At any one given time, the organic composition of capital depends on two factors: firstly, on the technical proportion between the labour-power and the means of production applied, and secondly, on the price of those means of production. As we have seen, this must be considered in percentage terms. We express the organic composition of a capital that consists of four-fifths constant and one-fifth variable capital by using the formula 80c + 20ν. We also assume for the sake of comparison an unchanged rate of surplus-value, say 100 per cent; any rate will do. The capital of 80c + 20ν then yields a surplus-value of 20s, which makes a rate of profit of 20 per cent on the total capital. The actual value of the product depends on how large the fixed part of the constant capital is and on how much of it goes into the product as depreciation, how much does not. But since this fact is completely immaterial as far as the rate of profit is concerned, and thus also for the present investigation, we shall assume for the sake of simplicity that in all cases the constant capital enters as a whole into the annual product of these capitals. We shall also assume that capitals in different spheres of production annually realize the same amount of surplus-value in proportion to the size of their variable components; and we shall ignore for the time being the differences that may be produced here by variation in the turnover times. This point will be dealt with later.
Let us take five different spheres of production, each with a different organic composition for the capital invested in it, as on the following page.
We now have very different rates of profit in different spheres of production with a uniform exploitation of labour, rates which correspond to the differing organic composition of the capitals involved.
The total sum of the capitals applied in the five spheres is 500;
Rate of |
Surplus- |
Value of |
Rate of |
|
I. 80c + 20v |
100% |
20 |
120 |
20% |
II. 70c + 30v |
100% |
30 |
130 |
30% |
III. 60c + 40v |
100% |
40 |
140 |
40% |
IV. 85c + 15v |
100% |
15 |
115 |
15% |
V. 95c + 5v |
100% |
5 |
105 |
5% |
the total sum of the surplus-value they produce 110; the total value of the commodities they produce 610. If we treat the 500 as one single capital, with I-V simply forming different portions of it (as for instance a cotton mill will have different proportions between variable and constant capital in its various departments, e.g. the carding, combing, spinning and weaving shops, and the average proportion has to be calculated for the entire factory), then the average composition of the capital of 500 would be 500 = 390c + 110ν, or in percentages 78c + 22ν. Treating the capitals of 100 as each simply a fifth of the total capital, its composition would be this average one of 78c + 22ν; in the same way the average surplus-value of 22 would accrue to each of these capitals of 100, the average rate of profit would thus be 22 per cent, and the price of each fifth of the total product produced by this capital of 500 would be 122. The product of each fifth of the total capital advanced would thus have to be sold at 122.
Yet in order not to arrive at totally incorrect conclusions, we must not take all the cost prices as 100.
With 80c + 20ν, and a rate of surplus-value of 100 per cent, the total value of the commodities produced by capital I would be 80c + 20ν + 20s = 120, assuming the entire constant capital were to enter into the annual product. This may well be the case in some spheres of production, in certain conditions, but hardly with a ratio between c and v of 4:1. In considering the values of the commodities produced by each different capital of 100, therefore, we must take into account the fact that they differ according to the different composition of c in terms of its fixed and circulating components, and that the fixed components of different capitals may themselves depreciate either faster or more slowly and thus add unequal quantities of value to the product in the same period. This is immaterial, however, as far as the profit rate is concerned. Whether the 80c gives up its value of 80 to the annual product, or 50, or 5, and whether the annual product is accordingly 80c + 20ν + 20s = 120, or 50c + 20ν + 20s = 90, or 5c + 20ν + 20s = 45, in all these cases the excess of the value of the product over its cost price is 20, and in all these cases this 20 has to be calculated on a basis of 100 to arrive at the rate of profit; the profit rate of capital I is thus always 20 per cent. In order to make this still clearer, we can let different parts of the constant capital enter the value of the product, taking the same five capitals as above:
Capitals |
Rate of surplus- value |
Surplus- value |
Rate of profit |
Used up c |
Value of commodities |
Cost price |
|
I. 80c + 20v |
100% |
20 |
20% |
50 |
90 |
70 |
|
II. 70c + 30v |
100% |
30 |
30% |
51 |
111 |
81 |
|
III. 60c + 40v |
100% |
40 |
40% |
51 |
131 |
91 |
|
IV. 85c + 15v |
100% |
15 |
15% |
40 |
70 |
55 |
|
V. 95c + 5v |
100% |
5 |
5% |
10 |
20 |
15 |
|
390c + 110v |
— |
110 |
110% |
— |
— |
— |
Total |
78c + 22v |
— |
22 |
22% |
— |
— |
— |
Average |
If we again treat capitals I-V as a single total capital, we see that in this case, too, the sum of the five capitals, 500 = 390c + 110ν, remains the same in composition, and thus their average composition is still 78c + 22ν; the average surplus-value is therefore 22. If this surplus-value were evenly distributed among capitals I-V, we would arrive at the following commodity prices:
Capitals |
Surplus value |
Value of commodities |
Cost price of commodities |
Price of commodities |
Rate of profit |
Diver gence of price from value |
I. 80c + 20v |
20 |
90 |
70 |
92 |
22% |
+ 2 |
II. 70c + 30v |
30 |
111 |
81 |
103 |
22% |
— 8 |
III. 60c + 40v |
40 |
131 |
91 |
113 |
22% |
— 18 |
IV. 85c + 15v |
15 |
70 |
55 |
77 |
22% |
+ 7 |
V. 95c + 5v |
5 |
20 |
15 |
37 |
22% |
+ 17 |
Taken together, commodities are sold at 2 + 7 + 17 = 26 above their value, and 8 + 18 = 26 below their value, so that the divergences of price from value indicated above cancel each other out when surplus-value is distributed evenly, i.e. through adding the average profit of 22 on the capital advance of 100 to the respective cost prices of commodities I-V. To the same extent that one section of commodities is sold above its value, another is sold below it. And it is only because they are sold at these prices that the rates of profit for capitals I-V are equal at 22 per cent, irrespective of their different organic compositions. The prices that arise when the average of the different rates of profit is drawn from the different spheres of production, and this average is added to the cost prices of these different spheres of production, are the prices of production. Their prerequisite is the existence of a general rate of profit, and this presupposes in turn that the profit rates in each particular sphere of production, taken by itself, are already reduced to their average rates. These particular rates are c in each sphere of production and are to be developed from the value of the commodity as shown in the first Part of this volume. In the absence of such a development, the general rate of profit (and hence also the production price of the commodity) remains a meaningless and irrational conception. Thus the production price of a commodity equals its cost price plus the percentage profit added to it in accordance with the general rate of profit, its cost price plus the average profit.
As a result of the differing organic composition of capitals applied in different branches of production, as a result therefore of the circumstance that according to the different percentage that the variable part forms in a total capital of a given size, very different amounts of labour are set in motion by capitals of equal size, so too very different amounts of surplus labour are appropriated by these capitals, or very different amounts of surplus-value are produced by them. The rates of profit prevailing in the different branches of production are accordingly originally very different. These different rates of profit are balanced out by competition to give a general rate of profit which is the average of all these different rates. The profit that falls to a capital of given size according to this general rate of profit, whatever its organic composition might be, we call the average profit. That price of a commodity which is equal to its cost price, plus the part of the annual average profit on the capital applied in its production (not simply the capital consumed in its production) that falls to its share according to its conditions of turnover, is its price of production. Let us take for example a capital of 500, of which 100 is fixed capital, 10 per cent of this being the depreciation of a circulating capital of 400 during one turnover period. Let the average profit for the duration of this turnover period be 10 per cent. The cost price of the product produced during this turnover is then 10c for depreciation plus 400 (c + v) circulating capital = 410, and its price of production 410 cost price plus 50 (10 per cent profit on 500) = 460.
