Theories of Surplus Value, Marx 1861-3

[Chapter XXII]  Ramsay

[1.  The Attempt to Distinguish Between Constant and Variable Capital.  The View that Capital Is Not an Essential Social Form]

||XVIII-086| Ramsay, George (of Trinity College, Cambridge), An Essay on the Distribution of Wealth, Edinburgh, 1836.

With Ramsay we return again to the political economists.

<In order to find a place for commercial capital, he calls it “the transport of commodities from one place to another” (op.  cit., p. 19).  He thus confuses trade with the carrying industry.>

Ramsay’s chief contribution:

First: That he does in fact make the distinction between constant and variable capital.  True, this occurs in such a manner, that the distinction between fixed and circulating capital which he takes from the circulation process is the only one which he nominally retains, but he defines fixed capital in such a way that it includes all the elements of constant capital.  He therefore regards as fixed capital not only machinery and instruments, buildings in which labour is carried on or in which the results of labour are stored, draught and breeding animals, but also all raw materials (semi-manufactures, etc.)  “the seed of the agriculturist, and the raw material of the manufacturer” (op. cit., p. 22).  Moreover “manure of all kinds, fences […] for agriculture, and the fuel consumed in manufactories” (loc. cit., p. 23) are fixed capital.

Circulating capital consists exclusively of subsistence and other necessaries advanced to the workmen, previous to the completion of the produce of their labour” (loc. cit., p. 23).

It can be seen therefore that by “circulating capital” he understands nothing ||1087| but that part of capital which constitutes wages, and by fixed capital, that part which constitutes the objective conditions—means and materials—of labour.

The mistake here, however, is the identification of this division of capital, which is directly derived from the production process, with the distinction which arises from the circulation process.  This is due to his adherence to the economic tradition.

On the other hand, Ramsay again confuses the purely material element of the fixed capital thus defined with its existence as “capital”.  Circulating capital (i.e., variable capital) does not enter into the real labour process, but what does enter, is living labour, which is bought with circulating capital, and which replaces it.  What enters in addition into the labour process is constant capital, that is, labour embodied in the objective conditions of labour, in the materials and means of labour.  Ramsay therefore writes:

“… fixed capital alone, not circulating, is properly speaking a source of national wealth” (loc. cit., p. 23).  “…labour and fixed capital are the only elements of expense of production” (op. cit., p. 28).

What is really expended in the production of a commodity are raw materials, machinery, etc., and the living labour which sets them in motion.

“Circulating” capital is superfluous, extraneous to the process of production.

“… were we to suppose the labourers not to be paid until the completion of the product, there would be no occasion whatever for circulating capital.  […] industry would be carried on on a scale quite as great[a] […] Nothing can prove more strongly[b] that circulating capital is not an immediate agent in[c] production, nor even essential to it at all, but merely a convenience rendered necessary by the deplorable poverty of the mass of the people” (op. cit., p. 24).

“…fixed capital […] alone constitutes an element of cost of production in a national point of view”… (loc. cit., p. 26).

In other words: the labour materialised in the conditions of labour—materials and means of labour—which we call “fixed capital”, and the living labour, in short, embodied, materialised labour and living labour, are necessary conditions of production, elements of the national wealth.  On the other hand, [according to Ramsay], it is a mere “convenience” due to the “deplorable poverty of the mass of the people” that the means of subsistence of the workers at all assume the form of “circulating capital”.  Labour is a condition of production, but wage-labour is not, and neither, therefore, is it necessary that the workers’ means of subsistence confront them as “capital”, as an “advance by the capitalist”.  What Ramsay overlooks is that if the means of subsistence of the workers did not confront them as “capital” (as “circulating capital”, as he calls it), neither would the objective conditions of labour confront them as “capital”, as “fixed capital”, as he calls it.  Ramsay attempts in earnest, and not merely in words as the other economists do, to reduce capital to “a portion of the national wealth, employed, or meant to be employed, in favouring reproduction” (op. cit., p. 21); he therefore declares wage-labour and consequently capital—that is the social form which the means of reproduction assume on the basis of wage-labour—to be unimportant and due merely to the poverty of the mass of the people.

Thus we have arrived at the point where political economy itself—on the basis of its analysis—declares the capitalist form of production, and consequently capital, to be not an absolute, but merely an “accidental”, historical condition of production.

Ramsay’s analysis, however, does not go far enough to draw the correct conclusions from his premises, from the new definition which he has given to capital in the immediate production process.

[2.  Ramsay’s Views on Surplus-Value and on Value.  Reduction of Surplus-Value to Profit.  The Influence Which Changes in the Value of Constant and Variable Capital Exert on the Rate and Amount of Profit]

Ramsay comes indeed close to the correct definition of surplus-value.

“… a circulating capital will always maintain more labour than that formerly bestowed upon itself.  Because, could it employ no more than had been previously bestowed upon itself, what advantage could arise to the owner from the use of it as such?” (op. cit., p. 49).  “There is no possible way of escaping this conclusion, except by asserting[d] that the quantity of labour which any circulating capital will employ is no more than equal to that previously bestowed upon it.  [… ] This would be [… ] to say, that the value of the capital expended is[e] equal to that of the product” (loc. cit., p. 52).

This means, therefore, that the capitalist exchanges less materialised labour for more living labour and that this surplus of unpaid living labour constitutes the excess of the value of the product over the value of the capital consumed in its production, in other words, the surplus-value (profit, etc.).  If the amount of labour for which the capitalist pays wages were equal to the amount which he receives back from the worker in the product, then the value of the product would be no greater than that of the capital and there would be no profit.  Although Ramsay is very close here to the real origin of surplus-value, he is nevertheless too bound up in the tradition of the economists not to begin immediately straying again along false paths.  First of all, the way he explains this exchange between variable capital ||1088| and labour is ambiguous.  If he had been quite clear about this, then further misunderstanding would have been impossible.  He says:

“… circulating capital”, for instance, “raised by the labour of 100 men, will […] employ a greater number, say 150.[f]  Therefore the product at the end of the […] year, will, in this case, be the result of the labour of 150 men” (loc. cit., p. 50).

Under what circumstances can the product of 100 men buy [the labour of] 150 men?

If the wages received by a worker for 12 hours’ labour were equal to the value of 12 hours’ labour, then only one working-day could be bought back with the product of his labour and only 100 working-days with the product of 100 working-days.  But if the value of the daily product of his labour is equal to 12 labour hours and the value of the daily wage he receives is equal to 8 labour hours, then 1 1/2 working-days or the labour of 1/2 men can be paid for, bought back, for the value of his daily product.  And 100 (1+1/2 men or working-days) = 100+50 or 150 men can be employed with the product of 100 working-days.  Thus, the condition in which the product of 100 men sets 150 in motion is that each of the 100 men and, in general, every worker, spends half as much time working gratis for the capitalist as he works for himself, or that he spends a third of the working-day working gratis.  Ramsay does not make this clear.  The ambiguity appears in the conclusion: “Therefore the product at the end of the … year, will, in this case, be the result of the labour of 150 men” [loc. cit., p. 50].  It will indeed be the result of the labour of 150 men in the same way as the product of 100 men was the result of the labour of 100 men.  The ambiguity (and certainly the lack of clarity, more or less derived from Malthus) is to be found in this: It appears as if the profit arises merely from the fact that 150 men are now employed instead of 100.  Just as if the profit derived from the 150 workers arose from the fact that 225 workers can now be set in motion by the product of the 150 [in the ratio of] 100:150= 150:225 [or] 20:30=30:45 [or] 4:6=6:9.  But that is not the point.

The labour which the 100 men supply amounts to x, if x equals their total working-day.  The wages they receive will then equal 2/3x.  Hence the value of their product equals x, the value of their wages equals x–1/3x, and the surplus-value made on them is 1/3x.

If the entire product of the labour of 100 men is again laid out in wages, then 150 men can be employed with it and their product will be equal to the wages of 225 men.  The labour-time of 100 men is the labour-time of 100 men.  But the labour they are paid for is the product of 66 2/3 men, that is, only 2/3 of the value embodied in their product.  The ambiguity [arises] because it appears as if the 100 men or the 100 working-days (it makes no difference whether they are days calculated over a year or separate days) produce 150 working-days—a product embodying the value of 150 working-days; while, conversely, the value of 100 working-days suffices to pay for 150 working-days.  If the capitalist continues to employ 100 men as he did previously, then his profit remains the same.  He will continue to pay the 100 men a product equal to the labour-time of 66 2/3 men and pocket the rest as he did before.  If, on the other hand, he bays out the whole product of the 100 men in wages once again, then he accumulates and appropriates a new amount of surplus labour equal to 50 working-days instead of only 33 1/3 as he did previously.

It is immediately apparent that Ramsay is not clear on the point, since he once again advances against the determination of value by labour-time the otherwise “inexplicable” phenomenon that the rates of profit are equal for capitals which exploit different masses of labour-power.

