Chapter 50: The Illusion Created by Competition

(1) A value component that replaces constant capital or represents labour already past, which was spent in the form of means of production for the production of the commodity; in other words, the value or price at which these means of production went into the commodity’s production process. We are referring here not to the individual commodity but always to commodity capital, i.e. the form which the product of capital takes over a definite section of time, e.g. annually, and of which the individual commodity simply forms one element, though its value also breaks down into the same analogous components.

(2) The value component of variable capital that measures the income of the worker and is transformed for him into wages, wages therefore which the worker has reproduced in this variable component; in other words the value component which represents the paid portion of the labour freshly added to the first, constant, portion in the production of the commodity.

(3) The surplus-value, i.e. the value component of the commodity product in which the unpaid labour or surplus labour is expressed. This last value component again assumes those independent forms that are at the same time forms of revenue: the forms of profit on capital (interest on capital as such, and profit of enterprise on capital as functioning capital), and ground-rent, which falls to the owner of the land which is playing its part in the production process.

Components (2) and (3), i.e. the value component that always assumes the revenue forms of wages (this only after it has previously passed through the form of variable capital), profit and rent, is distinguished from the constant component (1) by the fact that it contains the whole of the value in which there is objectified the labour freshly added to that constant part, the means of production of the commodity. If we leave aside the constant component of value, it is correct to say that the value of a commodity, in so far as this represents freshly added labour, is always reducible to three elements, wages, profit and rent, which constitute the three forms of revenue,55 while the respective value magnitudes, i.e. the aliquot parts that these form of the total value, are determined by different, specific laws that have already been developed. It would be wrong however to say that the value of wages, the rate of profit and the rate of rent are independent constituent elements of value, with the value of the commodity, minus its constant component, arising from their combination; in other words, it would be wrong to say that these form constituent components of commodity value or of the price of production.⁵⁶

The distinction can readily be seen.

Assume that the value produced by a capital of 500 is 400_c + 100_ν + 150_s = 650; the 150_s breaks down again into 75 profit + 75 rent. We shall further assume, in order to avoid needless difficulties, that this capital is of average composition, so that its production price and its value coincide; which is the case whenever the product of this individual capital can be treated as the product of a part of the total capital corresponding to it in size.

In this case, wages, measured by the variable capital, make up 20 per cent of the capital advanced; the surplus-value, reckoned on the total capital, is 30 per cent, i.e. 15 per cent profit and 15 per cent rent. The total value component of the commodity in which the freshly added labour is objectified is 100_ν + 150_s = 250. Its total amount is independent of its division into wages, profit and rent. The proportionate relationship between these components shows that the labour-power which was paid for with 100 in money, say £100, has supplied a quantum of labour expressed in a sum of money of £250. We can see from this that the worker has performed 1 1/2 times as much surplus labour as he has labour for himself. If the working day were 10 hours, he would be working 4 hours for himself and 6 hours for the capitalist. The labour of the workers who are paid £100 is expressed therefore in a money value of £250. Apart from this value of £250, there is nothing left to be shared between worker and capitalist, or capitalist and landowner. It is the total value freshly added to the value of the means of production, which was £400. The commodity value of £250 thus produced, and determined by the amount of labour objectified in it, sets the limit to the dividends that worker, capitalist and landlord can draw from this value in the form of revenue – wages, profit and rent.

Let us assume that a capital of the same organic composition, i.e. the same proportion between living labour-power applied and constant capital set in motion, is forced to pay £150 instead of £100 for the same labour-power that sets in motion the constant capital of £400. Let us further assume that profit and rent share the surplus-value in the same proportions. Since it is assumed that this variable capital of £150 sets the same amount of labour in motion as £100 did before, the value newly produced would still be £250 and the value of the total product £650, but we would now have 400_c + 150_ν + 100_s; and this 100_s might break down into 45 profit plus 55 rent. The proportion in which the total value produced is divided into wages, profit and rent would be very different; so too would be the total capital advanced, even though it only sets in motion the same total amount of labour. Wages would make up 27 3/11 per cent of the capital advanced, profit 8 2/11 per cent, and rent 10 per cent on this capital, so that the total surplus-value would be somewhat over 18 per cent.

The increase in wages would affect the unpaid part of the total labour, and with this the surplus-value. The worker would have worked 6 hours of the 10-hour working day for himself and only 4 hours for the capitalist. The proportions of profit and rent would also be different, and the diminished surplus-value would be divided in a changed proportion between capitalist and landowner. Finally, since the value of the constant capital has remained unaltered while the value of the variable capital advanced has risen, the diminished surplus-value would be expressed in a still further reduced gross rate of profit, by which we mean here the ratio of the total surplus-value to the total capital advanced.

