Capital Vol. III



At last I have the privilege of making public this third book of Marx’s main work, the conclusion of the theoretical part. When I published the second volume, in 1885, I thought that except for a few, certainly very important, sections the third volume would probably offer only technical difficulties. This was indeed the case. But I had no idea at the time that these sections, the most important parts of the entire work, would give me as much trouble as they did, just as I did not anticipate the other obstacles, which were to retard completion of the work to such an extent.

Next and most important of all, it was my eye weakness which for years restricted my writing time to a minimum, and which, even now, permits me to write by artificial light only in exceptional cases. Furthermore, there were other pressing labours which could not be turned down, such as new editions and translations of Marx’s and my own earlier works, hence reviews, prefaces, and supplements, often impossible without fresh study, etc. Above all, there was the English edition of the first volume of this work, for whose text I am ultimately responsible and which consequently consumed much of my time. Whoever has in any way followed the colossal growth of international socialist literature during the last ten years, particularly the great number of translations of Marx’s and my own earlier works, will agree with me that I have been lucky that the number of languages in which I could be of help to the translators, and therefore could not refuse in all conscience to review their work, is very limited. But the growth of literature was merely indicative of a corresponding growth of the international working-class movement itself. And this imposed new obligations upon me. From the first days of our public activity it was Marx and I who shouldered the main burden of the work as go-betweens for the national movements of Socialists and workers in the various countries. This work expanded in proportion to the expansion of the movement as a whole. Up to the time of his death, Marx had borne the brunt of the burden in this as well. But after his death the ever-increasing bulk of work had to be done by myself alone. Since then it has become the rule for the various national workers’ parties to establish direct contacts, and this is fortunately ever more the case. Yet requests for my assistance are still far more frequent than I would wish in view of my theoretical work. But if a man has been active in the movement for more than fifty years, as I have been, he regards the work connected with it as a bounden duty that brooks no delay. In our eventful time, just as in the 16th century, pure theorists on social affairs are found only on the side of reaction and for this reason they are not even theorists in the full sense of the word, but simply apologists of reaction.

In view of the fact that I live in London my party contacts are limited to correspondence in winter, while in summer they are largely personal. This fact, and the necessity of following the movement in a steadily growing number of countries and a still more rapidly growing number of press organs, have compelled me to reserve matters which permit no interruption for completion during the winter months, and primarily the first three months of the year. When a man is past seventy his Meynert’s association fibres of the brain function with annoying prudence. He no longer surmounts interruptions in difficult theoretical problems as easily and quickly as before. It came about therefore that the work of one winter, if it was not completed, had to be largely begun anew the following winter. This was the case with the most difficult fifth part.

As the reader will observe from the following, the work of editing the third volume was essentially different from that of editing the second. In the case of the third volume there was nothing to go by outside a first extremely incomplete draft. The beginnings of the various parts were, as a rule, pretty carefully done and even stylistically polished. But the farther one went, the more sketchy and incomplete was the manuscript, the more excursions it contained into arising side-issues whose proper place in the argument was left for later decision, and the longer and more complex the sentences, in which thoughts were recorded in statu nascendi. In some places handwriting and presentation betrayed all too clearly the outbreak and gradual progress of the attacks of ill health, caused by overwork, which at the outset rendered the author’s work increasingly difficult and finally compelled him periodically to stop work altogether. And no wonder. Between 1863 and 1867, Marx not only completed the first draft of the two last volumes of Capital and prepared the first volume for the printer, but also performed the enormous work connected with the founding and expansion of the International Workingmen’s Association. As a result, already in 1864 and 1865 ominous signs of ill health appeared which prevented Marx from personally putting the finishing touches to the second and third volumes.

I began my work by dictating into readable copy the entire manuscript, which was often hard to decipher even for me. This alone required considerable time. It was only then that I could start on the actual editing. I limited this to the essential. I tried my best to preserve the character of the first draft wherever it was sufficiently clear. I did not even eliminate repetitions, wherever they, as was Marx’s custom, viewed the subject from another standpoint or at least expressed the same thought in different words. Wherever my alterations or additions exceeded the bounds of editing, or where I had to apply Marx’s factual material to independent conclusions of my own, if even as faithful as possible to the spirit of Marx, I have enclosed the entire passage in brackets and affixed my initials. Some of my footnotes are not enclosed in brackets; but wherever I have initialled them I am responsible for the entire note.

As is only to be expected in a first draft, there are numerous allusions in the manuscript to points which were to have been expanded upon later, without these promises always having been kept. I have left them, because they reveal the author’s intentions relative to future elaboration.

Now as to details.

