If we consider the enormous development in the productive powers of social labour over the last thirty years* alone, compared with all earlier periods, and particularly if we consider the enormous mass of fixed capital involved in the overall process of social production quite apart from machinery proper, then instead of the problem that occupied previous economists, the problem of explaining the fall in the profit rate, we have the opposite problem of explaining why this fall is not greater or faster. Counteracting influences must be at work, checking and cancelling the effect of the general law and giving it simply the character of a tendency, which is why we have described the fall in the general rate of profit as a tendential fall. The most general of these factors are as follows.
The level of exploitation of labour, the appropriation of surplus labour and surplus-value, can be increased by prolonging the working day and making work more intense. These points have been developed in detail in Volume 1, in connection with the production of absolute and relative surplus-value. There are many aspects to the intensification of labour that involve a growth in the constant capital as against the variable, i.e. a fall in the rate of profit, such as when a single worker has to supervise a larger amount of machinery. In this case, as also with most procedures that serve to produce relative surplus-value, the same reasons that bring about a rise in the rate of surplus-value can also involve a fall in its mass, taking given magnitudes of total capital applied. There are also other factors in this intensification, as for example the accelerated speed of the machines, which will use up more raw material in the same space of time, but, as far as the fixed capital is concerned, the fact that this wears out the machines that much faster does not in any way affect the ratio of their value to the price of the labour that sets them in motion. In particular, however, it is the prolongation of the working day, this discovery of modern industry, which increases the amount of surplus labour appropriated without basically altering the ratio of the labour-power applied to the constant capital that this sets in motion, and which in point of fact rather reduces the constant capital in relative terms. It has already been shown, moreover, and this forms the real secret of the tendential fall in the rate of profit, that the procedures for producing relative surplus-value are based, by and large, either on transforming as much as possible of a given amount of labour into surplus-value or on spending as little as possible labour in general in relation to the capital advanced; so that the same reasons that permit the level of exploitation of labour to increase make it impossible to exploit as much labour as before with the same total capital. These are the counteracting tendencies which, while they act to bring about a rise in the rate of surplus-value, simultaneously lead to a fall in the mass of surplus-value produced by a given capital, hence a fall in the rate of profit. The introduction of female and child labour on a mass scale should be mentioned here too, in so far as the family as a whole has now to supply capital with a greater quantity of surplus labour than before, even if the sum of their wages increases, which is by no means always the case.
Everything that promotes the production of relative surplus-value by the simple improvement of methods, without a change in the magnitude of capital applied, has the same effect – in agriculture for example. Even though the constant capital applied does not grow here in proportion to the variable, there is still a rise in the volume of the product in relation to the labour-power applied. The same thing takes place if the productivity of labour (irrespective of whether its product goes into the consumption of the workers or into the elements of constant capital) is freed from restraints on commerce, arbitrary restrictions, or limitations which have become irksome in the course of time, and generally from fetters of any kind, without any initial impact on the proportion of variable to constant capital.
It might be asked whether these factors that inhibit the fall in the profit rate, though in the final instance they always accelerate it further, include the temporary but ever repeated increases in surplus-value that appear now in this branch of production, now in that, and raise it above the general level for the capitalist who makes use of inventions, etc. before they are universally applied. This question must be answered in the affirmative.
The mass of surplus-value that a capital of given size produces is the product of two factors, the rate of surplus-value and the number of workers employed at this rate. With a given rate of surplus-value, therefore, it depends on the number of workers, and with a given number of workers it depends on the rate – in general, therefore, it depends on the product of the absolute size of the variable capital and the rate of surplus-value. Now we have seen that the same factors that increase the rate of relative surplus-value lower the amount of labour-power applied on average. It is evident, however, that this effect can be greater or less, depending on the specific proportions in which this antithetical movement takes place, and that the tendency for the profit rate to be reduced, in particular, is attenuated by the increase in the rate of absolute surplus-value that stems from the prolongation of the working day.