These changes in the value of wages, the rate of profit and the rate of rent, whatever the effect of the laws governing the proportions between these parts, could move only within the limits set by the newly created commodity value of 250. The only exception would be if rent were based on a monopoly price. This would in no way affect the law, but simply complicate our treatment of it. For if we are dealing in this case simply with the product itself, it is only the division of the surplus-value that would vary; while if we are considering its relative value vis-à-vis other commodities, the only difference would be that one part of the surplus-value would be transferred from these to our particular commodity.

To recapitulate:

Value of the product	New value	Rate of surplus value	Gross rate of profit
First case 400c + 100v + 150b = 650	250	150%	30%
Second case 400c + 150v + 1005 = 650	250	66 2/3%	18 2/11%

The surplus-value, firstly, falls by a third of its former amnont, from 150 to 100. The rate of profit falls by somewhat more than a third, from 30 per cent to around 18 per cent, since the diminished surplus-value has to be reckoned against an increased total capital advanced. But it in no way falls in the same proportion as the rate of surplus-value. This falls from 150/100 to 100/150, i.e. from 150 per cent to 66⅔ per cent, whereas the rate of profit falls only from 150/500 to 100/550, or from 30 per cent to 18 2/11 per cent. Thus the rate of profit falls proportionately more than the mass of surplus-value, though less than the rate of surplus-value. It is also evident that the values and quantities produced remain the same if the same amount of labour is still applied as before, even though the capital advanced has expanded as a result of the increase in its variable component. This expansion of the capital advanced would also be very significant for the capitalist opening a new business. Taking reproduction as a whole, however, an increase in variable capital means nothing more than that a greater part of the value newly created by the freshly added labour is transformed into wages, and hence first of all into variable capital, instead of into surplus-value and surplus product. The value of the product thus remains the same, since it is defined on the one hand by the constant capital value of 400 and on the other by the figure of 250 which represents the freshly added labour. Both of these have remained unaltered. This product, if it itself went back into constant capital, would still represent the same amount of use-value within the same amount of value; i.e. the same amount of elements of constant capital would keep the same value. The situation would be different if wages rose, not because the worker kept a greater part of his own labour, but rather because the productivity of labour declined and he kept a greater part of his own labour as a result. In this case, the total value in which the same labour was expressed, i.e. paid and unpaid, would remain the same; but this quantity of labour would be expressed in a diminished product, i.e. the price of each aliquot part of the product would rise, since each part represented more labour. The increased wages of 150 would represent a product no greater than 100 did before; the diminished surplus-value of 100 would now represent only two-thirds the former product, 66⅔ per cent of the mass of use-values that were previously expressed in 100. In this case, the constant capital would also become more expensive, in so far as this product went into it. But this would not be the result of the increase in wages, the wage increase would rather result from the fact that the commodity had become more expensive and that the productivity of the same amount of labour had diminished. The illusion arises that the rise in wages has made the product dearer; but here this is not cause but consequence of a change in the commodity’s value, resulting from the diminished productivity of labour.

In otherwise identical circumstances, i.e. where the same amount of labour is applied and still expressed in 250, then if the value of the means of production it applied rises or falls, the value of the same volume of products will rise or fall by the same amount. 450_c + 100_ν + 150_s gives a product value of 700 for the value of the same amount of products, while 350_c + 100_ν + 150_s gives only 600, instead of 650 as before. Thus, if the capital advanced for putting the same amount of labour in motion grows or declines, the value of the product rises or falls, conditions being otherwise identical, as long as the increase or decrease in the capital advanced derives from a change in the value magnitude of the constant capital component. It remains unaffected, on the other hand, if the increase or decrease in the capital advanced derives from a change in the value magnitude of the variable capital component, with labour productivity remaining the same. As far as constant capital is concerned, the increase or decrease in its value is not compensated for by any movement in the opposite direction. In the case of variable capital, assuming that the productivity of labour remains the same, the increase or decrease in its value is compensated for by a movement in the opposite direction on the part of surplus-value, so that there is no change in the value of the variable capital plus the surplus-value, i.e. the value freshly added to the means of production by labour and expressed in the product.

If the increase or decrease in the variable capital or wages is the result of a rise or fall in commodity prices, i.e. of a decrease or increase in the productivity of the labour applied in that capital investment, this does affect the value of the product. But in this case the rise or fall in wages is not the cause, but simply the effect.

If in the above example, where we assume that the constant capital remains 400_c, the change from 100_ν + 150_s to 150_ν + 100_s, i.e. the rise in variable capital, were instead the result of a decline in labour productivity not in this particular branch, e.g. cotton-spinning, but say in agriculture, which provides the workers’ sustenance, i.e. if it were the result of an increase in the price of these provisions, the value of the product would remain unchanged. The value of 650 would still be expressed in the same amount of cotton yarn as before.

