Chapter 15: Development of the Law’s
Internal Contradictions
1. GENERAL CONSIDERATIONS
We saw in Part One of this volume how the profit rate always expresses the rate of surplus-value lower than it actually is. We have now seen how even a rising rate of surplus-value tends to be expressed in a falling rate of profit. The profit rate would only be equal to the rate of surplus-value if c = 0, i.e. if the total capital were laid out on wages. A falling rate of profit, then, expresses a falling rate of surplus-value only if the ratio between the value of the constant capital and the amount of labour-power that this sets in motion remains unchanged, or if this latter amount has risen in relation to the value of the constant capital.
Ricardo, while claiming to be dealing with the rate of profit, actually deals only with the rate of surplus-value, and this only on the assumption that the working day is a constant magnitude, both intensively and extensively.
A fall in the profit rate, and accelerated accumulation, are simply different expressions of the same process, in so far as both express the development of productivity. Accumulation in turn accelerates the fall in the profit rate, in so far as it involves the concentration of workers on a large scale and hence a higher composition of capital. On the other hand the fall in the profit rate again accelerates the concentration of capital, and its centralization, by dispossessing the smaller capitalists and expropriating the final residue of direct producers who still have something left to expropriate. In this way there is an acceleration of accumulation as far as its mass is concerned, even though the rate of this accumulation falls together with the rate of profit.
On the other hand, however, in view of the fact that the rate at which the total capital is valorized, i.e. the rate of profit, is the spur to capitalist production (in the same way as the valorization of capital is its sole purpose), a fall in this rate slows down the formation of new, independent capitals and thus appears as a threat to the development of the capitalist production process; it promotes overproduction, speculation and crises, and leads to the existence of excess capital alongside a surplus population. Thus economists like Ricardo, who take the capitalist mode of production as an absolute, feel here that this mode of production creates a barrier for itself and seek the source of this barrier not in production but rather in nature (in the theory of rent). The important thing in their horror at the falling rate of profit is the feeling that the capitalist mode of production comes up against a barrier to the development of the productive forces which has nothing to do with the production of wealth as such; but this characteristic barrier in fact testifies to the restrictiveness and the solely historical and transitory character of the capitalist mode of production; it bears witness that this is not an absolute mode of production for the production of wealth but actually comes into conflict at a certain stage with the latter’s further development.
Of course, Ricardo and his school were considering only industrial profit, within which they included interest. Yet the rate of ground-rent also has a tendency to fall, even though its absolute mass grows and it may even grow in relation to industrial profit. (See Edward West, who put forward the law of ground-rent before Ricardo.)* If we take the total social capital C, and call the industrial profit that remains after deducting interest and ground-rent p1, interest i and ground-rent r, then s/C = ν/C = p1 + i + r/C = p1/C + i/C + r/C. We have already seen that while s, the total sum of surplus-value, grows steadily as capitalist production develops, s/C steadily declines, since C grows more quickly than s. It is no contradiction, therefore, that p 1, i and r may each increase even though s/C = p/C and its component parts p1/C, i/C and r/C become ever smaller, or that p 1 may grow in relation to i, or r in relation to p 1, or even in relation to both p 1 and i. Given that the total surplus-value or profit (s = p) rises, while the rate of profit s/C = p/C simultaneously falls, the ratios between the component parts p 1, i and r into which s = p breaks down may alter in any way possible within the limits given by the total sum s, without thereby affecting the magnitude of either s or s/C.
The reciprocal variation of p1, i and r is simply a varying distribution of s under various headings. Thus either p/C, i/C or r/C – the rate of individual industrial profit, the rate of interest or the ratio of rent to the total capital – may rise in relation to the other fractions, even though s/C, the general rate of profit, falls; the only requirement is that the sum of all three = s/C. If the rate of profit falls from 50 per cent to 25, because the composition of capital, given a rate of surplus-value of 100 per cent for example, alters from 50c + 50ν to 75c + 25ν, then in the first case a capital of 1,000 will give a profit of 500, while in the second case a capital of 4,000 will give a profit of 1,000. s or p will have doubled, while p′ has fallen by half. Now if, out of the original 50 per cent, 20 was industrial profit proper, 10 interest and 20 rent, we would have p1/C = 20 per cent, i/C = 10 per cent and r/C = 20 per cent. So if the proportions remain the same after the rate has fallen to 25 per cent, we will have p1/C = 10 per cent, i/C = 5 per cent and r/C = 10 per cent. If on the other hand p1/C now falls to 8 per cent and i/C to 4 per cent, then r/C will rise to 13 per cent. The proportionate size of r would have risen against p 1 i and i, but p′ would still have remained unchanged. On both assumptions the sum total of p1, i and r would have risen, since this is now the product of a capital four times larger than before. Furthermore, Ricardo’s assumption that industrial profit (plus interest) originally accounted for the entire surplus-value is both historically and theoretically false. It is only the progress of capitalist production, rather, which (1) gives industrial and commercial capitalists the entire profit, in the first instance, for later redistribution, and (2) reduces rent to the surplus over and above profit. On this capitalist basis, rent then grows once more, as a portion of profit (i.e. of the surplus-value considered as product of the total capital), but not the specific portion of the product pocketed by the capitalist.
Assuming the necessary means of production, i.e. a sufficient accumulation of capital, the creation of surplus-value faces no other barrier than the working population, if the rate of surplus-value, i.e. the level of exploitation of labour, is given; and no other barrier than this level of exploitation, if the working population is given. And the capitalist production process essentially consists of this production of surplus-value, represented in the surplus product or the aliquot portion of commodities produced in which unpaid labour is objectified. It should never be forgotten that the production of this surplus-value – and the transformation of a portion of it back into capital, or accumulation, forms an integral part of surplus-value production – is the immediate purpose and the determining motive of capitalist production. Capitalist production, therefore, should never be depicted as something that it is not, i.e. as production whose immediate purpose is consumption, or the production of means of enjoyment for the capitalist. This would be to ignore completely its specific character, as this is expressed in its basic inner pattern.
