At long last I am able to make public this third volume of Marx’s great work, which concludes the theoretical part. When I published the second volume in 1885, I believed that the third would most probably involve only technical difficulties, save perhaps for a few sections of particular importance. This was indeed the case, and yet I had no idea at that time of the difficulties that precisely these sections, the most important of all, had in store for me. Other unsuspected obstacles, too, contributed to the great delay in producing this volume.
First and foremost, I have been worried by persistent eye trouble, which has for years reduced the time I can spend working on written material to a minimum. Even now, I can only rarely take up my pen in artificial light. Then there were other tasks, which could not be pushed aside: new editions and translations of earlier works by Marx and myself, as well as revisions, prefaces and supplementary material, which often required further study, etc. Above all, here, I must mention the English edition of Volume 1, for whose text I bear ultimate responsibility and which therefore took a great deal of my time. Anyone who has at all followed the colossal increase in socialist literature over the last decade, and particularly the number of translations of earlier works by Marx and myself, will realize how fortunate I am that the number of languages in which I could be of use to translators, and thus could not refuse the task of revising their work, is very limited. But the growth of this literature was only a symptom of a corresponding expansion of the international working-class movement. And this, too, imposed new obligations on me. From the earliest days of our public activity, a sizable portion of the work of maintaining contact between the individual socialist and workers’ movements in different lands has fallen to Marx and myself, and this work has grown in proportion to the strength of the movement as a whole. But while Marx took the main burden of this work, too, on himself, until his death, I have since had to deal with this ever mounting task alone. It is true that direct communication between the separate national parties has meanwhile become the norm, and is indeed becoming ever more so; yet my help is still required far more frequently than I would prefer, in the interests of my theoretical work. For someone like myself, however, who has been active in this movement for more than fifty years, the work arising therefrom is an inescapable duty and one that must immediately be fulfilled. Like the sixteenth century, our stirring age too sees pure theoreticians in the sphere of public affairs only on the side of reaction; and this very purity is the reason why these gentlemen are not genuine theorists at all but rather mere reactionary apologists.
The fact that I live in London means that in winter my party activity is largely limited to correspondence, but in summer it also requires a large number of personal meetings. And this circumstance, as well as the need to follow the progress of the movement in an ever growing number of countries and an even more rapidly growing number of journals, means that I can undertake the kind of work that brooks no interruption only in winter, particularly in the first three months of the year. After one is seventy, the Meynert fibres of association in the brain operate only with a certain annoying caution, and interruptions in difficult theoretical work can no longer be overcome as quickly or as easily as in the past. This has meant that the work, of one winter, in so far as it was not fully completed, had for the most part to be started all over again the following winter, and this was the case in particular with Part Five, the most difficult part.
The reader will see from the information that follows that the editorial work for this volume was very different from that required for Volume 2. There was only one draft, and even this contained very major gaps. As a rule, the beginning of each section had been more or less carefully elaborated, and generally polished stylistically as well. But as the section in question went on, the draft would become ever more sketchy and fragmented, and contain ever more digressions on side issues that had emerged in the course of the investigation, the proper place for these being left to be settled later. The sentences, too, in which thoughts written down in statu nascendi* found their expression, became ever longer and more intricate. At several points both handwriting and presentation betrayed only too clearly the onset and gradual progress of one of those bouts of illness, brought on by overwork, that made Marx’s original work more and more difficult and eventually, at times, quite impossible. And no wonder! Between 1863 and 1867 Marx not only drafted the two last volumes of Capital,* as well as preparing the finished text of Volume 1 for publication, but he also undertook the gigantic work connected with the foundation and development of the International Working Men’s Association. This is why we can already see in 1864 and 1865 the first signs of the illnesses that were responsible for Marx’s failure to put the finishing touches to Volumes 2 and 3 himself.
My first job was to dictate the entire manuscript, which in its original form even I found it difficult to decipher, and have a readable copy made, something that already took a fair amount of time. Only when this was done could I embark on the actual editing. I confined this simply to what was most necessary, and wherever clarity permitted I retained the character of the original draft, not even deleting certain repetitions where these grasped the subject-matter from a different angle or expressed it in another way, as was Marx’s custom. Wherever my alterations or additions are not simply editorial in character, or where I have had to take the factual material Marx provided and apply it to independent conclusions of my own, even if as far as possible in Marx’s spirit, I have put the entire passage in pointed brackets and indicated it with my initials. Here and there my footnotes lack such brackets but wherever they are followed by my initials I bear responsibility for the whole note.†
As goes without saying in the case of a first draft, the manuscript contained several references to points that were to be developed later. These promises were not always kept. I have let the references stand, as they show the author’s intentions as far as future elaboration is concerned.