As regards the first part, the main manuscript was serviceable only with substantial limitations. The entire mathematical calculation of the relation between the rate of surplus-value and the rate of profit (which makes up our Chapter III) is introduced in the very beginning, while the subject treated in our Chapter I is considered later and as the occasion arises. Two attempts at revising, each of them eight pages in folio, were useful here. But even these did not possess the desired continuity throughout. They furnished the substance for what is now Chapter I. Chapter II is taken from the main manuscript. There was a series of uncompleted mathematical calculations for Chapter III, as well as a whole, almost complete, note-book dating from the seventies, which presents the relation of the rate of surplus-value to the rate of profit in the form of equations. My friend Samuel Moore, who has also translated the greater portion of the first volume into English, undertook to edit this notebook for me, a work for which he was far better equipped, being an old Cambridge mathematician. It was from his summary, with occasional use of the main manuscript, that I then compiled Chapter III. Nothing but the title was available for Chapter IV. But since its subject-matter, the influence of turnover on the rate of profit, is of vital importance, I have written it myself, for which reason the whole chapter has been placed in brackets. It developed in the course of this work that the formula for the rate of profit given in Chapter III required modification to be generally valid. Beginning with Chapter V, the main manuscript is the sole source for the remainder of the part, although many transpositions and supplements were also essential.

As for the following three parts, aside from stylistic editing I was able to follow the original manuscript almost throughout. A few passages dealing mostly with the influence of turnover had to be brought into agreement with Chapter IV, which I had inserted, and are likewise placed in brackets and followed by my initials.

The greatest difficulty was presented by Part V which dealt with the most complicated subject in the entire volume. And it was just at this point that Marx was overtaken by one of the above-mentioned serious attacks of illness. Here, then, was no finished draft, not even a scheme whose outlines might have been filled out, but only the beginning of an elaboration — often just a disorderly mass of notes, comments and extracts. I tried at first to complete this part, as I had done to a certain extent with the first one, by filling in the gaps and expanding upon passages that were only indicated, so that it would at least approximately contain everything the author had intended. I tried this no less than three times, but failed in every attempt, and the time lost in this is one of the chief causes that held up this volume. At last I realised that I was on the wrong track. I should have had to go through the entire voluminous literature in this field, and would in the end have produced something that would nevertheless not have been a book by Marx. I had no other choice but to more or less cut the Gordian knot by confining myself to as orderly an arrangement of available matter as possible, and to making only the most indispensable additions. And so it was that I succeeded in completing the principal labours for this part in the spring of 1893.

As for the various chapters, Chapters XXI to XXIV were, in the main, complete. Chapters XXV and XXVI required a sifting of the references and an interpolation of material found elsewhere. Chapters XXVII and XXIX could be taken almost completely from the original manuscript, but Chapter XXVIII had to be re-arranged in places. The real difficulty, however, began with Chapter XXX. From here on it was not only a matter of properly arranging the references, but of putting the train of thought into proper order, interrupted as it was at every point by intervening clauses and deviations, etc., and resumed elsewhere, often just casually. Thus, Chapter XXX was put together by means of transpositions and excisions which were utilised, however, in other places. Chapter XXXI, again, possessed greater continuity. But then follows a long section in the manuscript, entitled "The Confusion", containing nothing but extracts from parliamentary reports on the crises of 1848 and 1857, in which are compiled statements of twenty-three businessmen and economists, largely on money and capital, gold drain, over-speculation, etc., and supplied here and there with short facetious comments. Practically all the then current views concerning the relation of money to capital are represented therein, either in the answers or in the questions, and it was the "confusion" revealed in identifying money and capital in the money-market that Marx meant to treat with criticism and sarcasm. After many attempts I convinced myself that this chapter could not be put into shape. Its material, particularly that supplied with Marx’s comments, was used wherever I found an opportune place for it.

Next, in tolerable order, comes what I placed in Chapter XXXII. But this is immediately followed by a new batch of extracts from parliamentary reports on every conceivable thing pertinent to this part, intermingled with the author’s comments. Toward the end these extracts and comments are focussed more and more on the movement of monetary metals and on exchange rates, and close with all kinds of miscellaneous remarks. On the other hand, the "Precapitalist" chapter (Chap. XXXVI) was quite complete.

Of all this material beginning with the "Confusion", save that which had been previously inserted, I made up Chapters XXXIII to XXXV. This could not, of course, be done without considerable interpolations on my part for the sake of continuity. Unless they are merely formal in nature, the interpolations are expressly indicated as belonging to me. In this way I have finally succeeded in working into the text all the author’s relevant statements. Nothing has been left out but a small portion of the extracts, which either repeated what had already been said, or touched on points which the manuscript did not treat any further.

