In the previous Part we showed, among other things, how the rate of profit may vary, either rising or falling, even with the same rate of surplus-value. In this chapter we now assume that the degree of exploitation of labour, i.e. the rate of surplus-value, and the length of the working day, is the same in all the spheres of production among which social labour is divided in the country in question. As far as the many variations in the exploitation of labour between different spheres of production are concerned, Adam Smith has already shown fully enough how they cancel one another out through all kinds of compensations, either real or accepted by prejudice, and how therefore they need not be taken into account in investigating the general conditions, as they are only apparent and evanescent.* Other distinctions, for instance in the level of wages, depend to a large measure on the distinction between simple and complex labour that was mentioned already in the first chapter of Volume 1, p. 135, and although they make the lot of the workers in different spheres of production very unequal, they in no way affect the degree of exploitation of labour in these various spheres. If the work of a goldsmith is paid at a higher rate than that of a day-labourer, for example, the former’s surplus labour also produces a correspondingly greater surplus-value than does that of the latter. And even though the equalization of wages and working hours between one sphere of production and another, or between different capitals invested in the same sphere of production, comes up against all kinds of local obstacles, the advance of capitalist production and the progressive subordination of all economic relations to this mode of production tends nevertheless to bring this process to fruition. Important as the study of frictions of this kind is for any specialist work on wages, they are still accidental and inessential as far as the general investigation of capitalist production is concerned and can therefore be ignored. In a general analysis of the present kind, it is assumed throughout that actual conditions correspond to their concept, or, and this amounts to the same thing, actual conditions are depicted only in so far as they express their own general type.
The distinctions between rates of surplus-value in different countries and hence between the different national levels of exploitation of labour are completely outside the scope of our present investigation. The object of this Part is simply to present the way in which a general rate of profit is arrived at within one particular country. It is clear for all, however, that in comparing different national rates of profit one need only combine what has been developed earlier with the arguments to be developed here. One would first consider the variation between national rates of surplus-value and then compare, on the basis of these given rates of surplus-value, how national rates of profit differ. In so far as their variation is not the result of variation in the national rates of surplus-value, it must be due to circumstances in which, as in this chapter, surplus-value is assumed to be everywhere the same, to be constant.
We showed in the previous chapter that, if the rate of surplus-value is taken as constant, the rate of profit yielded by a particular capital can rise or fall as a result of circumstances that increase or decrease the value of one or other portion of the constant capital, and thereby affect the ratio between the constant and variable components of the capital as a whole. We also noted that circumstances which lengthen or shorten a capital’s turnover time may affect the rate of profit in a similar way. Since the amount of profit is identical with the amount of surplus-value, with surplus-value itself, it was also apparent that the amount of profit – as distinct from the rate of profit – was not affected by the fluctuations in value just mentioned. These only modified the rate in which a given surplus-value and hence also a profit of given magnitude was expressed, i.e. its relative magnitude, its magnitude compared with the magnitude of the capital advanced. In so far as these fluctuations in value led to the tying-up or the release of capital, both the rate of profit and profit itself could be affected by this indirect route. However, this was true only of capital already invested, not of new capital investments; and moreover the expansion or contraction of profit itself was always dependent on the extent to which more or less labour could be set in motion with the same capital, as a result of these price fluctuations, i.e. the extent to which a greater or lesser amount of surplus-value could be produced with the same capital, at the same rate of surplus-value. Far from contradicting the general law or forming an exception to it, this apparent exception was in actual fact only a special case of the general law’s application.
It was shown in the previous Part that, with a constant level of exploitation of labour, the profit rate alters with changes in the value of the constituent elements of the constant capital, as well as with changes in the capital’s turnover time. From this it follows naturally that the rates of profit in different spheres of production that exist simultaneously alongside one another will differ if, other things remaining equal, either the turnover times of the capitals invested differ, or the value relations between the organic components of these capitals in different branches of production. What we previously viewed as changes that the same capital underwent in succession, we now consider as simultaneous distinctions between capital investments that exist alongside one another in different spheres of production.
We have now to investigate: (1) differences in the organic composition of capitals, (2) differences in their turnover time.
For this whole investigation, when we speak of the composition or the turnover of capital in a specific branch of production, it should be clear enough that we always mean the normal, average situation for capital invested in this branch of production, and refer always to the average of the total capital in the sphere in question, not to chance differences between individual capitals invested there.