To come now to the details.
For Part One, the main manuscript could be used only with major limitations. The mathematical treatment of the relationship between rate of surplus-value and rate of profit (corresponding to our Chapter 3) was introduced in full right at the beginning, while the subject of our Chapter 1 appeared only later and in passing. Two attempted revisions came to the rescue here, each of eight folio sheets, though even these did not entirely fill the gap. The present Chapter 1 was put together from these drafts. Chapter 2 is from the main manuscript. For Chapter 3, there was not only a whole series of incomplete mathematical drafts but also an entire notebook from the 1870s, almost complete, which presented the relationship between the rate of surplus-value and the rate of profit in equations. My friend Samuel Moore, who also did the greater part of the English translation of Volume 1, took on the task of working up this notebook on my behalf, and as a former Cambridge mathematician he was far better equipped to do so. I prepared the present Chapter 3 from his résumé, occasionally also using the main manuscript. There was no more to Chapter 4 than the title. But since the point dealt with here is of decisive importance, i.e. the effect of the turnover on the profit rate, I elaborated it myself, which is why the entire chapter is placed here in brackets. It became apparent at this stage that the formula for the profit rate given in Chapter 3 needed a certain modification if it was to have general validity. From Chapter 5 onwards the main manuscript is the sole source for the remainder of this Part, even though here again a lot of transposition and supplementary material was necessary.
For the three following Parts I was able to keep almost completely to the original manuscript, apart from stylistic editing. Certain passages, generally to do with the effect of the turnover, had to be written in on the lines of the Chapter 4 I had introduced; these are also placed in brackets and bear my initials.
It was Part Five that presented the major difficulty, and this was also the most important subject in the entire book. Marx was engaged in elaborating precisely this Part, when he was attacked by one of the serious illnesses referred to above. Here, therefore, we did not have a finished draft, or even an outline plan to be filled in, but simply the beginning of an elaboration which petered out more than once in a disordered jumble of notes, comments and extract material. I sought at first to complete this Part by filling in the gaps and elaborating the fragments that were simply indicated, as I had more or less managed to do with Part One, so that it would at least contain, by and large, everything the author had intended to include. I made at least three attempts to do this, but failed on each occasion, and the time that was thereby lost is one of the main reasons for the delay in publication. I finally realized that this way was hopeless. I would have had to go through the whole of the literature in this field and would have produced something at the end of it that was not Marx’s book. The only alternative was to make a fresh start, confine myself to arranging the material as best I could, and make only the most necessary alterations. In this way, the main work for this Part was finished early in 1893.
As far as the individual chapters are concerned, Chapters 21 to 24 were basically completed. For Chapters 25 and 26 the illustrative material had to be sorted out, and passages from other portions of the text had to be inserted. Chapters 27 and 29 could be reproduced almost directly from the manuscript, although Chapter 28 had to be partially rearranged. The real difficulty began with Chapter 30. From here on it was not only the illustrative material that needed correct arrangement, but also a train of thought that was interrupted continuously by digressions, asides, etc., and later pursued further in other places, often simply in passing. There then followed, in the manuscript, a long section headed ‘The Confusion’, consisting simply of extracts from the parliamentary reports on the crises of 1848 and 1857, in which the statements of some twenty-three businessmen and economic writers, particularly on the subjects of money and capital, the drain of gold, over-speculation, etc., were collected, with the occasional addition of brief humorous comments. Here, in one way or another, more or less all views then current on the relationship between money and capital were represented, and Marx intended to deal in a critical and satirical manner with the ensuing ‘confusion’ about what was money on the money market and what was capital. After several attempts, I came to the conclusion that it was impossible to produce this chapter; the material in question has been put in where the context provided the opportunity, especially the material with Marx’s own comments.
What I have made into Chapter 32 then follows in more or less good order, but this is directly followed again by a new flood of extracts from the parliamentary reports, on all kinds of subjects relevant to this Part, mixed in with longer or shorter remarks by the author himself. Towards the end, the extracts and comments are focused more and more on the movement of the money metals and rates of exchange, and they close again with all kinds of supplementary remarks. The chapter on ‘Pre-Capitalist Relations’ (Chapter 36), however, was completed in full.
From all this material, including the ‘Confusion’ in so far as it had not already been utilized at earlier points, I compiled Chapters 33–35. This was only possible, of course, given substantial interpolations on my part, setting the passages in their context. In so far as these insertions are not simply formal in character, they are expressly indicated as my own. In this way I finally managed to introduce into the text all of the author’s statements that were in any way pertinent to the matter in hand. All that remained was a small section of extracts that either simply repeated what had already been put forward elsewhere or dealt with points that the manuscript does not go into in any more detail.
