Theories of Surplus Value, Marx 1861-3
[CHAPTER X] Ricardo’s and Adam Smith’s Theory of
Cost-price (Refutation)
[A. Ricardo’s Theory of Cost-price]
[1. Collapse of the Theory of the Physiocrats and
the Further Development of the Theories of Rent]
With Anderson’s thesis (partly also contained in Adam
Smith’s work): It is not […] the rent of the land
that determines the price of its produce, but it is
the price of that produce which determines the rent
of the land…” the doctrine of the Physiocrats was
overthrown. The price of the agricultural
produce, and neither this produce itself nor the land, had
thus become the source of rent. This finished the
notion that rent was the offspring of the exceptional
productivity of agriculture which again was supposed to be
the offspring of the special fertility of the soil.
For, if the same quantity of labour was exerted in a
particularly productive element and hence was itself
exceptionally productive, then the result could only be that
this labour manifested itself in a relatively large
quantity of products and that the price of the
individual product was therefore relatively low; but it
could never have the opposite result, namely, that the
price of its product was higher than that of
other products containing the same quantity of labour and
that this price, as distinct from that of other
commodities, thus yielded a rent, in addition to
profit and wages. (In his treatment of rent Adam
Smith to some extent returns to the physiocratic view,
having previously refuted or at least rejected it by his
original conception of rent as part of surplus-labour.)
Buchanan sums up this discarding of the physiocratic view
in the following words:
“The notion of agriculture yielding a
produce, and a rent in consequence, because nature concurs
with human industry in the process of cultivation, is a mere
fancy. It is not from the produce, but from the price
at which the produce is sold, that the rent is derived; and
this price is got not because nature assists in the
production, but because it is the price which suits the
consumption to the supply.” [David Buchanan in Adam
Smith, An Inquiry into the Nature and Causes of the
Wealth of Nations, Vol. II, Edinburgh, 1814, p. 55,
note; quoted from David Ricardo, On the Principles of
Political Economy, and Taxation, third edition, London,
1821, p. 66, note.]
After the rejection of this notion of the
Physiocrats—which, however, was fully justified in its
deeper sense, because they regarded rent as the only
surplus, and capitalists and labourers together merely as
the paid employees of the landlord—only the following
viewpoints were possible.
||523| [Firstly:] The view
that rent arises from the monopoly price of
agricultural products, the monopoly price being due to the
landowners possessing the monopoly of the land.
According to this concept, the price of the
agricultural product is constantly above its
value. There is a surcharge of price and
the law of the value of commodities is breached by the
monopoly of landed property.
Rent arises out of the monopoly price of
agricultural products, because supply is constantly
below the level of demand or demand is constantly
above the level of supply. But why does supply
not rise to the level of demand? Why does not
an additional supply equalise this relationship and
thus, according to this theory, abolish all
rent? In order to explain this, Malthus on the one
hand takes refuge in the fiction that agricultural products
provide themselves with direct consumers (about which more
later, in connection with his row with Ricardo); on the
other hand, in the Andersonian theory, that agriculture
becomes less productive because the additional supply
costs more labour. Hence, in so far as this view is
not based on mere fiction, it coincides with the Ricardian
theory. Here too, price stands a b o v e
value, surcharge.
[Secondly:] The Ricardian Theory: Absolute rent does
not exist, only a differential rent. Here
too, the price of the agricultural products that bear
rent is above their individual value, and in so far
as rent exists at all, it does so through the excess of
the price of agricultural products over their
value. Only here this excess of price over
value does not contradict the general theory of value
(although the fact remains) because within each sphere of
production the value of the commodities belonging to
it is not determined by the individual value of the
commodity but by its value as modified by the
general conditions of production of that
sphere. Here, too, the price of the rent-bearing
products is a monopoly price, a monopoly however as
it occurs in all spheres of industry and only becomes
permanent in this one, hence assuming the form of rent as
distinct from excess profit. Here too, it is an excess
of demand over supply or, what amounts to the same
thing, that the additional demand cannot be satisfied by an
additional supply at prices corresponding to those of
the original supply, before its prices were forced up by the
excess of demand over supply. Here too, rent comes
into being (differential rent) because of excess
of price over value, [brought about by] the rise of
prices on the better land above the value of the
product, and this leads to the additional supply.
[Thirdly:] Rent is merely interest on the capital sunk
in the land. This view has the following in common
with the Ricardian, namely, that it denies the existence of
absolute rent. It must admit the existence of
differential rent, when pieces of land in which equal
amounts of capital have been invested, yield rents of
varying size. Hence in fact, it amounts to the
Ricardian view, that certain land yields no rent and
that where actual rent is yielded, this is
differential rent. But it is absolutely incapable of
explaining the rent of land in which no capital has
been invested, of waterfalls, mines etc. It was, in
fact, nothing but an attempt from a capitalist point of
view, to save rent despite Ricardo— under the name
of interest.
Finally [fourthly]: Ricardo assumes that on the
land which does not bear a rent, the price of the product
equals its value because it equals the average price,
i.e., capital outlay plus average profit. He thus
wrongly assumes that the value of the commodity equals the
average price of the commodity. If this wrong
assumption is dropped, then absolute rent becomes possible
because the value of agricultural products, like that
of a whole large category of other commodities, stands
above their average price, but owing to landed
property, the value of the agricultural products, unlike
that of these other commodities, is not levelled out at the
average price. Hence this view assumes, like the
monopoly theory, that property in land, as such, has
something to do with rent; it assumes differential rent
along with Ricardo, and finally it assumes that absolute
rent by no means infringes the law of value.
[2. The Determination of Value by
Labour-Time—the Basis of Ricardo’s Theory.
Despite Certain Deficiencies the Ricardian Mode of
Investigation Is a Necessary Stage in the Development of
Political Economy]
Ricardo starts out from the determination of the relative
va1ues(or exchangeable values) of commodities by “the
quantity of labour”. (We can examine
later the various senses in which Ricardo uses the term
value. This is the basis of Bailey’s criticism and, at
the same time, of Ricardo’s shortcomings.) The
character of this “labour” is not further
examined, If two commodities are equivalents—or bear a
definite proportion to each other or, which is the
same thing, if their magnitude differs according to
the ||524| quantity of
“labour” which they contain—then it is
obvious that regarded as exchange-values, their
substance must be the same. Their substance is
labour. That is why they are
“values”. Their magnitude varies,
according to whether they contain more or less of this
substance. But Ricardo does not examine the
form—the peculiar characteristic of labour that
creates exchange-value or manifests itself in
exchange-values—the nature of this
labour. Hence lie does not grasp the connection of
this labour with money or that it must assume
the form of money. Hence he completely fails to
grasp the connection between the determination of the
exchange-value of the commodity by labour-time and the fact
that the development of commodities necessarily leads to the
formation of money. Hence his erroneous theory of
money. Right from the start he is only concerned with
the magnitude of value, i.e., the fact that the
magnitudes of the va1ues of the commodities are
proportionate to the quantities of labour which are required
for their production. Ricardo proceeds from here and
he expressly names Adam Smith as his starting-point (Chapter
I, Section I).
Ricardo’s method is as follows: He begins with the
determination of the magnitude of the value of the commodity
by labour-time and then examines whether the other
economic relations and categories contradict this
determination of value or to what extent they modify
it. The historical justification of this method of
procedure, its scientific necessity in the history of
economics, are evident at first sight, but so is, at the
same time, its scientific inadequacy. This inadequacy
not only shows itself in the method of presentation (in a
formal sense) but leads to erroneous results because it
omits some essential links and directly seeks to
prove the congruity of the economic categories with one
another.