“The use of fixed capital modifies to a considerable extent the principle that value depends upon quantity of labour.  For some commodities on which the same quantity of labour has been expended, require very different periods before they are fit for consumption.  But as during this time the capital brings no return, in order that the employment in question should not be less lucrative than others in which the product is sooner ready for use, it is necessary that the commodity, when at last brought to market, should be increased in value by all the amount of the profit withheld.  This shews […] how capital may regulate value independently of labour” (op. cit., p. 43).

It shows rather that capital regulates average prices independently of the value of the particular product and that it exchanges commodities not according to their value, but in such a way that one employment of capital “should not be less ||1089| lucrative than others”.  Since empty tradition is more powerful in political economy than in any other science, Ramsay does not fail either to reproduce the “wine in the cellar”[g] argument which has been notorious since the time of [James] Mill.  And he therefore concludes that “capital is a source of value independent of labour” (op. cit., p. 55), whereas the most he would have been justified in concluding was that the surplus-value realised by capital in a particular branch of production does not depend on the quantity of labour employed by that particular capital.  |1089||

||1090| This false conception of Ramsay’s in this case is all the more surprising since, on the one hand, he grasps the natural basis, so to speak, of surplus-value, and, on the other hand, he affirms with regard to one instance that the distribution of surplus-value—its equalisation to the general rate of profit—does not increase the surplus-value itself.

[Ramsay says firstly:]

“… profits owe their existence to a[h] law of the material world, whereby the beneficence of nature when aided and directed by the labour and skill of man, gives so ample a return to national industry as to leave a surplus of products over and above what is absolutely necessary for replacing in kind the fixed capital consumed, and for perpetuating the race of labourers employed” [op. cit., p. 205].

<“Perpetuating the race of labourers” ||1091| is a fine result of capitalist production.  Of course, if labour only sufficed to reproduce the conditions of labour and to keep the workers alive, no surplus would be possible, hence no profit and no capital.  But that nature has nothing whatever to do with it and that the race of labourers perpetuates itself despite this surplus and that the surplus assumes the form of profit and on this basis, the race of capitalists perpetuates itself has been admitted by Ramsay himself since he declares that “circulating capital”, by which he means wages, wage-labour, is not an essential condition of production, but is due merely to the “deplorable poverty of the mass of the people”.  He does not draw the conclusion that it is capitalist production which “perpetuates” this “deplorable poverty”, although he admits it when he says that it “perpetuates the race of labourers” and leaves them only as much as is necessary for that perpetuation.  In the sense indicated above it can be said that surplus-value etc. rests on a natural law, that is, on the productivity of human labour in its exchange with nature.  But Ramsay himself states that a source of surplus-value is the absolute lengthening of labour-time (p. 102) as well as the increased productivity of labour brought about by industry.>

“… let the gross produce be ever so little more than is strictly essential for the above purposes, and the separation of a distinct revenue from the general mass, under the appellation of profit, and belonging to another class of men, becomes possible” (loc. cit., p. 205).  “… the very existence of the former[i] as a distinct class is dependent on the productiveness of industry” (loc. cit., p. 206).

Secondly, with regard to the equalisation of the rate of profit as a result of the rise in prices in some branches caused by increases in wages, Ramsay observes:

The rise in prices in some branches of industry resulting from increases in wages “… by no means exempted the master-capitalists from suffering in their profits, nor even at all diminished their total loss, but only served to distribute it more equally among the different orders composing that body” (op. cit., p. 163).

And if the capitalist whose wine is the product of 100 men (Ramsay’s example) sells it for the same price as a capitalist whose commodity is the product of 150 men, in order that “… the employment [of capital] in question should not be less lucrative than others” [p. 43], then it is clear that thereby the surplus-value embodied in the wine and in the other commodity is not increased, but only distributed equally between different orders of capitalists |1091||.

||1089| He also brings up again Ricardo’s exceptions [to the determination of value by labour-time].  These latter will have to be discussed in that part of our text where we speak of the conversion of value into price of production.  That is, very briefly, as follows.  Provided that in the different branches of production the length of the working—day (insofar as this is not compensated by the intensity of labour, the unpleasantness of the work, etc.) is the same, or rather the surplus labour is the same [as well as] the rate of exploitation, the rate of surplus-value can change only if wages rise or fall.  Such variations in the rate of surplus-value, like the rise or fall in wages, will affect the production prices of commodities in different ways according to the organic composition of capital.  Capital in which the variable part is large compared to the constant part, would acquire more surplus labour as a result of a fall in wages and would appropriate less surplus labour as a result of a rise in wages than capital with a larger proportion of the constant part to the variable part.  A rise or fall in wages would therefore have opposite effects on the rate of profit in the two branches or on the general rate of profit.  In order to maintain the general rate of profit, if wages rise, the prices of the first kind of commodities will rise, and those of the second kind will fall.  (Either type of capital will of course be directly affected by variations in wages only in proportion to the greater or less quantity of living labour it employs in comparison with the total capital expended.)  Conversely, if wages fall, the prices of the first kind of commodities will fall and those of the second kind will rise.

Strictly speaking, all this hardly belongs to the discussion of the original conversion of values into production prices and the original establishment of the general rate of profit, since it is much more a question of how a general rise or fall in wages will affect production prices regulated by the general rate of profit.

This problem has even less to do with the difference between fixed and circulating capital.  Bankers and merchants employ almost exclusively circulating capital and hardly any variable capital; that is, they lay out relatively small amounts of capital on living labour.  Contrariwise, a mine-owner employs incomparably more fixed capital than a capitalist engaged in tailoring.  But it is very questionable whether he employs relatively as much living labour.  It is merely because Ricardo advanced this special, relatively insignificant case as the only instance of a divergence between production price and value (or, as he incorrectly put it, [as] an exception to the determination of value by labour-time) and presented it in the form of a difference between fixed and circulating capital, that this blunder—and in an incorrect form at that—has survived as an important dogma in all subsequent political economy.  (The mine-owner should be counterposed not to the tailor but to the banker and the merchant.)

[Ramsay writes:]

“… the rise of wages […] is limited by the productiveness of industry.  In other words, … a man can never receive more for the labour of a day or year than with the aid of all the other sources of wealth, he can produce in the same time.  … his pay must be less than this, for a portion of the gross produce always goes to replace fixed capital” (i.e., constant capitol, raw materials and machinery, according to Ramsay) “with its profit” (op. cit., p. 119).

Here Ramsay confuses two things.  The amount of “fixed capital” embodied in the daily product is not the product of the day’s labour of the worker; in other words, this portion of the value of the product represented by a portion of the product in kind is not the product of this day’s labour.  On the other hand, profit is indeed a deduction from the daily product of the worker or from the value of this daily product.

Although Ramsay has not clearly elaborated the nature of surplus-value and although in particular he remains firmly rooted in the old prejudices with regard to the relation of value and production price and the conversion of surplus-value into average profit, he has on the other hand drawn another, correct ||1090| conclusion from his conception of fixed and circulating capital.

Before coming to this, [here is another passage about “value”]:

“… value must be in proportion not merely to the capital truly consumed, but to that also which continues unaltered, in a word,[j] to the total capital employed” (op. cit., p. 74).

By this he means that profit, and therefore also the production price, must be in proportion [to the total capital employed] whereas the value obviously cannot be altered by that part of the capital which does not enter into the value of the product.

[Ramsay drew the following conclusion from his conception of fixed and circulating capital.]

With the advance of society (i.e., of capitalist production) the fixed portion of capital increases at the expense of the circulating capital, i.e., that laid out in labour.  Therefore the demand for labour declines relatively as wealth increases or capital is accumulated.  In manufacture, the “evils” which the development of the productive forces generate for the workers are temporary, but reappear constantly.  In agriculture, they are continuous, especially in connection with the conversion of arable land into pasture.  The general result is: with the advance of society, i.e., with the development of capital, here with that of national wealth, the condition of the workers is affected less and less by this development, in other words, it worsens relatively in the same ratio as the general wealth increases, i.e., as capital is accumulated, or, what amounts to the same thing, as the scale of reproduction increases.  One can see that it is a far cry from this conclusion to the naive conceptions of Adam Smith or the apologetics of vulgar political economy.  For Adam Smith, the accumulation of capital is identical with growing demand for labour, continual rise of wages, and consequently with a fall of profits.  In his time, the demand for labour did in fact grow at least in the same proportion in which capital was accumulated, because manufacture still predominated at that time and large-scale industry was only in its infancy.

