The general formula for capital is M – C – M′, i.e. a sum of value is cast into circulation in order to extract a greater sum. The process that creates this greater sum of value is capitalist production; the process that realizes it is the circulation of capital. The capitalist does not produce commodities for their own sake, neither for their use-value nor for his own personal consumption. The product in which the capitalist is really interested is not the palpable product itself, but rather the excess in the value of the product over and above the value of the capital consumed in it. The capitalist advances the capital as a whole without considering the different roles that its components will play in the production of surplus-value. He advances all these components equally, not only so as to reproduce the capital he has advanced but also to produce an excess value over and above this. He can convert the value he advances into a higher value only by exchanging it with living labour, by the exploitation of living labour. But he can exploit labour only in so far as he advances at the same time the conditions for the realization of this labour, i.e. means and object of labour, machinery and raw materials, that is by transforming a certain sum of value that he has in his possession into the form of the conditions of production. Similarly, he is only a capitalist at all, and can only undertake the process of exploiting labour, because he confronts, as proprietor of the conditions of labour, the worker as the mere owner of labour-power. We have already shown in Volume 1 how it is precisely the possession of these means of production by the non-workers that turns the workers into wage-labourers and the non-workers into capitalists.*
It makes no difference to the capitalist whether we see him as advancing the constant capital to make a profit out of his variable capital, or advancing the variable capital in order to valorize the constant; whether he lays out money on wages in order to give machines and raw material a higher value, or advances money in machinery and raw material in order to exploit labour. Even though it is only the variable part of capital that creates surplus-value, it does so only under the condition that the other parts are advanced as well, i.e. the conditions of production for labour. Since the capitalist can exploit labour only by advancing constant capital, and since he can valorize the constant capital only by advancing the variable, these are both one and the same in his eyes, and this is all the more so in that the actual degree of his profit is determined in relation not to his variable capital but to his total capital; not by the rate of surplus-value but by the rate of profit, which, as we shall see, may remain the same while expressing different rates of surplus-value.
The costs of the product include all the components of its value which the capitalist has paid for, or for which he has cast an equivalent into the production process. These costs must be replaced even if his capital is to do no more than maintain itself, reproduce its original magnitude.
The value contained in a commodity is equal to the labour-time taken in making it, and this consists of both paid and unpaid labour. The costs of the commodity for the capitalist, on the other hand, include only the part of the labour objectified in it for which he has actually paid. The surplus labour contained in the commodity costs the capitalist nothing, even though it costs the worker labour, every bit as much as the paid labour does, and even though both paid and unpaid labour create value and enter the commodity as elements of value formation. The capitalist’s profit, therefore, comes from the fact that he has something to sell for which he has not paid. The surplus-value or profit consists precisely in the excess of commodity value over its cost price, i.e. in the excess of the total sum of labour contained in the commodity over the sum of labour that is actually paid for. The surplus-value, from wherever it may derive, is consequently an excess over and above the total capital advanced. This excess then stands in a certain ratio to the total capital, as expressed by the fraction s/C, where C stands for the total capital. We thus obtain the rate of profit s/C = s/c + ν, as distinct from the rate of surplus-value s/ν.
The rate of surplus-value, as measured against the variable capital, is known as the rate of surplus-value; the rate of surplus-value, as measured against the total capital, is known as the rate of profit. These are two different standards for measuring the same quantity, and as a result are able to express the different relations in which the same quantity may stand.
It is the transformation of surplus-value into profit that is derived from the transformation of the rate of surplus-value into the profit rate, not the other way round. In actual fact, the rate of profit is the historical starting-point. Surplus-value and the rate of surplus-value are, relative to this, the invisible essence to be investigated, whereas the rate of profit and hence the form of surplus-value as profit are visible surface phenomena.
As far as the individual capitalist is concerned, it is evident enough that the only thing that interests him is the ratio of the surplus-value, the excess value which he receives from selling his commodities, to the total capital advanced for the production of these commodities, whereas not only do the specific ratios of this excess value to the particular components of his capital, and its inner connections with them, not interest him, but it is actually in his interest to disguise these particular ratios and inner connections.
Even though the excess value of the commodity over its cost price arises in the immediate process of production, it is only in the circulation process that it is realized, and it appears all the more readily to derive from the circulation process in as much as in the world as it actually is, the world of competition, i.e. on the market, it depends on market conditions whether or not this excess is realized and to what extent. It needs no further elaboration here that, if a commodity is sold above or below its value, there is simply a different distribution of the surplus-value, and that this distribution, the altered ratio in which various individuals partake of the surplus-value, in no way affects either the magnitude or the character of the surplus-value itself. Not only is the circulation process, for its part, the scene of those transformations that were considered in Volume 2, but these also coincide with actual competition, the purchase and sale of commodities above or below their value, so that, as far as the individual capitalist is concerned, the surplus-value that he realizes depends just as much on this mutual cheating as on the direct exploitation of labour.
