest]
appears as the product intrinsically belonging to capital,
and industrial profit appears as a mere addition appended to
it.

Since the moneyed capitalist in fact receives his part of
the surplus-value only as owner of capital, while he
himself remains outside the production process; since the
price of capital—that is, of the mere title to
ownership of capital—is quoted on the money market as
the rate of interest in the same way as the market price of
any other commodity; since the share of surplus-value which
capital as such, the mere ownership of
capital, secures is thus of a stable magnitude,
whereas the rate of profit fluctuates, at any given moment
it varies in the different spheres of production and within
each sphere it is different for the individual capitalists,
partly because the conditions under which they produce are
more or less favourable, partly because they exploit labour
in capitalist fashion with different degrees of
circumspection and energy, and partly because they cheat
buyers or sellers of commodities with different degrees of
luck and cunning (profit upon expropriation, alienation)—it therefore appears natural to them, whether they
are or are not owners of the capital involved in the
production process, that interest is something due to
capital as such, to the ownership of capital, to the owner
of capital, whether they themselves own the capital or
someone else; industrial profit, on the other hand, appears
to be the result of their labour. As operating
capitalists—as real agents of capitalist
production—they therefore confront themselves or
others representing merely idle capital, as workers
they consequently confront themselves and others as
property owners. And since they are, as matters
stand, workers, they are in fact wage-workers, and because
of their superiority they are simply better-paid workers,
which they owe partly also to the fact that they pay
themselves their wages.

Whereas, therefore, interest and
interest-bearing capital merely express the
contradiction of materialised wealth as against labour, and
thereby its existence as capital, this position is
turned upside down in the consciousness of men because,
prima facie, the moneyed capitalist does not
appear to have any relations with the wage-worker, but only
with other capitalists, while these other capitalists,
instead of appearing to be in opposition to the
wage-workers, appear rather as workers, in opposition
to themselves or to other [capitalists] considered as mere
owners of capital, representing the mere existence of
capital. The individual
capitalist, moreover, can either lend his money
as capital or employ it himself as
capital. Insofar as he obtains interest on it,
he only receives for it the price which he would receive if
he did not “operate” as a capitalist, if he did
not “work”. It is clear, therefore, that
what he really gets from the production
process—insofar as it is only interest—is due to
capital alone, not to the production process itself and
| not to himself as a
representative of operating capital.

Hence also the pretty phrases used by some vulgar
economists to the effect that, if the industrial capitalist
did not get any profit in addition to interest, he would
lend his capital out for interest and become a rentier, so
that all capitalists would stop producing and all capital
would cease operating as capital, but nevertheless it would
still be possible to live on the interest. In
similar vein, Turgot has already [said] that if the
capitalist received no interest, be would buy land
(capitalised rent) and live off rent. But in this case
the interest would still be derived from surplus-value,
since for the Physiocrats rent represents the real
surplus-value. Whereas in that vulgarised concept
things are turned upside down.

Another fact should be noted. Interest is part of
the costs for the industrial capitalist who has
borrowed money, the term costs is here used in the sense
that it represents the value advanced. For example, a
capital of £1,000 does not enter the capitalist
production process as a commodity worth £1,000 but as
capital, this means that if a capital of £1,000
yields 10 per cent interest per annum, then it enters into
the annual product as a value of £1,100. This
shows clearly that the sum of values (and the
commodities in which it is embodied) becomes capital not
only in the production process but that, as capital, it is
antecedent to the production process and therefore already
contains within itself the surplus-value due to it as mere
capital. For the industrial capitalist who operates
with borrowed capital, interest, in other words capital as
capital—and it is this only insofar as it yields
surplus-value (so that if it is worth £1,000 as a
commodity, for example, it is worth £1,100 as capital,
i.e., 1,000+1,000/10,
C+C/x)—enters into his
costs. If the product only yielded interest, this,
though it would be a surplus over and above the value
of the capital employed, regarded as a mere commodity, would
not be a surplus over and above the value of the commodity
considered as capital, for the capitalist has to pay out
this surplus-value;
it is part of his outlay, part of the expenses he has
incurred in order to produce the commodities.

As far as the industrialist who operates with his own
capital is concerned, he pays the interest on his capital to
himself and regards the interest as part of his
outlay. In fact, what he has advanced is not simply a
capital of £1,000 for example, but the value of
£1,000 as capital, and this value would be
£1,050 if the rate of interest were 5 per cent.
This is moreover no idle consideration as far as he is
concerned. For the £1,000 used as capital
would yield him £1,050 if he lent it out instead of
employing it productively. Thus, insofar as he
advances the £1,000 to himself as capital, he is
advancing himself £1,050. Il faut bien se
rattraper sur quelqu’un et fusse-t-il sur lui méme![c]

The value of commodities worth £1,000 is
£1,050 as capital. This means that capital is
not a simple quantity. It is not a simple commodity,
but a commodity raised to a higher power; not a simple
magnitude, but a proportion. It is a proportion of the
principal, a given value, to itself as surplus-value.
The value of C is C
(1+1/x) (for one year) or
C+C/x. It is no more
possible by means of the elementary rules of calculation to
understand capital, that is, the commodity raised to a
higher power, or money raised to a higher power, than it is
to understand or to calculate the value of x in the
equation ax=n.

Just as in the case of interest, part of the
profit, of the surplus-value produced by capital, appears to
have been advanced by the capitalist, so also in
agricultural production another part of
surplus-value—rent—appears to have been
advanced. This seems to be less obviously irrational
because in this case rent appears to be the annual price of
the land which thus enters into production as a
commodity. A “price of land” is indeed
even more irrational than a price of capital, but this is
not apparent in the form as such. Because in this case
the land appears to be the use-value of a commodity and the
rent its price. (The irrationality consists in this,
that land, i.e., something which is not the product of human
labour, has a price, that is, a value expressed in money and
consequently a value, and is therefore to be regarded as
materialised social labour.) Considered purely
formally, land, just as any other commodity, is expressed in
two ways,
as use-value and as exchange-value, and the
exchange-value is expressed nominally as price, that is, as
something which the commodity as use-value is absolutely
not. On the other hand, in the statement: [a capital
of] £1,000 equals £1,050, or £50 is the
annual price of £1,000, something is compared with
itself, exchange-value with exchange-value, and the
exchange-value as something different from itself is
supposed to be its own price, that is, the exchange-value
expressed in money.

| Thus two forms of
surplus-value—interest and rent, the results of
capitalist production—enter into it as prerequisites,
as advances which the capitalist himself makes; for
him, therefore, they do not represent any surplus-value,
i.e., any surplus over and above the advances made.
As far as these forms of surplus-value are concerned,
it appears to the individual capitalist that the
production of surplus-value is a part of the production
costs of capitalist production, and that the
appropriation of other people’s labour and of the surplus
over and above the value of the commodities consumed in the
process (whether these enter into the constant or into the
variable capital) is a dominating condition of this mode of
production. To a certain extent this applies also to
average profit, insofar as it constitutes an element of
cost-price, and hence a condition of supply, of the very
creation of the commodity. Nevertheless, the
industrial capitalist rightly regards this surplus, this
part of surplus-value—although it constitutes an
element of production—as a surplus over his
costs; he does not regard it as belonging to his
advances in the same way as interest and rent. In
critical moments, profit too confronts the capitalist in
fact as a condition of production, since he curtails or
stops production when profit disappears or is reduced to a
marked degree as a result of a fall in prices. Hence
the nonsensical pronouncements of those who consider the
different forms of surplus-value to be merely forms of
distribution; they are just as much forms of
production. |

| It might appear that
in the trinity land—rent, capital—profit
(interest), labour—wages, the last group is the most
rational. At least it states the source from which
wages flow. But it is on the contrary the most
irrational of them all, and the basis for the other two, in
the same way as wage-labour in general presupposes
land in the form of landed property and the
product
in the form of capital. Only when labour
confronts its conditions [of production] in this form, is it
wage-labour. As wage-labour it is defined by the
formula labour—wages. Since wages here appear to
be the specific product of labour, its sole product (and
they are indeed the sole product of labour for the
wage-worker), the other parts of value—rent and
profit (interest)—appear to flow just as
necessarily from other specific sources. And just as
that part of the value of the product which consists of
wages [is conceived] as the specific product of
labour, so those parts of value which are made up of rent
and profit must be regarded as specific results of agencies
for which they exist and to which they accrue, that
is, as offspring of the earth and of capital,
respectively. |

### [4. The Process of Ossification of the
Converted Forms of Surplus-Value and Their Ever Greater
Separation from Their Inner Substance—Surplus
Labour. Industrial Profit as “Wages for the
Capitalist”]

| Let us consider the
road travelled by capital before it appears in the form of
interest-bearing capital.

In the immediate process of production, the matter is
fairly simple. Surplus-value has not as yet assumed a
separate form, apart from the fact that it is
surplus-value as distinct from the value which is equivalent
to the value reproduced in the product. In the same
way as value in general consists of labour, so surplus-value
consists of surplus labour, unpaid labour. Hence
surplus-value is only measured by that part of capital which
really changes its value—the variable capital, i.e.,
the capital which is laid out in wages. Constant
capital appears only as the condition enabling the variable
part of capital to operate. It is quite simple: if
with £100, i.e., the labour of 10 [men], one buys the
labour of 20 [men] (that is, commodities in which the labour
of 20 [men] is embodied), the value of the product will be
£200 and the surplus-value will amount to £100,
equal to the unpaid labour of 10 [men]. Or, supposing
20 men worked half a day each for themselves and half for
capital—20 half-days equal 10 whole ones—the
result would be the same as if only 10 men were paid and the
others worked for the capitalist gratis.

Here, in this embryonic state, the relationship is still
very obvious, or rather it cannot be misunderstood.
The difficulty is simply to discover how this appropriation
of labour without any equivalent arises from the law of
commodity exchange—out of the fact
that commodities exchange for one another
in proportion to the amount of labour-time embodied in them—and, to start with, does not contradict this law.

| The circulation
process obliterates and obscures the connection. Since
here the mass of surplus-value is also determined by the
circulation time of capital, an element foreign to
labour-time seems to have entered.

Finally, in capital as the finished phenomenon, as it
appears as a whole, [as] the unity of the circulation and
the production process, as the expression of the
reproduction process—as a definite sum of values which
produces a definite amount of profit (surplus-value) in a
definite time, a definite period of circulation—in
capital in this form the production and circulation
processes exist only as a reminiscence and as aspects which
determine the surplus-value equally, thereby
disguising its simple nature. Surplus-value now
appears as profit. This profit is, first, received for
a definite period of circulation of capital, and this period
is distinct from the labour-time; it is, secondly,
surplus-value calculated and drawn not on that part of
capital from which it originates directly, but quite
indiscriminately on the total capital. In this way its
source is completely concealed. Thirdly, although the
mass of profit is still quantitatively identical in this
first form of profit with the mass of surplus-value produced
by the individual capital, the rate of profit is, from the
very beginning, different from the rate of surplus-value;
since the rate of surplus-value is s/v and the rate
of profit is s/c+v. Fourthly, if the rate of
surplus-value is presumed given, it is possible for the rate
of profit to rise or to fall and even to move in the
opposite direction to the rate of surplus-value.

Thus, surplus-value in the first form of profit already
assumes a form which not only makes it difficult to perceive
that it is identical with surplus-value, i.e., surplus
labour, but appears directly to contradict this view.

Furthermore, as a result of the conversion of profit into
average profit, the establishment of the general rate
of profit and, in connection with it and determined by it,
the conversion of values into cost-prices, the profit of the
individual capital becomes different from the
surplus-value produced by the individual capital in its
particular sphere of production, and different,
moreover, not only in the way it is expressed—i.e.,
rate of profit as distinct from rate of
surplus-value—but it becomes
substantially different, that is, in this context,
quantitatively different. Profit does not
merely seem to be different, but is now in
fact different from surplus-value not only with regard to
the individual capital but also with regard to the total
capital in a particular sphere of production. Capitals
of equal magnitude yield equal profits; in other words,
profit is proportional to the size of the capital. Or
profit is determined by the amount of capital
advanced. The relation of profit to the organic
composition of capital is completely obliterated and no
longer recognisable in all these formulae. On the
other hand, it is quite obvious that capitals of the same
magnitude which set in motion very different amounts of
labour, thus commanding very different amounts of surplus
labour and consequently producing very different amounts of
surplus-value, yield the same amount of profit.
Indeed, the basis itself—the determination of the
value of commodities by the labour-time embodied in
them—appears to be invalidated as a result of the
conversion of values into cost-prices.

In this quite alienated form of profit and in the same
measure as the form of profit hides its inner core, capital
more and more acquires a material form, is transformed more
and more from a relationship into a thing, but a thing which
embodies, which has absorbed, the social relationship, a
thing which has acquired a fictitious life and independent
existence in relation to itself, a natural-supernatural
entity; in this form of capital and profit it appears
superficially as a ready-made pre-condition. It is the
form of its reality, or rather its real form of
existence. And it is the form in which it exists in
the consciousness and is reflected in the imagination of its
representatives, the capitalists.

This fixed and ossified (metamorphosed) form of profit
(and thereby of capital as its producer, for capital is the
cause and profit is the result; capital is the reason,
profit is the effect; capital is the substance, profit is
the adjunct; capital is capital only insofar as it yields
profit, only insofar as it is a value which produces profit,
an additional value)—and therefore also of capital as
its cause, capital which maintains itself and expands by
means of profit—the external aspect of this ossified
form is strengthened even more by the fact that the same
process of the equalisation of capital, which gives profit
the form of average profit, separates part of it in the form
of rent as something independent of it and arising
from a different foundation, the land. It is true that
rent originally emerges as a part of profit which the farmer
pays to the landlord. But since this surplus profit is
not pocketed by
the farmer, and the capital he employs does not differ in
any way as capital from other capitals (it is precisely
because surplus profit is not derived from capital as such
that the farmer pays it to the landlord), the land itself
appears to be the source of this part of the value of the
commodity (its surplus-value) and the landlord [appears to
represent] the land only |
as a juridical person.

If the rent is calculated on the capital advanced, then a
thread still remains which indicates its origin as a
distinct part of profit, that is, of surplus-value in
general. (The position is, of course, quite different
in a social order where landed property exploits labour
directly. In that case, it is not difficult to
recognise the origin of surplus wealth.) But the rent
is paid on a definite area of land; it is capitalised in the
value of the land; this value rises and falls in accordance
with the rise or fall of rent. The rise or fall of
rent is calculated with regard to a piece of land which
remains unchanged (whereas the amount of capital operating
on it changes); the difference in the types of land is
reflected in the amount of rent which has to be paid for a
given yardage, the total rental is calculated on the total
area of the land in order to determine the average rental,
for example, of a square yard. Rent, like every
phenomenon created by capitalist production, appears at the
same time as a stable, given pre-condition existing at any
particular moment, and thus, it is for each individual an
independently existing magnitude. The farmer has to
pay rent, so much per acre of land, according to the quality
of the land. If its quality improves or deteriorates,
then the rent he has to pay on so many acres rises or
falls. He has to pay rent for the land quite
irrespective of the capital he employs on it, just as he has
to pay interest irrespective of the profit he makes.

The calculation of rent on industrial capital is another
important formula of political economy which demonstrates
the inner connection between rent and profit, its
basis. But this connection does not appear in
reality, for the calculation of rent is based on the real
area of land, the intermediate links are thereby eliminated
and rent acquires its externalised independent aspect.
It is an independent form only in this externalisation, in
its complete separation from its antecedents. So many
square yards of land bring in so much rent. In this
formula, in which rent, a part of surplus-value, is
represented in relation to a particular natural element,
independent of human labour, not only the nature of
surplus-value is completely obliterated, because the
nature
of value itself is obliterated; but, just as the source
of rent appears to be land, so now profit itself
appears to be due to capital as a particular material
element of production. Land is part of nature and
brings in rent. Capital consists of products and these
bring in profit. That one use-value which is produced
brings in profit, while another which is not produced brings
in rent are simply two forms in which things produce
value, and the one form is just as comprehensible and as
incomprehensible as the other.