Thus although the capitalists in the different spheres of production get back on the sale of their commodities the capital values consumed to produce them, they do not secure the surplus-value and hence profit that is produced in their own sphere in connection with the production of these commodities. What they secure is only the surplus-value and hence profit that falls to the share of each aliquot part of the total social capital, when evenly distributed, from the total social surplus-value or profit produced in a given time by the social capital in all spheres of production. For each 100 units, every capital advanced, whatever may be its composition, draws in each year, or in any other period of time, the profit that accrues to 100 units in this period of time as an nth part of the total capital. The various different capitals here are in the position of shareholders in a joint-stock company, in which the dividends are evenly distributed for each 100 units, and hence are distinguished, as far as the individual capitalists are concerned, only according to the size of the capital that each of them has put into the common enterprise, according to his relative participation in this common enterprise, according to the number of his shares. While the portion of this commodity price that replaces the parts of the capital that are consumed in the production of the commodities, and with which these capital values must be bought back again – while this portion, the cost price, is completely governed by the outlay within each respective sphere of production, the other component of commodity price, the profit that is added to this cost price, is governed not by the mass of profit that is produced by this specific capital in its specific sphere of production, but by the mass of profit that falls on average to each capital invested, as an aliquot part of the total social capital invested in the total production, during a given period of time.22
If a capitalist sells his commodities at their price of production, he withdraws money according to the value of the capital that he consumed in their production and adds a profit to this in proportion to the capital he advanced as a mere aliquot part of the total social capital. His cost prices are specific [to his sphere of production]. But the profit on top of this cost price is independent of his particular sphere of production, it is a simple average per 100 units of capital advanced.
Let us suppose that the five different capital investments in the above example, I–V, belong to one and the same person. The variable and constant capital consumed in the production of the commodities in each particular investment I-V would be given, and this share in the value of commodities I-V would obviously form a portion of their price, since this is the least price required to replace the portion of capital that is advanced and consumed. These cost prices would thus be different for each kind of commodity I-V and would be fixed differently by the proprietor. As far as the different masses of surplus-value or profit produced in I-V were concerned, however, the capitalist might very well count them all as profit on the total capital he advanced, so that a definite aliquot part would fall to each capital of 100. The cost prices would therefore be different for each of the commodities produced in the individual investments I-V; but the share of the sale price that arose from the profit added per 100 units of capital would be the same. The total price of commodities I-V would thus be the same as their total value, i.e. the sum of the cost prices I-V plus the sum of the surplus-value or profit produced; in point of fact, therefore, the monetary expression for the total quantity of labour, both past and newly added, contained in commodities I-V. And in the same manner, the sum of prices of production for the commodities produced in society as a whole – taking the totality of all branches of production – is equal to the sum of their values.
This seems contradicted by the fact that the elements of productive capital are generally bought on the market in capitalist production, so that their prices include an already realized profit and accordingly include the production price of one branch of industry together with the profit contained in it, so that the profit in one branch of industry goes into the cost price of another. But if the sum of the cost prices of all commodities in a country is put on one side and the sum of the profits or surplus-values on the other, we can see that the calculation comes out right. Take for example a commodity A; its cost price may contain the profits of B, C, D, just as the profits of A may in turn go into B, C, D, etc. If we make this calculation, the profit of A will be absent from its own cost price, and the profits of B, C, D, etc. will be absent from theirs. None of them includes his own profit in his cost price. And so if there are n spheres of production, and in each of them a profit of p is made [and the symbol for the cost price of a single commodity is k], then the cost price in all together is k — np. Considering the calculation as a whole, to the same extent that the profits of one sphere of production go into the cost price of another, to that extent these profits have already been taken into account for the overall price of the final end-product and cannot appear on the profit side twice. They appear on this side only because the commodity in question was itself an end-product, so that its price of production does not go into the cost price of another commodity.
If a certain sum p goes into the cost price of a commodity for the profit of the producers of the means of production and on this cost price a profit of p 1 is added, the total profit P = p + p1. The total cost price of the commodity, discounting all portions of the price that count towards profit, is then its own cost price minus P. Using the symbol k again for this cost price, it is evident that k + P = k + p + p1. In dealing with surplus-value in Volume 1, Chapter 9, 2, pp. 331–2, we have already seen that the product of any capital can be treated as if one part simply replaces capital, while the other only represents surplus-value. To apply this method of reckoning to the total social product, we have to make certain rectifications, since, considering the whole society, the profit contained in the price of flax, for instance, cannot figure twice, not as both part of the price of the linen and as the profit of the flax producers.
There is no distinction between profit and surplus-value when the surplus-value of A, for instance, goes into the constant capital of B. As far as the value of commodities is concerned, it is completely immaterial whether the labour contained in them is paid or unpaid. This shows only that B pays the surplus-value of A. In the total account, A’s surplus-value cannot figure twice.