The part on ground-rent was much more fully treated, although by no means properly arranged, if only for the fact that Marx found it necessary to recapitulate the plan of the entire part in Chapter XLIII (the last portion of the part on rent in the manuscript). This was all the more desirable, since the manuscript opens with Chapter XXXVII, followed by Chapters XLV to XLVII, and only thereafter Chapters XXXVIII to XLIV. The titles for the differential rent II involved the greatest amount of work and so did the discovery that the third case of this class of rent had not at all been analysed in Chapter XLIII, where it belonged.

In the seventies Marx engaged in entirely new special studies for this part on ground-rent. For years he had studied the Russian originals of statistical reports inevitable after the "reform" of 1861 in Russia and other publications on landownership, had taken extracts from these originals, placed at his disposal in admirably complete form by his Russian friends, and had intended to use them for a new version of this part. Owing to the variety of forms both of landownership and of exploitation of agricultural producers in Russia, this country was to play the same role in the part dealing with ground-rent that England played in Book I in connection with industrial wage-labour. He was unfortunately denied the opportunity of carrying out this plan.

Lastly, the seventh part was available complete, but only as a first draft, whose endlessly involved periods had first to be dissected to be made printable. There exists only the beginning of the final chapter. It was to treat of the three major classes of developed capitalist society — the landowners, capitalists and wage-labourers — corresponding to the three great forms of revenue, ground-rent, profit and wages, and the class struggle, an inevitable concomitant of their existence, as the actual consequence of the capitalist period. Marx used to leave such concluding summaries until the final editing, just before going to press, when the latest historical developments furnished him with unfailing regularity with proofs of the most laudable timeliness for his theoretical propositions.

Citations and proofs illustrating his statements are, as in the second volume, considerably less numerous than in the first. Quotations from Book I refer to pages in the 2nd and 3rd editions. Wherever the manuscript refers to theoretical statements of earlier economists, the name alone is given as a rule, and the quotations were to be added during the final editing. Of course, I had to leave this as it was. There are only four parliamentary reports, but these are abundantly used. They are the following:

1) Reports from Committees (of the Lower House), Volume VIII, Commercial Distress, Volume II, Part I. 1847-48. Minutes of Evidence. — Quoted as Commercial Distress 1847-48.

2) Secret Committee of the House of Lords on Commercial Distress 1847. Report printed in 1848. Evidence printed in 1857 (because considered too compromising in 1848). — Quoted as C. D. 1848/57.

3) Report: Bank Acts, 1857. — Ditto, 1858. — Reports of the Committee of the Lower House on the Effect of the Bank Acts of 1844 and 1845. With evidence. — Quoted as: B. A. (also as B. C.) 1857 or 1858.

I am going to start on the fourth volume-the history of the theory of surplus-value — as soon as it is in any way possible.

In the preface to the second volume of Capital I had to square accounts with the gentlemen who raised a hue and cry at the time because they fancied to have discovered "in Rodbertus the secret source and superior predecessor of Marx". I offered them an opportunity to show "what the economics of a Rodbertus can accomplish"; I defied them to show "in which way an equal average rate of profit can and must come about, not only without a violation of the law of value, but on the very basis of it". These same gentlemen who for either subjective or objective, but as a rule anything but scientific reasons were then lionising the brave Rodbertus as an economic star of the first magnitude, have without exception failed to furnish an answer. However, other people have thought it worth their while to occupy themselves with the problem.

In his critique of the second volume (Conrads Jahrbücher, XI, 1885, S. 452-65), Professor Lexis took up the question, although he did not care to offer a direct solution. He says:

"The solution of the contradiction" (between the Ricardo-Marxian law of value and an equal average rate of profit) "is impossible if the various classes of commodities are considered individually and if their value is to be equal to their exchange-value, and the latter equal or proportional to their price."

According to him, the solution is only possible if

"we cease measuring the value of individual commodities according to labour, and consider only the production of commodities as a whole and their distribution among the aggregate classes of capitalists and workers.... The working class receives but a certain portion of the total product,... the other portion, which falls to the share of the capitalist class, represents the surplus-product in the Marxian sense, and accordingly ... the surplus-value. Then the members of the capitalist class divide this total surplus-value among themselves not in accordance with the number of workers employed by them, but in proportion to the capital invested by each, the land also being accounted for as capital-value."

The Marxian ideal values determined by units of labour incorporated in the commodities do not correspond to prices but may be

"regarded as points of departure of a shift which leads to the actual prices. The latter depend on the fact that equal sums of capital demand equal profits."

For this reason some capitalists will secure prices higher than the ideal values for their commodities, and others will secure lower prices.