It also emerges from what has been argued so far that, if the reduction in the outlay on constant capital is the effect of economy, etc. in branches of production whose products go into the workers’ consumption, this could lead to a reduction in wages just as could a direct increase in the productivity of the labour applied, because it would cheapen the workers’ means of subsistence and hence increase surplus-value. In this case the profit rate would rise for two reasons: on the one hand because the value of the constant capital would have declined and on the other because surplus-value would have increased. In considering the transformation of surplus-value into profit we assumed that wages did not fall but remained constant, since we were concerned there to investigate the fluctuations in the rate of profit independently of changes in the rate of surplus-value. The laws developed there, however, are general ones, and apply also for capital investments where the products do not go into the consumption of the workers, so that changes in the value of the product are without influence on wages.

Finally, if the equalization of surplus-value to average profit in the various spheres of production comes upon obstacles in the form of artificial or natural monopolies, and particularly the monopoly of landed property, so that a monopoly price becomes possible, above both the price of production and value of the commodities this monopoly affects, this does not mean that the limits fixed by commodity value are abolished. A monopoly price for certain commodities simply transfers a portion of the profit made by the other commodity producers to the commodities with the monopoly price. Indirectly, there is a local disturbance in the distribution of surplus-value among the various spheres of production, but this leaves unaffected the limit of the surplus-value itself. If the commodity with the monopoly price is part of the workers’ necessary consumption, it increases wages and thereby reduces surplus-value, as long as the workers continue to receive the value of their labour-power. It could press wages down below the value of labour-power, but only if they previously stood above the physical minimum. In this case, the monopoly price is paid by deduction from real wages (i.e. from the amount of use-values that the worker receives for the same amount of labour) and from the profit of other capitalists. The limits within which monopoly price affects the normal regulation of commodity prices are firmly determined and can be precisely calculated.

Just as the division of the commodity value newly added and completely reducible to revenue finds its given and governing limits in the proportion between necessary and surplus labour, wages and surplus-value, so the division of this surplus-value itself into profit and ground-rent finds its limits in the laws governing the equalization of the profit rate. With the division into interest and profit of enterprise, the average profit itself sets the limit for the two together. It supplies the given amount of value they have to share between them, and this is all they have to share. The specific ratio of this division is accidental here, i.e. it is determined exclusively by relations of competition. Whereas in other cases market prices cease to diverge from the average prices which govern them when demand and supply are matching, and the effect of competition is abolished, here this is the only determining factor. And why? Because the same factor of production, capital, has to share the portion of surplus-value accruing to it between two owners of this same production factor. But if the division of average profit has in this case no determining limit as imposed by the laws we have developed, that does not abolish this limit as a portion of commodity value; as little as when two partners in a company share their profit unequally, because of different external circumstances, this in any way affects the limits of this profit.

Thus if the portion of commodity value representing labour freshly added to the value of the means of production breaks down into different portions, which assume mutually independent shapes in the form of revenues, this does not in any way mean that wages, profit and ground-rent are now to be considered as the constituent elements, with the governing price (natural price, prix nécessaire) of commodities itself arising from their combination or sum; so that it would not be the commodity value, after deduction of the constant value component, that was the original unity and breaks down into these three components, but the price of each of these three components was rather determined independently, and the commodity’s price formed only from the addition of these three independent magnitudes. In actual fact commodity value is the quantitative premise, the sum total value of wages, profit and rent, whatever their relative mutual magnitudes might be. In the false conception considered here, however, wages, profit and rent are three independent value magnitudes, whose total produces, limits and determines the magnitude of commodity value.

It is evident from the start that if wages, profit and rent constituted the price of commodities, this would necessarily hold good both for the constant portion of commodity value and for the other portion in which variable capital and surplus-value are represented. This constant part can therefore be left out of consideration here, since the value of the commodities it consists of would likewise break down into the sum of the values of wages, profit and rent. As already noted, this view also involves a denial of the existence of such a constant value component.

It is also evident that any concept of value would inevitably disappear here. All that was left would be the idea of price, in the sense that a certain amount of money is paid to the owners of labour-power, capital and land. But what is money? Money is not a thing but a particular form of value, so that it again presupposes value. What is said therefore is that a certain amount of gold or silver is paid for those elements of production, or that they are mentally equated with this amount. But gold and silver are themselves commodities like all others (and enlightened economics is proud of this recognition). The price of gold and silver is thus also determined by wages, profit and rent. So we cannot determine wages, profit and rent by equating them with a certain quantity of gold and silver, for the value of this gold and silver, as the equivalent in which they are to be assessed, is precisely supposed to be determined by wages, profit and rent independently of gold and silver, i.e. independently of the value of any commodity, which is precisely the product of those three. To say that the value of wages, profit and rent consists in their being equal to a certain amount of gold and silver is thus simply to say that they are equal to a certain amount of wages, profit and rent.