The Part on ground-rent had been far more completely elaborated, even if not at all arranged, as is already apparent from the fact that Marx found it necessary in Chapter 43 (in the manuscript this is the last portion of the Part on rent) to recapitulate in brief the whole of this Part. This was extremely desirable as far as the editing of the text was concerned, in that in the manuscript Chapter 37 is followed by Chapters 45–47, before Chapters 38–44 eventually appear. Most work was required by the tables on the second form of differential rent, and by the discovery that the third case of this kind of rent that was to be treated in Chapter 43 was actually not analysed anywhere.
In the 1870s Marx embarked on entirely new and specific studies for this Part on ground-rent. For years he had been studying, in the original language, the statistical reports that the Russian ‘reform’ of 1861 had made unavoidable, as well as other publications on landed property which Russian friends put at his disposal as fully as anyone could desire. He made extracts from these and intended to make use of them in a new version of this section. Given the manifold diversity of forms of landed property and exploitation of the agricultural producers in Russia, this country was to play the same role in the Part on ground-rent as England had done for industrial wage-labour in Volume 1. Unfortunately Marx was never able to carry out this plan.
Part Seven, finally, was complete in the manuscript but only as a first draft, and its endlessly entangled sentences had first to be broken up before it was ready for publication. For the final chapter there is only the beginning. The intention here was to present the three great classes of developed capitalist society (landowners, capitalists and wage-labourers) that correspond to the three major forms of revenue (ground-rent, profit and wages), as well as the class struggle that is necessarily given with their very existence, as the actually present result of the capitalist period. Marx liked to leave conclusions of this kind for the final editing, shortly before printing, when the latest historical events would supply him, with unfailing regularity, with illustrations of his theoretical arguments, as topical as anyone could desire.
As also in Volume 2, quotations and illustrative material are significantly more sparse than in the first volume. Quotations from Volume 1 give the page numbers to the Second and Third Editions.* Where theoretical statements of earlier economists are referred to in the manuscript, it is generally only the name that is given, as the reference itself would be left to the final revision. I have naturally had to leave these as they were. As far as parliamentary reports are concerned, there are only four that are quoted,† though these are used quite substantially. They are:
(1) Reports from Committees (of the House of Commons), Vol. VIII, Commercial Distress, Vol. II, Part I, 1847–8, Minutes of Evidence. (Cited as Commercial Distress, 1847–8.)
(2) Secret Committee of the House of Lords on Commercial Distress 1847, Report printed 1848, Evidence printed 1857 (because considered too compromising in 1848). (Cited as C. D. 1848–57).
(3) Report: Bank Acts, 1857. [(4)] Ditto, 1858. Reports of the Committee of the House of Commons on the Effect of the Bank Acts of 1844 and 1845. With evidence. (Cited as B. A. 1857 or 1858.)
I intend to start work on the fourth volume – the history of the surplus-value theory – as soon as I am at all able to do so.*
*
In the Preface to the second volume of Capital I had to settle accounts with certain gentlemen who were making a great to-do at that time about having allegedly discovered ‘Marx’s secret source in Rodbertus, as well as his superior predecessor’. I offered them the opportunity to show ‘what Rodbertus’s economics can accomplish’ and asked them to explain, in particular, ‘how an average rate of profit can and must come about, not only without violating the law of value, but precisely on the basis of this law’ [Pelican edition, p. 102]. These same gentlemen, who were then proclaiming the brave Rodbertus to be an economic star of the first magnitude, for reasons either subjective or objective but generally quite other than scientific, have without exception failed to provide a single answer. Others, however, have taken the trouble to concern themselves with the problem.
In his critical review of Volume 2, Professor W. Lexis takes up the question, even if he does not try to give a direct solution (Conrads Jahrbücher [new series], Vol. 11, 5, 1885, pp. 452–65).†
‘The solution of this contradiction’ (between the Ricardo/Marx law of value and the equal average rate of profit), he says, ‘is impossible if the various types of commodity are considered separately and their values are to be equal to their exchange-values and these in turn equal or proportionate to their prices.’
According to him, the solution is possible only if ‘the measurement of value in terms of labour is abandoned so far as the individual commodities are concerned, and we focus merely on commodity production as a whole and its distribution between the entire classes of capitalists and workers… The working class receives only a certain portion of the total product… the other part, which accrues to the capitalists, forms what Marx calls the surplus product and accordingly also… the surplus-value. The members of the capitalist class now distribute this total surplus-value among themselves, not according to the number of workers that they each employ, but rather in proportion to the volume of capital applied by each, with the land and soil also being taken into account as a capital value.’ Marx’s ideal values, determined by the units of labour embodied in commodities, do not correspond to prices, but can ‘be considered as the starting-point of a shift which leads to the actual prices. These latter are governed by the fact that capitals of equal size demand equal profits.’ This means that some capitalists receive higher prices for their commodities than their ideal value, while others receive lower prices. ‘But since the losses and gains in surplus-value cancel one another out within the capitalist class, the overall amount of surplus-value is the same as if all prices were proportionate to the commodities’ ideal values.’
