The price of production of a commodity can vary for only two reasons:
(1) A change in the general rate of profit. This is possible only if the average rate of surplus-value itself alters, or, given an average rate of surplus-value, the ratio between the sum of surplus-value appropriated and the total social capital advanced.
In so far as the change in the rate of surplus-value does not rest on the depression of wages below their normal level, or a rise above this – and movements of this kind are never more than oscillations – it can occur only because the value of labour-power has either fallen or risen; both of these are impossible without a change in the productivity of that labour which produces the means of subsistence, i.e. without a change in value of the commodities that are consumed by the worker.
Alternatively, there may be a change in the ratio between the sum of surplus-value appropriated and the total social capital advanced. Since this change does not arise from the rate of surplus-value, it must proceed from the total capital, and moreover from its constant part. The mass of this, in its technical aspect, is increased or reduced in proportion to the labour-power bought by the variable capital, and the sum of its value then rises or falls with the growth or decline in the mass itself; thus the mass of constant capital rises or falls similarly in proportion to the sum of value of the variable capital. If the same labour sets more constant capital in motion, it has become more productive, and vice versa. Thus a change has taken place in the productivity of labour and a change must have occurred in the value of certain commodities.
Both of these cases are therefore covered by the following law: if the production price of a commodity changes as the result of a change in the general rate of profit, its own value may well remain unaffected. However, there must have been a change in its value relative to other commodities.
(2) The general rate of profit remains unaltered. In this case the production price of a commodity can change only because its value has altered; because more or less labour is required for its actual reproduction, whether because of a change in the productivity of the labour that produces the commodity in its final form, or in that of the labour producing those commodities that go towards producing it. The price of production of cotton yarn may fall either because raw cotton is produced more cheaply, or because the work of spinning has become more productive as a result of better machinery.
Price of production, as we have already shown, is k + p, cost price plus profit. But this = k + kp’, where k, the cost price, is a magnitude which varies according to the different spheres of production and is everywhere equal to the value of the constant and variable capital used up to produce the commodity, while p′ is the average rate of profit calculated as a percentage. If k = 200 and p′ = 20 per cent, the price of production k + kp’ = 200 + 200 × 20/100 = 200 + 40 = 240. It is evident that this price of production may remain the same even though the value of the commodity changes.
All changes in the price of production of a commodity can be ultimately reduced to a change in value, but not all changes in the value of a commodity need find expression in a change in the price of production, since this is not determined simply by the value of the particular commodity in question, but rather by the total value of all commodities. A change in commodity A, therefore, may be balanced by an opposite change in commodity B, so that the general proportion remains the same.
We have already seen that the divergence of price of production from value arises for the following reasons:
(1) because the average profit is added to the cost price of a commodity, rather than the surplus-value contained in it;
(2) because the price of production of a commodity that diverges in this way from its value enters as an element into the cost price of other commodities, which means that a divergence from the value of the means of production consumed may already be contained in the cost price, quite apart from the divergence that may arise for the commodity itself from the difference between average profit and surplus-value.
It is quite possible, accordingly, for the cost price to diverge from the value sum of the elements of which this component of the price of production is composed, even in the case of commodities that are produced by capitals of average composition. Let us assume that the average composition is 80c + 20ν. It is possible now that, for the actual individual capitals that are composed in this way, the 80c may be greater or less than the value of c, the constant capital, since this c is composed of commodities whose prices of production are different from their values. The 20ν can similarly diverge from its value, if the spending of wages on consumption involves commodities whose prices of production are different from their values. The workers must work for a greater or lesser amount of time in order to buy back these commodities (to replace them) and must therefore perform more or less necessary labour than would be needed if the prices of production of their necessary means of subsistence did coincide with their values.
Yet this possibility in no way affects the correctness of the principles put forward for commodities of average composition. The quantity of profit that falls to the share of these commodities is equal to the quantity of surplus-value contained in them. For the above capital, with its composition of 80c + 20ν, for example, the important thing as far as the determination of surplus-value is concerned is not whether these figures are the expression of actual values, but rather what their mutual relationship is; i.e. that v is one-fifth of the total capital and c is four-fifths. As soon as this is the case, as assumed above, the surplus-value ν produces is equal to the average profit. On the other hand, because it is equal to the average profit, the price of production = cost price + profit = k + p = k + s, which is equal in practice to the commodity’s value. In other words, an increase or decrease in wages in this case leaves k + p unaffected, just as it would leave the commodity’s value unaffected, and simply brings about a corresponding converse movement, a decrease or increase, on the side of the profit rate. If an increase or decrease in wages did affect the price of commodities in this case, the profit rate in these spheres of average composition would come to stand below or above its level in the other spheres. It is only in so far as their prices remain unaltered that the spheres of average composition maintain the same level of profit as the others. The same thing thus takes place in practice as if the products of these spheres were sold at their actual values. For if commodities are sold at their actual values, it is clear that with other circumstances remaining the same, a rise or fall in wages provokes a corresponding fall or rise in profit but no change in the commodity’s value, and that in no circumstances can a rise or fall in wages ever affect the value of commodities, but only the size of the surplus-value.