Let us first take wages. For even in this view, it is necessary to start from labour. How then is the governing price of wages determined, the price around which the market price oscillates?

By the demand for and supply of labour-power, it will be said. But what demand for labour-power are we talking about? Capital’s demand. The demand for labour is thus equal to the supply of capital. To speak of the supply of capital, we must first of all know what capital is. What does capital consist of? Let us take its simplest manifestation: money and commodities. Money is simply a form of commodity. So it consists of commodities. The value of commodities, however, is determined in the first instance, on the present assumption, by the price of the labour producing them, wages. Wages are presupposed here, and treated as a constituent element of commodity price. This price must then be determined by the proportion of labour on offer to capital. Capital’s demand for labour is equal to the supply of capital. The supply of capital is equal to the supply of a sum of commodities of a given price, and this price is governed in the first instance by the price of labour, the price of labour being equal in turn to the portion of commodity price which constitutes variable capital and is handed to the worker in exchange for his labour; the price of those commodities which make up variable capital, is again determined by the prices of wages, profit and rent. The determination of wages cannot start from capital, for wages are themselves a factor entering into the determination of the value of capital.

Moreover, it is no use bringing in competition. Competition makes the market prices of labour rise or fall. But assume that the demand for and supply of labour match one another. How are wages determined then? By competition? But we have precisely assumed that competition ceases to be a determinant, that its effect is abolished by the achievement of equilibrium between its two counteracting forces. And we are precisely out to find the natural price of wages, i.e. a price of labour which is not governed by competition, but on the contrary is what governs competition.

Nothing remains, then, but to determine the necessary price of labour by reference to the worker’s necessary means of subsistence. But these means of subsistence are commodities, with a price. The price of labour is thus determined by the price of the necessary means of subsistence, and the price of the means of subsistence, like that of all other commodities, is determined in the first place by the price of labour. So the price of labour is determined by itself. In other words, we do not know how the price of labour is determined. Labour always has a price here, since it is considered as a commodity. Thus in order to speak of the price of labour, we must know what price in general is. But this procedure does not tell us anything about price in general.

Let us assume, however, that the necessary price of labour is determined in this delightful way. What about the average profit, then, the profit of any capital in normal conditions, which forms the second element of commodity price? The average profit must be determined by an average rate of profit; how is this determined? By competition between the capitalists? But this competition already assumes the existence of profit. It assumes different rates of profit and hence different profits, whether in the same branch of production or in different ones. Competition can act on the profit rate only by acting on the price of commodities. Competition can only bring it about that producers within the same sphere of production sell their commodities at the same price, and that in different spheres of production they sell their commodities at prices that give them the same profit, the same proportionate surcharge to the price of the commodity that is already partly determined by wages. Hence competition can only even out inequalities in the rate of profit. In order to even out unequal rates of profit, profit must already exist as an element of commodity price. Competition does not create it from nothing. It makes it higher or lower, but it does not create the level that is present as soon as this equalization has taken place. And in so far as we speak of a necessary rate of profit, we precisely want to know the profit rate independently of the movement of competition, we want to know the rate which actually governs competition. The average rate of profit appears when the forces of the competing capitalists balance one another. Competition can produce this balance, but not the rate of profit which appears when the balance is given. When this balance is brought about, why is the general rate of profit now 10 per cent or 20 per cent or 100 per cent? On account of competition? But on the contrary, competition has abolished the causes that led to departures from the 10 per cent or 20 per cent or 100 per cent. It has brought about commodity prices at which each capital yields the same profit in proportion to its size. But the level of this profit itself is independent of competition. All competition does is persistently reduce all divergences to this level. One person competes with another, and competition forces him to sell his commodity at the same price as the next man. But why is this price 10 or 20 or 100?

There is nothing left for it, then, but to declare that the rate of profit and hence profit itself is a surcharge, determined in an incomprehensible way, on the partial price of a commodity as determined by wages. The only thing competition tells us is that this rate of profit must be a given level. But we already knew that when we brought in the general rate of profit and the ‘necessary price’.

It is quite unnecessary to wade through this absurd process again for ground-rent. We can already see that if it is carried through in any consistent way, it makes profit and rent appear as mere surcharges, determined by incomprehensible laws, on top of a commodity price determined in the first place by wages. Competition, in other words, is burdened with explaining all the economists’ irrationalities, whereas it is supposed to be the economists who explain competition.

If we ignore the fantastic idea of a profit and rent created by circulation, i.e. price components arising from sale – and the circulation sphere can never yield anything that was not previously put into it – the matter simply comes down to the following.