Historically, this method of investigation was justified
and necessary. Political economy had achieved a
certain comprehensiveness with Adam Smith; to a certain
extent he had covered the whole of its territory, so that
Say was able to summarise it all in one textbook,
superficially but quite systematically. The only
investigations that were made in the period between Smith
and Ricardo were ones of detail, on productive and
unproductive labour, finance, theory of population, landed
property and taxes. Smith himself moves with great
naïveté in a perpetual contradiction. On
the one hand he traces the intrinsic connection existing
between economic categories or the obscure structure of the
bourgeois economic system. On the other, he
simultaneously sets forth the connection as it appears in
the phenomena of competition and thus as it presents itself
to the unscientific observer just as to him who is actually
involved and interested in the process of bourgeois
production. One of these conceptions fathoms the inner
connection, the physiology, so to speak, of the bourgeois
system, whereas the other takes the external phenomena of
life, as they seem and appear and merely describes,
catalogues, recounts and arranges them under formal
definitions. With Smith both these methods of approach
not only merrily run alongside one another, but also
intermingle and constantly contradict one another.
With him this is justifiable (with the exception of a few
special investigations, [such as] that into money) since his
task was indeed a twofold one. On the one hand he
attempted to penetrate the inner physiology of bourgeois
society but on the other, he partly tried to describe its
externally apparent forms of life for the first time, to
show its relations as they appear outwardly and partly he
had even to find a nomenclature and corresponding mental
concepts for these phenomena, i.e., to reproduce them for
the first time in the language and [in the] thought
process. The one task interests him as much as the
other and since both proceed independently of one another,
this results in completely contradictory ways of
presentation: the one expresses the intrinsic connections
more or less correctly, the other, with the same
justification—and without any connection to the first
method of approach—expresses the apparent
connections without any internal relation. Adam
Smith’s successors, in so far as they do not represent the
reaction against him of older and obsolete methods of
approach, can pursue their particular investigations and
observations undisturbedly and can always regard Adam Smith
as their base, whether they follow the esoteric or the
exoteric part of his work or whether, as is almost always
the case, they jumble up the two. But at last Ricardo
steps in and calls to science: Halt! The basis, the
starting-point for the physiology of the bourgeois
system—for the understanding of its internal organic
coherence and life process—is the determination of
value by labour-time. Ricardo starts with this
and forces science to get out of the rut, to render an
account of the extent to which the other
categories—the relations of production and
commerce—evolved and described by it, correspond to or
contradict this basis, this starting-point; to elucidate how
far a science which in fact only reflects and reproduces the
manifest forms of the process, and therefore also how far
these manifestations themselves, correspond to the basis on
which the inner coherence, the actual physiology of
bourgeois society rests or the basis which forms its
starting-point; and in general, to examine how matters stand
with the contradiction between the apparent and the actual
movement of the system. This then is Ricardo’s ||525| great historical significance
for science. This is why the inane Say, Ricardo having
cut the ground from right under his feet, gave vent to his
anger in the phrase that “under the pretext of
expanding it” (science) “it had been pushed into
a vacuum”. Closely bound up with this scientific
merit is the fact that Ricardo exposes and describes the
economic contradiction between the classes—as shown by
the intrinsic relations—and that consequently
political economy perceives, discovers the root of the
historical struggle and development. Carey (the
passage to be looked up later) therefore denounces him as
the father of communism.
“Mr. Ricardo’s system is one of
discords …its whole tends to the production of
hostility among classes and nations… His
hook is the true manual of the demagogue, who seeks power by
means of agrarianism, war, and plunder.” (H. C. Carey,
The Past, the Present, and the Future, Philadelphia,
1848, pp. 74-75.)
Thus it follows on the one hand that the Ricardian method
of investigation is scientifically justified and has great
historical value, on the other hand the scientific
deficiencies of his procedure are clearly visible and will
become more evident in what follows later.
Hence also the very peculiar and necessarily faulty
architectonics of his work. The whole work consists of
32 chapters (in the third edition). Of this, 14
chapters deal with taxes, thus dealing only with the
application of the theoretical principles. The
twentieth chapter, “Value and Riches, Their
Distinctive Properties” is nothing but an examination
of the difference between use-value and exchange-value,
i.e., a supplement to the first chapter, “On
Value”. The twenty-fourth chapter
“Doctrine of Adam Smith Concerning the Rent of
Land”, like the twenty-eighth chapter “On the
Comparative Value of Gold, Corn and Labour…”
and the thirty-second chapter “Mr. Malthus’s Opinions
on Rent” are mere supplements to, and in part a
vindication of, Ricardo’s rent theory, thus forming mere
appendices to chapters II and III which deal with
rent. The thirtieth chapter “On the Influence of
Demand and Supply on Prices” is simply an appendix to
the fourth chapter “On Natural and
Market-Price.” The nineteenth chapter, “On
Sudden Changes in the Channels of Trade”, forms a
second appendix to this chapter. The thirty-first
chapter, “On Machinery”, is purely an appendix
to the fifth and sixth chapters “On Wages” and
“On Profits”. The seventh chapter,
“On Foreign Trade”, and the twenty-fifth,
“On Colonial Trade”—like the chapters on
taxes—are mere applications of previously established
principles. The twenty-first chapter “Effects of
Accumulation on Profits and Interest” is an appendix
to the chapters on rent, profits and wages. The
twenty-sixth chapter “On Gross and Net Revenue”
is an appendix to the chapters on wages, profits and
rent. Finally, the twenty-seventh chapter “On
Currency and Banks” stands quite apart from the
rest of the work and merely consists of further explanations
and in part modifications of views put forward in his
earlier writings on money.
The Ricardian theory is therefore contained exclusively
in the first six chapters of the work. It is in
respect of this part of the work that I use the term faulty
architectonics. The other part (with the exception of
the section on money) consists of applications, elucidations
and addenda which, by their very nature, are jumbled
together and make no claim to being systematically
arranged. But the faulty architectonics of the
theoretical part (the first six chapters) is not accidental,
rather it is the result of Ricardo’s method of investigation
itself and of the definite task which he set himself in his
work. It expresses the scientific deficiencies of this
method of investigation itself.
Chapter I is “On Value”. It is
subdivided into seven sections. The first section
actually examines whether wages contradict the
determination of the values of commodities by the
labour-time they contain. In the third section Ricardo
demonstrates that the entry of what I call constant capital
into the value of the commodity does not contradict
the determination of value and that the values of
commodities are equally unaffected by the rise or fall in
wages. The fourth section examines to what extent the
determination of exchangeable values by labour-time is
altered by the application of machinery and other fixed and
durable capital, in so far as it enters into the total
capital in varying proportions in different spheres of
production. The fifth section examines how far a rise
or fall in wages modifies the determination of values by
labour-time, if capitals of unequal durability and varying
periods of turnover are employed in different spheres of
production. Thus one can see that in this first
chapter not only are commodities assumed to
exist—and when considering value as such, nothing
further is required—but also wages, capital, profit,
the general rate of profit and even, as we shall see, the
various forms of capital as they arise from the process of
circulation, and also the difference between “natural
and market-price”. This latter, moreover, plays
a decisive role in the following chapters, Ch. II and
Ch. III: “On Rent” and “On the Rent of
Mines”. In accordance with his method of
investigation, the second chapter, “On
Rent” ||526|
—the third “On the Rent of Mines” is only
a supplement to this—again opens with the question:
Does landed property, and rent, contradict the
determination of the value of commodities by
labour-time?