In connection with the profit rate, we have found that to a fall in the rate, resulting from a rise in the mass of total capital applied, there corresponds in general an increase in the amount of profit. Taking the total variable capital of the society as a whole, the surplus-value it produces is the same as the profit. Besides the absolute amount of surplus-value, the rate of surplus-value has also risen; the former because the amount of labour-power applied by the society has grown and the latter because the level of exploitation of this labour has increased. But with respect to a capital of given magnitude, e.g. 100, the rate of surplus-value can grow while the average mass of surplus-value falls, since the rate is determined by the ratio in which the variable portion of the capital is valorized, while the mass is determined by the proportion that the variable capital forms in the total.
The rise in the rate of surplus-value – particularly since it takes place under circumstances in which, as mentioned above, there is no increase in the constant capital as against the variable, or no relative increase – is a factor which contributes to the determination of the mass of surplus-value and hence also the rate of profit. It does not annul the general law. But it has the effect that this law operates more as a tendency, i.e. as a law whose absolute realization is held up, delayed and weakened by counteracting factors. However, as the same factors that increase the rate of surplus-value (and the extension of the working day is itself a result of large-scale industry) tend to reduce the amount of labour-power employed by a given capital, the same factors tend both to reduce the rate of profit and to slow down the movement in this direction. If one worker is compelled to do work that it would really be rational for two to perform, and if this happens under circumstances in which this one worker can replace three, then one worker can now provide as much surplus labour as two did before, and to this extent the rate of surplus-value rises. But this one will not supply as much surplus labour as three did before, and this makes the mass of surplus-value fall. Its fall is compensated for or limited by the rise in the rate of surplus-value. If the entire population is set to work at the increased rate of surplus-value, the mass of surplus-value rises, even though the population remains the same. Still more is this the case with a growing population; and even though this growth is linked with a relative fall in the number of workers employed, compared with the size of the total capital, the fall is still moderated or halted by the higher rate of surplus-value.
Before we leave this point, it should be stressed once again that the rate of surplus-value can rise, with a constant amount of capital, even though the mass of surplus-value falls – and vice versa. The mass of surplus-value is equal to the rate multiplied by the number of workers; but the rate is never calculated on the total capital, but only on the variable capital, in actual fact on each working day individually. Once the size of the capital value is given, however, the rate of profit can never rise or fall without a similar rise or fall in the mass of surplus-value.
We simply make an empirical reference to this point here, as, like many other things that might be brought in, it has nothing to do with the general analysis of capital, but has its place in an account of competition, which is not dealt with in this work. It is none the less one of the most important factors in stemming the tendency for the rate of profit to fall.
Everything is relevant here that has been said in Part One of this volume about the causes that raise the rate of profit while the rate of surplus-value remains constant, or at least raise it independently of the latter. In particular, therefore, the fact that, viewing the total capital as a whole, the value of the constant capital does not increase in the same proportion as its material volume. For example, the quantity of cotton that a single European spinning operative works up in a modern factory has grown to a most colossal extent in comparison with that which a European spinner used to process with the spinning wheel. But the value of the cotton processed has not grown in the same proportion as its mass. It is the same with machines and other fixed capital. In other words, the same development that raises the mass of constant capital in comparison with variable reduces the value of its elements, as a result of the higher productivity of labour, and hence prevents the value of the constant capital, even though this grows steadily, from growing in the same degree as its material volume, i.e. the material volume of the means of production that are set in motion by the same amount of labour-power. In certain cases, the mass of the constant capital elements may increase while their total value remains the same or even falls.
Also related to what has been said is the devaluation of existing capital (i.e. of its material elements) that goes hand in hand with the development of industry. This too is a factor that steadily operates to stay the fall in the rate of profit, even though in certain circumstances it may reduce the mass of profit by detracting from the mass of capital that produces profit. We see here once again how the same factors that produce the tendency for the rate of profit to fall also moderate the realization of this tendency.