The circulation process is affected by the circulation time as well as by the working time, the time of circulation restricting the surplus-value that can be realized in a certain period. Other aspects deriving from circulation also react with decisive effect on the immediate process of production itself. Both these processes, the immediate process of production and the circulation process, constantly run into one another and intertwine, and in this way their distinguishing features are continuously blurred. In the circulation process, as we have already shown, the production of surplus-value, and of value in general, assumes new characteristics. Capital runs through the cycle of its transformations, and finally it steps as it were from its inner organic life into its external relations, relations where it is not capital and labour that confront one another, but on the one hand capital and capital, and on the other hand individuals as simple buyers and sellers once again. Circulation time and working time cut across each other’s paths, and both appear to determine surplus-value in the same way. The original form in which capital and wage-labour confront one another is disguised by the intervention of relations that seem to be independent of this; surplus-value itself does not appear as having been produced by the appropriation of labour-time, but as the excess of the sale price of commodities over their cost price, this latter readily presenting itself therefore as their proper value (valeur intrinsèque), so that profit appears as an excess of the sale price of commodities over their immanent value.
It is true that the nature of surplus-value persistently impresses itself on the capitalist’s consciousness in the course of the immediate production process, as we were shown by his greed for the labour-time of others, etc., when we were simply considering surplus-value as such. However:
(1) The immediate process of production is itself simply an evanescent moment, which is constantly passing over into the process of circulation, and vice versa, so that any inkling of the source of his profit, i.e. of the nature of surplus-value, which dawns more or less clearly on the capitalist in the production process itself, appears at the most as an equally valid moment alongside the notion that the excess that is realized stems from a movement that is independent of the production process itself and derives from the sphere of circulation, a movement therefore that capital possesses independently of its relation to labour. These phenomena of circulation are even adduced by modern economists such as Ramsay, Malthus, Senior, Torrens, etc. as direct proofs that capital in its mere material existence, independently of its social relation to labour (which is precisely how it comes to be capital), is an autonomous source of surplus-value alongside labour and independent of it.
(2) Under the heading of costs, which include not only wages but also the price of raw material, the depreciation of the machinery, etc., the extortion of unpaid labour appears simply as an economy in the payment for one of the articles that comprise these costs, simply as a lesser payment for a certain quantity of labour, an economy similar to that made when raw material is bought more cheaply or the wear and tear of machinery is reduced. The extortion of surplus labour then loses its specific character. Its specific relationship to surplus-value is obscured, and this is greatly furthered and facilitated by the representation of the value of labour-power in the form of wages, as we showed in Volume 1, Part Six [Chapter 19].
Since all sections of capital equally appear as sources of the excess value (profit), the capital relation is mystified.
Yet the way that surplus-value is transformed into the form of profit, by way of the rate of profit; is only a further extension of that inversion of subject and object which already occurs in the course of the production process itself. We saw in that case how all the subjective productive forces of labour present themselves as productive forces of capital.* On the one hand, value, i.e. the past labour that dominates living labour, is personified into the capitalist; on the other hand, the worker conversely appears as mere objectified labour-power, as a commodity. This inverted relationship necessarily gives rise, even in the simple relation of production itself, to a correspondingly inverted conception of the situation, a transposed consciousness, which is further developed by the transformations and modifications of the circulation process proper.
As can be studied in the case of the Ricardian school, it is completely wrong-headed to seek directly to present the laws of the profit rate as laws of the rate of surplus-value, or vice versa. In the mind of the capitalist these things are of course not distinguished. The expression s/C measures surplus-value against the value of the total capital advanced for its production, of which one part is completely consumed in this production, while another part is simply applied. In fact, the ratio s/C expresses the degree of valorization of the whole capital advanced; i.e. viewed in accordance with the conceptual, inner connection and the actual nature of surplus-value, it shows how the variation of the variable capital is related in magnitude to the total capital advanced.