This is how he opens the second chapter “On
Rent”:
“It remains however to be considered,
whether the appropriation of land, and the consequent
creation of rent, will occasion any variation in the
relative value of commodities, independently of the quantity
of labour necessary to production” (Principles of
Political Economy, third edition, London, 1821,
p. 53).
In order to carry out this investigation, he introduces
not only, en passant, the relationship of
“market-price” and “real price” (
monetary expression of value) but postulates the whole of
capitalist production and his entire conception of the
relationship between wages and profit. The fourth
chapter “On Natural and Market-Price” and the
fifth “On Wages” and the sixth “On
Profits” are thus not only taken for granted, but
fully developed in the first two chapters “On
Value” and “On Rent” and in Chapter III as
an appendix to II. The later three chapters, in so far
as they bring any new theoretical points, fill in
gaps here and there, and provide closer definitions, which
for the most part should by rights have found their place in
[chapters] I or II.
Thus the entire Ricardian contribution is contained in
the first two chapters of his work. In these chapters,
the developed relations of bourgeois production, and
therefore also the developed categories of political
economy, are confronted with their principle—the
determination of value—and examined in order to
determine the degree to which they directly correspond to
this principle and the position regarding the apparent
discrepancies which they introduce into the value relations
of commodities. They contain the whole of his critique
of hitherto existing political economy, the determined break
with the contradiction that pervades Adam Smith’s work with
its esoteric and exoteric method of approach, and, at the
same time, because of this critique, they produce some quite
new and startling results. Hence the great theoretical
satisfaction afforded by these first two chapters; for they
provide with concise brevity a critique of the old, diffuse
and meandering political economy, present the whole
bourgeois system of economy as subject to one fundamental
law, and extract the quintessence out of the divergency and
diversity of the various phenomena. But this
theoretical satisfaction afforded by these first two
chapters because of their originality, unity of fundamental
approach, simplicity, concentration, depth, novelty and
comprehensiveness, is of necessity lost as the work
proceeds. Here too, we are at times captivated by the
originality of certain arguments. But as a whole, it
gives rise to weariness and boredom. As the work
proceeds, there is no further development. Where it
does not consist of monotonous formal application of the
same principles to various extraneous matters, or of
polemical vindication of these principles, there is only
repetition or amplification; at most one can occasionally
find a striking chain of reasoning in the final
sections.
In the critique of Ricardo, we have to separate what he
himself failed to separate. [Firstly] his theory of
surplus-value, which of course exists in his work,
although he does not define surplus-value as distinct
from its particular forms, profit, rent, interest.
Secondly, his theory of profit. We shall begin
with the latter, although it does not belong into this
section, but into the historical appendix to Section
III.
[3. Ricardo’s Confusion about the Question of
“Absolute” and “Relative”
Value. His Lack of Understanding of the Forms of
Value]
Before we go on, just a few comments on how Ricardo
confuses the definitions of “value”.
Bailey’s polemic against him is based on this; it is however
also important for us.
First of all Ricardo speaks of “value in
exchange” (l.c., p. 1) and, like Adam Smith,
defines it as “the power of purchasing other
goods” (l.c., p. 1). This is exchange-value
as it appears at first. Then, however, he
proceeds to the real determination of value:
“It is the comparative quantity of
commodities which labour will produce, that determines their
present or past relative value” (l.c., p.
9).
“Relative value” here means
nothing other than the exchangeable value as determined by
labour-time. But relative value can also have
another meaning, namely, if I express the exchange-value of
a commodity in terms of the use-value of another, for
instance the ‘exchange-value of sugar in terms of the
use-value of coffee.
“Two commodities vary in relative
value, and we wish to know in which the variation
has […] taken place” (l.c., p. 9).
Which variation? Ricardo later also calls this
“relative value” “comparative
value” (p. 448 et seq.). We want to know in
which commodity “the variation” has taken
place. This means the variation of the
“value” which was called “relative
value” above. For instance, 1 pound of sugar
equals 2 pounds of coffee. Later 1 pound of sugar
equals 4 pounds of coffee. The “variation”
which we want to know about is: whether the
“necessary labour-time” has altered for
sugar or for coffee, whether sugar costs twice as much
labour-time as before or whether coffee costs half as much
labour-time as before and which of these
“variations” in the labour-time required for
their respective production has called forth this variation
in their exchange relation. This
“relative or comparative value” of sugar and
coffee—the ratio in which they exchange—is thus
different from relative value in the first sense. In
the first sense, the relative value of sugar is determined
by the quantity of sugar which can be produced by a certain
amount of labour-time ||527|. In the second case, the
relative value of sugar [and coffee] expresses the ratio in
which they are exchanged for one another and changes in this
ratio can be the result of a change in the “relative
value” in the first sense, in coffee or in
sugar. The proportion in which they exchange for one
another can remain the same, although their
“relative values” in the first sense have
altered, 1 lb. sugar can equal 2 lbs. coffee, as before,
even though the labour-time for the production of sugar and
of coffee has risen to double or has fallen to a half.
Variations in their comparative value, that
is, if the exchange-value of sugar is expressed in coffee,
and vice versa, will only appear when the variations in
their relative value in the first sense, i.e., the
values determined by the quantity of labour, have altered
to a different extent, when therefore comparative
changes have occurred. Absolute changes, when they do
not alter the original ratio, but are of equal magnitude and
move in the same direction, will not call forth any
variation in the comparative values—nor in the
money prices of these commodities, since, if the
value of money should change, it would do so equally for
both [commodities]. Hence, whether the values of two
commodities are expressed in their own reciprocal use-values
or in their money price—representing both commodities
in the form of the use-value of a third
commodity—these relative or comparative
values or prices are the same, and the changes in them must
be distinguished from changes in their relative
values in the first sense of the term, i.e., in so far
as they only express the change in the labour-time required
for their own production, and thus realised in
themselves. The latter relative value thus
appears as “absolute value” compared with
relative values in the second sense, i.e., in the sense of
actually representing the exchange-value of one commodity in
terms of the use-value of the other or in money. That
is why the term “absolute value” occurs
in Ricardo’s work, to denote “relative value” in
the first sense.
If, in the above example, 1 lb. sugar costs the same
amount of labour-time as before, then its “relative
value” in the first sense has not altered. If,
however, the labour cost of coffee has halved, then the
value of sugar expressed in terms of coffee has altered,
because the “relative value” of coffee, in the
first sense, has altered. The relative values of sugar
and coffee thus appear to be different from their
“absolute values” and this difference becomes
evident because the comparative value of sugar, for
instance, has not altered in comparison with commodities
whose absolute values have remained unchanged.
“The inquiry to which I wish to draw
the reader’s attention, relates to the effect of the variations in the relative value of commodities, and
not in their absolute value” (l.c., p. 15).
At times Ricardo also calls this “absolute”’
value “real value”’ or simply value (for
instance on p. 16).
See the whole of Bailey’s polemic against Ricardo in:
A Critical Dissertation on the Nature, Measures and
Causes of Value; chiefly in reference to the Writings of
Mr. Ricardo and his Followers. By the Author of Essays
on the Formation and Publication of Opinions, London,
1825. (See also his A Letter to a Political
Economist; occasioned by an article in the Westminster
Review etc., London, 1826.) [Bailey’s polemic]
partially revolves around these different instances of
definitions of value, which are not explained by Ricardo but
only occur de facto and are confused with one another, and
Bailey sees in this only “contradictions”.