It is clear that, as soon as surplus-value [is split up]
into different, separate parts, related to various
production elements—such as nature, products,
labour—which only differ physically, that is,
as soon as in general surplus-value acquires special
forms, separate from one another, independent of one another
and regulated by different laws, the common
unit—surplus-value—and consequently the nature
of this common unit, becomes more and more unrecognisable
and does not manifest itself in the appearance but
has to be discovered as a hidden mystery. This
assumption of independent forms by the various parts—and their confrontation as independent forms—is
completed as a result of each of these parts being related
to a particular element as its measure and its special
source; in other words, each part of surplus-value is
conceived as the effect of a special cause, as an adjunct of
a particular substance. Thus profit is related to
capital, rent to land, wages to labour.

These ready-made relations and forms, which appear as
pre-conditions in real production because the capitalist
mode of production moves within the forms it has created
itself and which are its results, confront it equally as
ready-made pre-conditions in the process of
reproduction. As such, they in fact determine the
actions of individual capitalists, etc., and provide the
motives, which are reflected in their consciousness.
Vulgar political economy does nothing more than express in
doctrinaire fashion this consciousness, which, in respect of
its motives and notions, remains in thrall to the appearance
of the capitalist mode of production. And the more it
clings to the shallow, superficial appearance, only bringing
it into some sort of order, the more it considers that it is
acting “naturally” and avoiding all abstract
subtleties.

| In connection with
the circulation process dealt with above[d] it has to be added that the
categories arising out of the
circulation process crystallise as attributes of
particular sorts of capital, fixed, circulating and so on,
and thus appear as definite material attributes of certain
commodities.

In the final state in which profit, assumed as something
given, appears in capitalist production, the innumerable
transformations and intervening stages through which it
passes are obliterated and unrecognisable, and consequently
the nature of capital is also unrecognisable. This
state becomes even more rigid owing to the fact that the
same process which gives it its final finish causes part of
the profit to confront it as rent, thus transforming
profit into a particular aspect of surplus-value, an
aspect based on capital as a special material instrument of
production, in exactly the same way as rent is based on
land; thus this state, separated from its inner essence by a
mass of invisible intermediate links, reaches an even more
externalised form, or rather the form of absolute
externalisation, in interest-bearing capital, in the
separation of interest from profit in interest-bearing
capital as the simple form of capital, the form in which
capital is antecedent to its own reproduction process.
On the one hand, this expresses the absolute form of capital
M—M', self-expanding value. On the other hand,
the intermediate link C, which still exists in genuine
merchant capital whose formula is M—C—M', has
disappeared. Only the relation of M to itself and
measured by itself remains. It is capital expressly
removed, separated from the process, as an antecedent it
stands outside the process whose result it is and through
which alone it is capital.

{[Here] the fact is disregarded that interest may be a
mere transfer and need not represent real surplus-value, as,
for example, when money is lent to a
“spendthrift”, i.e., for consumption. The
position may be similar when money is borrowed in order to
make payments. In both cases it is loaned as
money, not as capital, but it becomes capital to its
owner through the mere act of lending it out. In the
second case, [if it is used to] discount [bills] or as a
loan on temporarily not vendible commodities, it can be
associated with the circulation process of capital, the
necessary conversion of commodity capital into money
capital. Insofar as the acceleration of this
conversion process—such acceleration is a general
feature of credit—speeds up reproduction, and
therefore the production of surplus-value, the money lent is
capital. On the other hand, insofar as it only serves
to pay debts without accelerating the reproduction
process, perhaps even
limiting it or making it impossible, it is a mere
means of payment, only money for the borrower, and
for the lender it is, in fact, capital independent of the
process of capital. In this case interest, like
profit upon expropriation, is a fact independent of
capitalist production—the production of
surplus-value. It is in these two forms of
money—money as means of purchase of commodities
intended for consumption and as means of payment of
debts—that interest, like profit upon expropriation,
constitutes a form which, although it is reproduced in
capitalist production, is nevertheless independent of it and
[represents] a form of interest which belongs to earlier
modes of production. It is in the nature of capitalist
production, however, that money (or commodities) can exist
as capital and can be sold as capital outside the production
process, and that this can also be the case with the older
forms, which are not converted into capital but only serve
as money.

The third of the older forms of interest-bearing capital
is based on the fact that capitalist production does
not as yet exist, but that profit is still acquired
in the form of interest and the capitalist appears as a mere
usurer. This implies: first, that the producer still
works independently with his own means of production, and
that the means of production do not yet work with him[e] (even if slaves form a
part of these means of production, for in these
circumstances slaves do not constitute a separate economic
category any more than draught animals do; there is at best
a physical difference between them, i.e., dumb instruments,
and speaking and feeling instruments); secondly, that the
means of production belong only nominally to the producer;
in other words, that because of some incidental
circumstances he is unable to reproduce them from the
proceeds of the sale of his commodities. These forms
of interest-bearing capital occur, consequently, in all
social formations which include commodity and money
circulation, whether slave labour, serf labour or free
labour is predominant in them. In the last-mentioned
form, the producer pays the capitalist his surplus labour in
the form of interest, which therefore includes profit.
We have here the whole of | capitalist production without
its advantages, the development of the social forms of
labour and of the productivity of labour to which they give
rise. This form is very prevalent among peasant
nations who already have
to buy a portion of the necessaries of life and means of
production as commodities (alongside whom, therefore,
separate urban industries already exist) and who, in
addition, have to pay taxes, rent, etc., in money.}

Interest-bearing capital functions as such only insofar
as the money lent is really converted into capital and
produces a surplus of which interest constitutes a
part. This does not however invalidate the fact that
interest and interest-bearing have become attributes of it
independently of the [production] process. Any more
than the use-value of cotton as cotton is nullified by the
fact that it has to be spun or used in some other way, in
order to demonstrate its useful properties. And thus
capital [demonstrates] its capacity to yield interest only
by becoming part of the production process. But
labour-power likewise demonstrates its capacity to produce
value when it functions as labour, is realised as labour in
this process. This does not rule out that, in itself,
as a faculty, it is a value-creating activity and does not
merely become such as a result of the process, but rather is
antecedent to the process. It is bought as such.
A person can buy it without setting it to work (as, for
example, when a theatre manager hires an actor not in order
to give him a role in a play, but to prevent him from
performing in a rival theatre). Whether or not a man
who buys labour-power uses its faculty for which he pays,
i.e., its faculty to create value, is of no concern to the
man who sells it, and makes no difference to the commodity
sold, just as it makes no difference whether the man who
buys capital uses it as such, that is, employs the quality
of creating value which is inherent in it, in the
[production] process. What he pays for in these two
cases is the surplus-value and the capacity of maintaining
its own value—potentially, by the very nature of the
commodity bought—contained in the capital in the one
case and in the labour-power in the other. This is why
the capitalist who operates with his own capital regards
part of the surplus-value as interest, that is, as
surplus-value which is yielded by the production process,
because it has been brought into the production process by
the capital independently of the process.

Rent and the relationship land—rent may appear as a
much more mysterious form than that of interest, [and the
relationship] capital—interest. But the
irrational element in rent is not formulated in such a way
that it expresses a relation of capital itself.
Since land itself is productive (of use-value) and is
itself a living productive force (of use-value or for the
creation of use-values), it is possible either
superstitiously to confuse use-value with exchange-value,
i.e., to confuse it with a specific social form of the
labour contained in the product. In this case, the
reason for the irrationality lies in itself, since rent as a
particular category is independent of the capitalist process
as such. Or “enlightened” political
economy may deny altogether that rent is a form of
surplus-value, because it is not connected with either
labour or capital, and declare that it is merely a surcharge
which the landowner is able to make as a result of his
monopoly of landownership.

The position is different in the case of interest-bearing
capital. Here it is a question not of a relation which
is alien to capital, but of the capital relation itself; of
a relation which arises out of capitalist production, is
specific to it, and expresses the essence of capital; of an
aspect of capital in which it appears as capital.
Profit is still related to operating capital, to the
process in which surplus-value (and profit itself) is
produced. Whereas in profit the form of
surplus-value has become alienated, strange, so that its
simple form and therefore its substance and source of origin
are not immediately discernible, this is not the case in
interest-bearing capital; on the contrary it is
precisely this alienated form which is presupposed
and declared to be the essential feature of
interest. The alienated form has assumed an
independent and rigid existence as something
antagonistic to the real nature of
surplus-value. The relationship of capital to labour
is obliterated in interest-bearing capital. In fact,
interest presupposes profit, of which it is only a
part. The way in which surplus-value | is divided into interest and
profit and distributed between different sorts of
capitalists is actually a matter of complete indifference to
the worker.

Interest is definitely regarded as the offspring
of capital, separate, independent and outside the capitalist
process itself. It is due to capital as
capital. It enters into the production process and
therefore proceeds from it. Capital is impregnated
with interest. It does not derive interest from the
production process, but brings it into it. The surplus
of profit over interest, the amount of surplus-value which
capital derives solely from the production process, i.e.,
the surplus-value it produces as operating capital, acquires
a separate form, namely, that of industrial profit
(employer’s profit, industrial or commercial, depending on
whether the stress is laid on the production process or
the
circulation process), in contrast to interest, a value
created by capital in itself and due to
capital, to capital as capital. Thus
even the last form of surplus-value, which to some extent
recalls its origin, is separated and conceived not only as
an alienated form, but as one which is in direct
contradiction to its origin; consequently the nature of
capital and of surplus-value as well as that of capitalist
production in general is, finally, completely mystified.

Industrial profit, in contradistinction to
interest, represents capital in the [production]
process in contradistinction to capital outside the process,
capital as a process in contradistinction to capital as
property; it therefore represents the capitalist as
functioning capitalist, as representative of working
capital as opposed to the capitalist as mere
personification of capital, as mere owner of capital.
He thus appears as working capitalist in contrast to
himself as capitalist, and further, as worker
in contrast to himself as mere owner.
Consequently, insofar as any relation between surplus-value
and the process is still preserved, or apparent, this is
done precisely in the form in which the very notion of
surplus-value is negated. Industrial profit is
resolved into labour, not into unpaid labour of other
people but into wage-labour, into wages for the
capitalist, who in this case is placed into the same
category as the wage-worker and is merely a more highly paid
worker, just as in general wages vary greatly.

Money is indeed not converted into capital as a result of
the fact that it is exchanged against the material
conditions required for the production of the commodity, and
that in the labour process these conditions—materials
of labour, instruments of labour and labour—begin to
ferment, act on one another, combine with one another,
undergo a chemical process and form the commodity like a
crystal as a result of this process. The outcome of
this would be no capital, no surplus-value. This
abstract form of the labour process is common to all modes
of production whatever their social form or their particular
historical character. The process only becomes a
capitalist process, and money is converted into capital
only: 1) if commodity production, i.e., the
production of products in the form of commodities, becomes
the general mode of production; 2) if the commodity (money)
is exchanged against labour-power (that is, actually against
labour) as a commodity, and consequently if labour is
wage-labour; 3) this is the case however only when the
objective conditions, that is (considering the production
process as a whole),
the products, confront labour as independent forces, not
as the property of labour but as the property of someone
else, and thus in the form of capital.

Labour as wage-labour and the conditions of labour as
capital (that is, consequently, as the property of the
capitalist; they are themselves properties personified in
the capitalist and whose property in them, their property in
themselves, they represent as against labour) are
expressions of the same relationship, only seen from
opposite poles. This condition of capitalist
production is its invariable result. It is its
antecedent posited by itself. Capitalist
production is antecedent to itself and is therefore posited
with its conditions as soon as it has evolved and functions
in circumstances appropriate to it. However, the
capitalist production process is not just a
production process pure and simple. The contradictory,
socially determined feature of its elements evolves, becomes
reality only in the process itself, and this feature is the
predominant characteristic of the process, which it turns
precisely into that socially determined mode of production,
the capitalist process of production.

| The formation
process of capital—when capital, i.e., not any
particular capital, but capital in general, only
evolves—is the dissolution process, the
parting product of the social mode of production
preceding it. It is thus a historical process,
a process which belongs to a definite historical
period. This is the period of its historical
genesis. (In the same way the existence of the
human race is the result of an earlier process which organic
life passed through. Man comes into existence only
when a certain point is reached. But once man has
emerged, he becomes the permanent pre-condition of human
history, likewise its permanent product and result, and he
is pre-condition only as his own product and
result.) It is here that labour must separate itself
from the conditions of labour in their previous form, in
which it was identical with them. It becomes
free labour only in this way and only thus are its
conditions converted into capital and confront it as
such. The process of capital becoming capital or its
development before the capitalist production process
exists, and its realisation in the capitalist process of
production itself belong to two historically different
periods. In the second, capital is taken for
granted, and its existence and automatic functioning is
presupposed. In the first period, capital is the
sediment resulting from the process of dissolution of a
different social formation. It is the product
of a different [formation],
not the product of its own reproduction, as is the case
later. The existing basis on which capitalist
production works is wage-labour, which is however at the
same time reproduced continuously by it. It is
therefore based also on capital, the form assumed by
the conditions of labour, as its given prerequisite, a
prerequisite however which, like wage-labour, is its
continuous presupposition and its continuous product.

On this basis, money, for example, is, as such,
capital because the conditions of production in themselves
confront labour in an alienated form, they confront it as
someone else’s property and thus dominate it. Then
capital can also be sold as a commodity which has
this attribute, that is, it can be sold as capital, as is
the case when capital is loaned at interest.

But while thus the aspect of the specific social
determination of capital and of capitalist
production—a specific social determination which is
expressed juridically in capital as property, in capital
property as a special form of property—is
established, and interest, therefore, appears
as that part of surplus-value which is produced by
capital in this determinate form, independent of this
determination considered as the determination of the process
as a whole, then the other part of surplus-value, the
surplus of profit over interest, industrial profit,
must obviously represent value which does not arise from
capital as such, but from the production process separated
from its social determination, which has indeed already
found its special mode of existence in the formula,
capital—interest. Separated from capital,
however, the production process becomes labour
process in general. [Consequently] the industrial
capitalist as distinct from himself as capitalist, that is,
the industrialist in contradistinction to himself as
capitalist, i.e., owner of capital, is thus merely a simple
functionary in the labour process; he does not represent
functioning capital, but is a functionary irrespective of
capital, and therefore a particular representative of the
labour process in general, a worker. In this
way, industrial profit is happily converted into
wages and is equated with ordinary wages, differing
from them only quantitatively and in the special form in
which they are paid, i.e., that the capitalist pays wages to
himself instead of someone else paying them to him.

The nature of surplus-value (and therefore of capital) is
not only obliterated in this final division of profit into
interest and industrial profit, but it is
definitely presented as something quite different.

Interest represents part of surplus-value; it is
merely a portion of profit which is separated and classified
under a special name, the portion which accrues to the
person who merely owns the capital, the portion he
intercepts. But this merely quantitative
division is turned into a qualitative division which
transforms both parts in such a way that not even a trace of
their original essence seems to remain. | This is first of all confirmed
by the fact that interest does not appear as a
division which makes no difference to production, and takes
place only “occasionally” when the industrialist
operates with someone else’s capital. Even when he
operates with his own capital his profit is split into
interest and industrial profit, thereby
transforming the mere quantitative division into a
qualitative one which does not depend on the
accidental circumstance whether the industrialist owns or
does not own his capital; the qualitative division
arises out of the nature of capital and of capitalist
production itself. There exist not simply two portions
of profit distributed to two different persons, but two
separate categories of profit which are related in
different ways to capital and consequently to different
determinate aspects of capital. Apart from the reasons
mentioned earlier, this assumption of an independent
existence is established all the more easily since
interest-bearing capital appears on the scene as a
historic form before industrial capital and continues to
exist alongside it in its old form and it is only in the
course of the development of industrial capital that the
latter subordinates it to capitalist production by turning
it into a special form of industrial capital.