It is the extraction of this surplus-value that forms the immediate process of production, and this faces no other barriers than those just mentioned. As soon as the amount of surplus labour it has proved possible to extort has been objectified in commodities, the surplus-value has been produced. But this production of surplus-value is only the first act in the capitalist production process, and its completion only brings to an end the immediate production process itself. Capital has absorbed a given amount of unpaid labour. With the development of this process as expressed in the fall in the profit rate, the mass of surplus-value thus produced swells to monstrous proportions. Now comes the second act in the process. The total mass of commodities, the total product, must be sold, both that portion which replaces constant and variable capital and that which represents surplus-value. If this does not happen, or happens only partly, or only at prices that are less than the price of production, then although the worker is certainly exploited, his exploitation is not realized as such for the capitalist and may even not involve any realization of the surplus-value extracted, or only a partial realization; indeed, it may even mean a partial or complete loss of his capital. The conditions for immediate exploitation and for the realization of that exploitation are not identical. Not only are they separate in time and space, they are also separate in theory. The former is restricted only by the society’s productive forces, the latter by the proportionality between the different branches of production and by the society’s power of consumption. And this is determined neither by the absolute power of production nor by the absolute power of consumption but rather by the power of consumption within a given framework of antagonistic conditions of distribution, which reduce the consumption of the vast majority of society to a minimum level, only capable of varying within more or less narrow limits. It is further restricted by the drive for accumulation, the drive to expand capital and produce surplus-value on a larger scale. This is the law governing capitalist production, arising from the constant revolutions in methods of production themselves, from the devaluation of the existing capital which is always associated with this, and from the general competitive struggle and the need to improve production and extend its scale, merely as a means of self-preservation, and on pain of going under. The market, therefore, must be continually extended, so that its relationships and the conditions governing them assume ever more the form of a natural law independent of the producers and become ever more uncontrollable. The internal contradiction seeks resolution by extending the external field of production. But the more productivity develops, the more it comes into conflict with the narrow basis on which the relations of consumption rest. It is in no way a contradiction, on this contradictory basis, that excess capital coexists with a growing surplus population; for although the mass of surplus-value produced would rise if these were brought together, yet this would equally heighten the contradiction between the conditions in which this surplus-value was produced and the conditions in which it was realized.
Once a certain rate of profit is given, the mass of profit always depends on the magnitude of the capital advanced. But accumulation is then determined by the part of this mass that is transformed back into capital. This part, since it is equal to profit minus the revenue consumed by the capitalists, will depend not only on the value of the total profit but also on the cheapness of the commodities which the capitalist can buy with it; commodities which go partly into his own consumption, his revenue, and partly into his constant capital. (Wages here are taken as given.)
The mass of capital that the worker sets in motion, and whose value he maintains by his labour and makes reappear in the product, is completely different from the value that he adds. If the mass of capital is 1,000 and the labour added is 100, the capital reproduced is 1,100. If the mass is 100 and the labour added is 20, the capital reproduced is 120. The rate of profit is 10 per cent in the one case, and 20 per cent in the other. Nevertheless, more can be accumulated out of 100 than out of 20. Thus the stream of capital (leaving aside its devaluation as the result of a rise in productivity), or its accumulation, flows on in proportion to the impetus that it already possesses and not in proportion to the rate of profit. It is possible to have a high rate of profit even if labour is unproductive, if this is based on a high rate of surplus-value and the working day is very long; this is possible where the workers’ needs are very slight and the average wage very low, even though labour is unproductive. The low level of wages corresponds to a lack of energy on the workers’ part. Capital therefore accumulates slowly, despite the high profit rate. The population is stagnant, and the product requires a great deal of labour-time, even though the wages that the workers are paid are so small.
The rate of profit does not fall because the worker is less exploited, but rather because less labour is generally applied in relation to the capital invested.
If a falling rate of profit coincides with a rise in the mass of profit, as we have shown, then a greater part of the annual product of labour is appropriated by the capitalist under the heading of capital (as replacement for the capital used up) and a relatively smaller part is appropriated under the heading of profit. Hence the fantasy of Reverend Chalmers to the effect that the smaller the mass of the annual product the capitalists spend as capital, the greater the profits they pocket.* The Established Church, of course, is a great help to them here, in making sure that a large portion of the surplus product is consumed instead of being capitalized. The reverend gentleman confuses cause and effect. The mass of profit certainly does grow, even at a smaller rate of profit, as the capital laid out increases. But this brings about a simultaneous concentration of capital, since the conditions of production now require the use of capital on a massive scale. It also leads to the centralization of this capital, i.e. the swallowing-up of small capitalists by big, and their decapitalization. This is simply the divorce of the conditions of labour from the producers raised to a higher power, these smaller capitalists still counting among the producers, since their own labour still plays a role. The work done by the capitalist, in general, stands in inverse proportion to the size of his capital, i.e. to the degree in which he is a capitalist. It is in fact this divorce between the conditions of labour on the one hand and the producers on the other that forms the concept of capital, as this arises with primitive accumulation (Volume 1, Part Eight), subsequently appearing as a constant process in the accumulation and concentration of capital, before it is finally expressed here as the centralization of capitals already existing in a few hands, and the decapitalization of many. This process would entail the rapid breakdown of capitalist production, if counteracting tendencies were not constantly at work alongside this centripetal force, in the direction of decentralization.
2. THE CONFLICT BETWEEN THE EXTENSION OF PRODUCTION AND VALORIZATION
The development of the social productivity of labour is reflected in two ways – firstly, in the size of the productive forces already produced, the scale of the conditions of production in both value and mass, in so far as these are the conditions for new production to take place, and in the absolute magnitude of the productive capital already accumulated; secondly, in the relatively low proportion of capital, out of the total, that is laid out on wages, i.e. in the relatively small amount of living labour that is required to reproduce and valorize a given capital, and for mass production. This presupposes at the same time the concentration of capital.
As far as the labour-power applied is concerned, the development of productivity again takes a double form – firstly, there is an increase in surplus labour, i.e. a shortening of necessary labour-time, the time required for the reproduction of labour-power; secondly, there is a decline in the total amount of labour-power (number of workers) applied to set a given capital in motion.