It has been said that competition equalizes profit rates between the different spheres of production to produce an average rate of profit, and that this is precisely the way in which the values of products from these various spheres are transformed into prices of production. This happens, moreover, by the continual transfer of capital from one sphere to another, where profit stands above the average for the time being. Something that must also be considered here, however, is the cycle of fat and lean years that follow one another in a given branch of industry over a particular period of time, and the fluctuations in profit that these involve. This uninterrupted emigration and immigration of capitals that takes place between various spheres of production produces rising and falling movements in the profit rate which more or less balance one another out and thus tend to reduce the profit rate everywhere to the same common and general level.
This movement of capitals is always brought about in the first place by the state of market prices, which raise profits above the general average level in one place, and reduce it below the average in another. We are still leaving commercial capital out of consideration for the time being, as we have yet to introduce it, but as is shown by the paroxysms of speculation in certain favoured articles that suddenly break out, this can withdraw masses of capital from one line of business with extraordinary rapidity and fling them just as suddenly into another. In every sphere of actual production, however, industry, agriculture, mining, etc., the transfer of capital from one sector to another presents significant difficulties, particularly on account of the fixed capital involved. Experience shows, moreover, that if one branch of industry, e.g. cotton, yields extraordinarily high profits at one time, it may bring in very low profits at another, or even run a loss, so that in a particular cycle of years the average profit is more or less the same as in other branches. Capital soon learns to reckon with this experience.
What competition does not show, however, is the determination of values that governs the movement of production; that it is values that stand behind the prices of production and ultimately determine them. Competition exhibits rather the following phenomena: (1) average profits that are independent of the organic composition of capital in the various spheres of production, i.e. independent of the mass of living labour appropriated in a given sphere of exploitation; (2) rises and falls in the prices of production as a result of changes in the wage level – a phenomenon which at first sight seems completely to contradict the value relationship of commodities; (3) fluctuations in market prices that reduce the average market price of a commodity over a given period of time, not to its market value but rather to a market price of production that diverges from this market value and is something very different. All these phenomena seem to contradict both the determination of value by labour-time and the nature of surplus-value as consisting of unpaid surplus labour. In competition, therefore, everything appears upside down. The finished configuration of economic relations, as these are visible on the surface, in their actual existence, and therefore also in the notions with which the bearers and agents of these relations seek to gain an understanding of them, is very different from the configuration of their inner core, which is essential but concealed, and the concept corresponding to it. It is in fact the very reverse and antithesis of this.
Moreover, as soon as capitalist production has reached a certain level of development, the equalization between the various rates of profit in individual spheres which produces the general rate of profit does not just take place through the interplay of attraction and repulsion in which market prices attract or repel capital. Once average prices and the market prices corresponding to them have been established for a certain length of time, the various individual capitalists become conscious that certain differences are balanced out in this equalization, and so they take these into account in their calculations among themselves. These differences are actively present in the capitalists’ view of things and are taken into account by them as grounds for compensation.
The basic notion in this connection is that of average profit itself, the idea that capitals of equal size must yield equal profits in the same period of time. This is based in turn on the idea that capital in each sphere of production has to participate according to its size in the total surplus-value extorted from the workers by the total social capital; or that each particular capital should be viewed simply as a fragment of the total capital and each capitalist in fact as a shareholder in the whole social enterprise, partaking in the overall profit in proportion to the size of his share of capital.
This idea is then the basis of the capitalist’s calculation, for example, that a capital that turns over more slowly, either because the commodity in question remains in the production process for a longer period or because it has to be sold on distant markets, still charges the profit it would otherwise lose by raising its price and compensates itself in this way. Another example is how capital investments that are exposed to greater risk, as in shipping, for instance, receive compensation through increased prices. Once capitalist production is properly developed, and with it the insurance system, the risk is in fact the same for all spheres of production (see Corbet);* those more endangered simply pay higher insurance premiums and receive these back in the price of their commodities. In practice this always boils down to the situation that any circumstance that makes one capital investment less profitable and another one more so (and all these investments are taken as equally necessary, within certain limits) is invariably taken into account as a valid reason for compensation, without there being any need for the constant repetition of the activities of competition in order to demonstrate the justification for including such motives or factors in the capitalist’s calculations. He simply forgets (or rather he no longer sees it, since competition does not show it to him) that all these grounds for compensation that make themselves mutually felt in the reciprocal calculation of commodity prices by the capitalists in different branches of production are simply related to the fact that they all have an equal claim on the common booty, the total surplus-value, in proportion to their capital. It appears to them, rather, that the profit which they pocket is something different from the surplus-value they extort; that the grounds for compensation do not simply equalize their participation in the total surplus-value, but that they actually create profit itself, since profit seems to derive simply from the addition to the cost price made with one justification or another. Finally, what was said in Chapter 7, p. 236, about the capitalist’s ideas as to the source of surplus-value applies also to the average profit. The only way in which the situation looks different in this second case is that for a given market price and a given level of exploitation of labour, savings on the cost price depend on individual talent, attention, etc.