The creation of such a surplus population is inseparable from the development of labour productivity and is accelerated by it, the same development as is expressed in the decline in the profit rate. The more the capitalist mode of production is developed in a country, the more strikingly does the relative surplus population obtrude there. It is in turn a reason why the more or less incomplete subordination of labour to capital persists in several branches of production, and longer indeed than would seem to correspond at first sight to the general level of development; this is a result of the cheapness and quantity of available or dismissed wage-labourers and of the greater resistance that many branches of production, by their nature, oppose to the transformation of manual work into machine production. Furthermore, new branches of production open up, particularly in the field of luxury consumption, which precisely take this relative surplus population as their basis, a population often made available owing to the preponderance of constant capital in other branches of production; these base themselves in turn on a preponderance of the element of living labour, and only gradually pass through the same trajectory as other branches. In both cases variable capital forms a significant proportion of the total and wages are below the average, so that both the rate and mass of surplus-value in these branches of production are unusually high. Now since the general rate of profit is formed by the equalization of the rates of profit in the various particular branches of production, here again the same reasons that produce the tendential fall in the rate of profit also produce a counterweight to this tendency, which paralyses its effect to a greater or lesser extent.
In so far as foreign trade cheapens on the one hand the elements of constant capital and on the other the necessary means of subsistence into which variable capital is converted, it acts to raise the rate of profit by raising the rate of surplus-value and reducing the value of constant capital. It has a general effect in this direction in as much as it permits the scale of production to be expanded. In this way it accelerates accumulation, while it also accelerates the fall in the variable capital as against the constant, and hence the fall in the rate of profit. And whereas the expansion of foreign trade was the basis of capitalist production in its infancy, it becomes the specific product of the capitalist mode of production as this progresses, through the inner necessity of this mode of production and its need for an ever extended market. Here again we can see the same duality of effect. (Ricardo completely overlooked this aspect of foreign trade.)*
There is a further question, whose specific analysis lies beyond the limits of our investigation: is the general rate of profit raised by the higher profit rate made by capital invested in foreign trade, and colonial trade in particular?
Capital invested in foreign trade can yield a higher rate of profit, firstly, because it competes with commodities produced by other countries with less developed production facilities, so that the more advanced country sells its goods above their value, even though still more cheaply than its competitors. In so far as the labour of the more advanced country is valorized here as labour of a higher specific weight, the profit rate rises, since labour that is not paid as qualitatively higher is nevertheless sold as such. The same relationship may hold towards the country to which goods are exported and from which goods are imported: i.e. such a country gives more objectified labour in kind than it receives, even though it still receives the goods in question more cheaply than it could produce them itself. In the same way, a manufacturer who makes use of a new discovery before this has become general sells more cheaply than his competitors and yet still sells above the individual value of his commodity, valorizing the specifically higher productivity of the labour he employs as surplus labour. He thus realizes a surplus profit. As far as capital invested in the colonies, etc. is concerned, however, the reason why this can yield higher rates of profit is that the profit rate is generally higher there on account of the lower degree of development, and so too is the exploitation of labour, through the use of slaves and coolies, etc. Now there is no reason why the higher rates of profit that capital invested in certain branches yields in this way, and brings home to its country of origin, should not enter into the equalization of the general rate of profit and hence raise this in due proportion, unless monopolies stand in the way.36 There is in particular no reason why this should not be so when the branches of capital investment in question are subject to the laws of free competition. What Ricardo has in mind, on the other hand, is this: higher prices are obtained abroad; commodities are bought there and sent home in exchange; these commodities are therefore sold on the domestic market, so that the favoured spheres of production can have at most a temporary advantage over others. As soon as we take our leave of the money form, however, this semblance vanishes. The privileged country receives more labour in exchange for less, even though this difference, the excess, is pocketed by a particular class, just as in the exchange between labour and capital in general. Thus in as much as the profit rate is higher because it is generally higher in the colonial country, favourable natural conditions there may enable it to go hand in hand with lower commodity prices. An equalization still takes place, but not an equalization at the old level, as Ricardo believes.
