I X  MANCHESTER
[London,] 2 August 1862
Dear Frederick,
Best thanks for the £10.
I very much dislike your being in financial difficulties on my 
account, bùt que faire?a Who is capable of withstanding such a 
crisis as the American one? 
Not to mention my peculiar bad 
luck in having a rotten rag like the Vienna Presse to deal with. 
ОtHERwfst ,  the fellows might, at least, have been able to make up 
for the loss of the Tribune 
t o  some  
e x  гем  . Do you suppose, 
perhaps, that the time has now come for me to approach, say, the 
Evening Post 
( hie  
abolitionist  
paper  in New York) about my 
contributing to it?
All things considered, it’s a real miracle that I have been able to 
get on with my theoretical writing to such an extent. I now 
propose after all to include in this volume an extra chapter on the 
theory of rent, i.e., by way of ‘illustration’ to an earlier thesis of 
mine.154 Let me say a word or two about what will, in the text, be a 
lengthy and complex affair, so that you may let me have your opinion 
on it.
As you know, I distinguish 2 parts in capital: constant capital 
(raw material, matières instrumentales,h machinery, etc.), whose value 
only reappears in the value of the product, and secondly variable 
capital, i.e., the capital laid out in wages, which contains less 
materialised labour than is given by the worker in return for it. 
E.g. if the daily wage=10 hours and the worker works 12, he 
replaces the variable capital + '/5 of the same (2 hours). This latter 
surplus I call scurras  
vit
Let us assume that the rate of surplus value (that is the length of 
the working day and the surplus labour in excess of the necessary 
labour performed by the worker to reproduce his pay) is given, 
e.g. = 50 p.c. In this case, in a 12 hour working day the worker 
would work e.g. 8 hours for himself, and 4 hours (s/2) for the 
em ployer. And indeed, let us assume this to apply to all trades so that 
any variations there may be in the average working теме simply allow 
for the greater or lesser difficulty of the work, etc.
a what is one to do? - h auxiliary m aterials

395
In these circumstances, given equal exploitation of the worker in 
different trades , different capitals in different spheres of production will, given equal size, yield very different 
amounts  o f  surplus  
value  and hence very different rates of profit, since  profit  i s  nothing  but
TH E PROPORTION OK THE  SURPLUS VALUE TO  THE  TO TAL CAPITAL ADVANCED. T h lS
will depend on the organic composition of the capital, i.e., on its 
division into constant and variable capital.
Let us assume, as above, that the surplus labour=50 p.c. If, 
therefore, e.g. £1 = 1 working day (no matter whether you think in 
terms of a day or a week, etc.), the working day=12 hours, and 
the necessary labour (i.e. reproductive of the pay)=8 hours, then 
the wage of 30 workers (or working days)=£20 and the value of 
their labour=£30, the variable capital per worker (daily or 
weekly) = £ " 7 3 and the value he creates = £1. The amount  of surplus  
value  produced by a capital of £100 in different  trades  will vary greatly 
according to the proportion in which the capital of £100 is divided 
into constant and variable capital. Let us call constant  capital  C, and 
variable  capital  V. If, e.g. in the cotton  industry, the composition was 
C 80, V 20, the value of the product would=110 (given 50 p.c. 
surplus value or surplus  labour ) .  The amount of the surplus value= 10 
and the profit rate=10 p.c., since the profit=the proportion of 10 
(the surplus  value ) : 100 (the total value o f  the  capital  expended ) . Let us 
suppose that, in a large tailoring shop, the composition is C 50, V 50, 
so that the product=125, the surplus value (at a rate of 50 p.c. as 
above)=25 and the profit rate=25 p.c. Let us take another industry 
where the proportion is C 70, V 30, hence the product=115, 
the 
profit 
rate=15 
p.c. 
Finally, 
an 
industry 
where 
the 
composition=C 90, V 10, hence the product =105 and the profit 
rate = 5 p.c.
Here, given equal exploitation of labour, we have in  different  trades  
very D IFFEREN Tamounts  o f  surplus  value  and  hence  very  D IFFERENT KATES OI 
prof it  for capitals of equal size.
If, however, the above 4 capitals are taken together, we get:
Value
of the product 10
1. C 80 V 20
2. C 50 V 50
3. C 70 V 30
4. C 90 V 10
110 profit rate=10 p.c. 
125 profit rate=25 p.c. 
115 profit rate=15 p.c. 
105 profit rate= 5 p.c.
Rate of surplus 
value in all 
cases=50 p.c.
C apital 
400
Profit^ 55

396
On 100, this makes аprofit  rate  of 13% p.c.
If the total capital (400) of the class be considered, the profit rate 
would=133/4 p.c. And capitalists are brothers. As a result of 
competition ( transfer  o f  capital  o r  withdrawal  o f  capital  from  one  trade  
t o  the  other ) ,  capitals of equal size in different  trades , despite  their
D IFFERENT OGRAN1C COM POSITIONS, YIELD THE  SAME AVERAGE RATE OF PROFIT. In
other words, the average  profit, which f .i . a  capital  o f  £ 100  yields in  a  
certain  trade , it yields, not as a capital specifically applied to the same 
nor, therefore, in the proportion in which it of itself produces surplus  
value , but as an aliquot part of the total capital of the capitalist class. It 
is ashare  the dividend on which will be paid in proportion to its size 
out of the total amount of the surplus  value  (or unpaid labour) 
produced by the total variable (laid out in wages) capital of 
the class.
If then 1, 2, 3, 4 in the above illustration are to make the same 
average  profit , each category must sell its goods at £11373. 1 and 
4 will sell them at more than their value, 2 and 3 at less.
The price so regulated=THE expenses  o f  capital +
the  average  profit  
( f .i . 10 p.c.), is what Smith called the natural  price , cost  price ,448 etc. 
It is the average  price  to which competition between different  trades  
(by transfer  o f  capital  or withdrawal  o f  capital )  reduces the prices in 
different  trades . Hence, competition reduces commodities not to 
their value, but to the cost price, which, depending on the organic 
composition of the respective capitals, is either above, below or = to 
their values.
Ricardo confuses value and cost price. He therefore believes that, 
if there were such a thing as absolute rent (i.e., rent independent of 
variations in the fertility of the soil), 
agricultural  produce , etc., 
would be constantly sold for more than its value, because at more 
than cost price ( the  advanced  capital +
the  average  profit ) . That would 
demolish the fundamental law. Hence he denies absolute rent and 
assumes only differential rent.
But his identification of 
valuesof  gommodities  and 
cost  prices  o f  
commodities is totally wrong and has traditionally been taken over 
from A. Smith.
The facts are as follows:
If we assume that the average  composition  of all not  agricultural  
capital  is C 80, V 20, then the product (assuming that the rate of 
surplus value is 50 p.c.)=110 and the profit rate=10 p.c.
If we further assume that the average  composition  of agricultural  
capital  is C 60, V 40 (in England, this figure is statistically fairly 
correct; rent for pasture, etc., has .no bearing on this question, 
being determined not by itself, but by the corn  rent ) , then the