Since we also assume that the rate of surplus-value and the working day are constant and since this assumption also involves constancy of wages, a certain quantity of variable capital means a certain quantity of labour-power set in motion and hence a certain quantity of labour objectifying itself. Thus if £100 expresses the weekly wage of 100 workers, thus indicating 100 units of labour-power, then n× £100 expresses the wages of n × 100 workers, and £100/n the wages of 100/n workers. The variable capital serves here, as always when wages are taken as constant, as an index of the mass of labour set in motion by a certain total capital; variations in the magnitude of the variable capital applied serve as indices of variations in the mass of labour-power applied. If £100 represents 100 workers per week, and thus 6,000 hours’ labour if the workers work a 60-hour week, then £200 represents 12,000 hours’ labour, and £50 only 3,000.
By the composition of capital we mean, as already stated in Volume 1, the ratio between its active and its passive component, between variable and constant capital. Two relationships are involved here which are not of equal importance, even though they may in certain circumstances produce the same effect.
The first relationship depends on technical conditions and is to be taken as given, at any particular stage of development of productivity. A certain quantity of labour-power, represented by a certain number of workers, is required to produce a certain volume of products in a day, for example, and this involves putting a certain definite mass of means of production in motion and consuming them productively – machines, raw materials etc. A definite number of workers corresponds to a definite quantity of means of production, and thus a definite amount of living labour to a definite amount of labour already objectified in means of production. This proportion can vary greatly between different spheres of production and often even between different branches of one and the same industry, although it may also happen to be the same in branches of industry that are very far apart.
This proportion constitutes the technical composition of capital, and is the actual basis of its organic composition.
But it is possible for the proportion to be the same in different branches of industry only in so far as variable capital serves simply as an index of labour-power, and constant capital as an index of the volume of means of production that labour-power sets in motion. Certain operations in copper or iron, for example, may involve the same proportion between labour-power and means of production. But because copper is dearer than iron, the value relationship between variable and constant capital will be different in each case, and so therefore will the value composition of the two capitals taken as a whole. The distinction between technical composition and value composition shows itself in every branch of industry by the way the value ratio between the two portions of capital may change while the technical composition remains constant, whereas, with a changed technical composition, the value ratio may remain the same; the latter, of course, happens only if the change in the proportionate quantities of means of production and labour-power applied is cancelled out by an opposite change in their values.
The organic composition of capital is the name we give to its value composition, in so far as this is determined by its technical composition and reflects it.20
The variable capital, therefore, is assumed to be an index of a definite amount of labour-power, a definite number of workers or definite masses of living labour set in motion. We saw in the previous Part how changes in the magnitude of the variable capital may represent nothing but a higher or lower price for the same amount of labour. Here, however, this does not apply, as both the rate of surplus-value and the working day are taken as constant, and the wage for a certain labour-time is also given. A difference in the magnitude of the constant capital, on the other hand, may well be the index of a change in the volume of means of production set in motion by a certain quantity of labour-power; though it can also arise from a difference in the value that the means of production set in motion in one sphere of production have as compared with those in other spheres. Here, therefore, these two aspects both come into consideration.
The following fundamental point should also be noted:
Assume that £100 is the weekly wage for 100 workers, the working week is 60 hours, and the rate of surplus-value is 100 per cent. In this case, the workers work 30 of these 60 hours for themselves and 30 gratis for the capitalist. The £100 in wages actually embodies only 30 working hours of these 100 workers, or a total of 3,000 hours, while the other 3,000 hours that they work are embodied in the £100 surplus-value or profit that the capitalist tucks away. Even though the wage of £100 does not express the value in which the week’s work of 100 workers is objectified, it still indicates, since the length of the working day and the rate of surplus-value are given, that 100 workers are set in motion for a total of 6,000 hours. The capital of £100 indicates this for two reasons. Firstly, because it indicates the number of workers set in motion, since £1 = 1 worker per week, i.e. £100 = 100 workers; the second reason is this: owing to the fact that each worker, set in motion at the given rate of surplus-value of 100 per cent, performs as much labour again as is contained in his wage, i.e. £1, this wage, which is the expression of half a week’s labour, sets a whole week’s labour in motion, and similarly £100, though it contains only 50 weeks’ labour, sets in motion 100 weeks’. There is therefore a very fundamental distinction to be made between the variable capital laid out on wages to the extent that its value, the sum of wages paid, represents a definite quantity of objectified labour, and the variable capital to the extent that its value is simply an index of the mass of living labour that it sets in motion. This last is always greater than the labour contained in the variable capital and is thus also expressed in a higher value than that of the variable capital; in a value that is determined on the one hand by the number of workers that this variable capital sets in motion and on the other hand by the quantity of surplus labour they perform.