[Ramsay says:]

“… that demand[k] must depend” (directly, immediately) “upon the amount of the latter species of capital alone”[l] (op. cit., p. 87).  (This is tautology on Ramsay’s part, since he equates circulating capital with capital laid out in wages.)  “At every change of this kind,[m] the fixed capital of the country is increased at the expense of the circulating” (loc. cit., p. 89).  “… the demand for labour will generally increase as capital augments, still it by no means follows that it will do so in the same proportion”[n] (loc. cit., p. 88).  “It is not, until, in the progress of industry, favoured by the new inventions, circulating capital shall have become increased beyond what it formerly was,”

<here again the wrong assumption creeps in that an increase of necessaries in general and increase of that portion of necessaries intended for the workers are the same thing>

that a greater demand for labour will spring up.  Demand will then rise, but not in proportion to the accumulation of the general capital.  In countries where industry has much advanced, fixed capital comes gradually to bear a greater and greater proportion to circulating.  Every augmentation, therefore, in the national stock destined for reproduction, comes, in the progress of society, to hove a less and less influence upon the condition of the labourer” (loc. cit., pp. 90-91).  “Every addition to fixed capital, is made […] at the expense of the circulating”, i.e., at the expense of the demand for labour (loc. cit., p. 91).

“The evils resulting from the invention of machinery, to the labouring population employed in the latter,[o] will probably be but temporary, liable to be perpetually renewed however, as fresh improvements are constantly making for economising labour” [loc. cit., p. 91].

And for the following reasons.  [Firstly:] The capitalists who use the new machinery obtain extraordinary profits; consequently their capacity to save and to increase their capital grows.  A portion of this is also used as circulating capital.  Secondly, the price of the manufactured commodities falls in proportion to the diminished cost of production; thus the consumers save, and this facilitates the accumulation of capital, a portion of which may find its way to the manufacturing industry in question.  Thirdly: the fall in the price of these products increases the demand for them.

“Thus […] though […] it[p] may throw out of employment a considerable body of persons, “this” will yet probably be followed, after a longer or shorter period, by the re-engagement of the same, or even a much greater number of labourers” (loc. cit., pp. 92-93).

“… in agriculture the case is widely different.  The demand for raw produce cannot increase in that rapid way in which it may for manufactured goods…  But the change of all others most fatal[q] to the country people is the conversion of arable land into pasture…  Almost all the funds which formerly supported men, are now vested in cattle, sheep and other elements of fixed capital” (loc. cit., p. 93).  |1090||

||1091| Ramsay remarks correctly:

Wages … as well as profits, are to be considered each of them as really a portion of the finished product, totally distinct in the national point of view from the cost of raising it” (op. cit., p. 142).

“Independent of its results, it” (fixed capital) “is a pure loss…  But, besides this, labour … not what is paid for it, ought to be reckoned as[r] another element of cost of production, Labour is […] a sacrifice […] The more of it is expended in one employment, the less … for another, and therefore if[s] applied to unprofitable undertakings … the nation suffers from the waste of the principal source of wealth…  the reward of labour ought not to be considered as[t] an element of cost” … (loc. cit., pp. 142-43).

(This is quite right: labour, and not paid labour or wages, must be considered as an element of value.)

Ramsay describes the real reproduction process correctly:

“In what manner is a comparison to be instituted between[u] the product and the stock expended upon it?… With regard to a whole nation…  It is evident that all the various elements of the stock expended must be reproduced in some employment or another, otherwise the industry of the country could not go on as formerly.  The raw material of manufactures, the implements used in them, as also in agriculture, the extensive machinery engaged in the former, the buildings necessary for fabricating or storing the produce, must all be parts of the total return of a country, as well as of the advances of all its master-capitalists.  Therefore, the quantity of the former may be compared with that of the latter, each article being supposed placed as it were beside that of a similar kind” (loc. cit., pp. 137-39).

As regards the individual capitalist

<this is a false abstraction.  The nation does not exist, or exists only as the capitalist class, and the whole class operates in exactly the same way as the individual capitalist.  The two methods of approach differ from one another only in that one clings to and isolates use-value, the other exchange-value>

since the stock expended by him is not replaced in kind, because “the greater number [of its elements] must be obtained by exchange, a certain portion of the product being necessary for this purpose.  Hence each individual master-capitalist comes to look much more to the exchangeable value of his product than to its quantity” (loc. cit., pp. 145-46).[v]

||1092| “… the more the value of the[w] product exceeds the value of the capital advanced, the greater will be his profit.  Thus, then, will he estimate it, by comparing value with value, not quantity with quantity.  This is the first difference to be remarked in the mode of reckoning profits between nations and individuals” (loc. cit., p. 146).

<The nation too—if it is not supposed to be identical with the body of capitalists—can so far compare value with value.  It can calculate the total labour-time which it has to expend to replace the used-up part of its constant capital and the part of the product consumed individually, and the time of labour spent in producing a surplus designed to enlarge the scale of reproduction.>

“The second is, that, since the master-capitalist always makes an advance of wages to the labourers, instead of paying them out of the finished commodity, he considers this as well as the fixed capital consumed, a part of his expenses, though […] nationally speaking, it is not[x] an element of cost” (loc. cit., p. 146).

<This difference too disappears in fact in the process of reproduction as a whole.  The capitalist always pays out of the finished commodity, that is to say, out of the commodity finished by the labourer yesterday he pays his wages tomorrow, or in point of fact, he gives him, in the form of wages, only an assignation of products to be finished in future or almost produced, i.e., finally produced by the time they are bought.  The advance disappears as a mere illusion in reproduction, i.e., in the continuity of the process of production.>

“Hence his rate of profit will depend upon the excess in the value of his product over and above the value of the capital advanced, both fixed and circulating” (loc. cit., p. 146).

<This is likewise true in a “national point of view”.  His profit always depends on what he himself pays for the product, whether finished or not, when he pays wages.>

Ramsay has the merit, firstly, that he contradicts the false notion—current since Adam Smith—of the value of the whole product dissolving into revenue under different names; secondly, that he defines the rate of profit in two ways, [once] by the rate of wages, i.e., the rate of surplus-value, and a second time, by the value of the constant capital.  But he transgresses in the opposite direction to Ricardo.  Ricardo arbitrarily seeks to equalise the rate of profit and the rate of surplus-value.  On the other hand, the twofold determination of the rate of profit—1) by the rate of surplus-value (hence by the rate of wages) and 2) by the ratio of this surplus-value to the total capital advanced, that is, in fact determined by the ratio of the constant capital to the total capital—is irrationally presented by Ramsay as two parallel circumstances which determine the rate of profit.  He does not grasp the transformation which surplus-value undergoes before it becomes profit.  Whereas therefore Ricardo arbitrarily seeks to reduce the rate of profit to the rate of surplus-value in order to work out the theory of value consistently, Ramsay seeks to reduce surplus-value to profit.  We shall see later that the way he describes the influence of the value of constant capital on the rate of profit is very inadequate, and even incorrect.

[Ramsay writes:]

“Profit […] must rise or fall exactly as the proportion of the gross produce, or of its value, required to replace necessary advances, falls or rises…  Therefore, the rate of profit must depend […] upon two circumstances; first, the proportion of the whole produce which goes to the labourers; secondly, the proportion which must be set apart for replacing, either in kind or by exchange, the fixed capital” (loc. cit., pp. 147-48).

In other words, therefore, the rate of profit depends on the excess of the value of the product over the sum of circulating and fixed capital; hence on the proportion which, firstly, the circulating capital, and, secondly, the fixed capital bear to the value of the whole produce.  If we know where this surplus comes from, then the whole matter is very simple.  But if we only know that the profit depends on the ratio of the surplus to these outlays, then we can acquire the most inaccurate notions about the origin of this surplus, for example we can, like Ramsay, imagine that it originates in part in fixed (constant) capital.

||1093| “To me it seems certain,[y] that an increased facility of raising the various objects which enter into the composition of fixed capital, tends, by diminishing this proportion,[z] to raise the rate of profit, just as in the former case of an augmented return of the elements of circulating capital, which serves to maintain labour” (op. cit., p. 164).

With regard to the tenant farmer, for example:

“… be the [amount of gross] return small or great, the quantity of it required for replacing what has been consumed in these different forms, can undergo no alteration whatsoever, This quantity must be considered as constant, so long as production is carried on on the some scale.  Consequently, the larger the total return, the less must be the proportion of the whole which the farmer must set aside for the above purposes” (loc. cit., p. 166).

The more easily the farmer who produces food and raw materials such as flax, hemp, wood, can reproduce them, [the more] his profit will increase.[aa]

The farmer’s profit [increases] as a result of the increase in the quantity of his produce, the total value of which remains the same, but “a smaller proportion of this sum total, and consequently of its value, is required for restoring the various elements of fixed capital, with which the farmer can supply himself;” while the manufacturer would benefit because his product would have a greater purchasing power (loc. cit., pp. 166-67).

Let us assume that the harvest amounts to 100 quarters and the seed corn to 20, that is, a fifth of the harvest.  Let us assume further that the harvest is doubled the following year (with the expenditure of the same amount of labour) and now comes to 200 quarters.  If the scale of production remains the same, then the amount of seed corn remains 20 quarters as previously, but this is now only one-tenth of the harvest.  One has to take into account however that the value of the 100 quarters [previously harvested] is equal to that of the 200 quarters [now obtained], therefore one quarter of the first harvest is equal to two quarters of the second.  80 quarters remain over in the first case, 180 in the second.  Since wages are irrelevant to the present problem, which concerns the influence that a change in the value of constant capital exerts on the rate of profit, let us assume that the value of wages remains unchanged.  Then, if wages were 20 quarters in the first case, they are 40 in the second.  Finally, let us assume that the value of the other ingredients of constant capital which the farmer does not reproduce in kind amounted to 20 quarters in the first case and therefore to 40 in the second.