Say that the price of a commodity as determined by wages is 100, the rate of profit 10 per cent on the wages paid and the rent 15 per cent on wages. The commodity price as determined by the sum of wages, profit and rent is then 125. The surcharge of 25 cannot derive from the sale of the commodity. For if everyone who sells to someone else sells what cost 100 at 125, it is the same thing as if they had all sold at 100. The operation must therefore be considered independently of the circulation process.

If the three elements of the commodity price are divided within the commodity itself, and this commodity now costs 125 – and it makes no difference here if the capitalist first sells at 125 and only later pays the worker 100, himself 10 and the landlord 15–then the worker receives 4/5, = 100, of the value and the product. The capitalist receives 2/25 of the value and the product and the landlord 3/25. Since the capitalist sells at 125 instead of 100, he gives the worker only 4/5 of the product in which his labour is expressed. It would be the same thing therefore if he gave the worker 80 and kept back 20, with 8 of this accruing to him and 12 to the landlord. He has then sold the commodity at its value, since in actual fact the price surcharges are independent of the commodity’s value, which in this assumption is determined by the value of wages. It emerges by way of this detour, therefore, that the term ‘wages’ in this conception, = 100, is equal to the value of the product, i.e. to the sum of money in which this particular amount of labour is expressed; but that this value is different again from real wages, and hence leaves a surplus. It is simply that this is now brought about by a nominal surcharge to the price. Thus if wages were 110 instead of 100, profit would have to be 11 and ground-rent 16 1/2, i.e. the price of the commodity would be 137 1/2. This would leave the proportions quite unaltered. But since the division is always obtained by a nominal surcharge of a certain percentage on wages, the price rises and falls with wages. First wages are posited as equal to the value of the commodity, and then they are again divorced from the value of the commodity. In fact, however, it all comes down, by way of this irrational detour, to the determination of the value of the commodity by the amount of labour contained in it, while the value of wages is determined by the price of the necessary means of subsistence, and the excess of the value over and above wages forms profit and rent.

The dissolution of commodity values after the deduction of the value of the means of production used up in producing them, the dissolution of this given quantum of labour objectified in the commodity product into three component parts, which take the shape of autonomous and mutually independent forms of revenue, namely wages, profit and ground-rent – this dissolution is represented on the immediately visible surface of capitalist production, and hence in the minds of the agents trapped within it, in a distorted way.

Let the total value of some commodity or other be 300, of which 200 is the value of the means of production or elements of constant capital used up to produce it. 100 then remains as the sum of new value added to this commodity in its production process. This new value of 100 is all that is available for division into the three forms of revenue. If we call wages x, profit y and ground-rent z, the sum of x + y + z, in our present case, is always = 100. In the minds of the industrialists, merchants and bankers, and the vulgar economists as well, things proceed quite differently. For them it is not the commodity value that is given as 100, after the deduction of the value of the means of production used up in it, this 100 then being divided up into x, y and z. Instead, the price of the commodity is simply put together out of the value magnitudes of wages, profit and rent, which are determined independently of the commodity’s value and of one another; x, y and z are each given and determined independently, and it is only from the sum of these quantities, which may be greater or less than 100, that the magnitude of the commodity’s own value results. It results then from the addition of these constituent elements. This quid pro quo is necessary:

Firstly, because the commodity’s value components confront one another as independent revenues, which are related as such to three completely separate agents of production, labour, capital and the earth, and appear therefore to arise from these. Property in labour-power, capital and the earth is the reason why these different value components of the commodity fall to their respective proprietors, transforming them therefore into their revenues. But value does not arise from a transformation into revenue, it must rather be already in existence before it can be transformed into revenue and assume this form. The opposite appearance is necessarily reinforced all the more in as much as the relative size of these three parts is determined by different kinds of laws, their relationship with the value of the commodities, and limitation by this, being also in no way indicated on the surface.