It is clear that the question is very far from being solved here. Yet it is correctly posed, by and large, even if in a loose and superficial way. And this is indeed more than we might expect from someone who, like this writer, takes a certain pride in representing himself as a ‘vulgar economist’. It is even surprising, if we compare it with the achievements of other vulgar economists, which we shall go on to consider. This writer’s vulgar economics, in fact, falls in a class of its own. Profit on capital can be derived in Marx’s way, he agrees, but nothing forces us to this conception. On the contrary. Vulgar economics has an explanation of its own, which is allegedly at least more plausible:
‘The capitalist sellers, i.e. the raw material producer, the manufacturer, the wholesale trader and the retailer, make a profit in their businesses by each selling dearer than he buys, i.e. by increasing the price that his commodities cost him by a certain percentage. Only the worker is unable to obtain an additional value of this kind, for his unfortunate position vis-à-vis the capitalist compels him to sell his labour for the same price that it costs him himself, i.e. for the means of subsistence that he needs… these price additions thus retain their full significance vis-à-vis the workers as purchasers, and act so as to transfer a portion of the value of the total product towards the capitalist class.’
Now it does not need a great effort of thought to realize that this ‘vulgar economic’ explanation of profit on capital leads to the same result in practice as Marx’s theory of surplus-value; that the workers, for Lexis, find themselves in exactly the same ‘unfortunate position’ vis-à-vis the capitalist as they do for Marx; that they are equally swindled, since every non-worker can sell above price, whereas the worker cannot do so; and that on the basis of this theory a vulgar socialism can be constructed which is similarly at least plausible, like that constructed in England on the basis of the Jevons–Menger theory of use-value and marginal utility. I would even suppose that if Mr George Bernard Shaw were acquainted with this theory of profit he would grasp hold of it with both hands, say farewell to Jevons and Karl Menger, and build the Fabian church of the future anew on this rock.*
In reality, however, this theory is simply a paraphrase of Marx’s. What pays for all these price additions? Answer: the workers’ ‘overall product’. And this is because the commodity ‘labour’, or, as Marx would say, ‘labour-power’, has to be sold below its price. For if it is the common property of all commodities to be sold for more than their costs of production, with labour alone being the exception and being always sold at its cost of production, then in fact labour is sold below the price that is the rule in this vulgar-economic universe. The excess profit that accrues as a consequence to the capitalist or the capitalist class consists in, and can ultimately only come into being from, the fact that the worker, after reproducing the replacement for the price of his labour, has still to produce a further product for which he is not paid – surplus product, the product of unpaid labour, surplus-value. Lexis is extremely prudent in his choice of expression. He does not say outright that he shares this above conception. But if this is how he sees it, it is as clear as day that what we have here is not one of the usual run of vulgar economists, of whom Lexis himself says that every one is, in Marx’s eyes, ‘in the best of cases merely a hopeless dimwit’, but a Marxist disguised as a vulgar economist. Whether this disguise is deliberate or not is a psychological question with no interest for us here. Anyone who might care to explore this question will perhaps also investigate how it was possible for a man as shrewd as Lexis undoubtedly is to have ever defended, even if only once, such utter nonsense as bimetallism.
The first person who genuinely tried to answer the question was Dr Conrad Schmidt, in Die Durchschnittsprofitrate auf Grundlage des Marx’schen Werthgesetzes (Dietz, Stuttgart, 1889). Schmidt attempts to bring the details of market price formation into harmony both with the law of value and with the average rate of profit. What the industrial capitalist receives in his product is, firstly, the replacement for the capital he has advanced, and secondly, a surplus product which he has not paid for. In order to obtain this surplus product, however, he must advance his capital in production; i.e. he must apply a certain definite quantity of objectified labour in order to appropriate this surplus product. The capital he advances is therefore, for the capitalist, the quantity of objectified labour that is socially necessary to procure this surplus product. The same applies to every other industrial capitalist. Now, since according to the law of value products are exchanged in proportion to the labour socially necessary for their production, and since for the capitalist the labour necessary for the creation of his surplus product is precisely the stored-up, past labour in his capital, it therefore follows that surplus products are exchanged in proportion to the capitals required for their production and not according to the labour actually embodied in them. The share that falls to each unit of capital is therefore equal to the sum of all surplus-value produced, divided by the sum of the capitals to which this is related. In this conception, equal capitals yield equal profits in the same period of time, and this is achieved by adding the cost price of the surplus product calculated in this way, i.e. the average profit, to the cost price of the paid part of the product, and by selling both parts, paid and unpaid product, at this increased price. The average rate of profit is established even though the average prices of the various commodities are determined, as Schmidt holds, by the law of value.