"But since the losses and gains of surplus-value balance one another within the capitalist class, the total amount of the surplus-value is the same as it would be if all prices were proportional to the ideal values."

It is evident that the problem has not in any way been solved here, but has, though somewhat loosely and shallowly, been on the whole correctly formulated. And this is, indeed, more than we could have expected from a man who, like the above author, takes a certain pride in being a "vulgar economist". It is really surprising when compared with the handiwork of other vulgar economists, which we shall later discuss. Lexis’s vulgar economy is, anyhow, in a class of its own. He says that capital gains might, at any rate, be derived in the way indicated by Marx, but that nothing compels one to accept this view. On the contrary. Vulgar economy, he says, has at least a more plausible explanation, namely:

"The capitalist sellers, such as the producer of raw materials, the manufacturer, the wholesale dealer, and the retail dealer, all make a gain on their transactions by selling at a price higher than the purchase price, thus adding a certain percentage to the price they themselves pay for the commodity. The worker alone is unable to obtain a similar additional value for his commodity; he is compelled by reason of his unfavourable condition vis-à-vis the capitalist to sell his labour at the price it costs him, that is to say, for the essential means of his subsistence.... Thus, these additions to prices retain their full impact with regard to the buying worker, and cause the transfer of a part of the value of the total product to the capitalist class."

One need not strain his thinking powers to see that this explanation for the profits of capital, as advanced by "vulgar economy," amounts in practice to the same thing as the Marxian theory of surplus-value; that the workers are in just the same "unfavourable condition" according to Lexis as according to Marx; that they are just as much the victims of swindle because every non-worker can sell commodities above price, while the worker cannot do so; and that it is just as easy to build up an at least equally plausible vulgar socialism on the basis of this theory, as that built in England on the foundation of Jevons’s and Menger’s theory of use-value and marginal utility. I even suspect that if Mr. George Bernard Shaw had been familiar with this theory of profit, he would have likely fallen to with both hands, discarding Jevons and Karl Menger, to build anew the Fabian church of the future upon this rock.

In reality, however, this theory is merely a paraphrase of the Marxian. What defrays all the price additions? It is the workers’ "total product". And this is due to the fact that the commodity "labour", or, as Marx has it, labour-power, has to be sold below its price. For if it is a common property of all commodities to be sold at a price higher than their cost of production, with labour being the sole exception since it is always sold at the cost of production, then labour is simply sold below the price that rules in this world of vulgar economy. Hence the resultant extra profit accruing to the capitalist, or capitalist class, arises, and can only arise, in the last analysis, from the fact that the worker, after reproducing the equivalent for the price of his labour-power, must produce an additional product for which he is not paid — i.e., a surplus-product, a product of unpaid labour, or surplus-value. Lexis is an extremely cautious man in the choice of his terms. He does not say anywhere outright that the above is his own conception. But if it is, it is plain as day that we are not dealing with one of those ordinary vulgar economists, of whom he says himself that every one of them is "at best only a hopeless idiot" in Marx’s eyes, but with a Marxist disguised as a vulgar economist. Whether this disguise has occurred consciously or unconsciously is a psychological question which does not interest us at this point. Whoever would care to investigate this, might also probe how a man as shrewd as Lexis undoubtedly is, could at one time defend such nonsense as bimetallism.

The first to really attempt an answer to the question was Dr. Conrad Schmidt in his pamphlet entitled Die Durchschnittsprofitrate auf Grundlage des Marx’schen Werthgesetzes, Stuttgart, Dietz, 1889. Schmidt seeks to reconcile the details of the formation of market-prices with both the law of value and with the average rate of profit. The industrial capitalist receives in his product, first, an equivalent of the capital he has advanced, and, second, a surplus-product for which he has paid nothing. But to obtain a surplus-product he must advance capital to production. That is, he must apply a certain quantity of materialised labour to be able to appropriate this surplus-product. For the capitalist, therefore, the capital he advances represents the quantity of materialised labour socially necessary for him to obtain this surplus-product. This applies to every industrial capitalist. Now, since commodities are mutually exchanged, according to the law of value, in proportion to the labour socially necessary for their production and since, as far as the capitalist is concerned, the labour necessary for the manufacture of the surplus-product happens to be past labour accumulated in his capital, it follows that surplus-products are exchanged in proportion to the sums of capital required for their production, and not in proportion to the labour actually incorporated in them. Hence the share of each unit of capital is equal to the sum of all produced surplus-values divided by the sum of the capitals expended in production. Accordingly, equal sums of capital yield equal profits in equal time spans, and this is accomplished by adding the cost-price of the surplus-product so calculated, i.e., the average profit, to the cost-price of the paid product and by selling both the paid and unpaid product at this increased price. The average rate of profit takes shape in spite of average commodity-prices being determined, as Schmidt holds, by the law of value.