These two movements not only go hand in hand; they mutually condition one another, and are phenomena that express the same law. But they affect the profit rate in opposite directions. The total mass of profit is the same as the total mass of surplus-value, and the rate of profit 
. But surplus-value, in its total amount, is determined firstly by its rate and secondly by the mass of labour that is applied at this rate at any one time or, which comes to the same thing, by the magnitude of the variable capital. One of these factors, the rate of surplus-value, is rising; the other factor, the number of workers, is falling (relatively or absolutely). In so far as the development of productivity reduces the paid portion of the labour applied, it increases surplus-value by lifting its rate; but in so far as it reduces the total quantity of labour applied by a given capital, it reduces the number by which the rate of surplus-value has to be multiplied in order to arrive at its mass. Two workers working for 12 hours a day could not supply the same surplus-value as 24 workers each working 2 hours, even if they were able to live on air and hence scarcely needed to work at all for themselves. In this connection, therefore, the compensation for the reduced number of workers provided by a rise in the level of exploitation of labour has certain limits that cannot be overstepped; this can certainly check the fall in the profit rate, but it cannot cancel it out.
As the capitalist mode of production develops, so the rate of profit falls, while the mass of profit rises together with the increasing mass of capital applied. Once the rate is given, the absolute amount by which capital grows depends on its existing magnitude. But if this magnitude is given, the proportion in which it grows, i.e. its rate of growth, depends on the profit rate. A rise in productivity (which moreover always goes hand in hand with devaluation of the existing capital, as already mentioned) can increase the magnitude of the capital only if it increases the part of the annual profit that is transformed back into capital, by raising the rate of profit. In so far as labour productivity is concerned, this [the possible increase in the magnitude of the capital] can come about (since this productivity is not directly relevant to the value of the existing capital) only in so far as it either involves a rise in the relative surplus-value or else reduces the value of the constant capital, in other words cheapens either the commodities that go into the reproduction of labour-power or the elements of constant capital. Both of these, however, involve a devaluation of the existing capital, and both go hand in hand with a reduction in the variable capital as against the constant. Both processes condition the fall in the profit rate, and both delay it. In so far, moreover, as the higher rate of profit gives rise to an increased demand for labour, it leads to an increase in the working population and hence in the exploitable material which is precisely what makes capital capital.
Indirectly, however, the development of labour productivity contributes to an increase in the existing capital value, since it increases the mass and diversity of use-values in which the same exchange-value is represented, and which form the material substratum, the objective elements of this capital, the substantial objects of which constant capital consists directly and variable capital at least indirectly. The same capital and the same labour produce more things that can be transformed into capital, quite apart from exchange-value. These things can serve to absorb additional labour, and thus additional surplus labour also, and can in this way form additional capital. The mass of labour that capital can command does not depend on its value but rather on the mass of raw and ancillary materials, of machinery and elements of fixed capital, and of means of subsistence, out of which it is composed, whatever their value may be. Since the mass of labour applied thus grows, and the mass of surplus labour with it, the value of the capital reproduced and the surplus-value newly added to it grow as well.
Yet these two aspects involved in the accumulation process cannot just be considered as existing quietly side by side, which is how Ricardo treats them; they contain a contradiction, and this is announced by the appearance of contradictory tendencies and phenomena. The contending agencies function simultaneously in opposition to one another.
Simultaneously with impulses towards a genuine increase in the working population, which stem from the increase in the portion of the total social product that functions as capital, we have those agencies that create a relative surplus population.
Simultaneously with the fall in the profit rate, the mass of capital grows, and this is associated with a devaluation of the existing capital, which puts a stop to this fall and gives an accelerating impulse to the accumulation of capital value.
Simultaneously with the development of productivity, the composition of capital becomes higher, there is a relative decline in the variable portion as against the constant.
These various influences sometimes tend to exhibit themselves side by side, spatially; at other times one after the other, temporally; and at certain points the conflict of contending agencies breaks through in crises. Crises are never more than momentary, violent solutions for the existing contradictions, violent eruptions that re-establish the disturbed balance for the time being.
To express this contradiction in the most general terms, it consists in the fact that the capitalist mode of production tends towards an absolute development of the productive forces irrespective of value and the surplus-value this contains, and even irrespective of the social relations within which capitalist production takes place; while on the other hand its purpose is to maintain the existing capital value and to valorize it to the utmost extent possible (i.e. an ever accelerated increase in this value). In its specific character it is directed towards using the existing capital value as a means for the greatest possible valorization of this value. The methods through which it attains this end involve a decline in the profit rate, the devaluation of the existing capital and the development of the productive forces of labour at the cost of the productive forces already produced.
The periodical devaluation of the existing capital, which is a means, immanent to the capitalist mode of production, for delaying the fall in the profit rate and accelerating the accumulation of capital value by the formation of new capital, disturbs the given conditions in which the circulation and reproduction process of capital takes place, and is therefore accompanied by sudden stoppages and crises in the production process.
The relative decline in the variable capital as against the constant, which goes hand in hand with the development of the productive forces, gives a spur to the growth of the working population, while it continuously creates an artificial surplus population as well. The accumulation of capital, from the point of view of value, is slowed down by the falling rate of profit, which then serves yet again to accelerate the accumulation of use-value, while this in turn accelerates the course of accumulation in terms of value.
Capitalist production constantly strives to overcome these immanent barriers, but it overcomes them only by means that set up the barriers afresh and on a more powerful scale.
The true barrier to capitalist production is capital itself. It is that capital and its self-valorization appear as the starting and finishing point, as. the motive and purpose of production; production is production only for capital, and not the reverse, i.e. the means of production are not simply means for a steadily expanding pattern of life for the society of the producers. The barriers within which the maintenance and valorization of the capital-value has necessarily to move – and this in turn depends on the dispossession and impoverishment of the great mass of the producers – therefore come constantly into contradiction with the methods of production that capital must apply to its purpose and which set its course towards an unlimited expansion of production, to production as an end in itself, to an unrestricted development of the social productive powers of labour. The means – the unrestricted development of the forces of social production – comes into persistent conflict with the restricted end, the valorization of the existing capital. If the capitalist mode of production is therefore a historical means for developing the material powers of production and for creating a corresponding world market, it is at the same time the constant contradiction between this historical task and the social relations of production corresponding to it.