Considering the variable capital in this way, we arrive at two conclusions:
If a capital invested in sphere of production A spends only 100 in variable capital against 600 in constant, for each 700 overall, while in sphere of production B 600 is spent in variable capital and only 100 in constant, then that total capital A of 700 sets in motion a labour-power of only 100, thus under our above assumptions only 100 working weeks or 6,000 hours of living labour, while the equally large total capital B sets in motion 600 working weeks and therefore 36,000 hours of living labour. The capital in sphere A would therefore appropriate only 50 working weeks’ or 3,000 hours’ surplus labour, while the capital of equal size in sphere B would appropriate 300 working weeks or 18,000 hours. The variable capital is not only an index of the labour it itself contains, but also, at a given rate of surplus-value, of the excess or surplus labour that it sets in motion over and above this amount. At the same level of exploitation of labour, the profit would be 100/700 = 1/7 = 14 2/7 per cent in the first case, and 600/700 = 85 5/7 per cent in the second case, six times as much. Not only that, but the actual profit in this case would itself be six times greater, 600 for B as against 100 for A, as six times as much living labour has been set in motion with the same capital, and so six times as much surplus-value, and thus six times as much profit, has been made with the same degree of exploitation of labour.
If in sphere A it was not £700 but £7,000 that had been invested, as against a capital of only £700 in sphere B, then capital A, with the organic composition remaining the same, would use £1,000 of this £7,000 as variable capital and thus employ 1,000 workers for a week = 60,000 hours’ living labour, of which 30,000 hours would be surplus labour. But A would still, as before, set in motion only a sixth as much living labour for each £700 as would B and would therefore produce only a sixth as much profit. If we consider the rate of profit, then 1,000/7,000 = 100/700 = 14 2/7 per cent, against 600/700 or 85 5/7 per cent for capital B. With equal amounts of capital, the rates of profit here are different, since at equal rates of surplus-value the masses of surplus-value and therefore profit that are produced differ as a result of the different masses of living labour set in motion.
The same result follows in fact if the technical conditions in the one sphere of production are the same as in the other, but the value of the constant capital element is greater or less. Let us assume that both capitals employ £100 as variable capital and thus use 100 workers for a week to set the same quantity of machinery and raw material in motion, but that this quantity is dearer in case B than in case A. In this case, £100 variable capital would be combined with, say, £200 constant capital in case A and £400 in case B. At a rate of surplus-value of 100 per cent, then, the surplus-value produced is in both cases £100, and the profit in both cases similarly £100. But in A, 100/200c + 100ν = 1/3 = 33 1/3 per cent, while in B, 100/400c + 100ν = 1/5 = 20 per cent. In actual fact, if we take a definite aliquot part of the total capital in both cases, then in case B only £20 of each £100, or a fifth, forms the variable capital, while in case A £33 1/3 of each £100, or a third, is variable capital. B produces less profit for each £100 than does A, because it sets less living labour in motion [for each £100]. The difference in the rate of profit is thus reduced here again to a difference in the mass of profit – because mass of surplus-value – produced for each 100 units of capital invested.
The distinction between this second example and the one before is simply this: the equalization of A and B in the second case would require no more than a change in the value of the constant capital, either in A or B, with the technical basis remaining the same; in the first case, on the other hand, the technical composition itself differs between the two spheres of production and would have to be transformed in order for such an equalization to occur.
Differing organic compositions of capitals are thus independent of their absolute magnitudes. The only question is always how much of each 100 units is variable capital and how much is constant.