The construction is extremely ingenious. It is completely patterned after the Hegelian model, but like the majority of Hegelian constructions it is not correct. Surplus-product or paid product, makes no difference. If the law of value is also to be directly valid for the average prices, both of them must be sold at prices proportionate to the socially necessary labour required and expended in producing them. The law of value is aimed from the first against the idea derived from the capitalist mode of thought that accumulated labour of the past, which comprises capital, is not merely a certain sum of finished value, but that, because a factor in production and the formation of profit, it also produces value and is hence a source of more value than it has itself; it establishes that living labour alone possesses this faculty. It is well known that capitalists expect equal profits proportionate to their capitals and regard their advances of capital as a sort of cost-price of their profits. But if Schmidt utilises this conception as a means of reconciling prices based on the average rate of profit with the law of value, he repudiates the law of value itself by attributing to it as one of its co-determinative factors a conception with which the law is wholly at variance.

Either accumulated labour creates value the same as living labour. In that case the law of value does not apply.

Or, it does not create value. In that case Schmidt’s demonstration is incompatible with the law of value.

Schmidt strayed into this bypath when quite close to the solution, because he believed that he needed nothing short of a mathematical formula to demonstrate the conformance of the average price of every individual commodity with the law of value. But while on the wrong track in this instance, in the immediate proximity of the goal, the rest of his booklet is evidence of the understanding with which he drew further conclusions from the first two volumes of Capital. His is the honour of independently finding the correct explanation developed by Marx in the third part of the third volume for the hitherto inexplicable sinking tendency of the rate of profit, and, similarly, of explaining the derivation of commercial profit out of industrial surplus-value, and of making a great number of observations concerning interest and ground-rent, in which he anticipates ideas developed by Marx in the fourth and fifth parts of the third volume.

In a subsequent article (Neue Zeit, 1892-93, Nos. 3 and 4), Schmidt takes a different tack in his effort to solve the problem. He contends that it is competition which produces the average rate of profit by causing the transfer of capital from branches of production with under-average profit to branches with above-average profit. It is not a revelation that competition is the great equaliser of profits. But now Schmidt tries to prove that this levelling of profits is identical with a reduction of the selling price of commodities in excess supply to a magnitude of value which society can pay for them according to the law of value. Marx’s analyses in the book itself are ample evidence why this way, too, could not lead to the goal.

After Schmidt P. Fireman tackled the problem (Conrads Jahrbücher, dritte Folge, III, S. 793). I shall not go into his remarks on other aspects of the Marxian analysis. They rest upon the false assumption that Marx wishes to define where he only investigates, and that in general one might expect fixed, cut-to-measure, once and for all applicable definitions in Marx’s works. It is self-evident that where things and their interrelations are conceived, not as fixed, but as changing, their mental images, the ideas, are likewise subject to change and transformation; and they are not encapsulated in rigid definitions, but are developed in their historical or logical process of formation. This makes clear, of course, why in the beginning of his first book Marx proceeds from the simple production of commodities as the historical premise, ultimately to arrive from this basis to capital — why he proceeds from the simple commodity instead of a logically and historically secondary form — from an already capitalistically modified commodity. To be sure, Fireman positively fails to see this. These and other side-issues, which could give rise to still other diverse objections, are better left by the wayside, while we go on forthwith to the gist of the matter. While theory teaches Fireman that at a given rate of surplus-value the latter is proportional to the labour-power employed, he learns from experience that at a given average rate of profit, profit is proportional to the total capital employed. He explains this by saying that profit is merely a conventional phenomenon (which means in his language that it belongs to a definite social formation with which it stands and falls). Its existence is simply tied up with capital. The latter, provided it is strong enough to secure a profit for itself, is compelled by competition also to secure for itself a rate of profit equal for all sums of capital. Capitalist production is simply impossible without an equal rate of profit. Given this mode of production, the quantity of profit for the individual capitalist can, at a certain rate of profit, depend only on the magnitude of his capital. On the other hand, profit consists of surplus-value, of unpaid labour. But how is surplus-value, whose magnitude hinges upon the degree of labour exploitation, transformed into profit, whose magnitude depends upon the amount of the capital employed?

"Simply by selling commodities above their value in all branches of production in which the ratio between ... constant and variable capital is greatest; but this also implies that commodities are sold below their value in those branches of production in which the ratio between constant and variable capital = c:v is smallest, and that commodities are sold at their true value only in branches in which the ratio of c:v represents a certain mean figure.... Is this discrepancy between individual prices and their respective values a refutation of the value principle? By no means. For since the prices of some commodities rise above their value as much as the prices of others fall below it, the total sum of prices remains equal to the total sum of values ... in the end this incongruity disappears." This incongruity is a "disturbance"; "however, in the exact sciences it is not customary to regard a predictable disturbance as a refutation of a law".