The distinction is rather this. Apart from the fact that the price of the product of capital B, for example, diverges from its value, because the surplus-value realized in B is greater or less than the profit added in the price of the products of B, the same situation also holds for the commodities that form the constant part of capital B, and indirectly, also, its variable capital, as means of subsistence for the workers. As far as the constant portion of capital is concerned, it is itself equal to cost price plus surplus-value, i.e. now equal to cost price plus profit, and this profit can again be greater or less than the surplus-value whose place it has taken. As for the variable capital, the average daily wage is certainly always equal to the value product of the number of hours that the worker must work in order to produce his necessary means of subsistence; but this number of hours is itself distorted by the fact that the production prices of the necessary means of subsistence diverge from their values. However, this is always reducible to the situation that whenever too much surplus-value goes into one commodity, too little goes into another, and that the divergences from value that obtain in the production prices of commodities therefore cancel each other out. With the whole of capitalist production, it is always only in a very intricate and approximate way, as an average of perpetual fluctuations which can never be firmly fixed, that the general law prevails as the dominant tendency.
Since the general rate of profit is formed by the average of the various different rates of profit on each 100 units of capital advanced over a definite period of time, say a year, the distinction made between the different capitals by the distinction in turnover times is also obliterated. But this distinction plays a decisive role for the various different rates of profit in the various spheres of production, by means of whose average the general rate of profit is formed.
In our previous illustration of the formation of the general rate of profit, every capital in every sphere of production was taken as 100, and we did this in order to make clear the percentage differences in the rates of profit and hence also the differences in the values of the commodities that are produced by capitals of equal size. It should be understood, however, that the actual masses of surplus-value that are produced in each particular sphere of production depend on the magnitude of the capitals applied, since the composition of capital is given in each of these given spheres of production. Yet the particular rate of profit of an individual sphere of production is not affected by whether a capital of 100, m × 100 or xm × 100 is applied. The profit rate remains 10 per cent, whether the total profit is 10 on 100 or 1,000 on 10,000.
However, since the rates of profit in the various spheres of production differ, in that very different masses of surplus-value and therefore profit are produced according to the proportion that variable capital forms in the total, it is evident that the average profit per 100 units of social capital, and hence the average or general rate of profit, will vary greatly according to the respective magnitudes of the capitals invested in the various spheres. Let us take four capitals A, B, C, D. Say that the rate of surplus-value for all of them is 100 per cent. Let the variable capital for each 100 units of the total capital be 25 for A, 40 for B, 15 for C and 10 for D. Each 100 units of the total capital then yields a surplus-value or profit of 25 for A, 40 for B, 15 for C and 10 for D; a total of 90, and thus, if the four capitals are equal in size, an average rate of profit of 90/4 = 22 1/2 per cent.
If the total capitals were instead A = 200, B = 300, C = 1,000 and D = 4,000, the profits produced would then be 50, 120, 150 and 400 respectively. Altogether a profit of 720 on a capital of 5,500, or an average rate of profit of 13 1/11 per cent.
The masses of total value produced vary according to the different sizes of the total capitals respectively advanced in A, B, C and D. For the formation of the general rate of profit, therefore, it is not only a question of the difference in rates of profit between the various spheres of production, from which a simple average is to be taken, but also of the relative weight which these different rates of profit assume in the formation of this average. This depends however either on the relative size of the capital invested in each particular sphere, or on which particular aliquot part of the total social capital is invested in each particular sphere of production. It must naturally make a great deal of difference whether it is a greater or lesser part of the total capital that yields a higher or lower profit rate. And this depends in turn upon how much capital is invested in those spheres where the variable capital is relatively large or small compared with the total capital. It is the same as in the case of the average rate of interest that a moneylender makes if he lends different capitals at different rates of interest, e.g. at 4, 5, 6, 7 per cent, etc. The average rate is completely dependent on how much of his capital he had lent out at each of these different interest rates.