3. SURPLUS CAPITAL ALONGSIDE SURPLUS POPULATION
As the profit rate falls, so there is a growth in the minimum capital that the individual capitalist needs in order to make productive use of labour; he needs this minimum capital both to exploit labour in general and to ensure that the labour-time spent on the production of commodities is necessary labour-time and does not overstep the average labour-time that is socially necessary for the production of these commodities. Concentration grows at the same time, since beyond certain limits a large capital with a lower rate of profit accumulates more quickly than a small capital with a higher rate of profit. This growing concentration leads in turn, at a certain level, to a new fall in the rate of profit. The mass of small fragmented capitals are thereby forced onto adventurous paths: speculation, credit swindles, share swindles, crises. The so-called plethora of capital is always basically reducible to a plethora of that capital for which the fall in the profit rate is not outweighed by its mass – and this is always the case with fresh offshoots of capital that are newly formed – or to the plethora in which these capitals, which are incapable of acting by themselves, are available to the leaders of great branches of business in the form of credit. This plethora of capital arises from the same causes that produce a relative surplus population and is therefore a phenomenon that complements this latter, even though the two things stand at opposite poles – unoccupied capital on the one hand and an unemployed working population on the other.
Overproduction of capital and not of individual commodities – though this overproduction of capital always involves overproduction of commodities – is nothing more than over-accumulation of capital. To understand what this over-accumulation is (we shall study it in more detail below), we have only to take it as an absolute. When would the overproduction of capital be absolute? And indeed we refer here to an overproduction which does not just extend to this or that or a few major areas of production, but is rather itself absolute in scope, so that it involves all fields of production.
There would be an absolute overproduction of capital as soon as no further additional capital could be employed for the purpose of capitalist production. But the purpose of capitalist production is the valorization of capital, i.e. appropriation of surplus labour, production of surplus-value, of profit. Thus as soon as capital has grown in such proportion to the working population that neither the absolute labour-time that this working population supplies nor its relative surplus labour-time can be extended (the latter would not be possible in any case in a situation where the demand for labour was so strong, and there was thus a tendency for wages to rise); where, therefore, the expanded capital produces only the same mass of surplus-value as before, there will be an absolute overproduction of capital; i.e. the expanded C + Δ C will not produce any more profit, or will even produce less profit, than the capital C did before its increase by Δ C In both cases there would even be a sharper and more sudden fall in the general rate of profit, but this time on account of a change in the composition of capital which would not be due to a development in productivity, but rather to a rise in the money value of the variable capital on account of higher wages and to a corresponding decline in the proportion of surplus labour to necessary labour.
In actual fact, the situation would take the form that one portion of the capital would lie completely or partially idle (since it would first have to expel the capital already functioning from its position, to be valorized at all), while the other portion would be valorized at a lower rate of profit, owing to the pressure of the unoccupied or semi-occupied capital. The fact that a portion of the additional capital might take the place of the old, and that the old capital might thus take up a position within the additional capital, would be a matter of indifference here, as the old capital sum would be on one side of the account, the additional capital on the other. The fall in the profit rate would be accompanied this time by an absolute decline in the mass of profit, since on our assumptions the mass of labour-power applied has not increased and the rate of surplus-value not risen, so that the mass of surplus-value, too, could not be increased. And the reduced mass of profit would have to be calculated on an enlarged total capital. But even if we assume that the occupied capital continued to be valorized at the old rate of profit, so that the profit rate remained unchanged, then the mass of profit would still be calculated on the basis of an enlarged total capital, and this also would imply a fall in the rate of profit. If a total capital of 1,000 yields a profit of 100 and after being increased to 1,500 it still yields a profit of only 100, then in the second case 1,000 yields only 66 2/3. The valorization of the old capital would have experienced an absolute decline. The capital of 1,000, under the new conditions, would not yield more than a capital of 666 2/3 did earlier.
It is clear however that this kind of actual devaluation of the old capital would not take place without a struggle, and that the additional capital Δ C could not function as capital without a struggle. That competition which results from the overproduction of capital would not cause a fall in the rate of profit. Rather the reverse. Since the reduced rate of profit and the overproduction of capital spring from the same situation, a competitive struggle would now be unleashed. The capitalists already functioning would let the portion of Δ C that was already in their hands lie more or less idle, so as not to devalue their own original capital themselves and not constrict its place in the field of production, or else they would apply it so as to shift the idleness of the additional capital onto the more recent interlopers and onto their competitors in general, even at a temporary loss.
The part of Δ C that was in new hands would attempt to find a place for itself at the cost of the old capital, and would partly succeed in this, forcing a portion of the old capital to lie idle. It would compel this to evacuate its former place and would itself take the place of the additional capital that was employed only partially or not at all.
Whatever the circumstances, one part of the old capital would have to lie idle as far as its property as capital was concerned, i.e. the property of functioning as capital and being valorized. As to which section is particularly to be affected by this idling, this is decided in the course of the competitive struggle. As long as everything goes well, competition acts, as is always the case when the general rate of profit is settled, as a practical freemasonry of the capitalist class, so that they all share in the common booty in proportion to the size of the portion that each puts in. But as soon as it is no longer a question of division of profit, but rather of loss, each seeks as far as he can to restrict his own share of this loss and pass it on to someone else. For the class as a whole, the loss is unavoidable. But how much each individual member has to bear, the extent to which he has to participate in it, now becomes a question of strength and cunning, and competition now becomes a struggle of enemy brothers. The opposition between the interest of each individual capitalist and that of the capitalist class as a whole now comes into its own, in the same way as competition was previously the instrument through which the identity of the capitalists’ interests was asserted.