On comparing the relevant passages in Chapter IX with the above, it will be seen that Fireman has indeed placed his finger on the salient point. But the undeservedly cool reception of his able article shows how many interconnecting links would still be needed even after this discovery to enable Fireman to work out a full and comprehensive solution. Although many were interested in this problem, they were all still fearful of getting their fingers burnt. And this is explained not only by the incomplete form in which Fireman left his discovery, but also by the undeniable faultiness of both his conception of the Marxian analysis and of his own general critique of the latter, based as it was on his misconception.

Whenever there is a chance of making a fool of himself over some difficult matter, Herr Professor Julius Wolf, of Zurich, never fails to do so. He tells us (Conrads Jahrbücher, 1891, dritte Folge, II, S. 352 and following) that the entire problem is resolved in relative surplus-value. The production of relative surplus-value rests on the increase of constant capital vis-à-vis variable capital.

"A plus in constant capital presupposes a plus in the productive power of the labourers. Since this plus in productive power (by way of lowering the worker’s cost of living) produces a plus in surplus-value, a direct relation is established between the increasing surplus-value and the increasing share of constant capital in total capital. A plus in constant capital indicates a plus in the productive power of labour. With variable capital remaining the same and constant capital increasing, surplus-value must therefore, in accordance with Marx, increase as well. This was the problem presented to us."

True, Marx says the very opposite in a hundred places in the first hook; true, the assertion that, according to Marx, when variable capital shrinks, relative surplus-value increases in proportion to the increase in constant capital, is so astounding that it puts to shame all parliamentary declamation; true, Herr Julius Wolf demonstrates in his every line that he does not in the least understand, be it relatively or absolutely, the concepts of relative or absolute surplus-value; to be sure he says himself that

"at first glance one seems really to he in a nest of incongruities",

which, by the way, is the only true statement in his entire article. But what does all that matter? Herr Julius Wolf is so proud of his brilliant discovery that he cannot refrain from bestowing posthumous praise on Marx for it and from extolling his own fathomless nonsense as a

"new proof of the keen and far-sighted way his" (Marx’s) "system of criticism of capitalist economy is set forth".

But now comes the choicest bit of all. Herr Wolf says:

"Ricardo has likewise claimed that an equal investment of capital yielded equal surplus-value (profit), just as the same expenditure of labour created the same surplus-value (as regards its quantity). And the question now was how the one agreed with the other. But Marx has refused to accept this way of putting the problem. He has proved beyond a doubt (in the third volume) that the second statement was not necessarily a consequence of the law of value, that it even contradicted his law of value and should therefore be forthwith repudiated."

And thereupon Wolf probes who of us two, Marx or I, had made a mistake. It does not occur to him, naturally, that it is he who is groping in the dark.

I should offend my readers and fail to see the humour of the situation if I were to waste a single word on this choice morsel. I shall only add that his audacity in using the opportunity to report the ostensible gossip among professors that Conrad Schmidt’s above-named work was "directly inspired by Engels" matches the audacity with which he dared to say at one time what "Marx has proved beyond a doubt in the third volume." Herr Julius Wolf! It may be customary in the world in which you live and strive for the man who publicly poses a problem to others to acquaint his close friends on the sly with its solution. I am quite prepared to believe that you are capable of this sort of thing. But that a man need not stoop to such shabby tricks in my world is proved by the present preface.

No sooner had Marx died than Mr. Achille Loria hastened to publish an article about him in the Nuova Antologia (April 1883). To begin with, a biography brimming with misinformation, followed by a critique of public, political and literary work. He falsifies Marx’s materialist conception of history and distorts it with an assurance that bespeaks a great purpose. And this purpose was eventually carried out. In 1886, the same Mr. Loria published a book, La teoria economica della constituzione politica, in which he announced to his astounded contemporaries that Marx’s conception of history, so completely and purposefully misrepresented by him in 1883, was his own discovery. To be sure, the Marxian theory is reduced in this book to a rather Philistine level, and the historical illustrations and proofs abound in blunders which would never be tolerated in a fourth-form boy. But what does that matter? The discovery that political conditions and events are everywhere invariably explained by corresponding economic conditions was, as is herewith demonstrated, not made by Marx in 1845, but by Mr. Loria in 1886. At least he has happily convinced his countrymen of this, and, after his book appeared in French, also some Frenchmen, and can now pose in Italy as the author of a new epoch-making theory of history until the Italian Socialists find time to strip the illustrious Loria of his stolen peacock feathers.