The mere quantitative division thus becomes a qualitative
one. Capital is itself divided. Insofar as it is
a prerequisite of capitalist production, insofar,
therefore, as it expresses a specific social
relation, the alienated form of the conditions of
labour, it is realised in interest. It
realises its character as capital in interest. On the
other hand, insofar as it operates in the process, this
process appears as something separate from its specific
capitalist character, from its specific social
determination—as mere labour process in
general. Therefore, insofar as the capitalist plays
any part in it, he does so not as a capitalist—for
this aspect of his character is allowed for in
interest—but as a functionary of the labour process in
general, as a worker, and his wages take the form of
industrial profit. It is a special type of
labour—labour—of superintendence—but after
all types of labour in general differ from one another.

Thus the nature of surplus-value, the essence of capital
and the character of capitalist production are not only
completely obliterated in these two forms of surplus-value,
they are turned into their opposites. But even insofar
as the character and form of capital are complete [it is]
nonsensical [if] presented without any intermediate links
and expressed as the subjectification of objects, the
objectification of subjects, as the reversal of cause and
effect, the religious quid pro quo, the pure form of
capital expressed in the formula M—M'. The
ossification of relations, their presentation as the
relation of men to things having a definite social character
is here likewise brought out in quite a different manner
from that of the simple mystification of commodities and the
more complicated mystification of money. The
transubstantiation, the fetishism, is complete.

Thus interest in itself expresses precisely the
existence of the conditions of labour as capital in
their social contradiction and in their transformation into
personal forces which confront labour and dominate
labour. It sums up the alienated character of
the conditions of labour in relation to the activity of the
subject. It represents the ownership of capital or
mere capital property as the means for appropriating the
products of other people’s labour, as the control over other
people’s labour. But it presents this character of
capital as something belonging to it apart from the
production process itself and by no means as resulting from
the specific determinate form of the production process
itself. Interest presents capital not in opposition to
labour, but, on the contrary, as having no relation to
labour, and merely as a relation of one capitalist to
another; consequently, as a category which is quite
extrinsic to, and independent of, the relation of capital to
labour. The division of the profit amongst the
capitalists does not affect the worker. Thus
interest, the form of profit which is the special
expression of the contradictory character of capital,
is an expression in which this contradiction is completely
obliterated and explicitly left out of account. Apart
from expressing the capacity of money, commodities, etc., to
expand their own value, interest, insofar as it presents
surplus-value as something deriving from money, commodities,
etc., as their natural fruit, is therefore merely a
manifestation of the mystification of capital in its most
extreme form; insofar as it at all represents a social
relation as such, it expresses | merely relations between
capitalists, and by no means relations between capital and
labour.

On the other hand, the existence of this form of
interest gives the other part of profit the
qualitative form of industrial profit, of wages for
the labour of the industrial capitalist not in his capacity
as capitalist, but as a worker (industrialist).
The particular functions which the capitalist as such has to
perform in the labour process and which are incumbent
precisely on him as distinct from the workers, are
represented as mere labour functions. He produces
surplus-value not because he works as a capitalist,
but because he, the capitalist, also works. It
is just as if a king, who, as king, has nominal command of
the army, were to be assumed to command the army not because
he, as the owner of the kingship, commands, plays the
role of commander-in-chief, but on the contrary that he is
king because he commands, exercises the function of
commander-in-chief. If thus one part of surplus-value,
i.e., interest, is completely separated from the process of
exploitation, then the other part, that is, industrial
profit, emerges as its direct opposite, not as appropriation
of other people’s labour, but as the creation of value by
one’s own labour. This part of surplus-value is
therefore no longer surplus-value, but its opposite, an
equivalent given for labour performed. Since the
alienated character of capital, its opposition to
labour, is displayed outside the exploitation process, that
is, outside the sphere where the real action of this
alienation takes place, all the contradictory features
are eliminated from this process itself. Consequently,
real exploitation, the sphere where these
contradictory features are put into practice and where they
manifest themselves in reality, appears as its exact
opposite, as a substantially different kind of labour, which
belongs however to the same socially determined form of
labour—wage-labour—to the same category
of labour. The work of the exploiter is identified
here with the labour which is exploited.

This conversion of one part of profit into industrial
profit arises, as we have seen, from the conversion of
the other part into interest. The social form
of capital—that it is property—devolves on the
latter part; on the former part devolves the economic
function of capital, its function in the labour process, but
detached, abstracted from the social form, the contradictory
form in which it exercises this function. How this is
further justified by learned reasoning is to be examined in
greater detail in connection with the apologetic
interpretation of profit as [remuneration for] labour of
superintendence. Here the capitalist is equated with
his manager, as Adam Smith already noted.

Industrial profit does indeed include some part of
wages—in those cases where the manager does not draw
them. Capital appears in the production process as the
director of labour, as its commander (captain of industry)
and thus plays an active role in the labour process.
But insofar as these functions arise out of the specific
form of capitalist production—that is, out of the
domination of capital over labour as its labour and,
therefore, over the workers as its instruments, out of the
nature of capital, which appears as the social
entity, the subject of the social form of labour
personified in it [capital] as power over labour—this
work (it may be entrusted to a manager) which is linked with
exploitation is, of course, labour which, in the same way as
that of the wage-worker, enters into the value of the
product; just as in the case of slavery, the labour of
the overseer has to be paid for like that of a
worker. If man attributes an independent existence,
clothed in a religious form, to his relationship to
his own nature, to external nature and to other men so that
he is dominated by these notions, then he requires
priests and their labour. With the
disappearance of the religious form of consciousness and of
these relationships, the labour of the priests will likewise
cease to enter into the social process of production.
The labour of priests will end with the existence of the
priests themselves and, in the same way, the labour
which the capitalist performs qua capitalist, or
causes to be performed by someone else, will end together
with the existence of the capitalists. (The example of
slavery has to be amplified by quotations.)

Incidentally, these apologetics aimed at reducing profit
to wages, i.e., the wages of superintendence, boomerang on
the apologists themselves, for English | socialists have rightly
declared: Well, in future, you shall only draw the wages
usually paid to managers. Your industrial profit
should not be reduced to wages of superintendence or
direction of labour merely in words, but in practice.

<It is of course impossible to examine in detail
this nonsense and twaddle with all its contradictions.
For example, industrial profit rises and falls in inverse
[proportion] to interest or rent. The
superintendence of labour, the particular amount of
labour really performed by the capitalist, has however
nothing whatever to do with it, any more than with the
decline in wages. This kind of wages has the
peculiarity that it falls and rises in inverse proportion to
real wages (insofar as the rate of profit is determined by
the rate of surplus-value, and insofar as all the
conditions of
production remain unchanged, it is determined
exclusively by this). But “little
contradictions” of this kind do not prevent the
apologetic vulgarian from regarding them as identical.
The labour performed by the capitalist remains absolutely
the same whether he pays low or high wages, whether the
worker receives high or low wages. Just as the wages
paid for a working-day do [not] affect the amount of labour
involved. Moreover, the worker works more intensively
when he gets better wages. The labour of the
capitalist, on the other hand, is something strictly
determined, it is determined both qualitatively and
quantitatively by the amount of labour he has to direct, not
by the wages paid for this labour. He can no more
intensify his labour than the cotton operative can work up
more cotton than is available in the mill.>

And they[f] add: the
function of the manager, the labour of superintendence, can
now be bought on the market in the same way as any other
kind of labour-power, and is relatively just as cheap to
produce and therefore to buy. Capitalist production
itself has brought about that the labour of superintendence
walks the streets, separated completely from the ownership
of capital, whether one’s own or other people’s. It
has become quite unnecessary for capitalists to
perform this labour of superintendence. It is actually
available, separate from capital, not in the sham separation
which exists between the industrial capitalist and the
moneyed capitalist, but that between industrial managers,
etc., and capitalists of every sort. The best
demonstration of this are the co-operative factories built
by the workers themselves. They are proof that the
capitalist as functionary of production has become just as
superfluous to the workers as the landlord appears to the
capitalist with regard to bourgeois production.
Secondly: Insofar as the labour of the capitalist
does not arise from the [production] process as a capitalist
production process, and therefore disappears automatically
with the disappearance of capital, i.e., insofar as it is
not simply a name for the function of exploiting other
people’s labour, but insofar as it arises from the social
form of labour—co-operation, division of labour,
etc.—it is just as independent of capital as is this
form [of labour] itself once it has stripped off its
capitalist integument. To assert that this labour, as
capitalist labour, as the function of the capitalist,
is necessary, only shows that the vulgarian cannot
conceive the social productive forces and the
social character of labour developed within the framework of
capital as something separate from the capitalist form, from
the form of alienation, from the antagonism and
contradiction of its aspects, from its inversion and quid
pro quo. (And this is precisely what we
say.) |XV-919||

||XVIII-1142| <The
capitalist’s real profit is largely profit upon
expropriation and the “individual labour” of the
capitalist has an especially wide scope in this field, where
it is not a question of the creation of surplus-value but of
the distribution of the aggregate profit of the whole class
of capitalists among the individual members in the field of
commerce. This does not concern us here. Certain
kinds of profit, those based on speculation for example, are
restricted merely to this field. It is therefore quite
impossible to examine them here. It is an indication
of the bovine stupidity of vulgar economy that (particularly
in order to represent profit as “wages”) it
confuses this with profit insofar as it originates in
surplus-value. See the worthy Roscher, for
example. It is thus quite natural that, when dealing
with the division of the aggregate profit of the whole
capitalist class, such asses should mix up the items in the
accounts and grounds for compensation of capitalists in
different spheres of production with the grounds for the
exploitation of the workers by the capitalists, with the
grounds, so to speak, for the origin of profit as
such.> |XVIII-1142||

### [5. Essential Difference Between Classical and
Vulgar Economy. Interest and Rent as Constituent
Elements of the Market Price of Commodities. Vulgar
Economists Attempt to Give the Irrational Forms of Interest
and Rent a Semblance of Rationality]

||XV-919| It is in
interest-bearing capital—in the division of
profit into interest and [industrial] profit—that
capital finds its most objectified form, its pure fetish
form, and the nature of surplus-value is presented as
something which has altogether lost its identity.
Capital—as an entity—appears here as an
independent source of value; as something which creates
value in the same way as land [produces] rent, and labour
wages (partly wages
in the proper sense, and partly industrial profit).
Although it is still the price of the commodity which has to
pay for wages, interest and rent, it pays for them because
the land which enters into the commodity produces the rent,
the capital which enters into it produces the interest, and
the labour which enters into it produces the wages, [in
other words these elements] produce the portions of value
which accrue to their respective owners or
representatives—|
the landowner, the capitalist, and the worker (wage-worker
and industrialist). From this standpoint therefore,
the fact that, on the one hand, the price of commodities
determines wages, rent and interest and, on the other hand,
the price of interest, rent and wages determines the price
of commodities, is by no means a contradiction contained in
the theory, or if it is, it is a contradiction, a vicious
circle, which exists in the real movement.

True, the rate of interest fluctuates, but only like the
market price of any other commodity in accordance with the
ratio of demand and supply. This by no means
invalidates the notion of interest being inherent in capital
just as the fluctuations in the prices of commodities do not
invalidate prices as designations appropriate to
commodities.

Thus land, capital and labour on the one
hand—insofar as they are the sources of rent, interest
and wages and these are the constituent elements of
commodity prices—appear as the elements which create
value, and on the other hand, insofar as they accrue to the
owner of each of these means for the production of value,
i.e., insofar as he derives the portion of the value created
by them, they appear as sources of revenue, and rent,
interest and wages appear as forms of
distribution. (As we shall see later, it is the
result of stupidity that the vulgarians, as opposed to
critical economy, in fact regard forms of distribution
simply as different aspects of forms of production whereas
the critical economists separate them and fail to recognise
their identity.)

In interest-bearing capital, capital appears to be the
independent source of value or surplus-value it
possesses as money or as commodities. And it is indeed
this source in itself, in its material aspect. It must
of course enter into the production process in order to
realise this faculty; but so must land and labour.

One can therefore understand why the vulgar economists
prefer [the formula]: land—rent;
capital—interest; labour—wages, to that used by
Smith and others for the elements of price (or rather for
the parts into which it can be broken down) and where
[the relation]
capital—profit figures, just
as on the whole the capital relation as such is expressed in
this form by all the classical economists. The concept
of profit still contains the inconvenient connection with
the [production] process, and the real nature of
surplus-value and of capitalist production, in
contra-distinction to their appearance, is still more
or less recognisable. This connection is severed when
interest is presented as the intrinsic product of capital
and the other part of surplus-value, industrial profit,
consequently disappears entirely and is relegated to the
category of wages.

Classical political economy seeks to reduce the various
fixed and mutually alien forms of wealth to their inner
unity by means of analysis and to strip away the form in
which they exist independently alongside one another.
It seeks to grasp the inner connection in contrast to the
multiplicity of outward forms. It therefore reduces
rent to surplus profit, so that it ceases to be a specific,
separate form and is divorced from its apparent
source, the land. It likewise divests interest of its
independent form and shows that it is a part of
profit. In this way it reduces all types of revenue
and all independent forms and titles under cover of which
the non-workers receive a portion of the value of
commodities, to the single form of profit. Profit,
however, is reduced to surplus-value since the value of the
whole commodity is reduced to labour; the amount of paid
labour embodied in the commodity constitutes wages,
consequently the surplus over and above it constitutes
unpaid labour, surplus labour called forth by capital and
appropriated gratis under various titles. Classical
political economy occasionally contradicts itself in this
analysis. It often attempts directly, leaving out the
intermediate links, to carry through the reduction and to
prove that the various forms are derived from one and the
same source. This is however a necessary consequence
of its analytical method, | with which criticism and
understanding must begin. Classical economy is not
interested in elaborating how the various forms come into
being, but seeks to reduce them to their unity by means of
analysis, because it starts from them as given
premises. But analysis is the necessary prerequisite
of genetical presentation, and of the understanding of the
real, formative process in its different phases.
Finally a failure, a deficiency of classical political
economy is the fact that it does not conceive the basic
form of capital, i.e., production designed to
appropriate other people’s labour, as a historical
form but as a natural form
of social production; the analysis carried out by the
classical economists themselves nevertheless paves the way
for the refutation of this conception.

The position is quite different as regards vulgar
political economy, which only becomes widespread when
political economy itself has, as a result of its analysis,
undermined and impaired its own premises and consequently
the opposition to political economy has come into being in
more or less economic, utopian, critical and revolutionary
forms. For the development of political economy and of
the opposition to which it gives rise keeps pace with the
real development of the social contradictions and
class conflicts inherent in capitalist production.
Only when political economy has reached a certain stage of
development and has assumed well-established
forms—that is, after Adam Smith—does the
separation of the element whose notion of the phenomena
consists of a mere reflection of them take place, i.e., its
vulgar element becomes a special aspect of political
economy. Thus Say separates the vulgar notions
occurring in Adam Smith’s work and puts them forward
in a distinct crystallised form. Ricardo and
the further advance of political economy caused by him
provide new nourishment for the vulgar economist (who does
not produce anything himself): the more economic theory is
perfected, that is, the deeper it penetrates its
subject-matter and the more it develops as a contradictory
system, the more is it confronted by its own, increasingly
independent, vulgar element, enriched with material which it
dresses up in its own way until finally it finds its most
apt expression in academically syncretic and unprincipled
eclectic compilations.

To the degree that economic analysis becomes more
profound it not only describes contradictions, but it is
confronted by its own contradiction simultaneously with the
development of the actual contradictions in the economic
life of society. Accordingly, vulgar political economy
deliberately becomes increasingly apologetic and
makes strenuous attempts to talk out of existence the ideas
which contain the contradictions. Because he finds the
contradictions in Smith relatively undeveloped, Say’s
attitude still seems to be critical and impartial compared,
for example, with that of Bastiat, the professional
conciliator and apologist, who, however, found the
contradictions existing in the economic life worked out in
Ricardian economics and in the process of being worked out
in socialism and in the struggles of the time.
Moreover, vulgar economy in its early stages does
not find the material fully elaborated and therefore
assists to a certain extent in solving economic problems
from the standpoint of political economy, as, for example,
Say, whereas a Bastiat needs merely to busy himself
with plagiarism and attempts to argue away the
unpleasant side of classical political economy.