How then is this conflict to be resolved? How are the relations corresponding to a ‘healthy’ movement of capitalist production to be restored? The method of resolution is already implicit in the way in which the conflict is stated. It involves this, that capital should lie idle, or even, in part, be destroyed, either to the entire value of the additional capital Δ C or at least to one part of this; although this loss is by no means uniformly distributed amongst all the particular individual capitalists, as our depiction of the conflict has shown, the distribution being decided instead by a competitive struggle in which the loss is divided very unevenly and in very different forms according to the particular advantages or positions that have already been won, in such a way that one capital lies idle, another is destroyed, a third experiences only a relative loss or simply a temporary devaluation, and so on.
Under all circumstances, however, the balance will be restored by capital’s lying idle or even by its destruction, to a greater or lesser extent. This will also extend in part to the material substance of capital; i.e. part of the means of production, fixed and circulating capital, will not function and operate as capital, and a part of the productive effort that was begun will come to a halt. Even though, as far as this aspect goes, time affects and damages all means of production (except the land), what we have here is a far more intense actual destruction of means of production as the result of a stagnation in their function. The major effect here, however, is simply that these means of production cease to be active as means of production; a shorter or longer disruption occurs in their function as means of production.
The chief disruption, and the one possessing the sharpest character, would occur in connection with capital in so far as it possesses the property of value, i.e. in connection with capital values. The portion of capital value that exists simply in the form of future claims on surplus-value and profit, in other words promissory notes on production in their various forms, is devalued simultaneously with the fall in the revenues on which it is reckoned.
A portion of ready gold and silver lies idle and does not function as capital. Part of the commodities on the market can complete their process of circulation and reproduction only by an immense reduction in their prices, i.e. by a devaluation in the capital they represent. The elements of fixed capital are more or less devalued in the same way. Added to this is the fact that since certain price relationships are assumed in the reproduction process, and govern it, this process is thrown into stagnation and confusion by the general fall in prices. This disturbance and stagnation paralyses the function of money as a means of payment, which is given along with the development of capital and depends on those presupposed price relationships. The chain of payment obligations at specific dates is broken in a hundred places, and this is still further intensified by an accompanying breakdown of the credit system, which had developed alongside capital. All this therefore leads to violent and acute crises, sudden forcible devaluations, an actual stagnation and disruption in the reproduction process, and hence to an actual decline in reproduction.
But other agencies come into play at the same time. Stagnation in production makes part of the working class idle and hence places the employed workers in conditions where they have to accept a fall in wages, even beneath the average; an operation that has exactly the same effect for capital as if relative or absolute surplus-value had been increased while wages remained at the average. Periods of prosperity facilitate marriage among the workers and reduce the decimation of their offspring, factors which, however much they might involve a real increase in population, do not involve any increase in the population actually working, but do have the same effect on the relationship between the workers and capital as if the number of workers actually active had increased. The fall in prices and the competitive struggle, on the other hand, impel each capitalist to reduce the individual value of his total product below its general value by employing new machinery, new and improved methods of labour and new forms of combination. That is, they impel him to raise the productivity of a given quantity of labour, to reduce the proportion of variable capital to constant and thereby to dismiss workers, in short to create an artificial surplus population. The devaluation of the elements of constant capital, moreover, itself involves a rise in the profit rate. The mass of constant capital applied grows as against the variable, but the value of this mass may have fallen. The stagnation in production that has intervened prepares the ground for a later expansion of production – within the capitalist limits.
And so we go round the whole circle once again. One part of the capital that was devalued by the cessation of its function now regains its old value. And apart from that, with expanded conditions of production, a wider market and increased productivity, the same cycle of errors is pursued once more.
Even under the most extreme assumption that might be made, absolute overproduction of capital is not absolute overproduction in general, not absolute overproduction of the means of production. It is an overproduction of means of production only in so far as these function as capital, and hence have to produce an additional value in proportion to their value that has expanded together with their mass, i.e. have to valorize their value.
It is still overproduction, for all that, since the capital is unable to exploit labour at the level of exploitation that is required by the ‘healthy’ and ‘normal’ development of the capitalist production process, at a level of exploitation that at least increases the mass of profit along with the growing mass of capital applied; that therefore excludes a situation in which the rate of profit falls to the same degree as capital grows, or even falls more quickly than this.
Overproduction of capital never means anything other than overproduction of means of production – means of labour and means of subsistence – that can function as capital, i.e. can be applied to exploiting labour at a given level of exploitation; a given level, because a fall in the level of exploitation below a certain point produces disruption and stagnation in the capitalist production process, crisis, and the destruction of capital. It is no contradiction that this overproduction of capital is accompanied by a greater or smaller relative surplus population. The same causes that have raised the productivity of labour, increased the mass of commodity products, extended markets, accelerated the accumulation of capital, in terms of both mass and value, and lowered the rate of profit, these same causes have produced, and continue constantly to produce, a relative surplus population, a surplus population of workers who are not employed by this excess capital on account of the low level of exploitation of labour at which they would have to be employed, or at least on account of the low rate of profit they would yield at the given rate of exploitation.
If capital is sent abroad, this is not because it absolutely could not be employed at home. It is rather because it can be employed abroad at a higher rate of profit. But this capital is absolutely surplus capital for the employed working population and for the country in question. It exists as such alongside the relative surplus population, and this is an example of how the two things exist side by side and reciprocally condition one another.