We now have the following calculation:

1) The product amounts to 100 quarters.  The seed corn to 20 quarters.  The other elements of constant capital come to 20 quarters, wages to 20 quarters, profit to 40 quarters.

2) The product amounts to 200 quarters.  The seed corn to 20 quarters.  The other elements of constant capital come to 40 quarters, wages to 40 quarters and profit to 100 quarters; i.e., its value is equal to 50 quarters in the first case.  There would therefore be a surplus profit of 10 quarters [in the second case].

Thus not [only] the rate of profit, but also the amount of profit, would have increased here, as a result of a change in the value of constant capital.  Although wages remained the same in both 1 and 2, the ratio of profit to wages, that is, the rate of surplus-value, would have risen.  But this is only an illusion.  The profit would consist firstly of 80 quarters, equal to 40 quarters in case 1, and the ratio to wages would remain the same; secondly, [in case] 2, of 20 quarters, equal only to 10 quarters in the first case, which would have been converted into revenue from constant capital.

But is this calculation correct?  We must assume that the result in the second case was due to a successful harvest which came about although work was carried on in the same conditions as prevailed in the first case.  In order to clarify the matter, let us assume that 1 quarter equals £2 in the first case.  This means that for the harvest which has yielded him 200 quarters, the farmer has laid out: 20 quarters for seed corn (or £40), 20 quarters for other elements of constant capital (or £40), 20 quarters for wages (or £40).  A total of £120, and the product amounts to 200 quarters.  In the first case he likewise laid out only £120 (60 quarters) and the product amounting to 100 quarters was worth £200.  The profit remaining was £80, or 40 quarters.  Since the 200 quarters [in case 2] are the product of the same amount of labour [as the 100 quarters in case 1], then once again they are likewise equal to only £200.  Thus, only £80 profit remains, which is now, however, equal to 140 quarters.  Consequently, a quarter now [costs the farmer] only £ 4/7 and not £1.  In other words, the value of a quarter has fallen from £2 to £4/7, that is, by £13/7, and not from [£2] to [£1], that is, by a half as we assumed above in [case] 2 as opposed to [case] 1.

The farmer’s total product amounts to 200 quarters, that is, £200.  But £120 out of this £200 replaces the 60 quarters which he has expended, each one of which cost him £2.  There thus remains a profit of £80 which is equal to the remaining 140 quarters.  How does this happen?  The quarter is now worth £1, but each of the 60 quarters expended in production cost £2.  They cost the farmer as much as if he had expended 120 of the new quarters.  The remaining 140 quarters are worth £80, or no more than the remaining 40 were worth previously.  It is true that he sells each of the 200 quarters for £1 (if he sells his total product) and receives £200 for them.  But of the 200 quarters, 60 have cost him £2 each, the remaining quarters therefore only yield him £4/7 each.

If he now again lays out 20 quarters [for seed] (equal to £10 [if one reckons 10s.  for a quarter]), 40 quarters for wages (equal to £20), and 40 quarters for the other elements of constant capital (equal to £20), that is, a total of 100 quarters instead of 60 as previously and he harvests 180 quarters, then these 180 quarters have not the same value as did the 100 previously [if one reckons £1 for a quarter].  True, he has employed as much living labour as he did previously, and consequently the ||1094| value of the variable capital has remained the same and so has the value of the surplus product.  But he has laid out less materialised labour, since the 20 quarters, which were worth £20 previously, are now worth only £10.

The account will therefore work out as follows:

Constant capital Variable capital Surplus-value
1) 20 qrs. seed corn=£20 20 qrs. (£20) 40 qrs. (£40)
20 qrs. implements, etc. = £20
2) 20 qrs. [seed corn] = £10 40 qrs. (£20) 80 qrs. (£40)
40 qrs. [implements, etc.] = £20

In the first case the product comes to 100 qrs., or £100.  In the second case the product comes to 180 qrs., or £90.

Nevertheless the rate of profit would have risen [despite the fall in the value of the product], for in the first case the return on an outlay of £60 was £40 and in the second it was £40 for an outlay of £50.  In the first case it amounted to 66 2/3 per cent, in the second to 80 per cent.

Anyhow, the rise in the rate of profit is not due to the value remaining unchanged, as Ramsay supposes.  Since one part of the labour expended, i.e., the part contained in the constant capital (in seeds in this case), has diminished, the value of the product falls if production continues on the same scale, just as the value of 100 lbs. of twist falls if the cotton it is made of becomes cheaper.  But the ratio of variable to constant capital increases (without the value of the variable capital increasing).  In other words, the ratio of the total capital outlay declines in relation to the surplus.  Hence the rate of profit rises.

If what Ramsay says were correct, if the value remained the same, then the profit, the amount of profit, and consequently also the rate of profit, would rise.  There can be no question of a rise merely in the rate of profit.

The question [of the influence of a change in the value of constant capital on the rate of profit] is not however disposed of for the special case [where a part of the constant capital is replaced in kind].  In agriculture this special case takes the following form.

A certain amount of seed corn at the old price of the product figures in the harvest, this part is incorporated in the harvest in kind.  The other expenses are defrayed by the sale of the corn at its old price.  The old outlay yields a product which is twice as big as before.  Thus, in the above-mentioned case, for example, where 20 quarters are used as seed corn (equal to £40) and the other outlays amount to 40 quarters, equalling £80, the harvest yields 200 quarters and not, as the previous harvest, 100 quarters (worth £200), of which 40 quarters, equalling £80, were profit on an outlay of 60 quarters costing £120.  The outlay in connection with this second harvest is absolutely the same as it was in the first—60 quarters, the value of which is £120, but instead of a surplus of 40 quarters, the surplus is now 140 quarters.  The surplus in kind has in this case increased considerably.  But because the labour expended is the same in both cases, the 200 quarters have no greater value than did the 100, that is, £200.  In other words the value of the quarter has fallen from £2 to £1.  But since there was a surplus of 140 quarters, it seemed that it had to come to £140, for one quarter is worth just as much as any other.

The matter would be simplified if we considered it first of all without regard to the reproduction process, that is if we assumed that the tenant farmer was withdrawing from the business and selling his whole product.  Then he would indeed have to sell 120 quarters to recover his outlay of £120 (to reimburse himself).  In this way he would recover his capital outlay.  Thus a surplus of 80 quarters would remain, and not of 140, and since these 80 quarters are equal to £80, they are worth in absolute terms as much as the surplus in the first case.

In the course of the reproduction process, however, the matter is altered to a certain extent.  For the farmer replaces the 20 quarters of seed corn in kind out of his own product.  [As far as their value is concerned] they are replaced by 40 quarters in the [new] product.  But in the reproduction process he only needs to replace them with 20 quarters in kind, as was the case previously.  The rest of his expenditure [expressed in quarters] increases in the same ratio as the quarter is devalued (provided wages do not fall).  To replace the remaining portion of constant capital, the farmer now needs 40 quarters and not 20 as previously, and to replace wages he also needs 40 quarters instead of 20.  Altogether he must now lay out 100 quarters, compared to 60 quarters previously; but he need not lay out 120 quarters, the amount corresponding to the depreciation of the corn, because the 20 quarters used [as seed] which were worth £40, are replaced by 20 [quarters] (since in this context only their use-value matters) which are worth [£] 20.  So evidently he has made a gain ||1095| of these 20 qrs., now worth £20.  His surplus is therefore not £80 but £100, not 80 qrs., but 100.  (Expressed in quarters of the old value, not 40 quarters but 50.)  This is an unquestionable fact, and if the market price does not fall as a result of abundance, the farmer can sell 20 quarters more at the new value, thus gaining £20.

In the course of reproduction, moreover, the farmer obtains this surplus of £20 on the same outlay, because labour has become more productive without the rate of surplus-value having risen or the workers having performed more surplus labour than previously or having received a smaller portion of the reproduced part of the product (which represents living labour).  On the contrary, it is assumed that in the reproduction process the worker receives 40 quarters, whereas he received only 20 previously.  This then is a rather peculiar phenomenon.  It does not occur without reproduction, but it takes place in connection with it and it takes place [moreover] because the farmer replaces a part of his advances in kind.  Not only the rate of profit could increase in this case, but the amount of profit as well.  (With regard to the reproduction process itself, the farmer can either carry on on the old scale, in which case the price of the product will fall if he again obtains as good a harvest, because a portion of the constant capital has cost less, but the rate of profit will rise; or the farmer can increase the scale of production, sow more with the same outlay, and then both the rate of profit and the amount of profit will rise.)