Secondly, [Bailey’s polemic is directed] against
“absolute value” or “real value”
as distinct from comparative value (or relative value
in the second sense).
In the first of the above-mentioned works, Bailey
says:
“Instead of regarding value as a
relation between two objects, they”( Ricardo and his
followers) “consider it as a positive result produced
by a definite quantity of labour.” (Samuel Bailey,
A Critical Dissertation on the Nature, Measures and
Causes of Value, London, 1825, p. 30.)
They regard “value as something intrinsic and
absolute” (l.c., p. 8).
The latter reproach arises from Ricardo’s inadequate
presentation, because he does not even examine the form of
value—the particular form which labour assumes as the
substance of value. He only examines the magnitudes of
value, the quantities of this abstract, general and, in this
form social, labour which engender differences in the
magnitudes of value of commodities. Otherwise
Bailey would have recognised that the relativity of the
concept of value is by no means negated by the fact that all
commodities, in so far as they are exchange-values, are only
relative expressions of social labour-time and their
relativity consists by no means solely of the ratio in which
they exchange for one another, but of the ratio of all of
them to this social labour which is their substance.
On the contrary, as we shall see, Ricardo is rather to be
reproached for very often losing sight of this
“real” or “absolute value” and
only retaining “relative” and “comparative
values”.
||528| Thus:
[4.] Ricardo’s Description of Profit, Rate of Profit,
Average Prices etc.
[a) Ricardo’s Confusion of Constant Capital with Fixed
Capital and of Variable Capital with Circulating
Capital. Erroneous Formulation of the Question of
Variations in “Relative Values” and Their
Causative Factors]
In Section III of the First Chapter Ricardo explains that
the statement: the value of the commodity is determined by
labour-time includes not only the labour directly employed
on the commodity in the final labour process but also the
labour-time contained in the raw material and the
instruments of labour that are required for the production
of the commodity. Thus it applies not only to the
labour-time contained in the newly-added labour which has
been bought, paid for by wages, but also to the labour-time
contained in that part of the commodity which I call
constant capital. Even the very heading of this
Section III of Chapter I shows the deficiency of his
exposition. It runs like that:
“Not only the labour applied
immediately to commodities affect their value, but the
labour also which is bestowed on the implements, tools, and
buildings, with which such labour is assisted.” (David
Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, p. 16.)
Raw material has been omitted here, yet the labour
bestowed on raw material is surely just as different from
“labour applied immediately to commodities” as
the labour bestowed on “implements, tools and
buildings”. But Ricardo is already thinking of
the next section. In Section III he assumes that
equal component parts of value comprised in the
instruments of labour employed enter into the production of
the various commodities. In the next section he
examines the modifications arising from the varying
proportions in which fixed capital enters [into the
commodities]. Hence Ricardo does not arrive at the
concept of constant capital, one part of which
consists of fixed capital and the other of circulating
capital—raw material and auxiliary material—just
as circulating capital not only includes variable
capital but also raw material etc., and all means of
subsistence which enter into consumption in general,
not only into the consumption of the workers.
The proportion in which constant capital enters into a
commodity does not affect the values of the
commodities, the relative quantities of labour contained in
the commodities, but it does directly affect the different
quantities of surplus-value or surplus-labour
contained in commodities embodying equal amounts of
labour-time. Hence this varying proportion gives rise
to average prices that differ from values.
With regard to sections IV and V of Chapter I we have to
note, first of all, that Ricardo does not examine a highly
important matter which directly affects the
production of surplus-value, namely, that in different
spheres of production the same volume of capital contains
different proportions of constant and variable
capital. Instead, Ricardo concerns himself exclusively
with the different forms of capital and the varying
proportions in which the same capital assumes these various
forms, in other words, [with] different forms arising out
of the process of the circulation of capital, that is,
fixed and circulating capital, capital which is fixed to a
greater or lesser degree (i.e., fixed capital of varying
durability) and unequal velocity of circulation or rates of
turnover of capital. And the manner in which Ricardo
carries out this investigation is the following: He
presupposes a general rate of profit or an average
profit of equal magnitude for different capital
investments of equal magnitude, or for different spheres of
production in which capitals of equal size are
employed—or, which is the same thing, profit in
proportion to the size of the capital employed in the
various spheres of production. Instead of
postulating this general rate of profit,
Ricardo should rather have examined in how far its
existence is in fact consistent with the
determination of value by labour-time, and he would have
found that instead of being consistent with it,
prima facie, it contradicts it, and that its
existence would therefore have to be explained through a
number of intermediary stages, a procedure which is very
different from merely including it under the law of
value. He would then have gained an altogether
different insight into the nature of profit and would not
have identified it directly with surplus-value.
Having made this presupposition Ricardo then asks
himself how will the rise or fall of wages affect the
“relative values”, when fixed and
circulating capital are employed in different
proportions? Or rather, he imagines that this
is how he handles the question. In fact he deals with
it quite differently, namely, as follows: He asks himself
what effect the rise or fall of wages will have on the
respective profits on capitals with different periods
of turnover and containing different proportions of the
various forms of capital. And here of course he finds
that depending on the amount of fixed capital etc., a rise
or fall of wages must have a very different effect on
capitals, according to whether they contain a greater or
lesser proportion of variable capital, i.e., capital which
is laid out directly in wages. Thus in order to
equalise again the profits in the different spheres of
production, ||529| in other
words, to re-establish the general rate of profit,
the prices of the commodities—as distinct from their
values—must be regulated in a different
way. Therefore, he further concludes, these
differences affect the “relative values” when
wages rise or fall. He should have said on the
contrary: Although these differences have nothing to do with
the values as such, they do, through their varying effects
on profits in the different spheres, give rise to average
prices or, as we shall call them cost-prices which
are different from the values themselves and are not
directly determined by the values of the commodities but by
the capital advanced for their production plus the average
profit. Hence he should have said: These average
cost-prices are different from the values of
the commodities. Instead,’ he concludes that they are
identical and with this erroneous premise he
goes on to the consideration of rent.
Ricardo is also mistaken when he thinks that it is only
[through] the three cases he examines that he discovers the
“variations” in the “relative
values” that occur independently of the labour-time
contained in the commodities, that is in fact the difference
between the cost-prices and the values of the
commodities. He has already assumed this
difference, in postulating a general rate of
profit, thus presupposing that despite the varying
ratios of the organic component parts of capitals, these
yield a profit proportional to their size, whereas
the surplus-value they yield is determined absolutely by the
quantity of unpaid labour-time they absorb, and with a given
wage this is entirely dependent on the volume of that part
of capital which is laid out in wages, and not on the
absolute size of the capital.