But Bastiat does not represent the last stage. He
is still marked by a lack of erudition and a quite
superficial acquaintance with the branch of learning which
he prettifies in the interests of the ruling class.
His apologetics are still written with enthusiasm and
constitute his real work, for he borrows the economic
content from others just as it suits his purpose. The
last form is the academic form, which proceeds
“historically” and, with wise moderation,
collects the “best” from all sources, and in
doing this contradictions do not matter; on the contrary,
what matters is comprehensiveness. All systems are
thus made insipid, | their
edge is taken off and they are peacefully gathered together
in a miscellany. The heat of apologetics is moderated
here by erudition, which looks down benignly on the
exaggerations of economic thinkers, and merely allows them
to float as oddities in its mediocre pap. Since such
works only appear when political economy has reached the end
of its scope as a science, they are at the same time the
graveyard of this science. (That they look down
in an equally superior manner on the phantasies of the
socialists need hardly be stressed.) Even the genuine
thought of a Smith or a Ricardo, and others—not just
their vulgar elements—is made to appear insipid in
these works and becomes a vulgarism. Professor
Roscher is a master of this sort of thing and has
modestly proclaimed himself to be the Thucydides of
political economy. His identification of himself with
Thucydides may perhaps be based on his conception of
Thucydides as a man who constantly confuses cause with
effect.

In the form of interest-bearing capital it becomes
quite obvious that capital without expending any
labour appropriates the fruits of other people’s
labour. For it appears here in a form in which it is
separated from the production process as such. But it
can do this only because, in this form, it indeed enters by
itself, without labour, into the labour process, as an
element which in itself creates value, i.e., is a
source of value. While it appropriates part of the
value of the product without labour, it has also created it
without labour, ex proprio sinu, out of itself.

Whereas the classical, and consequently the critical,
economists are exercised by the form of alienation and seek
to eliminate
it by analysis, the vulgar economists, on the other
hand, feel completely at home precisely with the
alienated form in which the different parts of value
confront one another; just as a scholastic is familiar with
God the Father, God the Son, and God the Holy Ghost, so are
the vulgar economists with land—rent,
capital—interest, and labour—wages. For
this is the form in which these relationships appear to be
directly connected with one another in the world of
phenomena, and therefore they exist in this form in the
thoughts and the consciousness of those representatives of
capitalist production who remain captive to it. The
more the vulgar economists in fact content themselves with
translating common notions into doctrinaire language, the
more they imagine that their writings are plain, in
accordance with nature and the public interest, and free
from all theoretical hair-splitting. Therefore, the
more alienated the form in which they conceive the
manifestations of capitalist production, the closer they
approach the nature of common notions, and the more they
are, as a consequence, in their natural element.

This, moreover, renders a substantial service to
apologetics. For [in the formula:] land—rent,
capital—interest, labour—wages, for example,
the different forms of surplus-value and configurations of
capitalist production do not confront one another as
alienated forms, but as heterogeneous and independent forms,
merely different from one another but not
antagonistic. The different revenues are derived
from quite different sources, one from land, the second from
capital and the third from labour. Thus they do not
stand in any hostile connection to one another because they
have no inner connection whatsoever. If they
nevertheless work together in production, then it is a
harmonious action, an expression of harmony, as, for
example, the peasant, the ox, the plough and the land in
agriculture, in the real labour process, work together
harmoniously despite their dissimilarities.
Insofar as there is any contradiction between them, it
arises merely from competition as to which of the agents
shall get more of the value they have jointly created.
Even if this occasionally brings them to blows, nevertheless
the outcome of this competition between land, capital and
labour finally shows that, although they quarrel with one
another | over the
division, their rivalry tends to increase the value of the
product to such an extent that each receives a larger piece,
so that their competition, which spurs them on, is merely
the expression of their harmony.

Herr Arnd, for example, says in criticism of
Rau:

“Similarly, the author allows himself
to be led by some of his predecessors to adding to the three
elements of national wealth (wages, capital rent, land rent)
a fourth, that of employers’ profit. This entirely
destroys the basis—constructed with such
circumspection by Adam Smith—for any further
development of our science” (!); “such a
development is consequently quite out of the question in the
work under consideration” (Karl Arnd, Die
naturgemäße Volkswirthschaft, gegenüber dem
Monopoliengeiste und dem Communismus, mit einem
Rückblicke auf die einschlagende Literatur, Hanau,
1845, S.477).

By “capital rent” Herr Arnd means
interest (op. cit., p. 123). According to this
one might think that Adam Smith reduces national wealth to
interest, rent and wages, whereas on the contrary he
quite expressly declares that profit results from the
use of capital and repeatedly and expressly states that
interest—insofar as it constitutes
surplus-value at all—is only a form derived
from profit. Thus the vulgar economist reads into his
sources the direct opposite of what they contain.
Where Smith writes “profit” Arnd reads
“interest”. It would be interesting to
know what he supposes Adam Smith’s “interest” to
mean.

This same “circumspect” developer of
“our science” makes the following
interesting discovery:

“In the natural course of the
production of wealth, there is only one phenomenon
which—in fully cultivated countries—seems to be
destined to regulate the rate of interest to some extent,
and it is the ratio in which the amount of wood in the
European forests increases as a result of annual additional
growth. This annual increase takes place quite
independently of their exchange-value” (how
strange that the trees arrange their additional growth
“independently of exchange-value”!) “in
the ratio of 3 to 4 per 100. Accordingly
therefore” <since this additional increase
in the number of trees is “independent of their
exchange-value”, no matter how much their
exchange-value may depend on their additional growth>,
“a decline” (in the rate of interest)
“below the level at present prevailing in the richest
countries is not likely” (loc. cit., pp. 124-25).

This deserves to be called the “rate of interest
originating in the forest”, and in the same work its
inventor has rendered another service to “our
science” as the philosopher of the “dog
tax”.

{Profit (including industrial profit) is proportionate to
the amount of the capital advanced; on the other hand, the
wages
drawn by the industrial capitalist [stand] in inverse
ratio to the amount of capital. [They are]
considerable where the capital is small (because, in this
case, the capitalist is something between an exploiter of
other people’s labour and a person who lives off his own
labour), and insignificant where the capital is large, or
they are quite independent of it in the case where a manager
is [employed]. One part of the labour of
superintendence merely arises from the antagonistic
contradiction between capital and labour, from the
antagonistic character of capitalist production, and belongs
to the incidental expenses of production in the same way as
nine-tenths of the “labour” occasioned by the
circulation process. A conductor does not have to be
the owner of the instruments used by the orchestra, nor is
it one of his functions as a conductor to speculate on the
subsistence costs of the members of the orchestra, or, in
general, to have anything to do with their
“wages”. It is very remarkable that
economists like John Stuart Mill, who cling to the forms of
“interest” and “industrial profit”
in order to convert “industrial profit” into
wages for superintendence of labour, admit along with Smith,
Ricardo and all other economists worth mentioning, that the
average rate of interest is determined by the average rate
of profit, [which according to] Mill stands in inverse ratio
to the rate of wages, and it is therefore nothing but unpaid
labour, surplus labour.

Two facts provide the best proof that the wages of
superintendence do not enter [into the] average rate of
profit at all.

| 1) That in
co-operative factories, where the general manager receives a
salary as in all other factories, and is responsible for the
whole labour of superintendence—the overseers
themselves are simply workers—the rate of profit is
not below, but above, the average rate.

2) That where profit is continuously substantially above
the average rate, as in individual, non-monopolised branches
of business such as those of small shopkeepers, farmers,
etc., this is correctly explained by the economists as being
due to the fact that these people pay themselves their own
wages. Where only the proprietor himself works, his
profit consists of—1) the interest on his small
capital; 2) his wages; 3) that part of the surplus time
which, because of his capital, he is able to work for
himself instead of for someone else; i.e., the part not
already represented by interest. If, however, he
employs workers, then their surplus labour has to be
added.

Of course the worthy Senior (Nassau) also converts
industrial profit into wages of
superintendence. But he forgets this humbug as soon as
it is a question, not of doctrinaire phrases, but of
practical struggles between workers and factory
owners. Thus, he opposes the shortening of the
working-day, because in a working-day of say 11 1/2
hours, the workers allegedly work only one hour for the
capitalist, and the product of this one hour constitutes the
capitalist’s profit (apart from the interest for
which they also work an hour according to his own
calculation). Suddenly here industrial profit is equal
to the value added by the unpaid labour-time of the worker
and not to the value added by the labour which the
capitalist performs in the production process of
commodities. If industrial profit were the product of
the capitalist’s own labour, then Senior should not have
deplored that the workers work only one hour for the
capitalist for nothing instead of two, and even less should
he have said that, if the workers worked only 10 1/2
hours instead of 11 1/2, there [would be] no profit
at all. He should have said that if the workers
worked only 10 1/2 hours instead of 11 1/2, the
capitalist would not receive wages of superintendence for 11
1/2 hours but only for 10 1/2 hours, he would thus
lose one hour’s wages of superintendence. In which
case the workers would answer that if ordinary wages for 10
1/2 hours have to suffice for them, then the higher
wages the capitalist receives for 10 1/2 hours
should suffice for him.

It is incomprehensible how economists like John Stuart
Mill, who are Ricardians and even express the principle that
profit is equal to surplus-value, surplus labour, in the
form that the rate of profit and wages stand in inverse
ratio to one another and that the rate of wages determines
the rate of profit (which is incorrect when put in this
form), suddenly convert industrial profit into the
individual labour of the capitalist instead of into the
surplus labour of the worker, unless the function of
exploitation of other people’s labour is called labour by
them, the result of this is indeed that the wages of this
labour are exactly equal to the amount of other people’s
labour appropriated, in other words, they depend directly on
the degree of exploitation, not on the degree of exertion
that this costs the capitalist. (Insofar as this
function of exploitation really requires labour in the
course of capitalist production, it is represented by the
wages of general managers.) I say that it is
incomprehensible that, after they as Ricardians have reduced
profit to its real
element, they allow themselves to be misled by the
antithesis of interest and industrial profit which is simply
a disguised form of profit and is merely regarded as
an independent form due to ignorance of the nature of
profit. Only because one part of profit,
interest, appears to be due to capital as a thing, an
automatically functioning, automatically creating thing,
apart from the production process, the other part appears as
industrial profit, as arising from the activity
taking place in the process (really the active process, this
however also includes the activity of the operating
capitalist) and therefore as due to the labour of the
capitalist. Consequently, because capital and the
surplus-value which arises from it and is called interest
are considered mysteries. This view, which
clearly arises from notions reflecting the most superficial
aspects of the external form of capital, is the exact
opposite of Ricardo’s view and altogether inconsistent with
his conception of value. Insofar as capital is value,
its value is determined by the labour contained in it before
it enters into the [production] process. Insofar as it
enters the process as a thing, it does so as use-value, and
as such, it can never create exchange-value, whatever its
use. One can see how splendidly the Ricardians
understand their own master. In relation to the
moneyed capitalist, the industrial capitalist, who embodies
functioning capital and therefore actually squeezes out
surplus labour, is of course quite justified in pocketing a
part of this surplus. In relation to the moneyed
capitalist, he is a worker, but a worker who is a
capitalist, in other words, an exploiter of other people’s
labour. | But in
relation to the workers it is strange to plead that
the exploitation of their labour costs the capitalist labour
and that, therefore, they have to pay him for this
exploitation; it is the plea of the slave-driver addressed
to the slave.}

Every pre-condition of the social production process is
at the same time its result, and every one of its results
appears simultaneously as its pre-condition. All the
production relations within which the process moves
are therefore just as much its products as they are its
conditions. The more one examines its nature as it
really is, [the more one sees] that in the last form it
becomes increasingly consolidated, so that independently of
the process these conditions appear to determine it, and
their own relations appear to those competing in the process
as objective
conditions, objective forces, aspects of things, the more
so as, in the capitalist process, every element, even the
simplest, the commodity for example, is already an inversion
and causes relations between people to appear as attributes
of things and as relations of people to the social
attributes of things.

employment of savings; profit, properly so called, is the
remuneration for the agency for superintendence during
this productive employment[g] (The Westminster Review,
Vol. V, January–April 1826, p. 107).

Thus interest here is declared to be remuneration for the
fact that money, etc., is employed as capital; it therefore
arises from capital as such, which is remunerated for its
quality qua capital. Industrial profit, on the
other hand, is remuneration for the function of the capital
or capitalist “during this productive
employment”, i.e., in the production process
itself.> |

| Interest is
only a part of profit, the part which is paid to the owner
of capital by the industrial, functioning capitalist.
Since he can appropriate surplus labour only by means of
capital (money, commodities), etc., he has to hand over a
portion of it to the man who makes capital available to
him. And the lender, who wants to enjoy the advantages
of money as capital without letting it function as capital,
can do this only by being content with a part of the
profit. They are in fact co-partners, one of them
being the juridical owner of the capital, and the other,
while he employs it, the economic owner. But since the
profit only arises from the production process, is only its
result and has first to be produced, interest is in
fact merely a claim on part of the surplus labour which has
yet to be performed, a title to future labour, a claim on a
portion of the value of commodities which do not as
yet exist, it is therefore only the result of a production
process which takes place during the period at the end of
which the interest only falls due.

| Capital is bought
(that is, it is lent at interest) before it is paid
for. Money functions here as means of payment as it
does in relation to labour-power, etc. The price of
capital—i.e., interest—enters therefore just as
much into the advances made by the industrialist (and into
the advances made to himself where a man is operating with
his own capital) as the price of cotton which, for example,
is bought today, but for which he has to pay perhaps in six
weeks’ time. This fact is in no way
altered either by the fluctuations in the rate of
interest—the market price of money—or the
fluctuations in the market prices of other
commodities. On the contrary. The market price
of money—the name for interest-bearing capital as
money capital—is fixed on the money market by
competition between buyer and seller, by demand and supply,
like the price of any other commodity. The struggle
between the moneyed and industrial capitalists is simply a
struggle over the division of the profit, over the share
which is to accrue to each of the two sections when the
division is made. The relationship (demand and
supply), like each of its two extremes, is itself a result
of the production process or, in common parlance, [is
determined] by the business situation existing at the time,
the actual position in which the reproduction process and
its elements find themselves. But, formally and
apparently, it is this struggle which determines the
price of capital (i.e., interest) before capital
enters into the production process. This
determination, moreover, occurs outside the real production
process, and depends on factors independent of the process;
this price determination appears rather as one of the
conditions within which the process has to take place.
Thus the struggle appears not only to establish the property
title to a definite part of the future profit, but to cause
this part not to emerge as a result of the production
process, but on the contrary to enter into it as a
pre-condition, as the price of capital, just as the prices
of commodities or wages enter into it as pre-conditions,
although in the course of the reproduction process they in
fact continuously emerge from it. Each component of
the price of a commodity, insofar as it appears as an
advance—as an already existing commodity price which
enters into the production price—ceases to represent
surplus-value as far as the industrial capitalist is
concerned. That part of the profit which thus enters
into the production process as the price of capital is
reckoned as part of the cost of the outlay; it therefore no
longer appears to be surplus-value and is converted from a
product of the process into one of its given
pre-conditions—a condition of
production—which as such enters into the process
in an independent form and determines its result.

(If, for example, the rate of interest falls, and the
situation obtaining on the market requires a reduction in
the price of commodities below cost-price, the industrialist
can lower the commodity price without reducing the rate of
industrial profit; he can indeed lower the price and secure
a higher industrial
profit, which, however, will be regarded by the man
operating only with his own capital as a fall in the rate of
profit, a reduction in the gross profit. Everything
which appears as a given condition of production,
such as the prices of commodities, wages, capital—the
market prices of these elements—affects the
determination of the market price of the commodity at
any particular time; the real cost-price of a
particular commodity is established only within the
fluctuations of the market prices, and is only the
self-equalisation of these market prices, just as the
value of commodities is only established as a result
of the equalisation of the cost-prices of all the different
commodities. Thus, the vicious circle of the
vulgarian, whether he is a theoretician regarding matters
from the capitalist standpoint or is in fact a
capitalist—namely, that the prices of commodities
determine wages, interest, profit and rent and that, on the
other hand, the prices of labour, interest, profit and rent
determine the prices of commodities—is merely an
expression of the circular movement in which the
general laws assert themselves in contradictory fashion in
the real movement and in appearance.)