On the other hand, the fall in the profit rate that is bound up with accumulation necessarily gives rise to a competitive struggle. Compensation for the fall in the profit rate by an increase in the mass of profit is possible only for the total social capital and for the big capitalists who are already established. New and independently operating additional capital finds no compensatory conditions of this kind ready made; it must first acquire them, and so it is the fall in the profit rate that provokes the competitive struggle between capitals, and not the reverse. This competitive struggle, moreover, is accompanied by a temporary rise in wages and a further temporary fall in the profit rate, deriving from this. The same thing is evident in the overproduction of commodities and the over-supply of markets. Since capital’s purpose is not the satisfaction of needs but the production of profit, and since it attains this purpose only by methods that determine the mass of production by reference exclusively to the yardstick of production, and not the reverse, there must be a constant tension between the restricted dimensions of consumption on the capitalist basis, and a production that is constantly striving to overcome these immanent barriers. Moreover, capital consists of commodities, and hence overproduction of capital involves overproduction of commodities. Thus we have the singular phenomenon that the same economists who deny overproduction of commodities admit overproduction of capital. If it is said that there is no general overproduction, but simply a disproportion between the various branches of production, this again means nothing more than that, within capitalist production, the proportionality of the particular branches of production presents itself as a process of passing constantly out of and into disproportionality, since the interconnection of production as a whole here forces itself on the agents of production as a blind law, and not as a law which, being grasped and therefore mastered by their combined reason, brings the productive process under their common control. Countries where the capitalist mode of production is not developed are also required to consume and produce on a level that suits the countries of the capitalist mode of production. If it is said that overproduction is only relative, this is completely correct; but the whole capitalist mode of production is precisely such a relative mode of production, whose barriers are not absolute, but only absolute for it, on its basis. How else could there be a lack of demand for those very goods that the mass of the people are short of, and how could it be that this demand has to be sought abroad, in distant markets, in order to pay the workers back home the average measure of the necessary means of subsistence? It is because it is only in this specific, capitalist context that the surplus product receives a form in which its proprietor can make it available for consumption as soon as it has been transformed back into capital for himself. If it is said, finally, that the capitalists have only to exchange their commodities among themselves and consume them, then the whole character of capitalist production is forgotten, and it is forgotten that what is involved is the valorization of capital, not its consumption. In short, all the objections raised against the obvious phenomena of overproduction (phenomena that remain quite impervious to these objections) amount to saying that the barriers to capitalist production are not barriers to production in general and are therefore also not barriers to this specific, capitalist mode of production. But the contradiction in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move.
It is not that too many means of subsistence are produced in relation to the existing population. On the contrary. Too little is produced to satisfy the mass of the population in an adequate and humane way.
Nor are too many means of production produced to employ the potential working population. On the contrary. What is produced is firstly too great a section of the population which is in fact incapable of work, which owing to its situation is dependent on the exploitation of the labour of others or on kinds of work that can only count as such within a miserable mode of production.* Secondly, not enough means of production are produced to allow the whole potential working population to work under the most productive conditions, so that their absolute labour-time is curtailed by the mass and effectiveness of the constant capital applied during this labour-time.
Periodically, however, too much is produced in the way of means of labour and means of subsistence, too much to function as means for exploiting the workers at a given rate of profit. Too many commodities are produced for the value contained in them, and the surplus-value included in this value, to be realized under the conditions of distribution given by capitalist production, and to be transformed back into new capital, i.e. it is impossible to accomplish this process without ever-recurrent explosions.
It is not that too much wealth is produced. But from time to time, too much wealth is produced in its capitalist, antagonistic forms.
The barriers to the capitalist mode of production show themselves as follows:
(1) in the way that the development of labour productivity involves a law, in the form of the falling rate of profit, that at a certain point confronts this development itself in a most hostile way and has constantly to be overcome by way of crises;
(2) in the way that it is the appropriation of unpaid labour, and the proportion between this unpaid labour and objectified labour in general – to put it in capitalist terms, profit and the proportion between this profit and the capital applied, i.e. a certain rate of profit – it is this that determines the expansion or contraction of production, instead of the proportion between production and social needs, the needs of socially developed human beings. Barriers to production, therefore, arise already at a level of expansion which appears completely inadequate from the other standpoint. Production comes to a standstill not at the point where needs are satisfied, but rather where the production and realization of profit impose this.
If the rate of profit falls, on the one hand we see exertions by capital, in that the individual capitalist drives down the individual value of his own particular commodities below their average social value, by using better methods, etc., and thus makes a surplus profit at the given market price; on the other hand we have swindling and general promotion of swindling, through desperate attempts in the way of new methods of production, new capital investments and new adventures, to secure some kind of extra profit, which will be independent of the general average and superior to it.
The rate of profit, i.e. the relative growth in capital, is particularly important for all new off-shoots of capital that organize themselves independently. And if capital formation were to fall exclusively into the hands of a few existing big capitals, for whom the mass of profit outweighs the rate, the animating fire of production would be totally extinguished. It would die out. It is the rate of profit that is the driving force in capitalist production, and nothing is produced save what can be produced at a profit. Hence the concern of the English economists over the decline in the profit rate. If Ricardo is disquieted even by the very possibility of this, that precisely shows his deep understanding of the conditions of capitalist production. What other people reproach him for, i.e. that he is unconcerned with ‘human beings’ and concentrates exclusively on the development of the productive forces when considering capitalist production – whatever sacrifices of human beings and capital values this is bought with – is precisely his significant contribution. The development of the productive forces of social labour is capital’s historic mission and justification. For that very reason, it unwittingly creates the material conditions for a higher form of production. What disturbs Ricardo is the way that the rate of profit, which is the stimulus of capitalist production and both the condition for and the driving force in accumulation, is endangered by the development of production itself. And the quantitative relation is everything here. In actual fact, the underlying reason is something deeper, about which he has no more than a suspicion. What is visible here in a purely economic manner, i.e. from the bourgeois standpoint, within the limits of capitalist understanding, from the standpoint of capitalist production itself, are its barriers, its relativity, the fact that it is not an absolute but only a historical mode of production, corresponding to a specific and limited epoch in the development of the material conditions of production.
4. SUPPLEMENTARY REMARKS
Since the development of labour productivity is far from uniform in the various branches of industry and, besides being uneven in degree, often takes place in opposite directions, it so happens that the mass of average profit (= surplus-value) is necessarily very far below the level one would expect simply from the development of productivity in the most advanced branches. And if the development of productivity in different branches of industry does not just proceed in very different proportions, but often also in opposite directions, this does not arise simply from the anarchy of competition and the specific features of the bourgeois mode of production. The productivity of labour is also tied up with natural conditions, which are often less favourable as productivity rises – as far as that depends on social conditions. We thus have a contrary movement in these different spheres: progress here, regression there. We need only consider the influence of the seasons, for example, on which the greater part of raw materials depend for their quantity, as well as the exhaustion of forests, coal and iron mines, and so on.