Let us [now] consider the manufacturer.  Let us assume that he has laid out £100 in cotton twist and made a profit of £20.  The product therefore amounts to £120.  It is assumed that £80 out of the outlay of £100 has been paid for cotton.  If the price of cotton falls by half, he will now need to spend only £40 on the cotton and £20 on the rest, that is £60 in all (instead of £100) and the profit will be £20 as previously, the total product will amount to £80 (if he does not increase the scale of his production).  £40 thus remains in his pocket.  He can either spend it or invest it as additional capital.  If he invests it, he will lay out [an additional] £26 2/3 on cotton and £13 1/2 on labour, etc., on the new scale.  The profit [will amount to] £13 1/3.  The total product will now be 60+40+33 1/3, or £133 1/3.

Thus it is not the fact that the farmer replaces his seed corn in kind which is the key, for the manufacturer buys his cotton and does not replace it out of his own product.  What this phenomenon amounts to is this: release of a portion of the capital previously tied up in constant capital, or the conversion of a portion of the capital into revenue.  If exactly the same amount of capital is laid out in the reproduction process as previously, then it is the same as if additional capital had been employed on the old scale of production.  This is therefore a kind of accumulation which arises from the increased productivity of those branches of industry which supply the productive ingredients of capital.  However, such a fall in the [price of] raw materials, if due to the seasons, is counteracted by unfavourable seasons, in which the prices of raw materials rise.  The capital released in this way in one or several seasons is, therefore, to a certain extent, reserve capital for the other seasons.  For instance, the manufacturer whose [fixed capital] turns over once every twelve years, must arrange things in such a way that he can continue to produce—at least on the same scale throughout the twelve years.  One has therefore to take into account that the prices [of the raw materials] he has to replace fluctuate and even themselves out to a certain extent over a long period of years.

A rise in prices of the ingredients [of constant capital] has the opposite effect to a fall of the prices.  (We are leaving variable capital out of account here, although if wages fall, less variable capital—in terms of value—will need to be laid out, and if they rise more.)  If production is to be continued on the old scale, then a greater outlay of capital is necessary.  Therefore, apart from a fall in the rate of profit, extra capital must be employed or a part of the revenue must be converted into capital, although it will not have the effect of additional capital.

Accumulation has taken place in the one case although the value of the capital advanced has remained the same (but its material elements have been increased).  The rate of creating surplus-value increases, and the absolute magnitude of profit increases, because the effect is the same as if additional capital had been advanced on the old scale.  Accumulation has taken place in the other case insofar as the value of the capital advanced, i.e., that part of the value of the total output which functions as capital, has increased, But the material elements have not been increased.  The rate of profit falls.  (The amount of profit only falls if either a different number of workers is employed or if their wages rise as well.)

This phenomenon of the conversion of capital into revenue should be noted, because it creates the illusion that the amount of profit grows (or in the opposite case decreases) independently of the amount of surplus-value.  We have seen that, under ||1096| certain circumstances, a part of rent can be explained by this phenomenon.

In the way mentioned above (that is, if the remaining 20 quarters worth £20 are not used immediately to extend the scale of production, i.e., if they are not accumulated), a money capital of £20 is set free.  This is an example of how redundant money capital can be extracted from the reproduction process although the aggregate value of commodities remains the same, namely, by a portion of the capital which existed previously in the form of fixed (constant) capital being converted into money capital.

How little the above phenomenon [conversion of a portion of the capital into revenue] has to do with Ramsay’s determination of the rate of profit, becomes clear if one considers the case of a farmer (or manufacturer) who enters business under the new conditions of production.  Formerly he needed £120 to enter the business: £40 to buy 20 quarters of seeds, £40 to buy the other ingredients of constant capital, and £40 to pay wages.  And his profit was £80.  80 on 120 is equal to 8 on 12, or 2 on 3, or 66 2/3 per cent.

He now has to advance £20 to buy 20 quarters of seed, £40 as previously [to buy the other elements of constant capital], £40 to pay wages, so that his outlay of capital amounts to £100.  His profit is [£]80, that is, 80 per cent.  The amount of profit has remained the same, but the rate of profit has increased by 20 per cent.  Thus one can see that the fall in the value of seed (or of the price which has to be paid to replace the seed) has in itself nothing to do with the increase in [the amount of] profit, but implies merely an increase in the rate of profit.

Moreover, the farmer in the one case—or the manufacturer in the other—will not consider that he has obtained a larger profit, but that a portion of the capital previously tied up in production has been freed.  And his view will be based on the following simple calculation.  Previously, the amount of capital advanced in production was £120; now it is £100, and £20 is now in the hands of the farmer as free capital, money which can be invested in any way he likes.  But in either case the capital amounts to £120 only, its size has therefore not been increased.  The fact, however, that a sixth of the capital has been divested of the form in which it is inseparable from the production process does indeed have the same effect as an additional investment of capital.

Ramsay has not got to the bottom of this matter because he has not at all clearly worked out the relationship between value, surplus-value and profit.


Ramsay correctly expounds to what extent machinery, etc., insofar as it affects variable capital, influences profit and the rate of profit.  That is to say, he shows that this influence results from the depreciation of labour-power, the increase of relative surplus labour or, if the production process is considered as a whole, also the reduction of the part of the gross return which goes to replace wages.

“… an increased or diminished productiveness of the industry employed in raising commodities which do not enter into the composition of fixed capital, can have no influence on the rate of profit, except by affecting the proportion of the gross amount which goes to maintain labour” (op. cit., p. 168).

If[bb] the manufacturer has doubled his output as a result of improvements in machinery, the value of his goods must, in the end, fall in the same proportion as their quantity has increased.

<It is assumed that in fact, taking the wear and tear of the machinery into account, twice the quantity costs no more than half did previously.  If this is not the case, the value of the commodity falls, but not in proportion to its quantity.  Its quantity may double and, whereas the value of the aggregate product rises, the value of a unit of the commodity, may drop only from 2 to 1 1/4, etc., instead of from 2 to 1.>

…the manufacturer benefits only insofar as he is able to clothe the worker more cheaply so that a smaller portion of the gross return goes to the worker…  The farmer too benefits <as a result of the increased industrial productivity> only insofar as n portion of his outlay is expended on clothing for the labourers and he can buy this more cheaply now; that is, [he benefits] in the same way as the manufacturer (loc. cit., pp. 168-69).

A fall [or rise] in the value of the elements of constant capital affects the rate of profit by altering the ratio of surplus-value to the total capital outlay.  A fall (or rise) in wages, on the other hand, affects the rate of profit by influencing the rate of surplus-value directly.

Supposing for example, that, in the above-mentioned case, the price of the seed (assuming the farmer grows flax) remains the same, that is, £40 (20 quarters) and the rest of the constant capital costs £40 (20 quarters) as before, but that wages—that is, wages for the same number of workers—fall from £40 to £20 (from 20 quarters to 10 quarters).  In this case, the total value, which is equal to the wages plus surplus-value, remains unchanged.  Since the number of workers remains the same, their labour is embodied in a value of £40+£80, i.e., £120, as it was previously.  But from this £120, £20 now goes to the workers and the surplus-value now amounts to £100.  <It is assumed that no improvements have taken place which affect the number of labourers employed in this branch.>

The capital advanced is now £100 instead of £120 just as in the case where the value of the seed fell by half.  But the profit is now £100, i.e., 100 per cent, whereas in the other case, where the capital advanced was likewise reduced from £120 to £100, it was 80 per cent.  And as in that other case £20, or a sixth of the capital ||1097|, is set free.  But in the former case, the surplus-value remained unchanged—£80—(and since £40 was paid as wages, [the rate of surplus-value] was 200 per cent).  In the latter case, the surplus-value rises to £100 (and, since wages now come to £20, [the rate of surplus-value increases] to 500 per cent).

In this case, not only has the rate of profit risen but the profit itself, because the rate of surplus-value has risen and consequently the surplus-value itself.  This differentiates this case from the other, something which Ramsay does not grasp.  This always takes place when the increase in profit is not nullified by a corresponding reduction in the rate of profit resulting from a simultaneous change in the value of constant capital.  In the above-mentioned case for example, the capital outlay is £120 and the profit £80, that is, 66 2/3 per cent.  In the present case, the capital outlay is £100 and the profit £100, which works out at 100 per cent.  If, however, the capital outlay had risen from £100 to £150 as a result of a change in the price of constant capital, then the profit—which has increased from £80 to £100—would only give a rate of 66 2/3 per cent.

[Ramsay continues]

Because these commodities “help to make up neither fixed capital nor circulating, it follows that profit can in no way be affected by any alteration in the facilities for raising these.  Such are luxuries of all kinds” (loc. cit., pp. 169-70).

“Master-capitalists gain by the abundance” (of luxuries) “because their profits will command a greater quantity for their private consumption; but the rate of this profit is in no degree affected either by their plenty or scarcity” (loc. cit., p. 171).

First of all, a portion of the luxuries can be used as one of the elements of constant capital.  Grapes, for example, in [the production of] wine, gold in luxury articles, diamonds in glass cutting, etc.  But Ramsay excludes this case insofar as he says: commodities which do not enter into fixed capital.  In that case, however, the concluding sentence—“Such are luxuries of all kinds”, is incorrect.