A part of the surplus-value—interest—thus
appears as the market price of capital, which enters
into the [production] process, and is therefore regarded not
as surplus-value but as a condition of production.
Thus, the fact that two sets of capitalists share the
surplus-value, one set remaining outside the production
process and the other participating in it, is presented in
such a way that one part of surplus-value is due to capital
outside the process and the other part to capital within the
process. The fact that the division [of the
surplus-value] is established beforehand is presented as the
independence of one part from the other, as the independence
of one part from the production process itself; and finally
as the immanent attribute of things, money,
commodities, but of these things as capital; this
again appears not as the expression of a relationship, but
in such a way that this money, these commodities are
technologically intended for the labour process and
because of this they become capital. Defined in this
way, they are the simple elements of the labour process
itself | and as
such they are capital.

There is nothing mysterious at all in the fact that the
value of the commodity is made up partly of the value of the
commodities contained in it, partly of the value of the
labour—that is to say, the paid labour—partly of
the unpaid but none the
less salable labour, and that the part of its value which
consists of unpaid labour—i.e., its
surplus-value—is in turn divided into interest,
industrial profit and rent; in other words, the person who
“produces” and first of all takes possession of
the whole of this surplus-value has to hand over portions of
it to others, one portion to the landlord, another to the
owner of the capital, and he keeps the third for himself; he
does so however under a name—industrial
profit—which distinguishes it from interest and rent,
and from surplus-value and profit. The breakdown of
surplus-value, that is, of part of the value of commodities,
into these special headings or categories, is very
understandable and does not conflict in the least with the
law of value. But the whole matter is mystified
because these different parts of surplus-value acquire an
independent form, because they accrue to different people,
because the titles to them are based on different elements,
and finally because of the autonomy with which certain of
these parts of surplus-value confront the production process
as its conditions. From parts into which value can be
divided, they become independent elements which
constitute value, they become component
parts. This is what they are as far as market
prices are concerned. They really become the
constituent elements of the market price. How their
apparent independence as conditions of the process is
regulated by the inherent law and that they are only
apparently independent, does not become evident at
any moment in the course of the production process, nor does
it operate as a determining conscious motive. Exactly
the opposite. The highest consistency which can be
assumed by this semblance of results taking the form of
independent conditions becomes firmly established when
parts of surplus-value—in the form of prices of
the conditions of production—are included in the
price.

And this is the case with regard to both interest and
rent. They are part of the outlay of the industrial
capitalist and the farmer. They seem here to represent
not unpaid surplus labour, but paid surplus labour, that is,
surplus labour for which an equivalent is paid during the
production process, although not to the worker whose surplus
labour it is, but to other people, i.e., the owners of
capital and of land. They constitute surplus labour as
far as the worker is concerned, but they are equivalents as
regards the capitalist [who lends the money] and the
landowner to whom they have to be paid. Interest and
rent therefore appear not as surplus-value, and still less
as surplus
labour, but as prices of the commodities
“capital” and “land”, for they are
paid to the capitalist and the landowner only in their
capacities as owners of commodities, only as owners and
sellers of these commodities. That part of the value
of the commodity which represents interest, therefore,
appears as reproduction of the price paid for
capital, and that part which represents rent appears as
reproduction of the price paid for the land.
These prices therefore become constituent parts of
the total price. This does not merely appear to
be the case to the industrial capitalist; for him interest
and rent really constitute part of his outlay, and whereas,
on the one hand, they are determined by the market
price of his commodity—as the market price it is a
determination of a commodity in which a social process or
the result of a social process appears as a particular
aspect belonging to the commodity, and the up and down of
this process, its movement, appears as the fluctuations of
the commodity price—on the other hand, the market
price is determined by them, in just the same way as the
market price of cotton determines the market price of yarn
and, on the other hand, the market price of yarn determines
the demand for cotton, hence the market price of cotton.

Since parts of surplus-value, i.e., interest and rent,
enter into the production process as the prices of
commodities—of the commodity land and the commodity
capital—they exist in forms which not only conceal,
but which disavow their real origin.

That surplus labour, unpaid labour, constitutes
just as essential an element of the capitalist production
process as paid labour, is expressed by the fact that
factors of production—land and capital—distinct
from labour have to be paid for, in other words, that
costs besides the price of the commodities advanced
and wages enter into the price. Parts of
surplus-value—interest and rent—appear here as
costs, as advances made by the exploiting capitalist.

Average profit enters into the production price of
commodities as a determining factor and thus already here
surplus-value [appears to be] not a result, but a condition,
not one of the parts into which the value of the commodity
is divided, but a component part of its price.
But average profit, like the production price
itself, acts rather as a determining ideal and at the same
time appears as surplus over and above the advances
made | and as a price
which is different from the cost-price properly
speaking. Whether or not [average profit is
obtained] and whether it is higher or lower than the profit
corresponding to the market price—that is,
corresponding to the direct result of the [production]
process—determines the reproduction process, or rather
the scale of reproduction; it determines whether more or
less of the capital existing in this or that sphere of
production is withdrawn or invested; it also determines the
ratio in which newly accumulated capital flows into these
particular spheres, and finally, to what extent these
particular spheres act as buyers in the money market.
On the other hand, as interest and rent, the
separate portions of surplus-value in a quite definite form
become pre-conditions for the individual production prices
and are anticipated in the form of advances.

<Advances, that is, what is paid out by the
capitalist, may be defined as costs. Profit
accordingly appears as a surplus over these costs.
This applies to the individual prices of production.
And consequently, one can call the prices determined by the
advances cost-prices.

Costs of production can be defined as prices
determined by the average profit—that is, the price of
the capital advanced plus the average profit—since
this profit is the condition for reproduction, a condition
which regulates the supply and the distribution of capital
amongst the various spheres of production. These
prices are production prices.

Finally, the real amount of labour (materialised and
immediate labour) it costs to produce a commodity, is its
value. It constitutes the real production cost
of the commodity itself. The price which corresponds
to it is simply the value expressed in money.

The term “cost of production” is used
alternately in all three senses.>

If no surplus-value were produced, then of course
together with surplus-value the part of it which is called
interest would also cease to exist, and so would the part
which is called rent; the anticipation of
surplus-value would likewise come to an end, in other words,
it would no longer constitute a part of the costs of
production in the shape of the price of
commodities. The
existing value entering into the production process would
not emerge from it as capital at all, and
accordingly, could not enter into the reproduction process
as capital, nor be lent out as capital.
It is thus the continuous reproduction of the same
relations—the relations which postulate capitalist
production—that not only causes them to appear as the
social forms and results of this process, but at the same
time as its continual prerequisites. But they
are these only as prerequisites continually posited,
created, produced by the process itself. This
reproduction is therefore not conscious reproduction; on the
contrary, it only manifests itself in the continuous
existence of these relations as prerequisites and as
conditions dominating the production process.
The parts, for example, into which the commodity value can
be divided are turned into its component parts which
confront one another as independent parts, and they are
consequently also independent in relation to their
unity, which on the contrary appears to be a
compound of these parts. The bourgeois sees
that the product continually becomes the condition of
production. But he does not perceive that the
production relations themselves, the social forms in which
he produces and which he regards as given, natural
relations, are the continuous product—and only for
that reason the continuous prerequisite—of this
specific social mode of production. The different
relations and aspects not only become independent and assume
a heterogeneous mode of existence, apparently independent of
one another, but they seem to be the direct properties of
things; they assume a material shape.

Thus the participants in capitalist production live in a
bewitched world and their own relationships appear to them
as properties of things, as properties of the material
elements of production. It is however in the last,
most derivative forms—forms in which the intermediate
stage has not only become invisible but has been turned into
its direct opposite—that the various aspects of
capital appear as the real agencies and direct
representatives of production. Interest-bearing
capital is personified in the moneyed capitalist, industrial
capital in the industrial capitalist, rent-bearing capital
in the landlord as the owner of the land, and lastly, labour
in the wage-worker. They enter into the competitive
struggle and into the real process of production as these
rigid forms, personified in independent personalities that
appear at the same time to be mere representatives of
personified things. Competition presupposes this
externalisation.
These forms conform to its nature and
have come into being in the natural evolution of
competition, and on the surface competition appears to be
| simply the movement of
this inverted world. Insofar as the inner connection
asserts itself in this movement, it appears as a mysterious
law. The best proof is political economy itself, a
science which seeks to rediscover the hidden
connection. Everything enters into competition in this
last, most externalised form. The market price, for
example, appears to be the dominant factor here, just as the
rate of interest, rent, wages, industrial profit appear to
be the constituents of value, and the price of land and the
price of capital appear as given items with which one
operates.

We have seen how Adam Smith first reduces value to wages,
profit (interest) and rent, and then, conversely, presents
these as independent constituent elements of commodity
prices. He expresses the secret connection in the
first version and the outward appearance in the second.

If one comes still closer to the surface of the
phenomenon, then, in addition to the average rate of profit,
interest and even rent can be represented as constituent
parts of commodity prices (that is, of market
prices). Interest can be so represented quite
directly, since it enters into the cost-price.
Rent—as the price of land—may not determine the
price of the product directly, but it determines the method
of production, whether a large amount of capital is
concentrated on a small area of land, or a small amount of
capital is spread over a large area of land, and whether
this or that type of product is produced—e.g., cattle
or corn—the market price of which covers the
rent most effectively, for the rent must be paid before the
term stipulated by contract expires.

In order that rent should not bring about a reduction in
industrial profit, pasture is turned into arable land and
arable land into pasture, etc. Rent therefore
determines the market prices of individual commodities not
directly, but only indirectly, by influencing the
proportions in which the various types of commodities are
produced in such a way that demand and supply will produce
the best price for each so that rent can be paid. Even
though rent does not directly determine the market price of
corn, for example, it determines directly the market price
of cattle, etc., in short, of commodities produced in the
spheres where rent is not regulated by the market prices of
their products but where the market prices of products are
regulated by the
amount of rent borne by the grain-producing land.
The price of meat, for example, is always too high in
industrially developed countries, that is, it is not only
far above its production price, but above its value.
For the price must cover not only the cost of production,
but also the rent which the land would carry if corn were
grown on it. Otherwise, meat produced by large-scale
stock-breeding—where the organic composition of
capital approximates more closely [to the composition of
capital in industry] or may have an even greater
preponderance of constant capital over variable
capital—could only pay a very small amount of
absolute rent, or even none at all. The rent
which it pays, and which enters directly into its price, is,
however, determined by the absolute plus the differential
rent which the land would pay as arable land. This
differential rent, moreover, does not exist here in most
cases. The best proof is that meat pays rent on the
kind of land where corn does not.

If, therefore, profit enters into the production
price as a determining factor, it can be said that wages,
interest and, to a certain degree, rent constitute
determining elements of the market price and certainly of
the production price. Of course, ultimately everything
can be reduced to value which is determined by labour-time,
for on the whole the movement of interest is determined by
profit, while corn rent on the other hand is determined
partly by the rate of profit, partly by the value of the
product and the equalisation of the different values
produced on different kinds of land to the market value; the
rate of profit, however, is determined partly by wages,
partly by the productivity of labour in those spheres of
production which produce constant capital—in the last
analysis therefore by the level of wages and the
productivity of labour; wages, however, are the equivalent
of a part of the commodity (that is, [they are] equal to the
paid portion of labour contained in the commodity, and
profit is equal to the unpaid portion of labour contained in
the commodity). Finally, the productivity of labour
can affect the price of commodities only in two ways, either
it affects their value, i.e., reduces it, or it affects
their surplus-value, that is, increases it. Cost-price
is nothing but the value of the capitals advanced plus the
surplus-value they produce distributed amongst the different
spheres according to the quota of the total capital which
each sphere represents. Thus, cost-price resolves into
value if one considers the total capital and not the
individual
spheres. On the other hand, the market prices in
each sphere are continually reduced to the cost-price as a
result of the competition between the capitals of the
different spheres. Competition amongst the capitalists
in each individual sphere seeks to reduce the market price
of commodities to their market value. Competition
between capitalists of different spheres reduces market
values to common cost-prices.

Ricardo opposes Smith’s establishment of value out
of the parts of value which are determined by itself.
But he is not consistent. Otherwise it would have been
impossible for him to argue with Smith whether profit, wages
and rent or, as he says, merely profit and wages, enter into
price, that is, enter as constituent parts.
Regarded analytically, they enter into it as soon as they
are paid. He ought to have put it in this way: The
price of every commodity is reducible to profit and wages,
the prices of some commodities (and of very many,
indirectly) are reducible to profit, rent and
wages. But no commodity price is constituted by
them | for they are not
independent factors acting of their own accord, having a
definite magnitude, and making up the value of
commodities; on the contrary, when the value is given, it
can be divided into those parts in many different
proportions. The magnitude of value is not
determined by the addition or combination of given
factors—i.e., profit, wages and rent—but one and
the same magnitude of value, a given amount of
value, is broken down into wages, profit and rent, and
according to different circumstances it is distributed
between these three categories in very different ways.

Assuming that the production process repeats itself
continuously under the same conditions, in other words, that
reproduction takes place under the same conditions as
production, which presupposes that productivity of labour
remains unchanged, or at least that variations in
productivity do not alter the relationships of the different
factors of production; thus, even if the value of
commodities were to rise or fall as a result of changes in
productivity, the distribution of the value of commodities
amongst the different factors of production would remain the
same. In that case, although it would not be
theoretically accurate to say that the different parts of
value determine the value or price of the whole [output], it
would be useful and correct to say that they constitute it
insofar as one understands by constituting the formation of
the whole by adding up the parts. The value would be
divided at a steady and constant rate into
[pre-existing] value and surplus-value, and the [newly
created] value would be resolved at a constant rate into
wages and profit, the profit again being broken down at a
constant rate into interest, industrial profit and
rent. It can therefore be said that P—the price
of the commodity—is divided into wages, profit
(interest) and rent, and, on the other hand, wages, profit
(interest) and rent are the constituents of the value or
rather of the price.

This uniformity or similarity of reproduction—the
repetition of production under the same
conditions—does not exist. Productivity itself
changes and changes the conditions [of production].
The conditions, on their part, change productivity.
But the divergences are reflected partly in superficial
oscillations which even themselves out in a short time,
partly in a gradual accumulation of divergences which either
lead to a crisis, [to a] violent, seeming restoration of the
old relationships, or very gradually assert themselves and
are recognised as a change in the conditions.

Interest and rent, which anticipate surplus-value,
presuppose that the general character of reproduction
will remain the same. And this is the case as long as
the capitalist mode of production continues. Secondly,
it is presupposed moreover that the specific
relations of this mode of production remain the same
during a certain period, and this is in fact also more or
less the case. Thus the result of production
crystallises into a permanent and therefore
prerequisite condition of production, that is, it
becomes a permanent attribute of the material conditions
of production. It is crises that put an end
to this apparent independence of the various elements
of which the production process continually consists and
which it continually reproduces.

<What value is for the genuine economist the
market price is for the practical capitalist, that
is, in each case the primary factor of the whole
movement.>

The form of interest-bearing capital characteristic of
and in accordance with capitalist production is
credit. It is a form created by capitalist
production itself. (The subordination of commercial
capital [by the capitalist mode of production] does not
in fact require such a new creation since commodity and
money, and the circulation of commodities and money, remain
the elementary prerequisites of capitalist production and
are only turned into absolute prerequisites; commercial
capital, on the one hand, is therefore the general form of
capital and, on
the other hand, insofar as it represents capital in a
specific function—capital which operates exclusively
in the circulation process—its determination by
productive capital does not in any way alter its form.)

The equalisation of values to cost-prices occurs only
because the individual capital functions as a commensurate
part of the total capital of the whole class and, on the
other hand, because the total capital of the class is
distributed amongst the various individual spheres according
to the needs of production. This is brought about by
means of credit. Credit not only makes this
equalisation possible and facilitates it, but one part of
capital—in the form of moneyed capital—appears
in fact to be the material common to the whole class and
employed by it. This is one purport of credit.
The other is the continual attempt made by capital to
shorten the metamorphoses which it has to undergo in the
circulation process, to anticipate the circulation time, its
transformation into money, etc., and in this way to
counteract its own |
limitations. Finally, the function of
accumulating, insofar as it is not conversion [of
revenue] into capital but the supply of surplus-value in
the form of capital, becomes, in part, the responsibility of
a special class, in part everything accumulated by
society in this sense becomes accumulation of capital and is
placed at the disposal of the industrial capitalists.
Operations of this kind take place at a very large number of
isolated points in society, [their results] are concentrated
and collected in certain reservoirs. Money which lies
idle due to freezing of the commodities in the
metamorphosis, is thus converted into capital.