The general rate of profit is determined therefore by two factors:
(1) the organic composition of the capitals in the various spheres of production, i.e. the different rates of profit in the particular spheres;
(2) the distribution of the total social capital between these different spheres, i.e. the relative magnitudes of the capitals invested in each particular sphere, and hence at a particular rate of profit; i.e. the relative share of the total social capital swallowed up by each particular sphere of production.
In Volumes 1 and 2 we were only concerned with the values of commodities. Now a part of this value has split away as the cost price, on the one hand, while on the other, the production price of the commodity has also developed, as a transformed form of value.
If we take it that the composition of the average social capital is 80c + 20ν and the annual rate of surplus-value s’= 100 per cent, the average annual profit for a capital of 100 is 20 and the average annual rate of profit is 20 per cent. For any cost price k of the commodities annually produced by a capital of 100, their price of production will be k + 20. In those spheres of production where the composition of capital is (80 — x)c + (20 + x)ν, the surplus-value actually created within this sphere, or the annual profit produced, is 20 + x, i.e. more than 20, and the commodity value produced is k+ 20 + x, more than k + 20, or more than the price of production. In those spheres where the composition of capital is (80 + x)c + (20 — x)ν, the surplus-value or profit annually created is 20 — x, i.e. less than 20, and the commodity value therefore K + 20 — x, i.e. less than the price of production, which is k + 20. Leaving aside any variation in turnover time, the production prices of commodities would be equal to their values only in cases where the composition of capital was by chance precisely 80c + 20ν.
The specific degree of development of the social productivity of labour differs from one particular sphere of production to another, being higher or lower according to the quantity of means of production set in motion by a certain specific amount of labour, and thus by a specific number of workers once the working day is given. Hence its degree of development depends on how small a quantity of labour is required for a certain quantity of means of production. We therefore call capitals that contain a greater percentage of constant capital than the social average, and thus a lesser percentage of variable capital, capitals of higher composition. Conversely, those marked by a relatively smaller share of constant capital, and a relatively greater share of variable, we call capitals of lower composition. By capitals of average composition, finally, we mean those whose composition coincides with that of the average social capital. If this average social capital is composed of 80c + 20ν, in percentages, then a capital of 90c + 10ν is above the social average and one of 70c + 30ν is below this average. In general, for an average social capital composed of mc + nν, where m and n are constant magnitudes and m + n = 100, (m + x)c + (n — x)ν represents an individual capital or group of capitals of higher composition, and (m — x)c + (n + x)ν one of lower composition. How these capitals function after the average rate of profit is established, on the assumption of one turnover in the year, is shown by the following table, in which capital I represents the average composition, with an average rate of profit of 20 per cent.
I. 80c + 20ν + 20s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 120.
II. 90c + 10ν + 10s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 110.
III. 70c + 30v + 30s. Rate of profit = 20 per cent.
Price of the product = 120. Value = 130.
Commodities produced by capital II thus have a value less than their price of production, and those produced by capital III have a price of production less than their value. Only for capitals such as I, in branches of production whose composition chanced to coincide with the social average, would the value and the price of production be the same. In applying these terms to specific cases, of course, we must bear in mind that the ratio between c and v may depart from the general average not just as a result of a difference in the technical composition, but also simply because of a change in value of the elements of constant capital.
The development given above also involves a modification in the determination of a commodity’s cost price. It was originally assumed that the cost price of a commodity equalled the value of the commodities consumed in its production. But for the buyer of a commodity, it is the price of production that constitutes its cost price and can thus enter into forming the price of another commodity. As the price of production of a commodity can diverge from its value, so the cost price of a commodity, in which the price of production of other commodities is involved, can also stand above or below the portion of its total value that is formed by the value of the means of production going into it. It is necessary to bear in mind this modified significance of the cost price, and therefore to bear in mind too that if the cost price of a commodity is equated with the value of the means of production used up in producing it, it is always possible to go wrong. Our present investigation does not require us to go into further detail on this point. It still remains correct that the cost price of commodities is always smaller than their value. For even if a commodity’s cost price may diverge from the value of the means of production consumed in it, this error in the past is a matter of indifference to the capitalist. The cost price of the commodity is a given precondition, independent of his, the capitalist’s, production, while the result of his production is a commodity that contains surplus-value, and therefore an excess value over and above its cost price. As a general rule, the principle that the cost price of a commodity is less than its value has been transformed in practice into the principle that its cost price is less than its price of production. For the total social capital, where price of production equals value, this assertion is identical with the earlier one that the cost price is less than the value. Even though it has a different meaning for the particular spheres of production, the basic fact remains that, taking the social capital as a whole, the cost price of the commodities that this produces is less than their value, or than the price of production which is identical with this value for the total mass of commodities produced. The cost price of a commodity simply depends on the quantity of paid labour it contains, while the value depends on the total quantity of labour it contains, whether paid or unpaid; the price of production depends on the sum of paid labour plus a certain quantity of unpaid labour that is independent of its own particular sphere of production.