Schmidt’s construction is extremely ingenious, quite on Hegelian lines, but in common with the majority of Hegel’s constructions, it is not correct. Whether the product is surplus or paid makes no difference; if the law of value is to hold directly for the average prices, both parts must be sold in proportion to the socially necessary labour required for their production and expended in it. Right from the outset, the law of value is directed against the notion derived from the capitalist mode of thought that the stored-up past labour of which capital consists is not only a definite sum of ready-made value but also, as a factor of production and profit formation, itself a source of further value on top of that which it already has; it maintains that this property is possessed only by living labour. It is well enough known that capitalists expect equal profits in proportion to the size of their capitals, and view their capital advance, therefore, as a kind of cost price for their profit. But if Schmidt uses this conception in order to bring the prices calculated in terms of the average profit rate into harmony with the law of value, he abandons the law of value itself, by making a conception totally at variance with this law into one of its co-determinant factors.
Either stored-up labour forms value alongside living labour. In which case the law of value does not hold.
Or it does not form value. In which case Schmidt’s demonstration is incompatible with the law of value.
Schmidt was led astray in this way when he was already very close to the solution, because he believed he needed a mathematical formula, if possible, which would show the agreement between the average price of each commodity and the law of value. But even if here, so close to his goal, he took the wrong track, the remainder of his booklet shows the understanding with which he drew further conclusions from the first two volumes of Capital. He has the honour of having independently found the correct solution to the formerly unexplained tendency for the rate of profit to fall, which Marx provides in Part Three of Volume 3, as well as deriving commercial profit from industrial surplus-value and making a whole series of observations about interest and ground-rent in which points are anticipated which Marx develops in Parts Four and Five of this volume.
In a later work (Neue Zeit, 1892–3, nos. 3 and 4), Schmidt tries to solve the problem in another way. Here he argues that it is competition that establishes the average rate of profit, by making capital migrate from branches of production with below-average profit into branches in which above-average profit can be made. That competition is the great leveller of profits is no new discovery. But Schmidt now attempts to prove that this levelling of profits is identical with the reduction of the sale price of the excess commodities produced to the value which society can pay for them according to the law of value. Why this could not bring about the intended result is sufficiently clear from Marx’s own discussions in this volume.
After Schmidt, Peter Fireman applied himself to the problem (Conrads Jahrbücher, 3rd series, Vol. 3 [1892], p. 793). I do not intend to go into his remarks about other aspects of Marx’s presentation. They rest on the misunderstanding to the effect that Marx seeks to define where he only explains, and that one can generally look in Marx for fixed, cut-and-dried definitions that are valid for all time. It should go without saying that where things and their mutual relations are conceived not as fixed but rather as changing, their mental images, too, i.e. concepts, are also subject to change and reformulation; that they are not to be encapsulated in rigid definitions, but rather developed in their process of historical or logical formation. It will be clear, then, why at the beginning of Volume 1, where Marx takes simple commodity production as his historical presupposition, only later, proceeding from this basis, to come on to capital – why he proceeds precisely there from the simple commodity and not from a conceptually and historically secondary form, the commodity as already modified by capitalism. Fireman of course cannot see this at all. But we shall leave this aside here, as well as other secondary matters which might give equal cause for all kinds of objection, and pass immediately to the heart of the matter. While theory teaches the writer that, at a given rate of surplus-value, the mass of surplus-value is proportionate to the amount of labour-power employed, experience shows him that, at a given rate of profit, the mass of profit is proportionate in magnitude to the total capital invested. Fireman explains this by the fact that profit is only a conventional phenomenon (by which he means a phenomenon specific to the social formation in question, standing and falling together with it); its existence is simply bound up with capital. And capital, when it is strong enough to extract a profit for itself, is required by competition to extract an equal rate of profit for all capitals concerned. Without an equal rate of profit, no capitalist production is possible; but once this form of production is presupposed, the mass of profit received by each individual capitalist can only depend, with a given rate of profit, on the size of his capital. Profit, on the other hand, consists of surplus-value, of unpaid labour. How, then, does there take place the transformation of surplus-value, whose magnitude is governed by the exploitation of labour, into profit, whose magnitude is governed by the amount of capital required?