Secondly, we have seen how a general rise or fall in wages, by causing the general rate of profit to move in the opposite direction, other things being equal, alters the production prices of various commodities, raising some and making others fall, depending on the average composition of capital in the sphere of production in question. In some spheres of production, therefore, experience shows that the average commodity price rises because wages have risen and falls because they have fallen. What is not ‘experienced’ is the secret regulation of these changes by a commodity value independent of wages. If the rise in wages is local, on the other hand, taking place only in particular spheres of production as a result of specific circumstances, there may then be a corresponding nominal rise in the price of these commodities. This rise in the relative value of one kind of commodity, in relation to others for which wages remain unchanged, is then simply a reaction to the local disturbance of the uniform distribution of surplus-value over the various spheres of production, a means of adjusting the particular rates of profit to the general rate. ‘Experience’ here again shows the determination of the price by wages. What is experienced in both of these cases is how wages have determined commodity prices. What is not experienced is the hidden basis of this relationship. Moreover, the average price of labour, i.e. the value of labour-power, is determined by the production price of the necessary means of subsistence. If this rises or falls, so does the price of labour. Thus what is experienced here is the existence of a relationship between wages and the price of commodities; but the cause may present itself as effect, and the effect as cause, as is also the case with the movement of market prices, where a rise in wages above their average corresponds to the rise in market prices above prices of production characteristic of periods of prosperity, while the subsequent fall in wages below their average corresponds to the fall in market prices below prices of production. Given the link between production prices and commodity values and leaving aside the oscillating movements of market prices, experience ought always on the face of it to confirm that when wages rise the profit rate falls, and vice versa. But we have seen how the profit rate may be affected independently of wage movements, by movements in the value of constant capital; so that wages and rate of profit may rise or fall in the same direction, instead of in opposite ones. If the rate of surplus-value directly coincided with the rate of profit, this would not be possible. Even if wages rise as a result of the increased price of the means of subsistence, the profit rate can remain the same, or even rise, as a result of greater labour intensity or the prolongation of the working day. All these experiences confirm the illusion produced by the independent, distorted form of the value components, as if the value of commodities was determined either by wages alone, or by wages and profit together. As soon as this seems to be the case for wages, i.e. as soon as the price of labour seems to coincide with the value labour creates, it is self-evidently the case also for profit and rent. Their prices, i.e. their money expressions, must then be governed independently of labour and the value it produces.

Thirdly, let us assume that the values of commodities, or the prices of production that are only apparently independent of these, always coincide directly at the phenomenal level with market prices, instead of simply operating as the governing average prices through continuous compensations for the constant fluctuations in market prices. Let us further assume that reproduction always takes place under the same constant conditions, i.e. that the productivity of labour remains constant for all elements of capital. Let us finally assume that the value component of the commodity product that is formed in each sphere of production by adding a new quantum of labour, i.e. a newly produced value, to the value of the means of production, breaks down always in the same proportions into wages, profit and rent, so that the wages actually paid, the profit actually realized and the actual rent always coincide directly with the value of the labour-power, with the portion of the total surplus-value accruing to each independently functioning portion of the total capital by virtue of the average rate of profit and with the limits to which ground-rent is normally confined on this basis. Let us assume in other words that the distribution of the social value product and the regulation of production prices takes place on the capitalist basis, but in the absence of competition.

Under these assumptions, then, with the values of commodities being and appearing constant, with the value component of the commodity product that is reducible to revenue forming a constant quantity and always presenting itself as such, and finally with this given and constant portion of value always breaking down in the same proportions into wages, profit and rent –even on these assumptions, the real movement would necessarily appear in a distorted form: not as the dissolution of a value magnitude given in advance into three parts which assume the mutually independent forms of revenue, but conversely as the formation of this value magnitude from the sum of the component elements of wages, profit and ground-rent, taken as determined independently and separately. The reason why this illusion would necessarily arise is that in the real movement of individual capitals and their commodity product it is not the value of commodities that appears the premise of its own dissolution but, on the contrary, the components into which it can be dissolved function as the premises for a commodity’s value. We saw at the outset that the cost price of a commodity appears to each capitalist as a given quantity and constantly presents itself as such in the actual production process. But the cost price is equal to the value of the constant capital, the means of production advanced, plus the value of labour-power, although this presents itself to the agents of production in the irrational form of the price of labour, so that wages too appear as the worker’s revenue. The average price of labour is a given magnitude, since the value of labour-power, like that of any other commodity, is determined by the labour-time necessary for its reproduction. But as far as the component of commodity value that resolves into wages goes, this does not arise from the fact that it assumes the form of wages – that the capitalist advances to the worker his share in his own product in the phenomenal form of wages – but rather from the fact that the worker produces an equivalent corresponding to his wages, i.e. that one part of his daily or yearly labour produces the value contained in the price of his labour-power. Wages, however, are stipulated by contract before the value equivalent corresponding to them is produced. And since they are a price element whose magnitude is given before the commodity and its value are produced, a component of the cost price, wages appear not as a part separated off from the total value of the commodity in an independent form, but rather the reverse, as a given magnitude that determines the total value in advance, i.e. a formative element of price or value. Average profit plays a role in the price of production similar to that played by wages in the commodity’s cost price, for the price of production is equal to the cost price plus the average profit on the capital advanced. This average profit has a practical bearing in the mind and accounting of the capitalist himself, as a regulating element, not only in so far as it determines the transfer of capital from one sphere of investment into another, but also for all sales and contracts involved in a reproduction process extending over a prolonged period. But in so far as it has this practical bearing, it is a magnitude fixed in advance, which really is independent of the value and surplus-value produced in any particular sphere of production, and even more independent, accordingly, of each individual capital investment in any of these spheres. Instead of being the result of a division in value, it rather presents the appearance of a magnitude independent of the value of the commodity product, given in advance in the commodity’s production process and itself determining the average price of the commodities; it presents the appearance in other words of a formative element of value. Surplus-value, moreover, as a result of the separation of its various parts into forms which are completely independent of one another, appears as a premise of commodity value formation in a far more concrete form. One part of the average profit, in the form of interest, confronts the functioning capitalist from an independent position as an element already presupposed in the production of commodities and their value. Much as the amount of interest may fluctuate, it is at any given moment and for any single capitalist a given magnitude, which for him, the individual capitalist, enters into the cost price of the commodities he produces. The same can be said of ground-rent, in the form of the contractually fixed lease-money paid by the agricultural capitalist, or, in the case of other entrepreneurs, the rent for the space they need for their businesses. These parts into which surplus-value can be resolved, therefore, since as elements of the cost price they are given for the individual capitalist, appear upside-down, as formative elements of surplus-value; forming one portion of commodity price in the way that wages form the other. The secret reason why these products of the dissolution of commodity value constantly appear as the premises of value formation itself is simply that the capitalist mode of production, like every other, constantly reproduces not only the material product but also the socio-economic relations, the formal economic determinants of its formation. Its result thus constantly appears as its premise, and its premises as its results. And it is this constant reproduction of the same relationships which the individual capitalist anticipates as self-evident, as an indubitable fact. As long as capitalist production continues, one part of the labour newly added is constantly resolved into wages, another into profit (interest and profit of enterprise) and the third into rent. This is assumed in the contracts between the proprietors of the various different agents of production, and this assumption is correct, however much the relative quantitative proportions may fluctuate in each individual case. The specific shape in which the value components confront one another is presupposed because it is constantly reproduced, and it is constantly reproduced because it is constantly presupposed.