The formula that the price of production of a commodity = k + p, cost price plus profit, can now be stated more exactly; since p = kp’ (where p′ is the general rate of profit), the price of production = k + kp’. If = 300 and p′ = 15 per cent, the price of production k + kp’ = 300 + 300 × 15/100 = 345.
The price of production of commodities in a particular sphere of production may undergo changes of magnitude:
(1) while the value of the commodities remains the same (so that the same quantity of dead and living labour goes into their production afterwards as before), as the result of a change in the general rate of profit that is independent of the particular sphere in question;
(2) while the general rate of profit remains the same, by a change in value either in the particular sphere of production itself, as the result of a technical change or as the result of a change in the value of the commodities that go into its constant capital as formative elements;
(3) finally, by the common action of these two circumstances.
For all the great changes that constantly occur in the actual rates of profit in particular spheres of production (as we shall later show), a genuine change in the general rate of profit, one not simply brought about by exceptional economic events, is the final outcome of a whole series of protracted oscillations, which require a good deal of time before they are consolidated and balanced out to produce a change in the general rate. In all periods shorter than this, therefore, and even then leaving aside fluctuations in market prices, a change in prices of production is always to be explained prima facie by an actual change in commodity values, i.e. by a change in the total sum of labour-time needed to produce the commodities. We are not referring here, of course, to a mere change in the monetary expression of these values.23
It is clear on the other hand that, taking the total social capital as a whole, the sum of values of the commodities produced by it (or, expressed in money, their price) = value of constant capital + value of variable capital + surplus-value. Assuming a constant level of exploitation of labour, the profit rate can only change here, with the mass of surplus-value remaining the same, in three cases: if the value of the constant capital changes, if the value of the variable capital changes, or if both change. All these result in a change in C, thereby changing s/C, the general rate of profit. In each case, therefore, a change in the general rate of profit assumes a change in the value of the commodities which enter as formative elements into the constant capital, the variable capital, or both simultaneously.
Alternatively, the general rate of profit can change, with the value of commodities remaining constant, if the level of exploitation of labour changes.
Or again, the level of exploitation of labour remaining the same, the general rate of profit can change if the sum of labour applied changes in relation to the constant capital, as a result of technical changes in the labour process. But technical changes of this kind must always show themselves in, and thus be accompanied by, a change in value of the commodities whose production now requires either more or less labour than it did before.
We saw in the first Part how surplus-value and profit were identical, seen from the point of view of their mass. But the rate of profit is from the very beginning different from the rate of surplus-value, though at first this appears simply as a different way of calculating the same thing. Given however that the rate of profit can rise or fall, with the rate of surplus-value remaining the same, and that all that interests the capitalist in practice is his rate of profit, this circumstance also completely obscures and mystifies the real origin of surplus-value from the very beginning. The difference in magnitude, however, was simply between rate of surplus-value and rate of profit and not between surplus-value and profit themselves. Because the rate of profit measures surplus-value against the total capital and the latter is its standard, surplus-value itself appears in this way as having arisen from the total capital, and uniformly from all parts of it at that, so that the organic distinction between constant and variable capital is obliterated in the concept of profit. In actual fact, therefore, surplus-value denies its own origin in this, its transformed form, which is profit; it loses its character and becomes unrecognizable. And yet, up to this point, the distinction between profit and surplus-value simply involved a qualitative change, a change of form, while any actual difference in magnitude at this initial stage of the transformation lay simply between the rate of profit and the rate of surplus-value and not yet between profit and surplus-value as such.