However, productivity in the luxury industries can only increase in the same way as it does in all others—either because natural resources such as the land, mines, etc., from which the raw materials for the luxury industries are procured, become more productive, or new, more productive sources are discovered; or again by application of the division of labour, or, especially, by the use of machinery (or of better tools) and of natural forces.  <The improvement of tools, as well as the production of more specialised ones, belongs to the division of labour.> ( One should not forget chemical processes.)

Let us now assume that the production time for luxuries is reduced due to machinery (or chemical processes), that less labour is required to produce them.  This cannot have the slightest influence on wages, on the value of labour-power, since these articles do not enter into the consumption of the workers (at least never into that part of their consumption which determines the value of their labour-power).  (It can influence the market price of labour, if workers are thrown onto the streets as a result of these developments and the supply of labour-power is thereby increased.)  Increased productivity in the luxury industries, therefore, has no influence on the rate of surplus-value nor, consequently, on the rate of profit insofar as this is determined by the rate of surplus-value.  Nevertheless, it can influence the rate of profit insofar as it affects either the amount of surplus-value or the ratio of variable capital to constant capital and to the total capital.

If for example, [in the production of luxury articles] machinery makes it possible to employ 10 workers where 20 were previously employed, then, indeed the rate of surplus-value is not modified in any way.  The cheapening of luxury articles does not enable the worker to live more cheaply.  He requires the same amount of labour-time to reproduce his labour-power as he did previously.

<In practice, therefore, the manufacturer of luxury articles seeks to depress the wages of labour below its value, [below] its minimum.  This he is able to do because of the relative surplus population engendered by increasing productivity in other branches of industry, for example among knitters.  Or—as likewise happens in these branches—he seeks to extend the absolute labour-time, thus, in fact, producing absolute surplus-value.  It is correct, however, that productivity in the luxury industries cannot reduce the value of labour-power, it cannot produce any relative surplus-value and, in general, cannot produce that form of surplus-value which results from the growing productivity of industry as such.>

The amount of surplus-value is determined in two ways.  [First,] by the rate of surplus-value, that is, the surplus labour (absolute or relative) of the individual workers.  Secondly, by the number of workers simultaneously employed.  Insofar therefore as increasing productivity in the luxury industry reduces the number of workers which a certain quantity of capital employs, it reduced the amount of surplus-value, hence all other circumstances remaining unchanged, it reduces also the rate of profit.  The same thing occurs if the number of workers is reduced, or remains the same, but the capital laid out on machinery and raw materials is increased; in other words, it occurs wherever there is any diminution in the ratio of variable capital to the total capital which [according to our assumption]  is not balanced or partially offset by a reduction in wages.  But since the rate of profit in this sphere ||1098| enters into the equalisation process of the general rate of profit just as much as that in any other sphere, increased productivity in the luxury industry would, in the case under consideration, bring about a fall in the general rate of profit.

Conversely: If the increased productivity in the luxury industry was [due to improvements carried out not in that industry itself, but] in those branches of industry which provide it with constant capital, then the rate of profit would rise in the luxury industry.

<Surplus-value (that is, its size, its quantity, its total amount) is determined by the rate of surplus-value multiplied by the number of workers employed.  Certain circumstances may affect both factors simultaneously either in the same direction or in opposite directions, or they may affect only one of the factors.  Apart from the absolute lengthening of the working-day, increased productivity in the luxury industry can affect only the number [of workers employed].  The inevitable consequence therefore is a reduction in the amount of surplus-value and hence in the rate of profit, even if no increase in constant capital takes place.  If the constant capital increases, however, a reduced amount of surplus-value is calculated on an increased total capital.>


Ramsay comes closer to a correct understanding of the rate of profit than the others.  The shortcomings too are therefore more conspicuous in his exposition.  He brings out all the factors involved, but he does it one-sidedly and therefore incorrectly.

Ramsay sums up his view of profit in the following passage:

“… the causes which regulate the rate of profit in individual cases […] we have found to be,[cc] 1) The Productiveness of the Industry engaged in raising those articles of primary[dd] necessity which are required by the Labourer for Food, Clothing, etc.  2) The Productiveness of the Industry employed in raising those[ee] objects which enter into the composition of Fixed Capital.  3) The rate of Real Wages

<here this must mean the quantity of necessaries, etc., which the worker receives, irrespective of the price of the commodities which that quantity comprises>.

“A variation in the first and third of these causes, acts upon profit by altering the proportion of the gross produce which goes to the labourer: a change in the second affects the same, by modifying the proportion necessary for replacing, either directly or by means of exchange, the fixed capital consumed in production; for […] profit is essentially a question of proportion” (loc. cit., p. 172).

He rightly reproaches Ricardo (although Ramsay’s own presentation is also inadequate):

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


<It can already be noted in the first description of accumulation, i.e., of the conversion of surplus-value into capital, that the entire surplus labour takes the form of capital (constant and variable) and of surplus labour (profit, interest, rent).  For this conversion reveals that surplus labour itself assumes the form of capital and that the unpaid labour of the worker confronts him as the totality of the objective conditions of labour.  In this form it confronts him as alien property with the result that the capital which is antecedent to his labour, appears to be independent of it.  [It appears] as a ready-made value of a given magnitude, whose value the worker merely has to augment.  It is never the product of his past labour (nor any circumstances which, independently of the particular labour process into which the past labour of his enters, affect or increase its value) which, or the replacement of which, appears as exploitation, but it is always merely the manner and the rate in which his present labour is exploited.  As long as the individual capitalist continues to operate on the same scale of production (or on an expanding one), the replacement of capital appears as an operation which does not affect the worker, since, if the means of production belonged to the worker, he would likewise have to replace them out of the gross product in order to continue reproduction on the same scale or on an expanded scale (and the latter too is necessary because of the natural increase of population).  But this affects the worker in three respects.  1) The perpetuation of the means of production as property alien to him, as capital, perpetuates his condition as wage-worker and hence his fate of always having to work part of his labour-time for a third person for nothing.  2) The extension of these means of production, alias accumulation of capital, increases the extent and the size of the classes who live on the surplus labour of the worker; it worsens his position relatively by augmenting the relative wealth of the capitalist and his co-partners, by further increasing his relative surplus labour through the division of labour, etc., and reduces that part of the gross product which is used to pay wages; finally, since the conditions of labour confront the individual worker in an ever more gigantic form and increasingly as social forces, the chance of his taking possession of them himself as is the case in small-scale industry, disappears.>

[3.  Ramsay on the Division of “Gross Profit” into “Net Profit” (Interest) and “Profit of Enterprise”.  Apologetic Elements in His Views on the “Labour of superintendence”, “Insurance Covering the Risk Involved” and “Excess Profit”]

||1099| Ramsay uses the term gross profit for what I call simply profit.  He divides this gross profit into net profit (interest) and profit of enterprise (industrial profit).*

Ramsay, like Ricardo, takes issue with Adam Smith on the question of the fall in the general rate of profit.  Refuting Smith, he writes:

“Competition of the master-capitalists” can indeed even out profits which rise considerably above “the ordinary level” (this levelling is by no means a sufficient explanation for the formation of a general rate of profit) but it is wrong to say that this ordinary level itself is lowered.[gg]

“… could we suppose it[hh] possible that the Price of every commodity, both raw and fabricated, should fall in consequence of the competition among the producers, yet this could not in any way affect profit.  Each master-capitalist would sell his produce for less money, but on the other hand, every article of his expenses, whether belonging to fixed capital or to circulating, would cost him a proportionally smaller sum” (op. cit., pp. 180-81).

The following passage is directed against Malthus:

“The idea of profits being p aid by the consumers, is, assuredly, very absurd.  Who are the consumers?  They must be either landlords, capitalists, masters, labourers, or else people who receive a salary…” (loc. cit., p. 183).

The only competition which can affect the general rate of gross profits, is that between master-capitalists and labourers…” (op. cit., p. 206).

The last sentence expresses the true gist of Ricardo’s proposition.  The rate of profit can fall independently of the competition between capital and labour, but this is the only kind of competition which can bring about its decrease.  Ramsay himself, however, does not advance any reasons why the general rate of profit has a tendency to fall.  The only thing he says—and which is correct—is that the rate of interest can fall quite independently of the rate of gross profits in a given country, namely:

“But were we even to suppose, that capital was never borrowed with any view but to productive employment [I think] it very possible that interest might vary without any change in the rate of gross profits.  For, as a nation advances in the career of wealth, a class of men springs up and increases more and more, who by the labours” (exploitation, robbery) “of their ancestors find themselves in the possession of funds sufficiently ample to afford a handsome maintenance from the interest alone.  Very many also who during youth and middle age were actively engaged in business, retire in their latter days to live quietly on the interest of the sums they have themselves accumulated.  This class[ii] […] has a tendency to increase with the increasing riches of the country, for those who begin with a tolerable stock are likely to make an independence sooner than they who commence with little.  Thus it comes to pass, that[jj] in old and rich countries, the amount of national capital belonging to those who are unwilling to take the trouble of employing it themselves, bears a larger proportion to the whole productive stock of the society, than in newly settled and poorer districts.[kk] How […] numerous [is] the class of rentiers […] in England [… ] As the class of rentiers increases, so also does that of lenders of capital, for they are one and the same.  Therefore, from this cause interest must have a tendency to fall in old countries…” (loc. cit., pp. 201-02).