But this same foreign trade develops the capitalist mode of production at home, and hence promotes a decline in variable capital as against constant, though it also produces overproduction in relation to the foreign country, so that it again has the opposite effect in the further course of development.
We have shown in general, therefore, how the same causes that bring about a fall in the general rate of profit provoke counter-effects that inhibit this fall, delay it and in part even paralyse it. These do not annul the law, but they weaken its effect. If this were not the case, it would not be the fall in the general rate of profit that was incomprehensible, but rather the relative slowness of this fall. The law operates therefore simply as a tendency, whose effect is decisive only under certain particular circumstances and over long periods.
Before we proceed any further, we should like to repeat again two points that have already been developed several times, in order to avoid any misunderstanding.
Firstly, the same process that leads to the cheapening of commodities as the capitalist mode of production develops leads to a change in the organic composition of the social capital applied in commodity production, and leads as a result to a fall in the profit rate. Thus the reduction in the relative cost of the individual commodity, or even in the part of this cost that represents the wear and tear of the machinery, should not be confused with the rising value of the constant capital compared with the variable, even though, conversely, any reduction in the relative cost of the constant capital, with the volume of its material elements remaining the same or increasing, acts to increase the rate of profit, i.e. acts to reduce proportionately the value of the constant capital, compared with the variable capital that is applied on a scale which declines progressively.
Secondly, the fact that the additional living labour contained in the individual commodities which together compose the product of capital stands in a declining ratio to the materials of labour these contain and the means of labour consumed in them; the fact, therefore, that an ever smaller quantity of additional living labour is objectified in them, because less labour is required for their production as social productivity develops – this fact does not affect the proportion in which the living labour contained in the commodity is divided between paid and unpaid. On the contrary. Even though the total amount of the additional living labour contained in it falls, the unpaid part still grows in proportion to the paid part, either by an absolute or a proportionate fall in this paid part; for the same mode of production that reduces the total mass of additional living labour in a commodity is accompanied by a rise in absolute and relative surplus-value. The tendential fall in the rate of profit is linked with a tendential rise in the rate of surplus-value, i.e. in the level of exploitation of labour. Nothing is more absurd, then, than to explain the fall in the rate of profit in terms of a rise in wage rates, even though this too may be an exceptional case. Only when the relationships that form the rate of profit have been understood will statistics be able to put forward genuine analyses of wage-rates in different periods. The profit rate does not fall because labour becomes less productive but rather because it becomes more productive. The rise in the rate of surplus-value and the fall in the rate of profit are simply particular forms that express the growing productivity of labour in capitalist terms.
The above five points can also be supplemented by the following one, though we cannot go any deeper into it at this point. As capitalist production advances, and with it accelerated accumulation, one portion of capital is considered simply to be interest-bearing capital and is invested as such. This is not in the sense in which any capitalist who loans out capital is content to take the interest, while the industrial capitalist pockets the entrepreneurial profit. Nor does it affect the level of the general rate of profit, for as far as this is concerned, profit = interest + profit of all kinds + ground-rent, its distribution between these particular categories being a matter of indifference. It is rather in the sense that these capitals, although invested in large productive enterprises, simply yield an interest, great or small, after all costs are deducted – so-called ‘dividends’. This is the case with railways, for example. These do not therefore enter into the equalization of the general rate of profit, since they yield a profit rate less than the average. If they did go in, the average rate would fall much lower. From a theoretical point of view, it is possible to include them, and we should then obtain a profit rate lower than that which apparently exists and is really decisive for the capitalists, since it is precisely in these undertakings that the proportion of constant capital to variable is at its greatest.