Capitals of the same size, or capitals of different magnitudes reduced to percentages, operating with the same working day and the same degree of exploitation of labour, thus produce very different amounts of surplus-value and therefore profit, and this is because their variable portions differ according to the differing organic composition of capital in different spheres of production, which means that different quantities of living labour are set in motion, and hence also different quantities of surplus labour, of the substance of surplus-value and therefore of profit, are appropriated. Equal-sized portions of the total capital in different spheres of production include sources of surplus-value of unequal size, and the only source of surplus-value is living labour. At any given level of exploitation of labour, the mass of labour set in motion by a capital of 100, and thus also the surplus labour it appropriates, depends on the size of its variable component. If a capital whose percentage composition is 90c + 10ν were to produce just as much surplus-value or profit, at the same level of exploitation of labour, as a capital of 10c + 90ν, it would be as clear as day that surplus-value and hence value in general had a completely different source from labour, and in this way any rational basis for political economy would fall away. If we continue to take £1 as the weekly wage of one worker for 60 hours’ work and the rate of surplus-value as 100 per cent, it is readily apparent that the total value product that a worker can supply in a week is £2. Therefore, 10 workers cannot supply more than £20, and as £10 of this £20 has to replace the wages, these workers cannot create a surplus-value greater than £10. However, 90 workers whose total product was £180 and whose wages £90 would create a surplus-value of £90. The rate of profit here would be in the one case 10 per cent and in the other case 90 per cent. If it should be otherwise, value and surplus-value would have to be something other than objectified labour. Since capitals of equal size in different spheres of production, capitals of different size considered by percentage, are unequally divided into a constant and a variable element, set in motion unequal amounts of living labour and hence produce unequal amounts of surplus-value or profit, the rate of profit, which consists precisely of the surplus-value calculated as a percentage of the total capital, is different in each case.
But if capitals of equal size in different spheres of production, and thus capitals of different size, taken by percentage, produce unequal profits as a result of their differing organic composition, it follows that the profits of unequal capitals in different spheres of production cannot stand in proportion to their respective sizes, and that profits in different spheres of production are not proportionate to the magnitudes of the capitals that are respectively employed. For if profits did increase in proportion to the size of the capital applied, this would imply that the percentage of profit was always the same and that capitals of equal size had the same rate of profit in different spheres of production, despite their varying organic composition. It is only within the same sphere of production, where the organic composition of capital is therefore given, or between different spheres of production with the same organic composition of capital, that the mass of profit stands in exact proportion to the mass of capital employed. If the profits of unequal capitals were in proportion to their size, this would mean that equal capitals yielded equal profits, or that the rate of profit was the same for all capitals irrespective of their magnitude and their organic composition.
The above argument assumes that commodities are sold at their values. The value of a commodity is equal to the value of the constant capital contained in it, plus the value of the variable capital reproduced in it, plus the increment on this variable capital, the surplus-value produced. Given a certain rate of surplus-value, its mass evidently depends on the mass of the variable capital. The value produced by a capital of 100 would be in the one case 90c + 10ν + 10s = 110; in the other case 10c + 90ν + 90s = 190. If commodities are sold at their values, the first product is sold at 110, of which 10 represents surplus-value or unpaid labour; the second product is sold at 190, of which 90 is surplus-value or unpaid labour.
This is particularly important when the rates of profit in different countries are compared with one another. In a European country the rate of surplus-value might be 100 per cent, i.e. the worker might work half the day for himself and half the day for his employer; in an Asian country it might be 25 per cent, i.e. the worker might work four-fifths of the day for himself and one-fifth of the day for his employer. In the European country, however, the composition of the national capital might be 84c + 16ν, and in the Asian country, where little machinery, etc. is used and relatively little raw material productively consumed in a given period of time, the composition might be 16c + 84v. We then have the following calculation:
In the European country, the value of the product = 84c + 16ν + 16s = 116; rate of profit = 16/100 = 16 per cent.
In the Asian country, the value of the product = 16c + 84ν + 21s = 121; rate of profit = 21/100 = 21 per cent.
The rate of profit in the Asian country would thus be some 25 per cent higher than in the European country, even though the rate of surplus-value was only a fourth as great. Carey, Bastiat* and their like would draw precisely the opposite conclusion.
We may remark in passing that different national rates of profit generally depend on different national rates of surplus-value; but in this chapter we are comparing unequal rates of profit that spring from one and the same rate of surplus-value.