What he does in fact examine is this: supposing that
cost-prices differ from the values of
commodities—and the assumption of a general rate of
profit presupposes this difference—how in turn are
these cost-prices (which are now, for a change, called
“relative values”) themselves reciprocally
modified, proportionately modified by the rise or fall of
wages, taking also into account the varying proportions of
the organic component parts of capital? If Ricardo had
gone into this more deeply, he would have found
that—owing to the diversity in the organic composition
of capital which first manifests itself in the immediate
production process as the difference between variable and
constant capital and is later enlarged by differences
arising from the circulation process—the mere
existence of a general rate of profit necessitates
cost-prices that differ from values. He
would have found that, even if wages are assumed to
remain constant, the difference exists and therefore
is quite independent of the rise or fall in wages,
thus he would have arrived at a new definition. He
would also have seen how incomparably more important and
decisive the understanding of this difference is for the
whole theory, than his observations on the variation in
cost-prices of commodities brought about by the rise
or fall of wages. The result with which he contents
himself—and that he is content accords with the whole
manner in which he carries out his investigation—is as
follows: Once the variations in the cost-prices (or,
as he says, “relative values”) of the
commodities—in so far as they are due to changes,
rises or falls, in wages when capital of different organic
composition is invested in different spheres— are
admitted and taken into consideration the law remains valid;
that “the relative values” of the commodities
are determined by labour-time does not contradict the
law; for all other changes— changes that are not
merely transitory—in the cost-prices of the
commodities can only be explained by a change in the
necessary labour-time required for their respective
production.
On the other hand, it must be regarded as a great merit
that Ricardo associates the differences in fixed and
circulating capital with the varying periods of turnover of
capital and that he deduces all these differences from the
varying periods of circulation, i.e., in fact from
the circulation or reproduction period of
capital.
First of all, let us consider these differences
themselves, as he presents them in Section IV (Chapter I)
and then examine his views on how they act or bring about
variations in the “relative values”.
1. “In every state of society, the tools,
implements, buildings, and machinery employed in different
trades may be of various degrees of durability, and
may require different portions of labour to produce
them” (l.c., p. 25).
So far as the “different portions of labour to
produce them” are concerned, this can imply—and
here it seems to be Ricardo’s sole point—that the less
durable ones require more labour (recurring, directly
applied labour), partly for their repair and partly for
their reproduction; or it can also mean that machinery
etc. of the same degree of durability may be more or
less expensive, the product of more or less labour.
This latter aspect, important for the proportion of variable
to constant capital, is not relevant to Ricardo’s
consideration and therefore he does not take it up anywhere
as a separate point.
||530|
2. “The proportions, too, in which the capital
that is to support labour” (the variable capital),
“and the capital that is invested in tools, machinery,
and buildings” (fixed capital), “may be
variously combined”. Thus we have a
“difference in the degree of durability of fixed
capital, and this variety in the proportions in which
the two sorts of capital may be combined”
(l.c., p. 25).
It is at once evident why he is not interested in that
part of constant capital which exists as raw material.
The latter is itself part of circulating capital. A
rise in wages does not cause increased expenditure on
that part of capital which consists of machinery and does
not need to be replaced but remains available; the
rise, however, causes an increased outlay for that part
which consists of raw material, since this has to be
constantly replenished, hence also constantly
reproduced.
“The food and clothing consumed by
the labourer, the buildings in which he works, the
implements with which his labour is assisted, are all of a
perishable nature. There is however a vast
difference in the time for which these different capitals
will endure…According as capital is rapidly
perishable, and requires to be frequently reproduced,
or is of slow consumption, it is classed under the heads of
circulating, or of fixed capital” (l.c., p. 26).
Thus the difference between fixed and circulating capital
is here reduced to the difference in the time of
reproduction (which coincides with the period of
circulation).
3. “It is also to be observed that the
circulating capital may circulate, or be
returned to its employer, in very unequal
times. The wheat bought by a farmer to
sow* is
comparatively a fixed capital to the wheat purchased by a
baker to make into loaves. One leaves it in the
ground, and can obtain no return for a year; the other can
get it ground into flour, sell it as bread to his customers
and have his capital free to renew the same, or commence any
other employment in a week” (l.c., pp. 26-27).
On what does this difference in the circulation
periods of different circulating capitals depend? [On
the fact] that in one case, the same capital remains for a
longer time in the actual sphere of production,
though the labour-process does not continue.
This applies, for instance, to wine which lies in the cellar
to attain maturity, or to certain chemical processes in
tanning, dyeing etc.
“Two trades then may employ the
same amount of capital; but it may be very differently
divided with respect to the portion which is fixed, and that
which is circulating.” (l.c., p. 27.)
4. “Again two manufacturers may employ the
same amount of fixed, and the same amount of circulating
capital; but the durability of their fixed
capitals” (therefore also their period of
reproduction) “may he very unequal. One may have
steam-engines of the value of £10,000 the other, ships
of the same value” (l.c., pp. 27-28).
“Different degrees of durability of
…capitals, or, which is the same thing …of
the time which must elapse before one set of commodities
can be brought to market” (l.c., p. 30).
5.“It is hardly necessary to say, that commodities
which have the same quantity of labour bestowed on[a] their production,
will differ in exchangeable value, if they cannot be brought
to market in the same time” (l.c., p. 34).
[Thus we have:] 1. A difference in the proportion
of fixed to circulating capital. 2. A difference
in the period of turnover of circulating capital as a
result of a break in the labour-process while the production
process continues. 3. A difference in the
durability of fixed capital. 4. A
difference in the relative period during which a commodity
is altogether subjected to the labour-process (without any
break in the labour-process or without any difference
between production period and labour period) before it can
enter the actual circulation process. The last case is
described by Ricardo as follows:
“Suppose I employ twenty men at an
expense of £1,000 for a year in the production of a
commodity, and at the end of the year I employ twenty men
again for another year, at a further expense of £1,000
in finishing or perfecting the same commodity, and that I
bring it to market at the end of two years, if profits be
10 per cent, my commodity must sell for £2,310;
for I have employed £1,000 capital for one year, and
£2,100 capital for one year more. Another man
employs precisely the same quantity of labour, but he
employs it all in the first year; be employs forty men at an
expense of £2,000, and at the end of the first year he
sells it with 10 per cent profit, or for £2,200.
Here then are two commodities having precisely the some
quantity of labour bestowed on them, one of which sells
for £2,310—the other for £2,200”
(l.c., p. 34).
||531| But how is a change
in the relative values of these commodities brought
about by this difference—whether in the degree of
durability of fixed capital, or in the period of turnover of
circulating capital, or in the proportions in which the two
sorts of capital may be combined or, finally, in the time
required by different commodities upon which the same
quantity of labour is bestowed [to come on to the
market]. Ricardo says in the first place, that
“This difference …and
[…] variety in the proportions”
etc. “introduce another cause, besides the
greater or less quantity of labour necessary to produce
commodities, for the variations in their relative
value—this cause is the rise or fall in the value
of labour” (l.c., pp. 25-26).
And how is this proved?
“A rise in the wages of labour cannot
fail to affect unequally, commodities produced under
such different circumstances” (l.c., p. 27).
Namely when capitals of equal size are employed in
different industries, and one capital consists
chiefly of fixed capital and contains only a small amount of
capital “employed in the support of labour”
(l.c., p. 27), whereas in the other capital the proportions
are exactly the reverse. To begin with, it is nonsense
to say that the “commodities” are
affected. He means their values. But how
far are the values affected by these circumstances?
Not at all. In both cases it is the profit which is
affected. The man who, for instance, lays out only
1/5 of his capital in variable
capital—provided wages and the rate of surplus-labour
are constant—can only produce [a surplus-value of] 4
on 100, if the rate of surplus-value is 20 per cent.
On the other hand, another man, who lays out
4/5 in variable capital would produce
a surplus-value of 16 [on 100]. For in the first
example the capital laid out in wages is
100/5 = 20 and
1/5 of 20 or 20 per cent is 4.
And in the second example, the capital laid out in wages
equals 4/5 × 100 = 80. And
1/5 of 80 or 20 per cent = 16.