Land—rent and capital—interest are irrational
expressions insofar as rent is defined as the price
of land and interest as the price of capital.
The common origin [of all these different revenues] is still
recognisable in the forms of interest-bearing capital,
rent-bearing capital, profit-bearing capital, since, in
general, capital involves appropriation of surplus
labour; so that these different forms merely express the
fact that the surplus labour produced by capital is, as
concerns capital in general, divided between two types of
capitalists, and in the case of agricultural capital, it is
divided between capitalist and landlord.

Rent as the (annual) price of land and interest as
the price of capital are just as irrational as
√-3. The latter form contradicts
the number in its simple, elementary form just as
those do in the case of capital in its simple form of
commodities and money. They are in the converse sense
irrational. Land—rent, i.e., rent as the price
of land, defines land as a commodity, a use-value which has
a value whose monetary expression is its price. But a
use-value which is not the product of labour cannot have a
value; in other words, it cannot be defined as the
materialisation of a definite quantity of social labour, as
the social expression of a certain quantity of labour.
It is nothing of the kind. Only if it is the product
of concrete labour can use-value take the form of
exchange-value—become a commodity. Only under
this condition can concrete labour, for its part, be
expressed as social labour, value. Land and
price are incommensurable magnitudes, nevertheless they are
supposed to bear a certain relation to each other.
Here a thing which has no value has a price.

Interest as the price of capital, on the other hand,
expresses the converse irrationality. Here a commodity
which has no use-value has a dual value, it has a
value in the first place and in addition a price, which is
different from this value. For capital is, to
begin with, nothing but a sum of money or a
quantity of commodities equal to a certain sum of
money. If the commodity is lent out as capital, then
it is nothing but a sum of money in camouflaged
form. For what is lent as capital is not so
many pounds of cotton, but so much money whose value
exists in the form of cotton. The price of the
capital is therefore related to it only as the existence of
a sum of money, that is, a certain value expressed in
money and existing in the form of exchange-value. How
is it possible for a value to have a price apart from the
price which is expressed in its own money form? Price
after all is the value of the commodity as distinct
from its use-value. Price in contradistinction to the
value of the commodity, price as the value of a sum of money
(for price is simply the expression of value in money) is
therefore a contradiction in terms.

This irrationality of expression (the irrationality of
the thing itself arises from the fact that, as regards
interest, capital as the prerequisite appears divorced from
its own process, in which it becomes capital and
consequently self-expanding value, and that, on the other
hand, rent-bearing capital exists only as agricultural
capital, as capital which only yields rent in a particular
sphere, and this form in which it appears is transmitted
to
the element that differentiates it in general from
industrial capital), this irrationality of expression is
so much felt by the vulgarian that he falsifies both
expressions in order to make them appear rational. He
asserts that interest is paid on capital insofar as it is
use-value, and therefore talks about the utility which the
products or means of production have for reproduction and of
the utility which capital has as a material element of the
labour process.

But, after all, its utility, its use-value, already
exists in its form as a commodity and without this it would
not be a commodity and would have no value. As money,
it is the expression of the value of commodities and is
| convertible into them in
proportion to their own value. But if I convert money
into a machine, into cotton, etc., then I convert it into
use-values of the same value. The conversion is
concerned only with the value form. As money,
it has the use-value of being convertible into any other
commodity, a commodity, however, of the same value. As
a result of this transformation, the value of money changes
no more than that of the commodity when it is converted into
money. The use-value of the commodities into which I
can convert money does not give the money, in addition to
its value, a price which is different from its value.
If, however, I presuppose the conversion and assert that the
price is paid for the use-value of the commodities, then the
use-value of the commodities is not paid for at all or is
only paid insofar as their exchange-value is paid for.
How the use-value of any commodity is utilised, whether it
enters into individual or industrial consumption, has
absolutely no bearing on its exchange-value. It only
determines who will buy it—the industrial capitalist
or the immediate consumer. The productive usefulness
of a commodity can therefore account for the fact that the
commodity has exchange-value at all, for the labour embodied
in the commodity is paid for only if it has use-value.
Otherwise it is not a commodity—it is a commodity only
as the unity of use-value and exchange-value. But this
use-value can by no means account for the fact that as
exchange-value or as price, it has in addition another and
different price as well.

One can see how the vulgarian wants to get over the
difficulty here by seeking to convert
capital—that is, the money or the commodity
insofar as these have a specifically different form
from themselves as money or commodity—into a mere
commodity, in other words, by disregarding precisely
the specific
difference which has to be explained. He does not
wish to say that capital is a means for the exploitation of
surplus labour and that it therefore represents greater
value than the value contained in it. Instead he says:
It has more value than its own value because it is an
ordinary commodity like any other, that is, it possesses a
use-value. Here capital is identified with commodity,
whereas the point to be explained is how the commodity can
function as capital.

The vulgarian, insofar as he does not echo the
Physiocrats, deals with land in the opposite way. In
the previous case, he converted capital into a commodity in
order to explain the difference between capital and
commodity and the conversion of the commodity into
capital. Now he converts land into capital because the
capital relation as such is more in tune with his ideas than
the price of land. Rent can be regarded as interest on
capital. For example, if the rent is 20 and the rate
of interest is 5, then it can be said that this 20 is
interest on a capital of 400. And in fact the land
then sells at 400, which simply amounts to the sale of the
rent for a period of 20 years. This payment of the
anticipated 20 years’ rent is thus the price of the
land. The land is thereby converted into
capital. The annual payment of 20 merely represents 5
per cent interest on the capital which was paid for the
land. And in this way, the formula land—rent is
converted into capital—interest, which, for its part,
is transmogrified into payment for the use-value of
commodities, that is, into the relationship of use-value to
exchange-value.

The more analytical vulgarians understand that the price
of land is nothing more than an expression for the
capitalisation of rent; [that] in fact [it is] the purchase
price of rent for a number of years and that it is
determined by the prevailing rate of interest. They
understand that rent is antecedent to this capitalisation of
rent and that, on the other hand, it is therefore impossible
to explain rent by its own capitalisation. They
therefore deny the existence of rent itself by asserting
that it is interest on the capital invested in the
land. This does not prevent them from admitting that
land in which no capital is invested carries rent, any more
than it prevents them from admitting that equal
amounts of capital invested in land of different
fertility yield different amounts of rent, or that
unequal amounts of capital invested in land of
unequal fertility may yield the same amounts of
rent. [They admit] that likewise the capital invested
in land—if indeed it is to account for the
rent paid for the land—may yield perhaps five times
as much interest, that is, five times as much rent, as is
yielded by the same amount of capital invested as fixed
capital in industry.

One perceives that here the difficulty is always
eliminated by disregarding it and substituting a
relationship expressing the opposite of the specific
difference which has to be explained, and therefore, in
any case, not expressing the difference at all.

### [6. The Struggle of Vulgar Socialism Against
Interest (Proudhon). Failure to Understand the Inner
Connection Between Interest and the System of
Wage-Labour]

| Proudhon’s polemic
against Bastiat on the question of interest is
characteristic both of the manner in which the vulgarian
defends the categories of political economy and of the way
in which superficial socialism (Proudhon’s polemic hardly
deserves the name) attacks them. We shall return to
this in the section on the vulgarians. Here only a few
preliminary remarks.

The return movement [of money] should not have shocked
Proudhon as being something peculiar if he understood
anything at all about the movement of capital. Neither
should the surplus-value contained in the returning
amount. This is a characteristic feature of capitalist
production.

<For Proudhon however, as we shall see, the surplus
is a surcharge. Altogether his criticism is that of a
novice, he has not mastered the first elements of the
science he intends to criticise. Thus, he has never
understood that money is a necessary aspect of the commodity
(see Part I). Here he even confuses money and capital
because loan capital appears as money capital in the form of
money.>

What might have struck him was not the surplus for which
no equivalent was paid, since surplus-value—and
capitalist production is based on it—is value which
has cost no equivalent. This is not a specific feature
of interest-bearing capital. The specific
feature—insofar as we are considering the form of the
movement—is only the first phase, that is, precisely
the opposite of what Proudhon has in mind, namely, that the
lender hands over the money without receiving an equivalent
for it at the outset and that, therefore, the return of the
capital with interest, as regards the transaction between
borrower and
lender, [is not related to] the metamorphoses which
capital undergoes and which, insofar as they are mere
metamorphoses of economic form, consist of a series of
exchanges, conversion of commodities into money and
conversion of money into commodities; insofar as they are
real metamorphoses, that is, elements of the production
process, they coincide with industrial consumption.
Here consumption itself constitutes a phase of the movement
of economic forms.

But what money in the hands of the lender does not do, it
does in the hands of the borrower who really employs it as
capital. It performs its real movement as capital in
the hands of the borrower. It returns to him as money
plus profit, money plus 1/x
money. The movement between lender and borrower only
expresses the starting-point and the final point of
capital. It is money when it passes from the hands of
A into those of B. It becomes capital in B’s hands,
and as such, after undergoing a certain revolution, it
returns with profit. This interlude, the real process,
which comprises both the circulation process and the
production process, is not connected with the transaction
between borrower and lender. It [the transaction]
recommences only after the money has been realised as
capital. The money now passes back into the hands of
the lender along with a surplus, which, however, comprises
only part of the surplus realised by the borrower. The
equivalent which the borrower receives is industrial profit,
that is, the part of the surplus which he retains and which
he appropriates only by means of the money borrowed.
All this is not visible in the transaction between him and
the lender. This is limited to two acts.
Transfer from A’s hands into those of B. Interval
during which the money remains in B’s hands. After
this interval the money along with interest returns into A’s
hands.

If one examines merely this form—the transaction
between A and B—then one regards the mere form of
capital without the intervening stage: a certain amount of
money a is handed over and after a certain period
returns as a+1/xa without the
assistance of any intermediate link apart from the period of
time which elapses between the departure of the sum of money
a and its return as
a+1/xa.

And it is in this abstract form, which, indeed, exists as
an
independent movement alongside the real movement of
capital, opens it and closes it, that Mr. Proudhon considers
the matter in hand, so that everything inevitably remains
incomprehensible to him. If instead of buying and
selling, lending in this form were to be abolished, then,
according to Proudhon, the surplus would disappear. In
fact only the division of the surplus between two sets of
capitalists would disappear. But this division can and
must be constantly generated anew whenever it is possible to
convert commodities or money into capital, and, on the basis
of wage-labour, this is always possible. In order that
it should be impossible for commodities and money to become
capital and therefore be lent as capital in posse,
they must not confront wage-labour. If they are thus
not to confront it as commodities and money
and consequently labour itself is not to become a commodity,
then that amounts to a return to pre-capitalist modes of
production | in which it
[labour] does not become a commodity, and for the greater
part still exists in the form of serf or slave labour.
On the basis of free labour, this is only possible where the
workers are the owners of their means of production.
Free labour develops within the framework of capitalist
production as social labour. To say that they
are the owners of the means of production amounts to saying
that these belong to the united workers and that they
produce as such, and that their own output is controlled
jointly by them. But wanting to preserve wage-labour
and thus the basis of capital, as Proudhon does, and at the
same time to eliminate the “drawbacks” by
abolishing a secondary form of capital, reveals the
novice.

Gratuité du Crédit. Discussion
entre M. Fr. Bastiat et M. Proudhon, Paris, 1850.

He regards lending as something evil because it is not a
sale.

To lend at interest “is the ability to sell
the same object again and again and always to receive
a price for it without ever relinquishing ownership
of the object which one sells” (op. cit., p. 9)
(First Letter written by Chevé, one of the
editors of La Voix du Peuple).

What confuses him is that the “object” (money
or a house, for example) does not change owners as in the
case of buying and selling. But he does not see that
when money is handed over, no equivalent is received in
return; that, on the contrary, in the real [production]
process, in the form and on the basis of exchange, not only
an equivalent, but a surplus which is not
paid for, is returned; insofar as exchange, exchange of
things, takes place, no change of values occurs, the same
person remains the “owner” of the same value,
and insofar as there is a surplus, there is no
exchange. When the exchange of commodity and money
begins again, the surplus is already absorbed in the
commodity. Proudhon does not understand how profit,
and consequently interest as well, arise from the law of the
exchange of values. “House”,
“money”, etc., ought therefore to be exchanged
not as “capital”, but as “commodities
… at cost-price” (op. cit., pp. 43-44).

“Indeed the hatter, who sells
hats…gets back […] their value, neither more
nor less. But the capitalist who lends money, not
only…gets his capital back undiminished, he receives
more than the capital, more than he put into the exchange;
he receives interest in addition to the
capital…” (op. cit., p. 69).

Mr. Proudhon’s hatters do not appear to be
capitalists but journeymen.

“Since in trade the price of the
commodity is formed by adding interest on capital
to the workers’ wages, the worker is therefore unable
to buy back the product of his own labour. To live by
one’s labour is a principle which, under the rule of
interest, comprises a contradiction”
(op. cit., p. 105).

The worthy Proudhon confuses money as a means of
circulation with money as capital in Letter IX (pp. 144-52)
and therefore concludes that “capital” in France
yields 160 per cent, namely, 1,600 million interest annually
in State debts, mortgages, etc., on a capital of one
thousand million, i.e., “the amount of currency
… circulating in France…”

Further:

“Since, as a result of the
accumulation of interest, money capital always
returns to its source, from one exchange to another, it
follows that re-lending is always undertaken by the same
hand, always brings profit to the same person” (op.
cit., p. 154).

Because capital is lent out in the form of money,
Proudhon believes that money capital, that is, currency,
possesses this specific attribute. Everything should
be sold but nothing lent. In other
words: In the same way as he wanted commodities to exist but
did not want them to become “money”, so here he
wants commodities, money, to exist but they must not develop
into capital. When all phantastic forms have been
stripped away, this means nothing more than that there
should be no
advance from small, petty-bourgeois peasant and artisan
production to large-scale industry.

“Since value is nothing but a
proportion, and all products are necessarily
proportional to one another, it follows that, from a
social point of view, products are always values, and stable
values at that. For society, the difference between
capital and product does not exist. This difference is
quite subjective, it exists only for individuals”
(op. cit., p. 250).

What mischief is caused when such philosophical German
terms as “subjective” fall into the hands of a
Proudhon. The bourgeois social forms are
“subjective” for him. And the subjective,
and moreover erroneous, abstraction that, because the
exchange-value of commodities expresses a proportion,
it expresses every possible proportion between commodities
and does not express a third thing to which the commodities
are proportional—this false “subjective”
abstraction is the social point of view | according to which not only
commodity and money, but commodity, money and capital are
identical. Thus, from this “social point of
view”, all cats are indeed grey.

Finally there is also the surplus in the form of
morality:

“All labour must produce a
surplus” (op. cit., p. 200).

With which moral precept the surplus is naturally defined
very nicely. |

### [7. Historical Background to the Problem of
Interest. Luther’s Polemic Against Interest Is
Superior to That of Proudhon. The Concept of Interest
Changes as a Result of the Evolution of Capitalist
Relations]

| Luther, who lived in
the period of the dissolution of medieval civil society into
the elements of modern society—a process which was
accelerated by world trade and the discovery of new gold
deposits—naturally knew capital only in its two
antediluvian [forms] of interest-bearing capital and
merchant capital. Whereas in its early phase
capitalist production, haying gained strength, seeks to
subordinate interest-bearing capital to industrial capital
by force—this was in fact done first of all in
Holland, where capitalist production in the form of
manufacture and large-scale trade first blossomed, and in
England in the seventeenth century it was, partly in very
naive terms, declared to be the primary requisite of
capitalist production—on the other hand, during the
transition to capitalist
production, the first step is the recognition that
“usury”, the old-fashioned form of
interest-bearing capital, is a condition of production, a
necessary production relation; in the same way as later on
its justification is recognised by industrial capital, which
regards it as flesh of its own flesh, as soon as industrial
capital subordinates interest-bearing capital to itself
(eighteenth century, Bentham).