If the circulating part of the constant capital (raw material, etc.) steadily grows in mass together with the productivity of labour, this is not the case for the fixed capital – buildings, machinery, lighting and heating installations, and so on. Even though these become dearer in absolute terms as the physical mass of the machinery grows, they become relatively cheaper. If five workers produce ten times as many commodities as before, this does not mean that the outlay on fixed capital increases ten-fold. Even though the value of this portion of constant capital grows with the development of productivity, it is far from growing in the same ratio. We have already emphasized several times the distinction between the relationship of constant capital to variable as this is expressed in the fall in the profit rate, and the same relationship as presented – with the development of labour productivity – with respect to the individual commodity and its price.
(The value of a commodity is determined by the total labour-time contained in it, both past and living. The rise in labour productivity consists precisely in the fact that the share of living labour is reduced and that of past labour increased, but in such a way that the total sum of labour contained in the commodity declines; in other words the living labour declines by more than the past labour increases. The past labour embodied in the value of a commodity – the constant portion of capital – consists partly of the wear and tear of the fixed capital and partly of the circulating constant capital that goes completely into the commodity: raw and ancillary materials. The portion of value deriving from raw and ancillary materials must fall with the [rising] productivity of labour, since, as far as these materials go, this productivity is precisely expressed in the fact that their value has fallen. And yet it is precisely a characteristic of rising labour productivity that the fixed portion of the constant capital should experience a very sharp increase, and with this also the portion of value that it transfers to the commodities as wear and tear. For a new method of production to prove itself as a genuine advance in productivity, it must transfer a smaller additional share of value to the individual commodity for depreciation of the fixed capital than the portion of value that is deducted because less living labour is spared; it must in other words reduce the value of the commodity. And this necessity is self-evident, even if, as does happen in individual cases, an additional portion of value goes into the formation of the commodity for more or dearer raw or ancillary materials, besides the additional portion for depreciation of the fixed capital. All this additional value must be more than outweighed by the reduction in value that arises from the decrease in living labour.
This reduction in the total quantity of labour going into the commodity appears accordingly as the fundamental characteristic of a rise in labour productivity, irrespective of the social conditions under which production is carried on. In a society where the producers govern their production by a plan drawn up in advance, or even in simple commodity production, the productivity of labour is in fact invariably measured by such a standard. But what is the situation in capitalist production?
Assume that a certain branch of capitalist production produces a normal item of its commodity under the following conditions: the depreciation of the fixed capital comes to 1/2 shilling per item; 17 1/2 shillings go on raw and ancillary materials; 2 shillings on wages; and the rate of surplus-value is 100 per cent, so that surplus-value amounts to 2 shillings. The total value is then 22 shillings. We assume for the sake of simplicity that capital in this branch of production has the average social composition, so that the production price of the commodity coincides with its value and the capitalist’s profit coincides with the surplus-value he makes. The cost price of the commodity is then 1/2 + 17 1/2 + 2 = 20 shillings, and the average profit rate 2/20 = 10 per cent, with the production price of the article the same as its value of 22 shillings.
Now let us assume a machine is invented that cuts the living labour required for each item by half, while it produces a threefold increase in the share of value attributable to the depreciation of fixed capital. The matter then stands as follows: depreciation 1 1/2 shillings, raw and ancillary materials 17 1/2 shillings, wages 1 shilling and surplus-value 1 shilling, making a total of 21 shillings. The value of the commodity has now fallen by 1 shilling; the new machine has definitely raised the productivity of labour. But as far as the capitalist is concerned, the situation is thus: his cost price is now 1 1/2 shillings depreciation, 17 1/2 shillings raw and ancillary materials, and 1 shilling labour, making 20 shillings altogether, the same as before. Since the profit rate is not altered simply by the introduction of this new machine, he keeps 10 per cent on top of his cost price for himself, making 2 shillings. The price of production is therefore unchanged at 22 shillings, though this is now 1 shilling above the value. For a society producing under capitalist conditions, the commodity has not become cheaper and the new machine is not an improvement. The capitalist, therefore, has no interest in introducing the new machine. And since introducing it would also make his old machinery simply worthless, when it has not yet worn out, transforming it into nothing more than scrap-iron, so that he would actually suffer a positive loss, he refrains from what would be, for him, a piece of utopian stupidity.
For capital, therefore, the law of increased productivity of labour is not unconditionally valid. For capital, this productivity is not raised simply because more living labour in general is spared than is added in past labour, but only if more of the paid part of living labour is spared, as we have already indicated in brief in Volume 1, Chapter 15, pp. 515 ff. At this point the capitalist mode of production falls into a new contradiction. Its historical mission is ruthlessly to expand the productivity of human labour, to drive it onwards in geometrical progression. It is untrue to its mission as soon as it starts to inhibit the development of productivity, as it does here. It thereby simply shows once more that it is becoming senile and has further and further outlived its epoch.)37
In competition, the rising minimum amount of capital needed for the successful pursuit of an independent industrial business takes the following form, as productivity increases. Once the new and more expensive equipment has been generally introduced, smaller capitals are in future excluded from this line of business. Only when mechanical inventions in the various spheres of production are in their infancy can smaller capitals function independently. Very large undertakings, on the other hand, where the proportion of constant capital is extraordinarily high, such as railways, do not yield the average profit rate, but only a portion of this, an interest. If this were not so the general rate of profit would fall still lower. And yet a great accumulation of capital in the form of shares finds a direct field of employment here.
Growth of capital, i.e. accumulation of capital, involves a reduction in the rate of profit only in so far as this growth brings with it those changes in the ratio between the organic components of capital that were considered above. Yet despite the constant and daily transformations in the mode of production, a greater or smaller part of this total capital, now this, now that, continues to accumulate for a certain period of time on the basis of a given average ratio of these components, so that its growth does not involve any organic change and is thus no cause for a fall in the rate of profit. This constant enlargement of the capital, and therefore also an expansion in production on the basis of the old methods which goes smoothly forward while new methods are already introduced alongside, is a further reason why the rate of profit does not decline in the same measure as the total social capital grows.