In the first example the profit would be 4, in the second
16. The average profit for both would be
(16+4)/2 or 20/2
= 10 per cent. This is actually the case to which
Ricardo refers. Thus if they both sold at
cost-prices—and this Ricardo assumes—then
they would each sell their commodity at 110. Supposing
wages rose, for example, by 20 per cent. Where
previously a worker cost £ 1, he now costs £ 1
4s, or 24s. As before, the first [man] still has to
lay out £80 in constant capital (since Ricardo leaves
raw materials out of account here, we can do the same) and
for the 20 workers whom he employs, he has to lay out
80s. that is £ 4 in addition to the £ 20. His
capital therefore now amounts to £ 104 and, since the
workers are producing a smaller surplus-value instead of a
larger one, he is only left with £ 6 profit out of his
£ 110. £ 6 on £104 is 5
10/13 per cent. The other man,
however, who employs 80 workers, would have to pay out an
additional 320s., i.e., £16. Thus he would have to lay
out £116. If he were to sell at £110, he would
consequently make a loss of £6 instead of a
gain. This, however, is only the case because the average
profit has already modified the relation between the labour
he has laid out and the surplus-value which he himself
produces.
Instead therefore of investigating the important problem:
what changes have to take place in order that the one who
lays out £80 of his capital of 100 in wages does not
make four times as much profit as the other who only lays
out 20 of his £100 in wages, Ricardo examines the
subsidiary question of how it is that after this great
difference has been levelled out, i.e., with a given rate of
profit, any alteration of the rate of profit, due to rising
wages for instance, would affect the man who employs many
workers with his £100 far more than the man who
employs few workers with his £100, and
hence—provided the rate of profit is the
same—the commodity prices of the one must rise and of
the other must fall, if the rate of profit—or the
cost-prices—is to remain the same.
Ricardo’s first illustration has absolutely nothing to do
with “ a rise in the value of
labour” although he originally stated that the
whole of the variation in “the relative values”
were to arise from this cause. This is the
example:
“Suppose two men employ one hundred
men each for a year in the construction of two machines, and
another man employs the same number of men in cultivating
corn, each of the machines at the end of the year will be of
the same value as the corn, for they will each be produced
by the same quantity of labour. Suppose one of the
owners of one of the machines to employ it, with the
assistance of one hundred men, the following year in making
cloth, and the owner of the other machine to employ his
also, with the assistance likewise of one hundred men, in
making cotton goods, while the farmer continues to employ
one hundred men as before in the cultivation of corn.
During the second year they will all have employed the same
quantity of labour”
<in other words they will have laid out the same
capital in wages, but they will by no means have employed
the same quantity of labour>
“but the goods and machine together
||532| of the clothier, and
also of the cotton manufacturer, will be the result of the
labour of two hundred men, employed for a year; or, rather,
of the labour of one hundred men for two years; whereas the
corn will be produced by the labour of one hundred men for
one year, consequently if the corn he of the value of
£ 500 the machine and cloth of the clothier together,
ought to he of the value of £1,000 and the machine and
cotton goods of the cotton manufacturer, ought to be also
of twice the value of the corn. But they will
be of more than twice the value of the corn, for the
profit of the clothier’s and cotton manufacturer’s capital
for the first year has been added to their capitals,
while that of the farmer has been expended and
enjoyed. On account then of the different degrees
of durability of their capitals, or, which is the same
thing, on account of the time which must elapse
before one set of commodities can be brought to market, they
will be valuable, not exactly in proportion to the
quantity of labour bestowed on them,—they will not
he as two to one, but something more, to compensate for
the greater length of time which must elapse before the most
valuable can be brought to market. Suppose that
for the labour of each workman £50 per annum were
paid, or that £5,000 capital were employed and
profits were 10 per cent, the value of each of the
machines as well as of the corn, at the end of the first
year, would be £ 5,500. The second year the
manufacturers and farmers wilt again employ £5,000
each in support of labour, and will therefore again sell
their goods for £5,500; but the men using the
machines, to be on a par with the farmer, must not
only obtain £5,500, for the equal capitals of
£5,000 employed on labour, but they must obtain a
further sum of £550; for the profit on
£5,500, which they have invested in machinery,
and consequently” (because actually, an
equal annual rate of profit of 10 per cent is assumed as
a necessity and a law) “their goods must sell for
£6,050”[l.c., pp. 29-30].
<That is, average prices or cost-prices
different from the values of the commodities come into
being as a result of the average profit—the general
rate of profit presupposed by Ricardo.>
“Here then are capitalists employing
precisely the same quantity of labour annually on the
production of their commodities, and yet the goods they
produce differ in value on account of the different
quantities of fixed capital, or accumulated labour,
employed by each respectively” (l.c., pp. 30-31).
<Not on account of that, but on account of both those
ragamuffins having the fixed idea that both of them must
draw the same spoils from “the support they have given
to labour”; or that, whatever the respective
values of their commodities, those commodities must
be sold at average prices, giving each of them the
same rate of profit.>[b]
“The cloth and cotton goods are of
the same value, because they are the produce of equal
quantities of labour, and equal quantities of fixed capital;
but corn is not of the same value” <should
read cost-price> “as these commodities, because
it is produced, as far as regards fixed capital, under
different circumstances” (l.c., p. 31).
This exceedingly clumsy illustration of an exceedingly
simple matter is so complicated in order to avoid saying
simply: Since capitals of equal size, whatever the ratio of
their organic components or their period of circulation,
yield profits of equal size—which would be
impossible if the commodities were sold at their
values etc.—there exist cost-prices which
differ from the values of commodities. And this is
indeed implied in the concept of a general rate of
profit.
Let us examine this complicated example and reduce it to
its genuine dimensions, which are hardly
“complicated”. And for this purpose let us
begin from the end and note at the outset, in order to reach
a clearer understanding, that Ricardo
“presupposes” that the farmer and the cotton
manufacturer spend nothing on raw material, that,
furthermore, the farmer does not lay out any capital for
instruments of labour and, finally, that no part of the
fixed capital laid out by the cotton-manufacturer enters
into his product as wear and tear. Though all these
assumptions are absurd, they do not in themselves affect the
illustration.
Having made these assumptions, and starting Ricardo’s
example from the end, it runs as follows: The farmer lays
out £5,000 in wages; the cotton fellow lays out
£5,000 in wages and £5,500 in machinery.
The first therefore spends £5,000 and the second
£10,500; the second ||533| thus spends as much again as
the first. If therefore both are to make a profit of
10 per cent, the farmer must sell his commodity at £
5,500 and the cotton fellow his at £6,050 (since it
has been assumed that no part of the £5,500 expended
in machinery forms part of the value of the product as wear
and tear). One absolutely cannot conceive what Ricardo
intended to elucidate in this example, apart from the fact
that the cost-prices of commodities—in so far as they
are determined by the value of the outlay embodied in the
commodities plus the same annual rate of
profit—differ from the values of the
commodities and that this difference arises because the
commodities are sold at prices that will yield the same
rate of profit on the capital advanced; in short, that
this difference between cost-prices and values
is identical with a general rate of profit.
Even the difference between fixed capital and circulating
capital which he introduces here is, in this example, sheer
humbug. Since if, for instance, the additional
£5,500 which the cotton spinner employs, consisted of
raw materials, while the farmer did not require any seeds
etc., the result would be exactly the same. Neither
does the example show, as Ricardo asserts, that
“the goods they” (the
cotton-manufacturer and the farmer) “produce differ in
value on account of the different quantities of fixed
capital, or accumulated labour, employed by each
respectively” (l.c., p. 31).