But this is just a sample or Mr. Loria’s style. He assures us that all Marx’s theories rest on conscious sophistry (un consaputo sofisma); that Marx did not stop at paralogisms even when he knew them to be paralogisms (sapendoli tali), etc. And after thus impressing the necessary upon his readers with a series of similar contemptible insinuations, so that they should regard Marx as an unprincipled upstart à la Loria who achieves his little effects by the same wretched humbug as our professor from Padua, he reveals an important secret to them, and thereby takes us back to the rate of profit.

Mr. Loria says: According to Marx, the amount of surplus-value (which Mr. Loria here identifies with profit) produced in a capitalist industrial establishment should depend on the variable capital employed in it, since constant capital does not yield profit. But this is contrary to fact. For in practice profit does not depend on variable, but on total capital. And Marx himself recognises this (Book I, Chap. XIII) and admits that on the surface facts appear to contradict his theory. But how does he get around this contradiction? He refers his readers to an as yet unpublished subsequent volume. Loria has already told his readers about this volume that he did not believe Marx had ever entertained the thought of writing it, and now exclaims triumphantly:

"I have not been wrong in contending that this second volume, which Marx always flings at his adversaries without it ever appearing, might very well have been a shrewd expedient applied by Marx whenever scientific arguments failed him (un ingegnoso spediente ideato dal Marx a sostituzione degli argomenti scientifici)." And whosoever is not convinced after this that Marx stands in the same class of scientific swindlers as l’illustre Loria, is past all redemption.

We have at least learned this much: According to Mr. Loria, the Marxian theory of surplus-value is absolutely incompatible with the existence of a general equal rate of profit. Then, there appeared the second volume and therewith my public challenge precisely on this very point. If Mr. Loria had been one of us diffident Germans, he would have experienced a certain degree of embarrassment. But he is a cocky southerner, coming from a hot climate, where, as he can testify, cool nerve is a natural requirement. The question of the rate of profit has been publicly put. Mr. Loria has publicly declared it insoluble. And for this very reason he is now going to outdo himself by publicly solving it.

This miracle is accomplished in Conrads Jahrbücher, neue Folge, Buch XX, S. 272 and following, in an article dealing with Conrad Schmidt’s already cited pamphlet. After Loria learned from Schmidt how commercial profit was made, he suddenly saw daylight.

"Since determining value by means of labour-time is to the advantage of those capitalists who invest a greater portion of their capital in wages, the unproductive" (read commercial) "capital can derive a higher interest" (read profit) "from these privileged capitalists and thus bring about an equalisation between the individual industrial capitalists... For instance, if each of the industrial capitalists A, B, C uses 400 working-days and 0, 400, 200 constant capital respectively in production, and if the wages for 400 working-days amount to 50 working-days, then each receives a surplus-value of 50 working-days, and the rate of profit is 400% for the first, 33.3% for the second, and 20% for the third capitalist. But if a fourth capitalist D accumulates an unproductive capital of 300, which claims an interest" (profit) "equal in value to 40 working-days from A, and an interest of 20 working-days from B, then the rate of profit of capitalists A and B will sink to 20%, just as that of C, while D with his capital of 300 receives profit of 60, or a rate of profit of 20%, the same as the other capitalists."

With such astonishing dexterity, l’illustre Loria solves by sleight of hand the question which he had declared insoluble ten years previously. Unfortunately, he did not let us into the secret wherefrom the "unproductive capital" obtained the power to squeeze out of the industrialists their extra profit in excess of the average rate of profit, and to retain it in its own pocket, just as the landowner pockets the tenant’s surplus-profit as ground-rent. Indeed, according to him it would be the merchants who would raise a tribute analogous to ground-rent from the industrialists, and would thereby bring about an average rate of profit. Commercial capital is indeed a very essential factor in producing the general rate of profit, as nearly everybody knows. But only a literary adventurer who in his heart sneezes at political economy, can venture the assertion that it has the magic power to absorb all surplus-value in excess of the general rate of profit even before this general rate has taken shape, and to convert it into ground-rent for itself without, moreover, even having need to do with any real estate. No less astonishing is the assertion that commercial capital manages to discover the particular industrialists, whose surplus-value just covers the average rate of profit, and that it considers it a privilege to mitigate the lot of these luckless victims of the Marxian law of value to a certain extent by selling their products gratis for them, without asking as much as a commission for it. What a mountebank one must be to imagine that Marx had need to resort to such miserable tricks!