‘Simply through this, that in all those branches of production where the ratio of… constant capital to variable is greatest, commodities are sold above their value, which also means that in those branches where the ratio of constant capital to variable, c:v, is lowest, commodities are sold below their value, and that only where c:v is a certain average are commodities parted with at their true value… Is this incongruence between particular prices and their respective values a refutation of the value principle? By no means. Owing to the fact that the prices of some commodities rise above their values in the same degree as the prices of others fall below theirs, the total sum of prices equals the total sum of values… “In the last instance” the incongruence disappears.’
This incongruence is a ‘disturbance’: ‘but in the exact sciences a calculable disturbance is never treated as refuting a law.’
If we compare this with the corresponding passages in Chapter 9, we shall find that Fireman put his finger on the decisive point. Yet the number of intermediate links which would still have been needed, even after this discovery, to enable Fireman to arrive at a complete and concrete solution to the problem is shown by the undeservedly cool reception met with by his very important article. Even though many people were interested in the problem, they were all still afraid of getting their fingers burned. And this is explained not only by the incomplete form in which Fireman left his findings, but also by his undeniably inadequate conception of Marx’s presentation and his general criticism of it based on this conception.
Wherever the opportunity presents itself, in the shape of a knotty problem, Professor Julius Wolf of Zürich never fails to make a fool of himself. The whole problem, he informs us (Conrads Jahrbücher, 3rd series, Vol. 2 [1891], pp. 352 ff.), is solved by relative surplus-value. The production of relative surplus-value depends on the increase of constant capital in relation to variable:
‘An increase in constant capital presupposes an increase in the productivity of the workers. But since this increased productivity leads to an increase in surplus-value (by lowering the cost of the workers’ means of subsistence), there is a direct connection between an increase in surplus-value and an increased share of constant capital in the total capital. With variable capital remaining the same and constant capital growing, therefore, surplus-value must rise, according to Marx’s theory. This was the question put to us.’
True, Marx does say the exact opposite at a hundred places in the first volume. The contention, too, that according to Marx relative surplus-value rises in proportion with constant capital, given a fall in variable capital, is astonishing enough to put even parliamentary language to shame. Mr Julius Wolf shows in these lines only that he has understood neither relatively nor absolutely the slightest thing about absolute or relative surplus-value. He even says himself: ‘We seem to find ourselves here, at first sight, in a tangle of inconsistencies’, which is incidentally the only true thing he says in his entire article. But what does that matter? Mr Julius Wolf is so proud of his brilliant discovery that he is unable to refrain from praising Marx for it posthumously and lauding his own unfathomable nonsense as a ‘recent indication of the keen and far-sighted way in which his’ (Marx’s) ‘critical theory of the capitalist economy is set out’!
Still better things are to come. Mr Wolf says:
‘Ricardo maintained both: equal expenditure of capital, equal surplus-value (profit), and: equal expenditure of labour, equal surplus-value (in absolute amount). The question was then how the one principle fitted in with the other. But Marx did not accept the question in this form. He has undoubtedly shown (in the third volume) that the second contention is not an unconditional consequence of the law of value, that it even contradicts his law of value, and must therefore be immediately discarded.’
He goes on to investigate who has gone wrong, himself or Marx. He does not think for a moment, of course, that the error is on his side.
It would only offend my readers, and misconstrue completely the comic character of the situation, if I were to waste any further words on this prize gem. I would only add that, with the same boldness which enabled him to say in advance what Marx had ‘undoubtedly shown in the third volume’, he takes the opportunity to report on an alleged item of gossip among his fellow professors, according to which Conrad Schmidt’s above-mentioned book ‘was directly inspired by Engels’. Mr Julius Wolf! It may well be the custom in your milieu for a man who publicly sets others a problem to make known the solution quietly to his personal friends. I am quite prepared to believe that you are capable of this. But the present Preface should make clear to you that, in the world in which I operate, it is simply unnecessary to resort to meanness of this kind.
Marx had only just died when Mr Achille Loria rushed to publish an article on him in the Nuova Antologia (April 1883), a biography swarming with false statements followed by a criticism of his public activity, both political and literary. In this article Loria twisted and distorted Marx’s materialist conception of history with a confidence that indicated the existence of a broader purpose. And this purpose was achieved: in 1886 the same Mr Loria published a book, La teoria economica della costituzione politica, in which he proclaimed to his astonished contemporaries that Marx’s theory of history, which he had so completely and deliberately misrepresented in 1883, was actually his own discovery. Marx’s theory, moreover, was reduced here to a quite philistine level; and the historical evidence and examples are full of blunders which would not be tolerated from a fourth-former. But what does this matter? The discovery that political conditions and events have their explanation in the corresponding economic conditions has now been shown to have been made not by Marx in 1845 but by Mr Loria in 1886. At least he has impressed this on his compatriots and, now that his book has appeared in French, on some Frenchmen as well. He can now run round Italy posing as the author of a new and epoch-making theory of history, until the Italian socialists find time to strip the illustrious Loria of his stolen peacock feathers.