For according to his assumption, the cotton-manufacturer
employs a fixed capital of £5,500 and the farmer nil;
the one employs fixed capital, the other does not. By
no means do they, therefore, employ it “in different
quantities”, any more than one could say that, if one
person eats meat and the other eats no meat, they consume
meat “in different quantities”. On the
other hand it is correct (though very wrong to introduce the
term surreptitiously with an “or”) that they
employ “accumulated labour”, i.e., materialised
labour, “in different quantities”, namely, one
to the amount of £10,500 and the other only
£5,000. However, the fact that they employ
“different quantities of accumulated labour”
only means that they lay out “different quantities of
capital” in their respective trades, that the amount
of profit is proportionate to this difference in the size of
the capitals they employ, because the same rate of
profit is assumed, and that, finally, this difference in
the amount of profit, proportionate to the size of the
capitals, is expressed, represented, in the respective
cost-prices of the commodities. But whence the
clumsiness in Ricardo’s illustration?
“Here then are capitalists employing
precisely the same quantity of labour annually on the
production of their commodities, and yet the goods they
produce differ in value” (l.c., pp. 30-31).
This means that they do not employ the same quantity of
labour—immediate and accumulated labour taken
together—but they do employ the same quantity of
variable capital, capital laid out in wages, the same
quantity of living labour. And since money exchanges
for accumulated labour, i.e., existing commodities, in the
form of machines etc., only according to the law of
commodities, since surplus-value comes into being
only as the result of the appropriation without payment of a
part of the living labour employed—it is clear (since,
according to the assumption, no part of the machinery enters
into the commodity as wear and tear) that both can only make
the same profit if profit and surplus-value are
identical. The cotton-manufacturer would have to sell
his commodity for £5,500, like the farmer, although he
lays out more than twice as much capital. And even if
the whole of his machinery passed into the commodity, he
could only sell his commodity for £11,000; he would
make a profit of less than 5 per cent, while the farmer
makes 10. But with these unequal profits, the
farmer and the manufacturer would have sold the commodities
at their values, provided that the 10 per cent made
by the farmer represented actual unpaid labour embodied in
his commodity. If therefore, they sell their
commodities at an equal profit, then this must be due to one
of two things: either the manufacturer arbitrarily adds 5
per cent on to his commodities and then the commodities of
the manufacturer and the farmer, taken together, are sold
above their value; or the actual surplus-value which
the farmer makes is, for instance, 15 per cent and both add
the average of 10 per cent on to their commodity. In
this case, although the cost price of the respective
commodity is either above or below its value, both
commodities taken together are sold at their
value and the equalisation of the profits is itself
determined by the total surplus values they contain.
Here, in Ricardo’s above proposition, when correctly
modified, lies the truth, [namely] that capitals of equal
size, containing [different] proportions of variable to
constant capital, must result in commodities of unequal
values and thus yield different profit; the levelling out of
these profits must therefore result in cost-prices
which differ from the values of the commodities.
“Here then are capitalists employing
precisely the same quantity of” (immediate, living)
“labour annually on the production of the commodities,
and yet the goods they produce differ in value” (i.e.,
have cost-prices different from their values) “on
account of the different quantities of …accumulated
labour employed by each respectively” [l.c., pp.
30-31.]
But the idea foreshadowed in this passage is never
clearly stated by Ricardo, It only explains the meanderings
and obvious fallaciousness of the illustration, which up to
this point had nothing to do with the “different
quantities of fixed capital employed”.
Let us now go further back in the analysis. In the
first year, the manufacturer builds a machine with a hundred
men; the farmer, meanwhile, produces corn, also with a
hundred men. In the second year the manufacturer uses
the machine to manufacture cotton, for which he again
employs a hundred men. The farmer, on the other hand,
again employs a hundred men for the cultivation of
corn. Suppose, says Ricardo, the value of corn is
£500 per annum. Let us assume that the unpaid
labour contained therein equals 25 per cent [of the labour
paid for], i.e., [of] 400 = 100. Then at the end of
the first year, the machine would also be worth £500,
of which £400 would be paid labour and £100 the
value of the unpaid labour. Let us ||534| assume that by the end of the
second year, the whole of the machine has been used up, has
passed into the value of the cotton. In fact Ricardo
assumes this, in that, at the end of the second year, he
compares not only the value of the cotton goods, but
“the value of the cotton goods and the machine”
with “the value of the corn ”[l.c., p. 29].
Well then. At the end of the second year, the value
of the cottons must be equal to £1,000, namely,
£500 the value of the machine, and £500 the
value of the newly-added labour. The value of the
corn, on the other hand, is £500, namely, £400
the value of the wages and £100 unpaid labour.
So far, there is nothing in this case which contradicts
the law of value. The cotton-manufacturer makes a
profit of 25 per cent just as the corn-manufacturer
does. But the commodities of the former equal
£1,000 and those of the latter equal £500,
because the former commodity embodies the labour of 200 men
and the latter the labour of only 100 in each year.
Furthermore, the £100 profit (surplus-value) , which
the cotton-manufacturer has made on the machine in the first
year—by absorbing 1/5 of the
labour of the workers who constructed it, without paying for
it—are only realised for him in the second year, since
it is only then that he realises in the value of the cotton,
simultaneously the value of the machine. But now we
come to the point. The cotton-manufacturer sells for
more than £1,000, i.e., at a higher value than his
commodity has, while the farmer sells his corn at
£500, thus, according to our assumption, at its
value. If, therefore, there were only these two people
to exchange with one another, the manufacturer obtaining
corn from the farmer and the farmer cotton from the
manufacturer, then it would amount to the same as if the
farmer sold his commodity below its value, making
less than 25 per cent [profit] and the manufacturer sold his
cotton above its value. Let us do without the
two capitalists (the cloth-man and the cotton-man) whom
Ricardo introduces here quite superfluously, and let us
modify his example by only referring to the
cotton-manufacturer. Ricardo’s double calculation is
of no value at all to the illustration at this point.
Thus:
“But they” (the cottons)
“will be of more than twice the value of the
corn, for the profit on the …
cotton-manufacturer’s capital for the first year has
been added to their capitals, while that of the farmer has
been expended and enjoyed” [l.c., p. 30].
(This latter bourgeois extenuating phrase is here quite
meaningless from a theoretical standpoint. Moral
considerations have nothing to do with the matter.)
“On account then of the different
degrees of durability of their capitals, or, which is
the same thing, on account of the time which must elapse
before one set of commodities can be brought to market,
they will he valuable, not exactly in proportion to the
quantity of labour bestowed on them,—they will not be
as two to one, but something more, to compensate for the
greater length of time which must elapse before the most
valuable can be brought to market” (l.c.,
p. 30).
If the manufacturer sold the commodity at its value, then
he would sell it at £1,000, twice the price of corn,
because it embodies twice as much labour, £500 of
accumulated labour in the machinery (£100 of which he
has not paid for) and £500 labour employed in the
production of cotton, 100 of which again he has not paid
for. But he calculates like this: the first year I
laid out £400 and by exploiting the workers, I
produced a machine with this, which is worth
£500. I thus made a profit of 25 per cent.
The second year I laid out £900, namely, £500 in
the said machine and again £400 in labour. If I
am again to make 25 per cent, I must sell the cotton at
£1,125, i.e., £125 above its value.