But experience and appearance also show that market prices – and it is only through their influence that the value determination actually becomes apparent to the capitalist – are in no way dependent on these anticipations as far as their level goes; they are not affected by whether interest or rent is fixed high or low. Market prices are constantly changing, and their average for longer periods is precisely what gives rise to the respective averages of wages, profit and rent, as the constant quantities that therefore ultimately govern market prices.

It seems very simple, on the other hand, to reflect that if wages, profit and rent are formative elements of value, because they appear as presupposed in value production, and are presupposed for the individual capitalist in the cost price and price of production, then the constant capital component, whose value is given in the production of any commodity, is also a value-forming element. But the constant capital component is nothing but a sum of commodities and hence commodity values. We would thus get the absurd tautology that commodity value forms and causes commodity value.

If the capitalist had any interest at all in considering this – and what he considers as a capitalist is determined exclusively by his own self-interest and the resulting motives – he is taught by experience that the product he himself produces goes into other spheres of production as a constant capital component, while products from these other spheres go into his own product as constant capital components. Since for him, therefore, as far as his new production goes, additional value seems to be formed by the magnitudes of wages, profit and rent, this must also apply to the constant component that consists of the products of other capitalists, and hence the price of the constant capital component, and with it the total commodity, can be reduced in the last instance, even if in a way that cannot be entirely fathomed, to the sum of value that results from the addition of independent value elements governed by different laws and formed from different sources: wages, profit and rent.

Fourthly, it is completely immaterial for the individual capitalist whether commodities are sold at their values or not, and so therefore is the whole determination of value. Right from the start, this is something that goes on behind his back, by virtue of relations independent of him, since it is not values but rather prices of production differing from them that form the governing average prices in each sphere of production. The value determination as such interests and affects the individual capitalist, and capital in any particular sphere of production, only in so far as the diminished or increased amount of labour that is required with the rise or fall in the productivity of the labour producing the commodities in question enables him in the one case to make an extra profit at the existing market prices, while in the other case it compels him to increase the price of his commodities, since more wages, more constant capital, and hence also more interest, falls to the share of each unit product or individual commodity. This interests him only in so far as it raises or lowers his own production costs for the commodity, i.e. in so far as it places him in an exceptional position.

Wages, interest and rent, on the other hand, appear to him as governing limits not only to the price at which he can realize the portion of profit that accrues to him as functioning capitalist, the profit of enterprise, but also to the price at which he has to sell the commodity if continuing reproduction is to be possible. It is a matter of complete indifference to him whether he realizes the value and surplus-value contained in the commodity on its sale or not, as long as he extracts from the price the customary profit of enterprise, or a greater profit, above the cost price as individually given for him by wages, interest and rent. Apart from the constant capital component, therefore, wages, interest and rent appear to him as the limiting elements to commodity price, and hence as creative and determining elements. If he manages to drive wages down below the value of labour-power, for example, i.e. below their normal level, or to obtain capital at a lower rate of interest and pay a lease-price below the normal level of rent, he does not at all mind selling his product below its value, or even below the general price of production, i.e. parting with a portion of the surplus labour contained in the commodity for nothing. The same applies to the constant capital component. If an industrialist can purchase raw material, for instance, below its price of production, this protects him from loss even if he resells it below the price of production in the finished commodity. His profit of enterprise can remain the same, and even grow, as long as the excess of the commodity price above the elements of it that must be paid for, replaced by an equivalent, remains the same or grows. But on top of the value of the means of production going into the production of his commodities, it is precisely wages, interest and rent that go into this production as limiting and governing amounts of price. These therefore appear to him as the elements determining the price of his commodities. Profit of enterprise, from this standpoint, appears either as determined by an excess of market price, resulting from chance relations of competition, over the immanent value of commodities as determined by the above-mentioned elements of price; or, in so far as it is itself included in the market price as a determinant element, it appears as dependent in turn on competition among buyers and sellers.