Luther is superior to Proudhon. The
difference between lending and selling does
not confuse him, for he perceives that usury exists equally
in both. The most striking feature of his polemic is
that he makes his main point of attack the fact that
interest is an innate element of capital.

I. Books on trade and usury written in
1524. [Von Kauffshandlung und Wucher in] Part
VI of Luther’s Works, Wittenberg, 1589.

(This was written on the eve of the Peasant War.)

[About] trade (merchant capital):

“There is now great outcry against
the nobles or robbers amongst the merchants” (one can
see why the merchants are for the princes and against the
peasants and knights), “that they have to conduct
their trade in great danger and that they are arrested,
beaten, despoiled and robbed, etc., in consequence of
trading. But if they suffered these things for the
sake of righteousness, then, in truth, all merchants would
be holy men… But since such great
unrighteousness and un-Christian thieving is rife throughout
the whole world because of the merchants, and often enough
amongst them themselves, why should we wonder if God wills
it that such great wealth, gained by unrighteous means, is
lost or stolen in its turn, and that because of it, the
merchants are knocked on the head or arrested?… And
it is the duty of the princes to punish such unrighteous
commerce with due force and to see to it that their subjects
are not fleeced so shamefully by the merchants. But
because they do not do this, God uses the knights and the
robbers and punishes the wickedness of the merchants through
them; they must be His devils. Just as He plagues with
devils or destroys with enemies the Land of Egypt and the
whole world. Thus He causes one scoundrel to be
flogged by another, but He does not indicate thereby that
knights are lesser robbers than merchants, since the
merchants rob the whole world every day while a knight only
robs one or two people once or twice a year”
(p. 296).

“… Follow the words of Isaiah:
Your princes have become the companions of thieves.
While they hang thieves who have stolen a guilder or half a
guilder, they consort with those who rob the whole world and
who steal more safely than any others; truly, the
proverb—big thieves hang | little thieves—still
holds good, and, as Cato, the Roman senator, said: Little
thieves are put into dungeons and in the stocks, but great
thieves parade in gold and silk. But what will God
have to say in the end? He will do as He said when He
spoke through the mouth of Ezekiel: He will crush and melt
prince and merchant, one thief and another, into one another
like lead and brass, just as happens when a town is burned
down, so that there will
be princes and merchants no longer, and I fear that this
is not so far off” (p. 297).

[On] usury. Interest-bearing capital:

“I am told that nowadays 10 guilders,
i.e., 30 per cent, are charged in any Leipzig market; some
add also the Neunburg market so that it comes to 40 per
cent. I don’t know whether it is even higher.
Shame on you, where the devil will it end?… Whoever
in Leipzig now has 100 florins, takes 40 in a year, this
means that he has eaten up a peasant or a burgher in a
year. If he has 1,000 florins, then he takes 400 in a
year, that is, he eats up a squire or a rich gentleman in a
year. If he has 10,000, he takes 4,000, that is, he
eats up a rich count in a year. If he has 100,000, as
must happen in the case of the great merchants, then he
takes 40,000 in a year, that is, he eats up a great, rich
prince in a year. If he has 1,000,000, then he takes
400,000 in a year, that is, he eats up some great king in a
year. And he suffers not any danger in so doing,
neither to his body nor to his treasure, labours not, sits
by the fire and roasts apples; thus a chair thief may sit at
home and eat up a whole world in 10 years”
(pp. 312-13).

<II. Eyn Sermon auf das Evangelion von dem
reichen Mann und armen Lazaro etc., Wittemberg, 1555 [A
Sermon on the Gospel of the Rich Man and Poor Lazarus,
etc.].

“We must not regard the rich man
according to his outer bearing, for he wears sheep’s
clothing and his life shines and seems pretty and covers up
the wolf most perfectly. For the Gospel does not
charge him that he committed adultery, murder, robbery,
sacrilege or anything that the world or reason would
censure. Indeed he is as honest in his life as that
Pharisee who fasts twice a week and is not as other
men.”>

Here Luther tells us how usurer’s capital arises,
[through] the ruination of the citizens (small townspeople
and peasants), the gentry, the nobility and the
princes. On the one hand, the usurer comes into
possession of the surplus labour and, in addition, the
conditions of labour of plebeians, peasants, members of
craft guilds, in short, of the small commodity producers who
need money in order, for example, to make payments before
they convert their commodities into money, and who have to
buy certain of their conditions of labour, etc. On the
other hand, the usurer appropriates rent from the owners of
rent, that is, from the prodigal, pleasure-seeking
rich. Usury is a powerful means for establishing the
pre-conditions for industrial capital—a mighty agency
for separating the conditions of production from the
producers, insofar as it has the twofold result, firstly, of
establishing independent fortunes in the form of money,
secondly, of appropriating the conditions of labour to
itself, that is, ruining the owners of the old conditions of
labour, just like
the merchant. And both have the common feature that
they acquire an independent fortune, that is, they
accumulate in their hands in the form of money claims part
of the annual surplus labour, [part] of the conditions of
labour [and also part] of the accumulated annual
labour. The money actually in their hands constitutes
only a small portion of both the annual and the annually
accumulated wealth and circulating capital. That they
acquire fortunes means that a significant portion of
both the annual production and the annual revenue accrues to
them, and this is payable not in kind, but in the converted
form, in money. Consequently, insofar as money does
not circulate actively as currency, is not in movement, it
is accumulated in their hands. They also hold some of
the reservoirs of circulating money and to an even larger
extent they hold and accumulate titles to products, but in
the form of money titles, titles to commodities converted
into money. | On the
one hand, usury leads to the ruin of feudal wealth and
property; on the other hand, it brings about the ruin of
petty-bourgeois, small-peasant production, in short, of all
forms in which the producer is still the owner of his means
of production.

The worker in capitalist production does not own
the means of production, [he owns] neither the land he
cultivates nor the tools with which he works. This
alienation of the conditions of production corresponds here,
however, to a real change in the mode of production
itself. The tool becomes a machine, and the worker
works in the workshop, etc. The mode of production no
longer tolerates the dispersal of the means of production
connected with small property, just as it does not tolerate
the dispersal of the workers themselves. In capitalist
production, usury can no longer separate the
conditions of production from the workers, from the
producers, because they have already been separated from
them.

Usury centralises property, especially in the form
of money, only where the means of production are scattered,
that is, where the worker produces more or less
independently as a small peasant, a member of a craft guild
(small trader), etc. As peasant or artisan, whether
the peasant is or is not a serf, or the artisan is or is not
a member of a craft guild. The usurer here not only
appropriates the part of the surplus labour belonging to the
bondsman himself, or in the case of the free peasant, etc.,
the whole surplus labour, but he also appropriates the
instruments of production, though the peasant, etc., remains
their nominal
owner and treats them as his property in the process of
production. This kind of usury rests on this
particular basis, on this mode of production, which
it does not change, to which it attaches itself as a
parasite and which it impoverishes. It sucks it dry,
enervates it and compels reproduction to be undertaken under
constantly more atrocious conditions. Thus the popular
hatred of usury, especially under the conditions prevailing
in antiquity, where this form of production—in which
the conditions of production are the property of the
producer—was at the same time the basis of the
political relationships, of the independence of the
citizen. This comes to an end as soon as the worker no
longer possesses any conditions of production. And
with it the power of the usurer likewise comes to an
end. On the other hand, insofar as slavery
predominates or [insofar as] the surplus labour is consumed
by the feudal lord and his retainers and they fall prey to
the usurer, the mode of production also remains the same,
only it becomes more oppressive. The debt-ridden
slave-holder or feudal lord squeezes more out because he
himself is being squeezed dry. Or, finally, he makes
way for the usurer, who becomes a landowner, etc., like the
eques,[h]
etc., in Ancient Rome. In place of the old exploiter,
whose exploitation was to some extent a means of political
power, there appears a coarse, money-hunting parvenu.
But the mode of production itself remains unchanged.

The usurer in all pre-capitalist modes of production has
a revolutionary impact only in the political sense,
in that he destroys and wrecks the forms of property whose
constant reproduction in the same form constitutes the
stable basis of the political structure. [The usurer]
has a centralising [effect] as well, but only on the basis
of the old mode of production, thus leading to the
disintegration of society—apart from the slaves,
serfs, etc., and their new masters—into a mob.
Usury can continue to exist for a long time in Asiatic forms
of society without bringing about real disintegration, but
merely giving rise to economic decay and political
corruption. It is only in an epoch where the other
conditions for capitalist production exist—free
labour, a world market, dissolution of the old social
connections, a certain level of the development of labour,
development of science, etc.—that usury appears as one
of the factors contributing to the establishment of the new
mode of production; and at the same time
causing the ruin of the feudal lords, the pillars of the
anti-bourgeois elements, and the ruin of small-scale
industry and agriculture, etc., in short, as a factor
leading to the centralisation of the conditions of
production in the form of capital.

The fact that the usurers, merchants, etc., possess
“monetary fortunes” simply means that the wealth
of the nation, insofar as it takes the form of commodities
or money, is concentrated in their hands.

At the outset capitalist production has to fight against
usury to the extent that the usurer himself does not become
a producer. With the establishment of capitalist
production the domination of the usurer over surplus labour,
a domination which depends on the continued existence of the
old mode of production, ceases. The industrial
capitalist collects surplus-value directly in the form of
profit; he has also already seized part of the means of
production and he appropriates part of the annual
accumulation directly. From this moment, and
especially as soon as industrial and commercial wealth
develops, the usurer—that is, the lender at
interest—is a person who is differentiated from the
industrial capitalist only as the result of the division of
labour, but is subordinated to industrial capital.

| III. An die
Pfarrherrn wider den Wucher zu predigen.
Vermanung, Wittemberg, 1540 (without pagination).

[Discusses] trading (buying, selling) and
lending. (Unlike Proudhon, Luther is not deceived
by these differences of form.)

“Fifteen years ago I wrote against
usury since it had already become so widespread that I could
hope for no improvement. Since that time, it has
exalted itself to such a degree that it no longer
wishes to be a vice, sin or infamy but extols
itself as downright virtue and honour as if it conferred a
great favour on and did a Christian service to the
people. What will help and counsel us now that infamy
has become honour and vice virtue? Seneca says with
good reason: Deest remedii locus, ubi, quae vitia
fuerunt, mores fiunt.[i] Germany has become what
it had to become, accursed avarice and usury have corrupted
it completely…

“First concerning lending and
borrowing: Where money is lent and more or better is
demanded and taken in return, that is usury, anathemised in
all laws. Therefore all those who take five, six or
more on a hundred on money lent are usurers, and they know
they are acting as such and are called the idolatrous
servants of covetousness and of Mammom… And one
should say the same in respect of corn, barley and other
goods, where more or better is: demanded in return, that it
is usury, goods stolen and extorted. For lending means
my handing over my money, goods or chattels to somebody
for
as long as he needs them, or for as long as I can and
wish to, and he returns the same things to me in his own
good time, in as good a condition as that in which I lent
him them.”

“Thus they also make a
usury out of buying and selling. But this is
too much to deal with in one single bite. We must deal
with one thing now, with usury as regards loans; when we
have put a stop to this (as on the Day of Judgement), then
we will surely read the lesson with regard to usurious
trade.”

“Thus Squire Usurer says: Friend, as
things are at present, I do my neighbour a great
service in that I lend him a hundred at five, six,
ten. And he thanks me for such a loan as a very
special favour. He does, in truth, entreat me for it
and pledges himself freely and willingly to give me five,
six, ten guilders in a hundred… Should I not be
able without extortion to take this interest with a good
conscience?…

“Let [whoever wants to do so] extol
himself, put on finery and adorn himself [but pay no heed
and keep firmly to the scripture] … whoever takes
more or better than he gives, that is usury and is not a
service, but a wrong done to his neighbour, as when one
steals and robs. All is not service and benefit to a
neighbour that is called service and benefit. For an
adultress and an adulterer do one another a great service
and pleasure. A horseman does a great service to a
robber by helping him to rob on the highway, and attack the
people and the land. The papists do us a great service
in that they do not drown, burn, murder all or let them rot
in prison, but let some live and drive them out or take from
them what they have. The devil himself does his
servants a great, inestimable service… To sum
up: the world is full of great, excellent daily services and
good deeds… The poets write about the Cyclops
Polyphemus, who said he would do Ulysses an act of
friendship, namely, that he would eat his companions first
and then Ulysses last. In sooth, this would have been
a service and a fine favour. Such services and good
deeds are performed nowadays most diligently by the
high-born and the low-born, by peasants and burgesses, who
buy goods up, pile up stocks, bring dear times, | increase the price of corn,
barley and of everything people need; they then wipe their
mouths and say: Yes—one must have what one must have;
I let my things out to help people although I
might—and could—keep them for myself; and God is
thus fooled and deceived… The sons of men have
become very holy… So that now nobody can
profiteer, be covetous or wicked; the world has really
become holy, everyone serves his fellows, nobody
harms anybody else…

“But if this is the kind of service
he does, then he does it for Satan himself; although a poor
needy man requires such service and must accept it as a
service or favour that he is not eaten up
completely…

“He[j] does and must do thee such a
favour” (pay interest to the usurer) “if he
wants to get money.”

<One can see from the above that usury increased
greatly in Luther’s time and was already justified as a
“service” (Say, Bastiat). Even the
formulation of competition or harmony existed already:
“Everyone serves his fellows.”

In the world of antiquity, during the better
period, usury was forbidden (i.e., interest was not
allowed). Later [it was] lawful, and very
prevalent. Theoretically the view always
[predominated] that interest in itself is wicked (as was
stated by Aristotle).

In the Christian Middle Ages, it was a
“sin” and prohibited by “the
canon”.

Modern times. Luther. The
Catholic-pagan view still [prevailed]. Usury became
very widespread (as a result partly of the monetary needs of
the government, [partly] of the development of trade and
manufacture, [and the] necessity to convert the products
into money). But its civic justification is already
asserted.

Holland. The first apologia for usury.
It is also here that it is first modernised and subordinated
to industrial or commercial capital.

England. Seventeenth century. The
polemics are no longer directed against usury as such, but
against the amount of interest, and the fact that it
dominates credit. The desire to establish the form of
credit. Regulations are imposed.

Eighteenth century. Bentham.
Unrestricted usury is recognised as an element of capitalist
production.>

[A few more extracts from Luther’s An die Pfarrherrn
wider den Wucher zu predigen.]

Interest as compensation for loss.

[“The following case can happen and no doubt does
happen often, that I, Hans, lend you, Baltzer, a hundred
guilders on condition that I must have it back by Michaelmas
when I shall need it urgently, otherwise (if you fail me) I
shall be in dire trouble. Michaelmas comes and you do
not give me the hundred guilders back. Thereupon the
judge takes me by the throat, or throws me in the dungeon or
prison, or some other trouble befalls me until I pay.
There I sit, or remain locked away, missing my food and
improvement to my great cost; and you with your delay have
brought me to this pass and returned my good deed so
badly. What shall I now do? My losses increase
day by day and I suffer additional expenses because, and so
long as, you delay and do nothing. Who is now to bear
the loss or penalty? For my losses will remain an
insufferable guest in my house until I am utterly
ruined.”]