It is quite a different matter as soon as a general rate of profit is established, and with this an average profit corresponding to the amount of capital invested in the various spheres of production.
It is now purely accidental if the surplus-value actually produced in a particular sphere of production, and therefore the profit, coincides with the profit contained in the commodity’s sale price. In the case now under consideration, profit and surplus-value themselves, and not just their rates, will as a rule be genuinely different magnitudes. At a given level of exploitation of labour, the mass of surplus-value that is created in a particular sphere of production is now more important for the overall average profit of the social capital, and thus for the capitalist class in general, than it is directly for the capitalist within each particular branch of production. It is important for him only in so far as the quantity of surplus-value created in his own branch intervenes as a co-determinant in regulating the average profit.24 But this process takes place behind his back. He does not see it, he does not understand it, and it does not in fact interest him. The actual difference in magnitude between profit and surplus-value in the various spheres of production (and not merely between rate of profit and rate of surplus-value) now completely conceals the true nature and origin of profit, not only for the capitalist, who has here a particular interest in deceiving himself, but also for the worker. With the transformation of values into prices of production, the very basis for determining value is now removed from view. The upshot is this: in the case of a simple transformation from surplus-value into profit, the portion of commodity value that forms this profit confronts the other portion of value as the commodity’s cost price, and the concept of value thus already goes by the board as far as the capitalist is concerned, because he does not have to deal with the total labour that the production of the commodity cost, but only the part of the total labour that he has paid for in the form of means of production, living or dead, so that profit appears to him as something standing outside the immanent value of the commodity. But what happens now [with the establishment of a general rate of profit] is that this idea is completely confirmed, reinforced and hardened by the fact that the profit added to the cost price is not actually determined, if the particular spheres of production are taken separately, by the value formation that proceeds within these branches, but on the contrary established quite externally to them.
This inner connection is here revealed for the first time. But as we shall see from what follows, and also from Volume 4,* all economics up till now has either violently made abstraction from the distinctions between surplus-value and profit, between rate of surplus-value and rate of profit, so that it could retain the determination of value as its basis, or else it has abandoned, along with this determination of value, any kind of solid foundation for a scientific approach, so as to be able to retain those distinctions which obtrude themselves on the phenomenal level. This confusion on the part of the theorists shows better than anything else how the practical capitalist, imprisoned in the competitive struggle and in no way penetrating the phenomena it exhibits, cannot but be completely incapable of recognizing, behind the semblance, the inner essence and the inner form of this process.
All the laws governing rises and falls in the profit rate, developed in the first Part, have in fact the following double significance:
(1) On the one hand they are laws of the general rate of profit. Given the many different causes that lead the profit rate to rise or fall, according to our arguments developed above, one might believe that the general rate of profit would have to change every single day. But as the movement of one sphere of production will cancel out the movement of another, the forces mutually counteract and paralyse each other. We shall see later on in what direction such fluctuations tend in the last analysis. But this process is slow, and the suddenness, multilateral character and differential duration of fluctuations in the particular spheres of production lead to a situation in which they partly compensate for one another in their temporal succession, so that a fall in price succeeds a rise, and vice versa, and they therefore remain local, i.e. confined to the particular sphere of production concerned. The various local fluctuations, in other words, reciprocally neutralize one another. Changes take place within each particular sphere of production, departures from the general profit rate, which on the one hand balance each other out over a certain period of time and hence do not react back on the general rate, while on the other hand they do not react back on it because they are cancelled out by other simultaneous local fluctuations. Since the general rate of profit is determined not only by the average rate of profit in each sphere, but also by the distribution of the total capital between the various particular spheres, and since this distribution is constantly changing, we have again a constant source of change in the general rate of profit – but a source of change that also becomes paralysed, for the most part, given the uninterrupted and all-round character of this movement.
(2) Within each sphere there is room for shorter or longer periods in which the profit rate in this sphere fluctuates, before this fluctuation, a rise or a fall, is consolidated for a sufficient time to affect the general rate of profit and thus to have more than a local significance. Within these spatial and temporal limits, therefore, the laws of the profit rate developed in the first Part of this volume similarly continue to apply.