The increase in the absolute number of workers, despite the relative decline in the variable capital laid out on wages, does not take place in all branches of production and does not take place evenly in the branches where it does. In agriculture, the decline in the element of living labour may be absolute.
It is simply the needs of the capitalist mode of production, moreover, that lead the number of wage-labourers to increase absolutely, despite this relative decline. As far as this mode of production is concerned, labour-power is superfluous the moment it is no longer necessary to occupy it for 12 to 15 hours per day. A development in the productive forces that would reduce the absolute number of workers, and actuallyenable the whole nation to accomplish its entire production in a shorter period of time, would produce a revolution, since it would put the majority of the population out of action. Here we have once again the characteristic barrier to capitalist production, and we see how this is in no way an absolute form for the development of the productive forces and the creation of wealth, but rather comes into conflict with this at a certain point in its development. One aspect of this conflict is presented by the periodic crises that arise when one or another section of the working population is made superfluous in its old employment. The barrier to capitalist production is the surplus time of the workers. The absolute spare time that the society gains is immaterial to capitalist production. The development of productivity is only important to it in so far as it increases the surplus labour-time of the working class and does not just reduce the labour-time needed for material production in general; in this way it moves in a contradiction.
We have seen how the growing accumulation of capital involves its growing concentration. Thus the power of capital grows, in other words the autonomy of the social conditions of production, as personified by the capitalist, is asserted more and more as against the actual producers. Capital shows itself more and more to be a social power, with the capitalist as its functionary – a power that no longer stands in any possible kind of relationship to what the work of one particular individual can create, but an alienated social power which has gained an autonomous position and confronts society as a thing, and as the power that the capitalist has through this thing. The contradiction between the general social power into which capital has developed and the private power of the individual capitalists over these social conditions of production develops ever more blatantly, while this development also contains the solution to this situation, in that it simultaneously raises the conditions of production into general, communal, social conditions. This transformation is brought about by the development of the productive forces under capitalist production and by the manner and form in which this development is accomplished.
*
No capitalist voluntarily applies a new method of production, no matter how much more productive it may be or how much it might raise the rate of surplus-value, if it reduces the rate of profit. But every new method of production of this kind makes commodities cheaper. At first, therefore, he can sell them above their price of production, perhaps above their value. He pockets the difference between their costs of production and the market price of the other commodities, which are produced at higher production costs. This is possible because the average socially necessary labour-time required to produce these latter commodities is greater than the labour-time required with the new method of production. His production procedure is ahead of the social average. But competition makes the new procedure universal and subjects it to the general law. A fall in the profit rate then ensues – firstly perhaps in this sphere of production, and subsequently equalized with the others – a fall that is completely independent of the capitalists’ will.
It should also be noted at this point that the same law prevails even in those spheres of production whose products do not enter either directly or indirectly into the workers’ consumption, or into the conditions of production of their means of subsistence; i.e. it prevails even in those spheres of production in which no cheapening of commodities can increase relative surplus-value and make labour-power cheaper. (In fact, a cheapening of constant capital in any of these branches may increase the profit rate, if the level of exploitation of labour remains the same.) As soon as the new mode of production begins to spread, giving actual proof that these commodities can be produced more cheaply, then those capitalists who operate under the old conditions of production must sell their product below its full price of production; the value of this commodity has fallen, so that they need more labour-time to produce it than is socially necessary. In short, and this appears as the effect of competition, they must also introduce the new mode of production which reduces the ratio of variable capital to constant.
The application of machinery reduces the price of the commodities produced with that machinery owing to various factors, which can always be reduced to the decline in the quantity of labour absorbed by each individual commodity; but in addition to this there is the decline in the portion of value that goes into the individual commodity as the depreciation element of the machinery. The slower the machinery’s depreciation, the more commodities it is distributed over, the more living labour it replaces before the day when its reproduction falls due. In both cases the quantity and value of the fixed constant capital are increased as against the variable.
‘All other things being equal, the power of a nation to save from its profits varies with the rate of profits, is great when they are high, less, when low; but as the rate of profit declines, all other things do not remain equal… A low rate of profit is ordinarily accompanied by a rapid rate of accumulation, relatively to the numbers of the people, as in England… a high rate of profit by a lower rate of accumulation, relatively to the numbers of the people.’ Examples: Poland, Russia, India, etc. (Richard Jones, An Introductory Lecture on Political Economy, London, 1833, pp. 50 ff.)*
Jones is right to stress that, despite the falling rate of profit, the ‘inducements and faculties to accumulate’ increase. Firstly, on account of the growing relative surplus population. Secondly, because as the productivity of labour grows, so does the mass of use-values represented by the same exchange-value, i.e. the material elements of capital. Thirdly, because of the increasing diversity of branches of production. Fourthly, through the development of the credit system, joint-stock companies, etc., and the ease with which the possessor of money can now transform it into capital without having to become an industrial capitalist. Fifthly, the growth in needs and the desire for enrichment. Sixthly, the growing mass of investment of fixed capital, and so on.
*
Three cardinal facts about capitalist production:
(1) The concentration of the means of production in a few hands, which means that they cease to appear as the property of the immediate workers and are transformed on the contrary into social powers of production. Even if this is at first as the private property of capitalists. The latter are trustees of bourgeois society, though they pocket all the fruits of this trusteeship.
(2) The organization of labour itself as social labour: through cooperation, division of labour and the association of labour with natural science.
On both these counts the capitalist mode of production abolishes private property and private labour, even if in antithetical forms.
(3) Establishment of the world market.
The tremendous productive power, in proportion to the population, which is developed within the capitalist mode of production, and – even if not to the same degree – the growth in capital values (not only in their material substratum), these growing far more quickly than the population, contradicts the basis on behalf of which this immense productive power operates, since this basis becomes ever narrower in relation to the growth of wealth; and it also contradicts the conditions of valorization of this swelling capital. Hence crises.