But it is not until we compare him with his northern competitors, for instance with Herr Julius Wolf, who was not born yesterday either, that the illustrious Loria shines in his full glory. What a yelping pup Herr Wolf appears even in his big volume on Sozialismus und kapitalistische Gesellschaftsordnung, alongside the Italian! How awkward, I am almost tempted to say modest, he appears beside the rare confidence of the maestro who takes it for granted that Marx, neither more nor less than other people, was as much a sophist, paralogist, humbug and mountebank as Mr. Loria himself — that Marx took in the public with the promise of rounding out his theory in a subsequent volume whenever he was in a difficult position, knowing full well that he neither could nor ever would write it. Boundless nerve coupled with a flair for slipping like an eel through impossible situations, a heroic contempt for pummellings received, hasty plagiarism of other people’s accomplishments, importunate and fanfaronading advertising, spreading his fame by means of a chorus of friends — who can equal him in all this?

Italy is the land of classicism. Ever since the great era when the dawn of modern times rose there, it has produced magnificent characters of unequalled classic perfection, from Dante to Garibaldi. But the period of its degradation and foreign domination also bequeathed it classic character-masks, among them two particularly clear-cut types, that of Sganarelle and Dulcamara. The classic unity of both is embodied in our illustre Loria.

In conclusion I must take my readers across the Atlantic. Dr. (Med.) George C. Stiebeling, of New York, has also found a solution to the problem, and a very simple one. So simple, indeed, that no one either here, or there, took him seriously. This aroused his ire, and he complained bitterly about the injustice of it in an endless stream of pamphlets and newspaper articles appearing on both sides of the great water. He was told in the Neue Zeit that his entire solution rested on a mathematical error. But this could scarcely disturb him. Marx had also made mathematical errors, and was yet right in many things. Let us then take a look at Dr. Stiebeling’s solution.

"I take two factories working with equal capitals for an equal length of time, but with a different ratio of Constant and variable capitals. I make the total capital (c + v) = y, and the difference in the ratio of the constant and variable capital = x. For factory I, y = c + v, for factory II, y = (c - x) + (v + x). Therefore the rate of surplus-value for factory I = s/v, and for factory II = s/(v + x). Profit (p) is what I call the total surplus-value (s) by which the total capital y, or c + v, is augmented in the given time; thus p = s. Hence, the rate of profit for factory I = p/y, or s/(c + v), and for factory II it is also p/y, or s/ (c - x) + (v + x), i.e., it is also s/(c + v). The ... problem thus resolves itself in such a way that, on the basis of the law of value, with equal capital and equal time, but unequal quantities of living labour, a change in the rate of surplus-value causes the equalisation of an average rate of profit." (G. C. Stiebeling, Das Werthgesetz und die Profitrate, New York, John Heinrich.)

However pretty and revealing the above calculation may be, we are compelled to ask Dr. Stiebeling one question: How does he know that the sum of surplus-value produced by factory I is exactly equal to the sum of the surplus-value produced by factory II? He states explicitly that c, v, y and x, that is, all the other factors in the calculation, are the same for both factories, but makes no mention of s. It does not by any means follow from the fact that he designated both of the above-mentioned quantities of surplus-value algebraically with s. Rather, it is just the thing that has to be proved, since Mr. Stiebeling without further ado also identifies profit p with the surplus-value. Now there are just two possible alternatives. Either the two s’s are equal, both factories produce equal quantities of surplus-value, and therefore also equal quantities of profit, since both capitals are equal. In that case Mr. Stiebeling has from the start taken for granted what he was really called upon to prove. Or, one factory produces more surplus-value than the other, in which case his entire calculation tumbles about his ears.

Mr. Stiebeling spared neither pains nor money to build mountains of calculations upon this mathematical error, and to exhibit them to the public. I can assure him, for his own peace of mind, that they are nearly all equally wrong, and that in the exceptional cases when this is not so, they prove something entirely different from what he set out to prove. He proves, for instance, by comparing U.S. census figures for 1870 and 1880 that the rate of profit has actually fallen, but interprets it wrongly and assumes that Marx’s theory of a constantly stable rate of profit should be corrected on the basis of experience. Yet it follows from the third part of the present third book that this Marxian "stable rate of profit" is purely a figment of Mr. Stiebeling’s imagination, and that the tendency for the rate of profit to fall is due to circumstances which are just the reverse of those indicated by Dr. Stiebeling. No doubt Dr. Stiebeling has the best intentions, but when a man wants to deal with scientific questions he should above all learn to read the works he wishes to use just as the author had written them, and above all without reading anything into them that they do not contain.

The outcome of the entire investigation shows again with reference to this question as well that it is the Marxian school alone which has accomplished something. If Fireman and Conrad Schmidt read this third book, each one, for his part, may well be satisfied with his own work.

London, October 4, 1894

Frederick Engels

Next: Chapter 1