Ramsay says the following about the rate of net profit (interest):

“The rate of these” [profits] “must depend,[ll] partly upon the rate of gross profits […] partly on the proportion in which these are separated into profits of capital and those of enterprise.[mm] This proportion […] depends upon the competition between the lenders of capital and […] borrowers […], which competition[nn] is influenced, though by no means entirely regulated, by the rate of gross profit expected to be realised, And the […] competition is not exclusively regulated by this cause […] because on the one hand many borrow without any view to productive employment; and […] because the proportion of the whole national capital to be lent, varies with the riches of the country independently of any change in gross profits” (loc. cit., pp. 206-07).  “The profits of enterprise depend upon the net profits of capital not the latter upon the former” (loc. cit., p. 214).

||1100| Apart from the circumstance mentioned earlier, Ramsay says—rightly:

Interest is only a measure of net profits where the level of civilisation is such that the “want of certainty” of repayment is not a factor which enters into the calculation.[oo] “In England, for instance, at the present day, we cannot, I think, consider[pp] compensation for risk as at all entering into the interest received from funds lent on what would be cabled good security” (op. cit., p. 199, note).

Speaking of the industrial capitalist, whom he calls the master-capitalist, Ramsay remarks:

“He is the general distributor of the national revenue; the person who undertakes to pay[qq] […] to the labourers, the wages, […]—to the capitalist, the interest […]—to the proprietor, the rent [… ] On the one hand are masters, on the other, labourers, capitalists and landlords [… ] The interests of these two grand classes are diametrically opposed to each other.  It is the master who hires labour, capital, and land, and of course tries to get the use of them on as low terms as possible; while the owners of these sources of wealth do their best to let them as high as they can” (op. cit., pp. 218-19).

Industrial profit.  (Labour of superintendence.)

What Ramsay writes about industrial profit (and especially, about the labour of superintendence) is on the whole the most reasonable part of his book, although part of his demonstration is borrowed from Storch.

The exploitation of labour costs labour.  Insofar as the labour performed by the industrial capitalist is rendered necessary only because of the contradiction between capital and labour, it enters into the cost of his overseers (the industrial non-commissioned officers) and is already included in the category of wages in the same way as costs caused by the slave overseer and his whip are included in the production costs of the slave-owner.  These costs, like the greater part of the trading expenses, belong to the incidental expenses of capitalist production.  As far as the general rate of profit is concerned, the labour of the capitalists arising from their competition with one another and their attempts to ruin one another counts just as little as the greater or lesser skill of one industrial capitalist compared to another in extracting the largest amount of surplus labour from his workers for the smallest expenditure and making the best use of this extracted surplus labour in the process of circulation.  These matters should be dealt with in the analysis of the competition of capitals.  Such an analysis deals in general with the struggle of the capitalists and their effort to acquire the greatest possible amount of surplus labour and it is concerned only with the division of the surplus labour amongst the different individual capitalists, and not with the origin of surplus labour or its general extent.

All that remains for the labour of superintendence is the general function of organising the division of labour and the cooperation of certain individuals.  This labour is fully taken into account in the wages of the general manager in the larger capitalist enterprises.  It has already been deducted from the general rate of profit.  The best practical proof of this is provided by the co-operative factories set up by the English workers, for these, despite the higher rate of interest they have to pay, yield profits higher than average, although the wages of the general manager, which are naturally determined by the market price for this kind of labour, are deducted.  The industrial capitalists who are their own general managers save one item of the production costs, pay wages to themselves, and consequently receive a rate of profit above the average.  If this assertion of the apologists [that profit of enterprise constitutes wages for the labour of superintendence] were taken literally tomorrow, and the profit of the industrial capitalist limited to the wages of management and direction, then capitalist production, the appropriation of the surplus labour of others and its transformation into capital would come to an end the day after tomorrow.

However, if we consider this [payment of the] labour of superintendence as wages concealed in the general rate of profit, then the law established by Ramsay and others applies, namely, that while profit (industrial profit as well as gross profit [including interest]) is proportional to the amount of capital invested, this portion of the profit stands in inverse ratio to the size of the capital, it is infinitesimally small in the ease of large capital and enormously large where the capital is small, i.e., where the capitalist production is purely nominal.  Whereas the small capitalist, who does almost all the work himself, seems to obtain a very high rate of profit in proportion to his capital, what happens in fact is that, if he does not employ a few workers whose surplus labour he appropriates, he actually makes no profit at all and his enterprise is only nominally a capitalist one.  (whether he is engaged in industry or in commerce).  What distinguishes him from the wage-worker is that, because of his nominal capital he is indeed the master and owner of his own conditions of labour and consequently has no master over him; ||1101| and hence he appropriates his whole labour-time himself instead of it being appropriated by someone else.  What appears to be profit here, is merely the excess [of his income] over ordinary wages, an excess which results from the fact that he appropriates his own surplus labour.  However, this phenomenon belongs exclusively to those spheres which have not as yet been really conquered by the capitalist mode of production.

[Ramsay says:]

“The profits of enterprise may … be considered as made up of 3 parts: one… the salary of … the master; another an insurance for risk; the remainder … his surplus gains” (op. cit., p. 226).

As regards point 2, it is quite irrelevant here.  Corbet (and Ramsay himself) has stated that the insurance which covers the risk only distributes the losses of the capitalists uniformly or distributes them more generally amongst the whole class.  The profits of the insurance companies—that is, of the capitals which are employed in the business of insurance, and take over this distribution—must be deducted from these uniformly distributed losses.  These companies receive a part of the surplus-value in the same way as mercantile or moneyed capitalists do, without participating in its direct production.  This is a question of the distribution of the surplus-value amongst the different sorts of capitalists and of the deductions which are consequently made from [the surplus-value accruing to] the individual capitalists.  It has nothing to do either with the nature or with the magnitude of the surplus.  The worker obviously cannot provide any more than his surplus labour.  He cannot make an additional payment to the capitalist so that the latter may insure the fruits of this surplus labour against loss.  At most one could say that, even apart from capitalist production, the producers themselves might have certain expenses, that is, they would have to spend a part of their labour, or of the products of their labour in order to insure their products, their wealth, or the elements of their wealth, against accidents, etc.  Instead of each capitalist insuring himself, it is safer as well as cheaper for him if one section of capital is entrusted with this job.  Insurance is paid out of a portion of surplus-value, its protection and distribution between the capitalists has nothing to do with its origin and magnitude.

What is left is 1) the salary and 2) the surplus gains, as Ramsay calls that part of surplus-value which falls to the industrial capitalist as opposed to the interest-grabber and which, consequently, is determined by the ratio of interest to industrial profit; the two parts into which the surplus-value accruing to capital (in contrast to landed property) is divided.

As far as 1), the salary, is concerned, it is first of all self-evident that in capitalist production, the function of capital as lord over labour falls to the capitalist, or a clerk or a representative paid by him.  Even this function would disappear together with the capitalist mode of production, insofar as it does not arise from the nature of co-operative labour but from the domination of the conditions of labour over labour itself.  Ramsay himself however sweeps away this element or reduces it to such an extent that it is not worth speaking of.

The salary [of the employer], like the work [of superintendence], remains roughly the same, be the concern large or small (loc. cit., pp. 227-29).  A worker will never be able to say that he can do the same amount of work as two, three or more of his workmates.  But one industrial capitalist or farmer can take the place of ten or more[rr] (p. 255).

The third part [of the profits of enterprise], the surplus gains, includes [compensation for] risks—which are only possible risks, nothing but the possibility of losing the gains and the capital—it in fact however takes the form of insurance and therefore of a share which certain capitals in a particular branch receive in the total surplus-value.

“These surplus gains,” Ramsay writes, “do truly represent […] the revenue derived from the power of commanding the use of capital” (in other words from the power of commanding other people’s labour) “whether belonging to the person himself or borrowed from others…  these[ss] net profits” (interest) “vary exactly as the amount of capital […] on the contrary […] the larger the capital, the greater the proportion they bear[tt] to the stock employed” (loc. cit., p. 230).

In other words, this means nothing more than that the salaries of masters stand in inverse ratio to the size of the capital.  The larger the scale on which the capital operates, the more capitalist the mode of production, the more negligible is the element of industrial profit which is reducible to salary, and the more clearly appears the real character of industrial profit, namely, that it is a part of the surplus gains, i.e., of surplus-value, i.e., of unpaid surplus labour.

The whole contradiction between industrial profit and interest only has meaning as a contradiction between the rentier and the industrial capitalist, but it has not the slightest bearing on the relationship of the worker to capital, the nature of capital, or the origin of the profit capital yields.