But this is just to give a taste of Loria’s style. He assures us that all Marx’s theories rest on deliberate sophistry (un consaputo sofisma); that Marx does not flinch from paralogisms, even when he recognizes them as such (sapendoli tali), etc. And after giving his readers a whole series of these vulgar fairy-tales, so that they have all that is needed to see Marx as a careerist à la Loria, staging his little effects with the same repulsive and petty humbug as our Padua professor, he can now reveal to them an important secret. With this, he takes us back to the rate of profit.
According to Marx, Mr Loria says, the mass of surplus-value produced in a capitalist industrial firm (and Mr Loria identifies this mass with the profit) is governed by the variable capital applied, since constant capital does not yield any profit. But this is in conflict with the real state of affairs. For, in practice, profit is governed not by the variable capital but by the total capital. Marx sees this himself (Volume 1, Chapter 11) and concedes that the facts seem at least to contradict his theory. How then does he solve the contradiction? He refers his readers to a later volume that has not yet appeared. Loria had already told his readers earlier on that he didn’t believe Marx intended for a moment to write this volume, and he now exclaims in triumph:
‘I was not wrong, therefore, in maintaining that this second volume, with which Marx constantly threatened his opponents, though it never appeared, might very well have been a sly expedient which he resorted to when scientific arguments failed him (un ingegnoso spediente ideato dal Marx a sostituzione degli argomenti scientifici).’
And if anyone is still not convinced that Marx stands on the same level of scientific fraud as the illustrious Loria – well, we can just give him up as a dead loss!
We had thus learned, according to Mr Loria, that Marx’s theory of surplus-value was absolutely incompatible with the fact of a general and uniform rate of profit. Then Volume 2 appeared, and with it the question that I publicly set on this very point.* Had Mr Loria been a timid German, he might have experienced a certain degree of embarrassment. But he is a cocky Southerner and comes from a hot climate where, as he can testify, brazenness [Unverfrorenheit] is a natural condition.† The problem of the rate of profit had been publicly raised. Mr Loria publicly declared it to be insoluble. And for this very reason, he is now going to outdo himself by publicly solving it.
This miracle was performed in Conrads Jahrbücher, new series, Vol. 20 [1890], pp. 272 ff., in an article on Conrad Schmidt’s above-mentioned book. Once Loria had learned from Schmidt how commercial profit comes into existence, everything became immediately clear to him.
‘Now since the determination of value by labour-time gives those capitalists who deploy a greater part of their capital in wages an advantage, unproductive’ (i.e. commercial) ‘capital can extract a higher interest’ (i.e. profit) ‘from these advantaged capitalists, and bring about equality between the various industrial capitalists… If, for example, industrial capitalists A, B and C each spend 100 working days on production, but use 0, 100 and 200 units of constant capital respectively, and if the wage for 100 working days represents 50 working days, then each capitalist receives a surplus-value of 50 working days, and the rate of profit is 100 per cent for the first capitalist, 33.3 per cent for the second and 20 per cent for the third. If however a fourth capitalist D accumulates an unproductive capital of 300, which demands an interest’ (profit) ‘to the value of 40 working days from A, and an interest of 20 working days from B, then the rate of profit for capitalists A and B falls in each case to 20 per cent, as is already the case with C, while D, with a capital of 300, receives a profit of 60, i.e. a rate of profit of 20 per cent, just like the other capitalists.’
With this astounding dexterity, Loria solves by sleight of hand the same question that he had declared insoluble ten years before. Unfortunately he did not disclose to us the secret of what it is that gives this ‘unproductive capital’ the power not only to pinch from the industrialists this extra profit above the average, but also to hang on to it for themselves, in the same way as the landowner confiscates the surplus profit of the farmer as ground-rent. If this actually were the case, the merchant would in fact extract a tribute from the industrialist completely analogous to ground-rent and thereby establish the average rate of profit. Commercial capital is of course a very important factor in the formation of the general profit rate, as almost everyone knows. But only a literary adventurer, who at the bottom of his heart simply thumbs his nose at all economics, can permit himself to maintain that this commercial capital has the magic power to absorb all excess surplus-value over and above the general rate of profit, and moreover, even before such a rate is established, to transform it into a ground-rent for itself, and all this without needing anything like landed property. No less astonishing is the contention that commercial capital manages to discover those very industrialists whose surplus-value just covers the average rate of profit, and is pleased to ease the burden of these wretched victims of Marx’s law of value by selling their products for them gratis, without even asking a commission. What a trickster one must be to imagine that Marx needed any such miserable subterfuge.
