Theories of Surplus Value, Marx 1861-3
||636| 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.
||637| 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).
“… 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.
||638| 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.
“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 ||639|, 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 reproduced from year to year; such as hats, shoes, corn, 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).
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 ||640| 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 ||641| 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. |641||
|642| 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|
|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.
||643| 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. |643||
||641| 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. |641||
||641| 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. ||642| 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. |642||
||643| [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) ||644| “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.
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 ||645| 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.
||646| 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 l6 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.
||647| 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 va1ues 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 va1ues 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).
||648| 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 ||650| as we have seen previously.
We now come to the presentation of Ricardo’s theory of surplus-value.
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. ||651| 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.
||652| 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. |652||
||652| 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. |652||
||652| 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. |652||
||652| 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 he 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 he 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. ||653| 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 ||654| 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 va1ues 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 ||655| 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.
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.
||656| 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.
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.
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.
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 ||658| 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. ||659| 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, ||660| 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, ||661| 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]).
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.
||662| 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.
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 he 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).
||663| “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). |663|| .
||663| “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 ||364| 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 he 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, ||665| 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.)
||666| 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.
* ||663| (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).) |663||
[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.