With regard to rent not derived from corn, Ramsay says:

“In this manner the rent paid for one species of produce becomes the cause of the high value of others” (op. cit., p. 279).

Revenue,” says Ramsay in the final chapter, “differs from the annual gross produce, simply by the absence of all those objects which go to keep up fixed capital” (by which he means constant capital, raw materials in all stages of production, auxiliary materials and machinery, etc.)  (op. cit., p. 471).

||1102| Ramsay has already said[uu] and repeats in the final chapter that

“circulating capital”—that is his term for capital laid out in wages—is superfluous, it is “… not[vv] an immediate agent in production, nor even essential to it at all…” (loc. cit., p. 468).

But he does not draw the obvious conclusion that by denying that wage-labour and capital laid out in wages are essential, the necessity for capitalist production in general is denied and the conditions of labour consequently cease to confront the workers as “capital” or, to use Ramsay’s term, as “fixed capital”.  One part of the conditions of labour appears as fixed capital only because the other part appears as circulating capital.  But once capitalist production is presupposed as a fact, Ramsay declares that wages and gross profits of capital (industrial profit or, as he calls it, profit of enterprise included) are necessary forms of revenue (loc. cit., pp. 478, 475).

These are naturally the two forms of revenue which, in their simplicity and generality, indeed epitomise the essence of the capitalist mode of production and of the two classes on which it is based.  On the other hand, Ramsay declares that rent, in other words landed property, is a superfluous form of capitalist production (l.c., p. 472), but forgets that it is a necessary product of this mode of production.  The same applies to his statement that the “net profit of capital”, that is, interest, is not a necessary form.

[In case of a sharp reduction in gross profits] it would only be necessary for the rentiers to become industrial capitalists.  As regards national wealth this makes no difference…  The gross profit need certainly not be so high as to afford separate incomes to the owner and the employer[ww] (pp. 476-77).

Here Ramsay again forgets what he has said himself, namely that, as a necessary consequence of the development of capital, a constantly growing class of rentiers comes into being.[xx]

“… gross profit [of capital and enterprise] is […] essential in order that production should go on at all…” (loc. cit., p. 475).

Naturally.  Without profit, no capital and without capital, no capitalist production.


Thus, the conclusion at which Ramsay arrives is, on the one hand, that the capitalist mode of production based on wage-labour is not really a necessary, i.e., not an absolute form of social production (which Ramsay himself expresses only in a rather limited form by stating that “circulating capital” and “wages” [would be] superfluous if the mass of the people were not so poor that they had to receive their share of the product in advance, before it was completed).  On the other hand, he concludes that interest (in contrast to industrial profit) and rent (that is the form of landed property created by capitalist production itself) are superfetations which are not essential to capitalist production and of which it can rid itself.  If this bourgeois ideal were actually realisable, the only result would be that the whole of the surplus-value would go to the industrial capitalist directly, and society would be reduced (economically) to the simple contradiction between capital and wage-labour, a simplification which would indeed accelerate the dissolution of this mode of production.  |1102||


||1102| <In the Morning Star (December 1, 1862), a manufacturer moans:

Deduct from the gross produce the wages of labour, the rent of land, the interest on capital, the cost of raw material, and the gains of the agent, merchant, or dealer, and what remained was the profit of the manufacturer, the Lancashire resident, the occupier, on whom the burden of maintaining the workmen for so many partakers in the distribution of the gross produce is thrown.”

If one disregards the value and considers the gross produce in kind, it is clear that after the replacement of the constant capital and the capital laid out in wages, that portion of the product which remains constitutes the surplus-value.  From this however has to be deducted a portion for rent and the gains of the agents, merchants or dealers, all of whom, whether they use capital of their own or not, also share in that part of the gross product which constitutes surplus-value.  All these therefore are deductions for the manufacturer.  His profit itself is subdivided into industrial profit and interest—if he has borrowed capital.>

<With regard to differential rent: The work of the labourer working on more fertile soil is more productive than that of a man working on less fertile soil.  If, therefore, he were to be paid in kind, he would receive a smaller share of the gross product than the labourer working on less fertile soil.  Or, what amounts to the same thing, his relative surplus labour would be greater than that of the other labourer, although he worked the same number of hours per day.  But the value of the wage of the one is equal to that of the other.  Hence the profit of his employer is no greater [than that of the other employer].  The surplus-value contained in the additional amount of his product, the greater relative productivity of his labour, or the differential surplus labour performed by him, is pocketed by the landlord.> |1102||

* ||1130| (The reason Mr. Senior—whose Outline appeared at approximately the same time as Ramsay’s Essay on the Distribution of Wealth, in which batter work the division of profit into profit of enterprise and into “net profits of capital or interest” (Chapter IV) is dealt with at length—is supposed to have discovered this division, which was already known in 1821 and 1822, can be explained only by the fact that Senior—a mere apologist of the existing order and consequently a vulgar economist—is very congenial to Herr Roscher.)  |1130||

[a] The manuscript has “Production would be just as great.”—Ed.

[b] The manuscript has “This proves”.—Ed.

[c] The manuscript has “of”.—Ed.

[d] Marx translated the first part of this passage and condensed it to: “or will people assert”.—Ed.

[e] The manuscript has “was”.—Ed.

[f] In the manuscript “will employ 150 men”.—Ed.

[g] See this volume, pp. 86, 87, 177, 229.—Ed.

[h] Instead of “profits owe their existence to a”, the manuscript has: “The source of profits is the”.—Ed.

[i] In the manuscript “master-capitalists”.—Ed.

[j] The manuscript has “viz.”—Ed.

[k] The manuscript has “The demand for labour”.—Ed.

[l] The manuscript has “amount of circulating capital alone”.—Ed.

[m] The manuscript has “With the progress of civilisation”.—Ed.

[n] The manuscript has “The demand for labour will not therefore generally increase as capital augments, at least not in the same proportion.”—Ed.

[o] The manuscript has “manufactures”.—Ed.

[p] The manuscript has “the machinery”.—Ed.

[q] Instead of “But the change of all others most fatal”, the manuscript has “the most fatal”.—Ed.

[r] Instead of “labour […] not what is paid for it, ought to be reckoned as”, the manuscript has “Only labour, not wages, not what is paid for it is”.—Ed.

[s] The manuscript has “when”.—Ed.

[t] The manuscript has “does not constitute”.—Ed.

[u] The manuscript has “How is it possible to compare”.—Ed.

[v] The first part of the passage starting with “As regards” and ending with “because” is a free summary (mainly in German), not a quotation.—Ed.

[w] The manuscript has “his”.—Ed.

[x] The manuscript has “though they, nationally speaking, are not”.—Ed.

[y] The manuscript has “It is certain”.—Ed.

[z] That is, diminishing the part of the gross product which is required to replace the fixed capital.—Ed.

[aa] This paragraph and part of the next are summaries (in German) by Marx of the ideas developed by Ramsay.—Ed.

[bb] This paragraph and the one after the next beginning with the words: “the manufacturer benefits…” are not a quotation, but a paraphrase by Marx of the ideas expressed by Ramsay on pp. 168-69 of his book.  They are written in German but interspersed with many English words and phrases.—Ed.

[cc] The manuscript has “The rate of profit in individual cases is therefore determined by the following causes”.—Ed.

[dd] The manuscript has “the articles of first”.—Ed.

[ee] The manuscript has “the”.—Ed.

[ff] The manuscript has “Ricardo forgets that the whole product is divided not only between wages and profits, but that a part of it is also necessary for replacing fixed capital.”—Ed.

[gg] This is not a quotation but Marx’s rendering (mainly in German) of the ideas developed by Ramsay on pp. 179-80 of his book.—Ed.

[hh] Instead of “Could we suppose it”, the manuscript has “If it were”.—Ed.

[ii] The manuscript has “These two classes”.—Ed.

[jj] Instead of “Thus it comes to pass, that”, the manuscript has “Therefore”.—Ed.

[kk] The manuscript has “poor countries”.—Ed.

[ll] The manuscript has “it depends”.—Ed.

[mm] The manuscript has “separated into interest and industrial profit”.—Ed.

[nn] The manuscript has “borrowers of capital.  This competition is influenced, but not entirely”.—Ed.

[oo] This sentence is a paraphrase of Ramsay by Marx.—Ed.

[pp] The manuscript has “We cannot consider.”—Ed.

[qq] The manuscript has “The industrial capitalist is the general distributor of the revenue; he pays”.—Ed.

[rr] This is Marx’s summing up of the arguments advanced by Ramsay.—Ed.

[ss] The manuscript has “the”.—Ed.

[tt] The manuscript has “the larger the capital, the larger the proportion of the surplus gains”.—Ed.

[uu] See this volume, p. 327.—Ed.

[vv] The manuscript has “neither”.—Ed.

[ww] This is in part Marx’s paraphrase of Ramsay’s argument.—Ed.

[xx] See this volume, p. 354.—Ed.