But it is only when we compare him with his northern competitors, such as Mr Julius Wolf, that our illustrious Loria shines forth in all his glory, even though Wolf, too, was not born yesterday. What a yelping cub Wolf seems, even in his thick tome on Socialism and the Capitalist Social Order, compared with this Italian! How awkwardly – I am almost tempted to say ‘modestly’ – he stands beside the noble audacity with which our maestro takes it for granted that Marx, no more and no less than all others, was just as much a conscious sophist, paralogist, braggart and charlatan as Mr Loria himself, and that, whenever he got stuck, Marx hoodwinked his public with the promise of a conclusion to his theory in an ensuing volume, which, as he himself well knew, he neither could nor intended to deliver! Unlimited impudence, combined with an eel-like flair for slipping out of impossible situations; heroic contempt for kicks received, hasty appropriation of other people’s achievements, importunate charlatanry and self-advertisement, and orchestration of his fame by a coterie of his friends – who could equal Loria in all this?
Italy is the land of classicism. Since the great age when it saw the dawn of the modern world, it has produced magnificent characters unequalled in their classical perfection, from Dante down to Garibaldi. But the period of subjugation and foreign rule also left its classical character masks, including the two especially finely carved types of Sganarella and Dulcamara.* Our illustrious Loria embodies the classical unity of these two.
To conclude, I must take my readers across the ocean. In New York, Dr (med.) George C. Stiebeling also found a solution to the problem, and an extremely simple one at that. So simple, indeed, that no one anywhere would acknowledge it. Seized with anger, Stiebeling complained most bitterly, on both sides of the great water, in an unending series of pamphlets and newspaper articles. He was told in Neue Zeit† that his entire solution rested on a mistake in calculation. But this failed to move him; Marx, too, had made similar mistakes, and was right for all that about many things. Let us take a look, then, at Stiebeling’s solution.
‘I take two factories, working for the same time with equal capitals, but with different ratios of constant and variable capital. The total capital (c + v) I take as y, and the difference in the ratio of constant to variable capital I take as x. In factory I, y = c + v; in factory II, y = (c — x) + (v + x). The rate of surplus-value in factory I is then s/ν, and in factory II s/ν + x. By profit (p) I mean the total surplus-value (s) by which the total capital y or c + v is expanded in the given time, therefore p = s. The rate of profit is accordingly p/y or s/c + ν in factory I, and p/y or s/(c − x) + (ν + x) in factory II, i.e. also s/c + ν. The… problem is thus resolved on the basis of the law of value, in such a way that with equal capitals and equal time, but unequal quantities of living labour, a change in the rate of surplus-value still gives an equal average rate of profit’ (G. C. Stiebeling, Das Werthgesetz und die Profitrate, John Heinrich, New York [1890]).
Fine and illuminating as the above calculation is, we must still ask our Dr Stiebeling one question. How does he know that the sum of surplus-value that factory I produces is exactly equal to the sum of surplus-value produced in factory II? As far as c, v, y and x are concerned, i.e. all the other factors in his calculation, he tells us expressly that they have the same value for both factories, but he does not say a single word about s. This however in no way follows from the mere fact that he denotes the two quantities of surplus-value involved here with the same algebraic symbol s. It is rather just what has to be proved, since Dr Stiebeling also identifies the profit p with the surplus-value, without more ado. Only two things are possible. Either the two s’s are both equal, in which case each factory produces an equal amount of surplus-value, and also equal profit, and then Dr Stiebeling has assumed in advance what he is supposed to have proved. Or else the one factory produces a bigger sum of surplus-value than the other, and then his whole calculation breaks down.
Dr Stiebeling spared neither time nor money to construct whole castles of calculation on this basic error and put them on show to the public. I can give him the comforting assurance that they are almost all equally false, and that in those exceptional cases where this is not so, they prove something quite different from what he intends. Thus Stiebeling demonstrates the empirical fall in the rate of profit by comparing the U.S. census reports of 1870 and 1880, but explains this in a completely false way and holds that Marx’s theory of a constant and stable rate of profit has to be corrected on the basis of practical experience. It follows however from Part Three of this third volume that Marx’s ‘stable rate of profit’ is a pure figment of Stiebeling’s imagination, and that the tendency for the rate of profit to fall rests on causes that run diametrically counter to those given by Dr Stiebeling. I am sure Dr Stiebeling has the best of intentions, but if people want to concern themselves with scientific questions, the first tiling they must do is learn to read the texts they wish to use as their author wrote them, and above all not read into them things they do not contain.
The overall result of our investigation, so far as the question at hand is concerned, is again that it is only the Marxian school that has achieved anything. Fireman and Conrad Schmidt, if they read this third volume, may each be well satisfied with his own work.
London, 4 October 1894. Frederick Engels