In itself, the value of the total capital stands in no inner relationship to the amount of surplus-value, at least not directly. As far as its material elements are concerned, the total capital minus the variable capital, i.e. the constant capital, consists of the material conditions for the realization of labour – its materials and means. In order that a definite quantity of labour may be realized in commodities, and therefore form value, a definite quantity of materials and means of labour is required. There is a definite technical proportion between the amount of labour and the mass of means of production to which this living labour is to be added, a proportion that depends on the particular character of the labour. There is also therefore a definite proportion between the amount of surplus-value or surplus labour, and the mass of means of production. If the labour needed for the production of the worker’s wage amounts to 6 hours per day, for example, the worker has to work for 12 hours in order to perform 6 hours of surplus labour and create a surplus-value of 100 per cent. In 12 hours he consumes twice as much in the way of means of production as he does in 6 hours. But this does not mean that the surplus-value he adds in 6 hours stands in any direct relationship to the value of the means of production that are used in these 6 or 12 hours. Their value is completely immaterial here; what matters is the amount technically needed. It is quite unimportant whether the raw material or means of labour are cheap or dear, as long as they possess the use-value required and are present in the technically prescribed proportions for the labour they are to absorb. But if I know that x lb. of cotton are spun in an hour, and they cost y shillings, I also know that in 12 hours 12x lb. of cotton, = 12y shillings, are spun, and I can then calculate the ratio of the surplus-value to the value spun in 12 hours as well as to the value spun in 6. However, the ratio of living labour to the value of these means of production comes into question here only in as much as y shillings serves as the name for x lb. of cotton; because a certain specific quantity of cotton has a definite price, and conversely, therefore, a specific price can serve as an index for a definite quantity of cotton, as long as the price of cotton does not change. If I know that in order to appropriate 6 hours’ surplus labour I have to have the workers perform 12 hours’ labour, I must have enough cotton ready for 12 hours, and if I know the price of this quantity of cotton, there exists in this roundabout way a certain relationship between the price of cotton (as index of the quantity needed) and the surplus-value. But I can never argue conversely from the price of the raw material to the quantity of raw material that can be spun in one hour but will not do for six. There is thus no inner and necessary relationship between the value of the constant capital and the surplus-value, nor, hence, is there one between the value of the total capital (= c + v) and the surplus-value.
If the rate of surplus-value and its absolute magnitude are both given, the rate of profit expresses no more than what it in fact is, i.e. an alternative measurement of surplus-value, its measurement in terms of the value of the total capital, instead of in terms of the value of that part of capital from which it directly derives by way of its exchange against labour. In actuality, however, i.e. in the world of phenomena, things are the other way round. Surplus-value is given, but given as an excess of the sale price of the commodity over its cost price; and it therefore remains a mystery how this excess arises – from the exploitation of labour in the production process, from the mutual cheating of the dealers in the circulation process, or from both. What is also given is the relationship of this excess to the value of the total capital, i.e. the rate of profit. The calculation of this excess of the sale price over the cost price in terms of the total capital advanced is very important, and naturally so, since this is in fact the way that we find the ratio in which the total capital has been valorized or its degree of valorization. But if we start from this rate of profit, we can never establish any specific relationship between the excess and the part of capital laid out on wages. We shall see in a later chapter the amusing capers Malthus cuts when he tries in this way to penetrate the secret of surplus-value and its specific relationship to the variable part of capital.* What the rate of profit as such shows is rather a uniform relationship of the excess to equally important parts of the capital, which from this point of view exhibits no internal distinctions apart from that between fixed and circulating. Even this distinction arises only in so far as the excess is calculated in two ways. Firstly, as a simple quantity: the excess over and above the cost price. In this first form the circulating capital enters the cost price in full, while the fixed capital enters only to the extent of its depreciation. Secondly, there is the relationship of this excess value to the total value of the capital advanced. Here the value of the entire fixed capital comes into the calculation as much as the value of the circulating capital. The circulating capital thus comes into the calculation in the same way each time, while the fixed capital is involved in the first case in a different way from the circulating capital, in the second case in the same way. Thus the distinction between circulating and fixed capital suggests itself here to us as the only one.
We might say in the Hegelian fashion that the excess is reflected back into itself from the rate of profit, or else that the excess, which is characterized more specifically by the rate of profit, appears as an excess which the capital produces over and above its own value, either annually or in some definite period of circulation.
Thus even if the rate of profit is numerically different from the rate of surplus-value, while surplus-value and profit are in fact the same and even numerically identical, profit is still for all that a transformed form of. surplus-value, a form in which its origin and the secret of its existence are veiled and obliterated. In point of fact, profit is the form of appearance of surplus-value, and the latter can be sifted out from the former only by analysis. In surplus-value, the relationship between capital and labour is laid bare. In the relationship between capital and profit, i.e. between capital and surplus-value as it appears on the one hand as an excess over the cost price of the commodity realized in the circulation process and on the other hand as an excess determined more precisely by its relationship to the total capital, capital appears as a relationship to itself, a relationship in which it is distinguished, as an original sum of value, from another new value that it posits. It appears to consciousness as if capital creates this new value in the course of its movement through the production and circulation processes. But how this happens is now mystified, and appears to derive from hidden qualities that are inherent in capital itself.
The further we trace out the valorization process of capital, the more is the capital relationship mystified and the less are the secrets of its internal organization laid bare.
In this Part, the rate of profit is taken as numerically different from the rate of surplus-value; profit and surplus-value on the other hand are treated as numerically identical magnitudes, different only in form. In the following Part we shall observe the further development of the externalization by which profit presents itself as a magnitude distinct from surplus-value in a numerical respect as well.