Besides the differing organic composition of capital, i.e. besides the different masses of labour, and therefore, other things being equal, of surplus labour as well, set in motion by capitals of the same size in different spheres of production, there is a further source of inequality between rates of profit: the variation in the length of capital turnover in the different spheres of production. We have already seen in Chapter 4 that with the same composition of capital, other things being equal, rates of profit vary in inverse proportion to the turnover time, and similarly that the same variable capital, taking different periods of time to turn over, brings in unequal masses of surplus-value in the course of the year. Variation in the turnover time is thus a further reason why capitals of equal size do not produce equally large profits in equal periods of time, and why rates of profit thus vary between the different spheres.
As far as concerns the proportion in which the capital is composed of fixed and circulating elements, this does not in any way affect the profit rate, taken by itself. It can only affect it either if this differing composition coincides with a differing ratio between the variable and constant portions, in which case the variation in the rate of profit is due to this difference and not to the different ratio between circulating and fixed; or alternatively if the varying ratio between fixed and circulating components involves a variation in the turnover time that it takes to realize a certain profit. If capitals exhibit different proportions of fixed and circulating capital, this always has an influence on their turnover time and gives rise to differences in it; but it does not follow from this that the turnover time in which the same capitals realize a certain profit necessarily differs. Though A might always have to convert a greater portion of its product into raw material, etc., while B uses the same machines for a longer time with less raw material, both have regularly committed a portion of their capital, to the extent of their production; the one in raw material, i.e. circulating capital, the other in machines, etc., i.e. in fixed capital. A is constantly transforming a portion of its capital from the commodity form into the money form, and from this back into the form of raw material; while B uses part of its capital as an instrument of labour for a longer period of time without such a change. If both of them employ the same amount of labour, they will certainly sell products of unequal value in the course of a year, but in each case the mass of products will contain the same amount of surplus-value, and their rates of profit will be the same, calculated on the total capital advanced, despite the differences in their composition in terms of fixed and circulating capital, and similarly their turnover time. The two capitals realize equal profits in equal times, even though they take different times to turn over.21 Variation in the turnover time is significant in and of itself only in so far as it affects the mass of surplus-value that the same capital can appropriate and realize in a given time. Thus if unequal compositions of circulating and fixed capital do not necessarily go together with unequal turnover times, which in turn mean unequal rates of profit, it is evident that, in so far as the latter does occur, this does not arise from the unequal composition of circulating and fixed capital as such, but rather from the way that this latter simply indicates an inequality in turnover times that affects the rate of profit.
Thus the differing proportions of circulating and fixed capital, of which constant capital is composed, in the different branches of industry, do not have any bearing in themselves on the rate of profit; what is decisive is the ratio between the variable capital and the constant, while the value of the constant capital, and thus its relative magnitude in relation to the variable, is quite independent of the fixed or circulating character of its components. We do find, however – and this can lead to incorrect conclusions – that where fixed capital is strongly developed, this is simply an expression of the fact that production is pursued on a large scale and that constant capital is very much predominant over variable, i.e. that the living labour-power applied is small in comparison with the volume of means of production that it sets in motion.
We have shown, therefore, that in different branches of industry unequal profit rates prevail, corresponding to the different organic composition of capitals, and, within the indicated limits, corresponding also to their different turnover times; so that at a given rate of surplus-value it is only for capitals of the same organic composition – assuming equal turnover times – that the law holds good, as a general tendency, that profits stand in direct proportion to the amount of capital, and that capitals of equal size yield equal profits in the same period of time. The above argument is true on the same basis as our whole investigation so far: that commodities are sold at their values. There is no doubt, however, that in actual fact, ignoring inessential, accidental circumstances that cancel each other out, no such variation in the average rate of profit exists between different branches of industry, and it could not exist without abolishing the entire system of capitalist production. The theory of value thus appears incompatible with the actual movement, incompatible with the actual phenomena of production, and it might seem that we must abandon all hope of understanding these phenomena.
It has emerged from Part One of this volume that cost prices are the same for the products of different spheres of production if equal portions of capital are advanced in their production, no matter how different the organic composition of these capitals might be. In the cost price, the distinction between variable and constant capital is abolished, as far as the capitalist is concerned. For him, a commodity which he must lay out £100 to produce costs the same whether he lays out 90c + 10ν or 10c + 90ν. In each case it costs him £100, neither more nor less. Cost prices are the same for equal capital investments in different spheres, however much the values and surplus-values produced may differ. This equality in the cost prices forms the basis for the competition between capital investments by means of which an average profit is produced.