Both in competition between the individual capitalists and in competition on the world market, given and presupposed amounts for wages, interest and rent go into the account as constant and governing quantities; constant not in the sense that they do not change, but rather in that they are given in any one particular case and constantly set the limit for the ever fluctuating market price. In competition on the world market, for example, it is exclusively a question of whether, with the given levels of wages, interest and rent, the commodity can profitably be sold at or below the given general market price, i.e. whether it can be sold to realize an appropriate profit of enterprise. If wages and the price of land are low in one country but interest on capital is high, because the capitalist mode of production is not fully developed, while in another country wages and the price of land are nominally high whereas the interest on capital is low, a capitalist in the first country will use more land and labour and a capitalist in the other relatively more capital. In calculating how far competition between the two is possible, these factors are determining elements. Experience shows here in theory, and the self-interested calculation of the capitalist shows in practice, that commodity prices are determined by wages, interest and rent, by the prices of labour, capital and land, and that these price elements are in fact the governing elements of price formation.

There still of course remains one element that is not assumed in advance but results from the market price of commodities, namely the excess over the cost price formed from the addition of these elements, wages, interest and rent. This fourth element appears in each individual case as determined by competition, and in the average case by the average profit, which is again governed by the same competition, simply over a longer period.

Fifthly, on the basis of the capitalist mode of production, it is so completely obvious a step to split up the value in which the freshly added labour is expressed into the revenue forms of wages, profit and ground-rent that this method is used even where the conditions of existence for these forms of revenue are completely lacking. (Not to speak of past historical periods, which we have given examples of in connection with ground-rent.) That is to say, everything is subsumed under them, by way of analogy.

If an independent worker labours for himself and sells his own product – we may take a small peasant, since in this case all three forms of revenue can be used – he is first of all considered as his own employer (capitalist), employing himself as a worker, and as his own landowner, using himself as his own farmer. He pays himself wages as a worker, lays claim to profit as a capitalist and pays himself rent as a landowner. Once the capitalist mode of production and the relationships corresponding to it are assumed as the general social basis, this subsumption is correct in as much as he does not have his labour to thank but rather his possession of means of production – which in this case are always taken to have the form of capital – that he is in a position to appropriate his own surplus labour. Furthermore, in as much as he produces his product as a commodity and is therefore dependent on its price (and even if he is not, this price can be estimated), the amount of surplus labour he can valorize is not dependent on its own magnitude but rather on the general rate of profit; and likewise the possible excess above the quota of surplus-value determined by the general rate of profit is again not determined by the amount of labour he performs, but can be appropriated by him because only he is the owner of the land. Because a form of production that does not correspond to the capitalist mode of production can be subsumed under its forms of revenue (and up to a certain point this is not incorrect), the illusion that capitalist relationships are the natural condition of any mode of production is further reinforced.

If however wages are reduced to their general basis, i.e. that portion of the product of his labour which goes into the worker’s own individual consumption; if this share is freed from its capitalist limit and expanded to the scale of consumption that is both permitted by the existing social productivity (i.e. the social productivity of his own labour as genuinely social labour) and required for the full development of individuality; if surplus labour and surplus product are also reduced, to the degree needed under the given conditions of production, on the one hand to form an insurance and reserve fund, on the other hand for the constant expansion of reproduction in the degree determined by social need; if, finally, both (1) the necessary labour and (2) the surplus labour are taken to include the amount of labour that those capable of work must always perform for those members of society not yet capable, or no longer capable of working – i.e. if both wages and surplus-value are stripped of their specifically capitalist character – then nothing of these forms remains, but simply those foundations of the forms that are common to all social modes of production.

This kind of subsumption, incidentally, is also characteristic of modes of production previously dominant, e.g. the feudal. Relations of production that in no way corresponded to it, standing completely outside it, were subsumed under feudal relationships; e.g. ‘tenures in common socage’ in England (as opposed to ‘tenures on knight’s service’), which simply involved monetary obligations and were feudal only in name.