“Well then, speaking in worldly and
juridical fashion (we shall have to wait until later to
speak about it theologically), you, Baltzer, are due to give
me the hundred guilders along with all the losses and
charges which have been added.” <By charges, he
means legal charges, etc., which the lender has incurred
because he himself could not pay his debts.> “It
is therefore right and proper and likewise according to
reason and natural law that you make restitution to me of
everything—both the capital sum
and the loss… In legal books, the Latin
word for this indemnification is
interesse…

“Something else can happen in the way
of loss. If you, Baltzer, do not give me back my
hundred guilders by Michaelmas and l have to make a
purchase, say to buy a garden, a plot of land or a house, or
anything from which I and my children could derive great use
or sustenance, then I must forego it and you do me damage
and are a hindrance to me so that I can never get such a
bargain again because of your delay and inactivity,
etc. But since I lent you the hundred guilders, you
have caused me to suffer twofold damage because I cannot
pay on the one hand and cannot buy on the other and thus
must suffer loss on both sides. This is called
duplex interesse, damni emergentis et lucri cessantis[k]…

“Having heard that Hans has suffered
loss on the hundred guilders which he lent and demands just
recompense for this loss, they rush in and charge such
double compensation on every 100 guilders, namely, for
expenses incurred and for the inability to buy the garden;
just as though every hundred could grow double interest
naturally, so that whenever they have a hundred guilders,
they loan them out and charge for two such losses which
however they have not incurred at all…

“Therefore thou art a usurer, who
makes good thine own imagined losses with your neighbour’s
money, losses which no one has caused thee and which
thou canst neither prove nor calculate. The
lawyers call such losses non verum, sed phantasticum
interesse.[l]
A loss which each man dreams up for himself…

“It will not do | to say I might incur a loss
because I might not have been able to pay or
buy. That would mean ex contingente
necessarium,[m] making something that
must be out of something which is not, to turn a thing which
is uncertain into a thing which is absolutely sure.
Would such usury not eat up the world in a few
years…

“If the lender accidentally
incurs a loss through no fault of his own, he must be
recompensed, but it is different in such deals and just the
reverse. There he seeks and invents losses to
the detriment of his needy neighbours; thus he wants to
maintain himself and get rich, to be lazy and idle and to
live in luxury and splendour of other people’s labour
and worry, danger and loss. So that I sit behind the
stove and let my hundred guilders gather wealth for me
throughout the land, and, because they are only
loaned, I keep them safely in my purse without any risk
or worry; my friend, who would not like that?

“And what has been said about money
which is loaned applies also to corn, wine and such like
goods which are lent, for they also may occasion such double
damage. But such double damage is not something
naturally accruing to the goods, but may arise by
accident only and cannot therefore be reckoned as damage
unless it has actually occurred and been proved,
etc…

“Usury there must be, but woe to the
usurers…

“All wise, reasonable heathens have
also inveighed against usury as something exceedingly
evil. Thus Aristotle, in his Politics, says
that usury
is against nature and for this reason: it always takes
more than it gives. Thereby it abolishes the means and
measure of all virtue, which we call like for like,
aequalitas arithmetica[n], etc.…

“But taking from other people,
stealing or robbing, is called a shameful way of maintaining
oneself, and those who do so are called, by your leave,
thieves and robbers, whom we are accustomed to hang on the
gallows; a usurer however is a nice thief and robber and
sits in a chair, therefore we call him a chair
thief…

“The heathens were able, by the light
of reason, to conclude that a usurer is a double-dyed thief
and murderer. We Christians, however, hold them in
such honour that we fairly worship them for the sake of
their money… Whoever eats up, robs and steals
the nourishment of another, commits as great a murder (so
far as in him lies) as he who starves a man to death or
utterly undoes him. But such does a usurer, and sits
the while, safe on his chair, when he ought rather to be
hanging on the gallows and eaten by as many ravens as he has
stolen guilders, if only there was so much flesh on him that
so many ravens could stick their beaks in and share
it…

“But the dealers and usurers will cry
out that what is written under hand and seal must be
honoured. To this the jurists have given a prompt and
sufficient answer. In malis promissis.[o] Thus the
theologians say that some people give the devil something
under hand and seal signifies nothing, even if it is written
and sealed in blood. For what is against God, Right
and Nature is null and void. Therefore let a Prince
who can do so, take action, tear up bond and seal, take no
notice of it, etc. …

“Therefore there is on this earth no
greater enemy of men, after the devil, than a miser
and usurer, for he wants to be God over all
men. Turks, soldiers, tyrants are also bad men,
yet they must let the people live and confess that they are
bad and enemies, and can, nay must, now and then show pity
on some. But a usurer and money-grubber, such a one
would have the whole world perish of hunger and thirst,
misery and want, so far as in him lies, so that he may have
all to himself and everyone receive from him as from a
God and | be his
serf for evermore. This is what gladdens his
heart, refreshes his blood. And, at the same time, he
can wear sable cloaks, golden chains, rings, gowns, wipe his
mouth, be deemed and taken for a worthy, pious man, who is
more merciful than God Himself, more loving than the Mother
of God, and all the holy Saints…

“And they write of the great deeds of
Hercules, how he overcame so many monsters and frightful
horrors in order to save his country and his people.
For usury is a great horrible monster, like the werewolf,
who lays everything waste, more than any Cacus, Geryon or
Antaeus, etc. And yet he decks himself out and wants
to appear pious so that people may not see where the oxen
have gone (that he drags backwards into his
den).”

<An excellent picture, it fits the capitalist in
general, who pretends that what he has taken from others and
brought into his den, emanates from him, and by
causing it to go backwards he gives it the semblance
of having come from his den.>

“But Hercules shall hear the cry of
the oxen and of the prisoners and shall seek out Cacus even
on the cliffs and among the rocks, and he shall set the oxen
loose again from the villain. For Cacus means the
villain that is a pious usurer who steals, robs and
eats everything. And will not admit that he has done
it and thinks no one will find him out, because the oxen,
drawn backwards into his den, make it seem from their
footprints that they have been let out. Thus
the usurer wants to deceive the world, as though he were of
use and gave the world oxen, whereas, in reality, he
seizes them for himself and consumes
them…

“Therefore, a usurer and miser is,
indeed, not truly a human being, sins not in a human way and
must be looked upon as a werewolf, more than all the
tyrants, murderers and robbers, nearly as evil as the devil
himself, but one who sits in peace and safety, not like an
enemy, but like a friend and citizen, yet robs and murders
more horribly than any enemy or incendiary. And since
we break on the wheel and behead highwaymen and burglars,
how much more ought we to break on the wheel and kill all
usurers, and drive out, curse and behead all
misers… ”

A highly picturesque and striking description of both the
character of old-fashioned usury, on the one hand, and of
capital in general, on the other, with the “imagined
loss”, the “indemnification which naturally
accrues” to money and commodities, the general phrases
about usefulness, the “pious” air of the usurer
who is not “like the rest of men”, the
appearance of giving when one is taking, and of letting out
when one is pulling in, etc.

“The great premium attached to the
possession of Gold and Silver, by the power it gives of
selecting advantageous moments of purchasing, gradually gave
rise to the trade of the Banker.” The Banker
“differs from the old Usurer in this respect,
that he lends to the rich and seldom or never to the
poor. Hence he lends with less risk, and can
afford to do it on cheaper terms; and for both reasons, he
avoids the popular odium which attended the Usurer”
(Francis William Newman, Lectures on Political
Economy, London, 1851, p. 44).

The involuntary alienation of feudal landed property
develops along with the development of usury and money.

“The introduction of money which buys
all things, and in consequence of that, the favour due to
creditors, who have lent their money to a possessor of land,
brings in the necessity of legal alienation for the payment
of what has been thus lent…” (John Dalrymple,
An Essay towards a General History of Feudal Property in
Great Britain, London, 1759, fourth ed., p. 124).

| “According to
Thomas Culpeper (1641), Josiah Child (1670) and Paterson
(1694) wealth depends on the self-imposed reduction in the
rate of
interest on gold and silver.” [This rule]
“was observed in England for almost two
centuries” (Charles Ganilh, (Des systémes
d’économie politique…, seconde éd.,
tome premier, Paris, 1821, pp. 58-59]).

When Hume—in opposition to
Locke—declared that the rate of interest is regulated
by the rate of profit, he had a much higher development of
capitalism in mind. This was even more true of Bentham
when he wrote his defence of usury towards the end of the
eighteenth century.

A reduction in the rate of interest was imposed by law
from the time of Henry VIII to that of Queen Anne.

No country had a general rate of
interest during the Middle Ages. Only the priests
[prohibited all transactions involving interest] with great
sternness. Legal measures safeguarding loans were
unreliable. The rate of interest was consequently very
high in individual cases. The amount of money in
circulation was small and it was necessary to make most
money payments in cash, for bills of exchange were not
yet widely used. Hence interest and the concept of
usury varied considerably. In Charlemagne’s time it
was regarded as usurious if 100 per cent was charged.
The local burghers in Lindau on Lake Constance charged 216
2/3 per cent in 1344. The legal
rate of interest in Zürich was fixed at 43
1/3 per cent by the Council. In
Italy, 40 per cent had to be paid occasionally although the
usual rate did not exceed 20 per cent from the twelfth to
the fourteenth centuries. Verona decreed a legal rate
of 121/2 per cent. Frederick II
10 per cent, but this only for Jews. He would not say
what the rate should be for Christians. The usual rate
in the Rhenish part of Germany was 10 per cent as early as
the thirteenth century (Hüllmann, Städtewesen
des Mittelalters, Zweiter Teil, Bonn, 1827, pp.
55-57).

The enormous rates of interest in the Middle Ages
(insofar as they were not paid by the feudal aristocracy,
etc.) were based in the towns, in very large measure,
on the gigantic profits upon alienation which the merchants
and urban craftsmen made out of country people, whom they
cheated.

In Rome, as in the entire ancient world—apart from
merchant cities, like Athens and others, which were
particularly developed industrially and commercially—[high interest was] a means used by the big landowners not
only for expropriating the small proprietors, the plebeians,
but for appropriating their persons.

Usury was originally permitted freely in Rome. The
Law of the Twelve Tables (303 A.U.C.[p]) “fixed interest on money at
1 per cent per year” (Niebuhr says 10 per cent).
“This law was promptly infringed […]
Duilius”(398 A.U.C.) “reduced the rate of
interest to 1 per cent again […] unciario
foenore[q]
[…] It was limited to 1/2
per cent in the year 408, and in 413 lending
at interest was totally prohibited as a result of a
referendum initiated by the Tribune Genucius
[… ] It is not surprising that in a republic in
which the citizens were forbidden to carry on industry and
both wholesale and retail trade, trading in money should
also be prohibited” (Dureau de la Malle,
[Économie politique des Romains,] t. II,
[Paris, 1840,] pp. 259-61). “This lasted for
300 years until the fall of Carthage. It then [became
legal to charge up to] 12 per cent, but the usual rate of
annual interest was 6 per cent” (loc. cit.,
p. 261). “Justinian fixed the rate of interest
at 4 per cent; in Trajan’s time the legal rate of interest
was 5 per cent, usura quincunx.[r] In Egypt the legal
commercial interest was 12 per cent in 146 B.C.” (loc.
cit., pp. 262-63). |

||950a| James William
Gilbart in his The History and Principles of
Banking (London, 1834) says the following with regard to
interest.

“That a man who borrows money with a
view of making a profit by it, should give some
portion of his profit to the lender, is a self-evident
principle of natural justice. A man makes a profit
usually by means of traffick. But in a country purely
agricultural, and under such government as was the feudal
system,[s] there can
be but little traffick, and hence but little profit.”
Legislation against extortionate interest is therefore
justified in the Middle Ages. “Besides, in an
agricultural country a person seldom wants to borrow money
except he be reduced to poverty or distress by
misfortune” (p. 163).

“In the reign of Henry VIII, interest
was limited to 10 per cent. James I reduced it to 8
per cent […] Charles II […] to 6 per cent
[…] Anne […] to 5 per cent”
(pp. 164-65). “…in those times, the
lenders […] had in fact, though not a legal, yet an
actual monopoly, and hence it was necessary that they, like
other monopolists, should be placed under restraint.
In our times, it is the rate of profit which regulates the
rate of interest. In those times, it was the rate of
interest which regulated the rate of profit. If the
money-lender charged a high rate of interest to the
merchant, the merchant must have charged a higher rate of
profit on his goods. Hence, a large sum of money would
be taken from the pockets of the purchasers to be put into
the pockets of the money-lenders. This additional
price, too, put upon the goods, would render the
public less able and less inclined to purchase them”
(p.165).

In the seventeenth century, Josiah Child in his Brief
Observations concerning Trade and Interest of Money, and
Thomas Culpeper in his Traité contre l’usure
(1621) likewise, attacks Thomas Manley (author of the
tract Interest of Money Mistaken)
whom he calls the “champion of the
usurers”. Naturally the point of
departure—like that of all the arguments of English
economists of the seventeenth century—was the wealth
of Holland where there was a low rate of interest.
Child considers that this low rate of interest is the cause
of wealth. Manley declares that it is only the result
[of wealth].

“Insomuch that to know whether any
Country be rich or poor … no other question needs to
he resolved, but this, viz. What Interest do they pay for
Money?” ([Josiah Child, Brief Observations
concerning Trade and Interest of Money, London, 1668,
p. 9;] Troités, p. 74).[t]

“…the gentleman brings up his
battalia, and, like a stout champion for the sly and
timorous herd of usurers, plants his main battery against
that part which I confessed to be weakest… And
he positively denies that the lowness of interest is the
cause” (of wealth), “and affirms it to be only
the affect thereof…” ([Josiah Child, A New
Discourse of Trade…, London, 1775, p. 39;]
Traités, p. 120).

“When interest is abated, they who
call in their money must either buy land” (whose price
goes up as a result of the number of buyers), “or
trade with it…”([A New Discourse…,
p. 47;] Traités, p. 133).

“… whilst interest is at 6 per
cent no man will run an adventure to sea for the gain of 8
or 9 per cent which the Dutch, having money at 4 or 3 per
cent at interest, are contented with…”([A
New Discourse…, p.47;] Traités,
p. 134).

The low rate of interest and the high price
of land force the merchant to stick to commerce.
“…it” (a low rate of interest)
“inclines a nation to thriftiness” ([A New
Discourse…, p. 52;] Traités,
p. 144).

“…if trade be that which
enricheth any kingdom, and lowering of interest advanceth
trade…then the abatement of interest, or more
properly restraining of usury… is doubtless a primary
and principal cause of the riches of any nation; it being
not improper to say, nor absurd to conceive, that the same
thing ||950b| may be both a
cause and an effect” ([A New
Discourse…, p.58;] Traités,
p. 155).

“…an egg is the cause of a
hen, and a hen the cause of an egg.

“… [The like may be said of
nations:] the abatement of interest causeth an increase of
wealth, and the increase of wealth may cause a further
abatement of interest. But that is best done by the
midwifery of good laws…” ([A New
Discourse…, p. 59;] Traités, p.
156).

“… I am an advocate for
industry, he for idleness…” ([A New
Discourse…, p.71;] Traités,
p. 179).

He appears here as the direct champion of industrial and
commercial capital. |XV-950b||

[a]
Tokos—to bear, produce, the product;
figuratively: interest on money lent.—Ed.

[b] Free
credit.—Ed.

[c] One must, after
all, recover what is due to oneself, even if one takes it
out of one’s own pocket.—Ed.

[d] See this volume,
pp. 480-81.—Ed.

[e] This can also
mean: “the means of production do not yet work with
it”, i.e., capital.—Ed.

[f] The English
socialists.—Ed.

[g] Marx gives this
passage in his own words.—Ed.

[h]
Knight.—Ed.

[i] There is no
remedy where that which was regarded as unvirtuous becomes
the habit.—Ed.

[j] The poor
man.—Ed.

[k] Twofold
compensation, for the loss incurred and for the gain
missed.—Ed.

[l] Not real but
imagined losses.—Ed.

[m] Making a
necessity out of an accident.—Ed.

[n] Arithmetical
equality.—Ed.

[o] In evil
promises.—Ed.

[p]
A.U.C.—anno urbis conditae—in the year
of the founding of the City, used to express the date since
the foundation of Rome (753 B.C.).—Ed.

[q] Increase by
one twelfth (one ounce).—Ed.

[r] Interest of
five twelfths (five ounces).—Ed.

[s] In Marx’s
manuscript this sentence reads (in German) as follows:
“But in the Middle Ages the population was wholly
agricultural. And in this case, just as under a
feudal government”, etc.—Ed.

[t] Marx quotes
this and the following passages from the French translation
of Child’s work—Traités sur le commerce et
sur les avantages qui résultent de la
réduction de l’interest de l’argent, Amsterdam et
Berlin, 1754.—Ed.