The theoretical opinion regarding the first transformation of surplus-value into profit, i.e. that each portion of capital yields profit in a uniform way,25 expresses a practical state of affairs. However an industrial capital may be composed, whether a quarter is dead labour and three-quarters living labour, or whether three-quarters is dead labour and only a quarter sets living labour in motion, so that in the one case three times as much surplus labour is sucked out, or surplus-value produced, as in the other – with the same level of exploitation of labour and ignoring individual differences, which disappear anyway, since in both cases we are concerned only with the average composition of the sphere of production as a whole – in both cases it yields the same profit. The individual capitalist (or alternatively the sum total of capitalists in a particular sphere of production), whose vision is a restricted one, is right in believing that his profit does not derive just from the labour employed by him or employed in his own branch. This is quite correct as far as his average profit goes. How much this profit is mediated by the overall exploitation of labour by capital as a whole, i.e. by all his fellow-capitalists, this interconnection is a complete mystery to him, and the more so in that even the bourgeois theorists, the political economists, have not yet revealed it. Saving of labour – not only the labour necessary to produce a specific product, but also the number of workers employed – and a greater use of dead labour (constant capital), appears a quite correct economic operation, and seems from the very beginning not to affect the general rate of profit and the average profit in any manner. How therefore can living labour be the exclusive source of profit, since a reduction in the quantity of labour needed for production not only seems not to affect the profit, but rather to be the immediate source of increasing profit, in certain circumstances, at least for the individual capitalist?
If the portion of the cost price which represents constant capital rises or falls in a given sphere of production, this is the portion that comes out of the circulation sphere and goes into the commodity’s production process from the outset either enlarged or reduced. But say that the workers employed produce more or less in the same period of time, i.e. with the number of workers remaining the same, the quantity of labour required for the production of a certain amount of commodities changes. In this case, the part of the cost price that represents the value of the variable capital may remain the same and thus go into the cost price of the total product with the same magnitude. But each of the individual commodities whose sum comprises the total product now contains more or less labour (paid and therefore also unpaid), i.e. also more or less of the outlay for this labour, a greater or smaller portion of the wages. The total paid by the capitalist in wages remains the same, but this is different when calculated on each item of the individual commodity. There is thus a change in this part of the commodity’s cost price. Now it does not matter whether the cost price of the individual commodity rises or falls as a result of such changes in value, either its own or the value of its commodity elements (or alternatively the cost price of the sum of commodities produced by a capital of given size) – if the average profit is 10 per cent, for example, it remains 10 per cent, even though this 10 per cent, taken for the individual commodity, may represent a very different magnitude as a result of the change in the individual cost price brought about by the change in value we have just presupposed.26
As far as the variable capital is concerned – and this is the most important thing, since it is the source of surplus-value and since everything that conceals its position in the capitalist’s enrichment mystifies the entire system – the situation looks cruder, or at least this is the way it appears to the capitalist. A variable capital of £100, say, represents the wages of 100 workers. If these 100 workers, with a given working day, produce a weekly product of 200 items of a commodity, = 200C, then 1C - ignoring the portion of the cost price that the constant capital adds – costs £100/200 = 10 shillings, since £100 = 200C Let us now assume a change in the productivity of labour; if this doubles, the same number of workers produce twice this 200C in the same space of time as they formerly took to produce 200C. In this case, as far as the cost price consists simply of labour, £100 now equals 400C, and so 1C = £100/400 = 5 shillings. If productivity had been reduced by a half, the same labour would only produce 200C/2, and since 200C/2 = £100, 1C would now equal £200/200 = £1. The changes in the labour-time required for the production of the commodities, and therefore in their value, now appear in connection with the cost price, and therefore also with the price of production, as a different distribution of the same wages over more or fewer commodities, according to whether more or fewer commodities are produced in the same labour-time for the same wages. What the capitalist sees, and therefore the political economist as well, is that the part of the paid labour that falls to each item of the commodity changes with the productivity of labour, and so too therefore does the value of each individual article; he does not see that this is also the case with the unpaid labour contained in each article, and the less so, as the average profit is in fact only accidentally determined by the unpaid labour absorbed in his own sphere. The fact that the value of commodities is determined by the labour they contain now continues to percolate through only in this crudified and naive form.