For this £125 does not represent any labour contained
in the cotton, neither labour accumulated in the first year
nor labour added in the second. The aggregate amount
of labour contained in the cotton only amounts to
£1,000. On the other hand, suppose the two
exchange with one another, or that half the capitalists find
themselves in the position of the cotton-manufacturer and
the other half in the position of the farmer. How are
the first half to be paid £ 125? From what
fund? Obviously only from the second
half. But then it is clear that this second half
does not make a profit of 25 per cent, Thus the first half
would cheat the second under the pretext of a general
rate of profit, while, in fact, the rate of profit would
be 25 per cent for the manufacturer and below 25 per cent
for the farmer. It must, therefore, come about in a
different way.
In order to make the illustration clearer and more
accurate, let us suppose the farmer uses £900 in the
second year. Then, with a profit of 25 per cent, he
has made £100 on the £400 laid out in the
first year, and £225 in the second, altogether
£325. As against this, the manufacturer makes 25
per cent on the £400 in the first year, but in the
second only £100 on £900, i.e., only 11
1/9 per cent (since only the
£400 laid out in labour yield surplus-value, whereas
the £500 in machinery yield none). Or let us
suppose the farmer lays out £400 again, then he has
made 25 per cent in the first year as well as in the second;
which taken together is 25 per cent or £200 on an
outlay of £800 in two years. As against this,
the manufacturer will have made 25 per cent in the first
year and 11 1/9 in the second; i.e.,
£200 on an outlay of £ 1,300 in two years which
amounts to 15 5/13 per cent. If
this were levelled out, the manufacturer would receive 20
5/26 per cent and so would the
farmer. In other words, this would be the average
profit. This would result in [a price of] less than
£500 for the farmer’s commodity and more than
£1,000 for the manufacturer’s commodity.
||535| At all events, the
manufacturer here lays out £400 in the first year and
£900 in the second, while the farmer lays out only
£400 on each occasion. If the manufacturer
instead of producing cotton had built a house (if he were a
builder) then at the end of the first year, the unfinished
house would embody £500 and he would have to spend a
further £400 on labour in order to complete it.
The farmer, however, whose capital turned over within the
year, can recapitalise a part, say 50, of his £100
profit and spend it again on labour, which the manufacturer,
in the supposed case, cannot do. If the rate of profit
is to be the same in both cases, then the commodity
of one must be sold above its value and that of the
other below its value. Since competition
strives to level out values into cost-prices, this is what
happens.
But it is incorrect to say, as Ricardo does, that here a
variation in the relative values takes place “on
account of the different degrees of durability of
capitals” (p. 30) or “on account of the time
which must elapse before one set of commodities can be
brought to market” (p. 30). It is, rather, the
adoption of a general rate of profit, which despite
the different values brought about by the circulation
process, gives rise to equal cost-prices which are
different from values, for values are determined only
by labour-time.
Ricardo’s illustration consists of two examples.
The durability of capital, or the character of
capital as fixed capital, does not enter into the second
example at all. It only deals with capitals of
different size, but of which the same amount is laid out in
wages, as variable capital, and where profits are to be
equal, although the surplus-values and values must be
different.
Neither does durability enter into the first
example. It is concerned with the longer
labour-process—the longer period during which the
commodity has to remain within the sphere of production,
before it becomes a finished commodity and can enter
into circulation. In this example of Ricardo the
manufacturer also employs more capital in the second year
than the farmer although he employs the same amount of
variable capital in both years. The farmer, however,
could employ a greater variable capital in the second year,
because his commodity remains within the labour-process for
a shorter period and is converted more quickly into
money. Besides, that part of profit which is consumed
as revenue, is already available to the farmer at the end of
the first year, but to the manufacturer only at the end of
the second. The latter must therefore spend an
additional amount of capital for his keep which he
advances to himself. Incidentally, whether in
the second case a compensation can take place and profits
can be equalised depends here entirely on the degree
to which the profits of the capitals which are turned over
in one year are recapitalised, in other words, on the actual
amount of profits produced. Where there is nothing,
there is nothing to equalise. Here the capitals again
produce values, hence surplus-values, hence profits not in
proportion to the size of the capital; If profits are to be
proportionate to their size, then there must be
cost-prices different from the values.
Ricardo gives a third illustration, which, however, is
again exactly the same as the first example of the
first illustration and contains nothing new at all.
“Suppose I employ twenty men at an
expense of £1,000 for a year in the production of a
commodity, and at the end of the year I employ twenty men
again for another year, at a further expense of £1,000
in finishing or perfecting the same commodity, and that I
bring it to market at the end of two years, if profits be 10
per cent, my commodity must sell for £2,310;
for I have employed £1,000 capital for one
year, and £2,100 capital for one year more.
Another man employs precisely the same quantity of labour,
but he employs it all in the first year; he employs forty
men at an expense of £2,000, and at the end of the
first year he sells it with 10 per cent profit, or
for £2,200. Here then are two commodities having
precisely the same quantity of labour bestowed on them, one
of which sells for £2,310—the other for
£2,200. This case appears to differ from
the last, but is, in fact, the same” (l.c.,
pp. 34-35).
It is not only the same “in fact”, but
“in appearance” too, except that in the one case
the commodity is called “machine” and here
simply “commodity”. In the first example,
the manufacturer laid out £400 in the first year and
£900 in the second. This time he lays out
£1,000 in the first and £2,100 in the
second. The farmer laid out £400 in the first
and £400 in the second. This time, the second
man lays out £2,000 in the first year and nothing in
the second. That is the whole difference. In
both cases, however, the fable turns on the fact that one of
the men lays out in the second year the whole of the product
of the first (including surplus-value) plus an additional
sum.
The clumsiness of these examples shows that Ricardo is
wrestling with a difficulty which he does not understand and
succeeds even less in overcoming. The clumsiness
consists in this: The first example of the first
illustration is meant to bring in the durability of
capital; it does nothing of the sort; Ricardo himself has
made this impossible because he does not let any part
of fixed capital enter into the commodity as wear and tear,
thus excluding the very factor through which the peculiar
mode of circulation of fixed capital becomes
evident. He merely demonstrates that as a consequence
of the longer duration of the labour-process, a
greater capital is employed than where the
labour-process takes a shorter time. The third example
is supposed to illustrate something different, but in
reality illustrates the same thing. The second
example of the first ||536|
illustration, however, is intended to show what differences
arise as a result of different ratios of fixed
capital. Instead it only shows the difference brought
about by two capitals of unequal size, although the
same amount of capital is laid out in wages. And,
furthermore, the manufacturer operates without cotton and
yarn and the farmer without seeds or implements! The
complete inconsistency, even absurdity, of this illustration
necessarily arises from this underlying lack of clarity.
[b) Ricardo’s Confusion of Cost-Prices with Value and the
Contradictions in His Theory of Value Arising
Therefrom. His Lack of Understanding of the Process of
Equalisation of the Rate of Profit and of the Transformation
of Values into Cost-Prices]
Finally he states the practical conclusions to be drawn
from all these illustrations:
“The difference in value arises in
both cases from the profits being accumulated as
capital, and is only a just compensation” (as
though it were a question of justice here) “for the
time that the profits were withheld” (l.c.,
p. 35).
What does this mean, other than that in a definite
period of circulation, for instance a year, a capital
must yield 10 per cent whatever its specific period of
circulation may be and quite independently of the various
surplus-values which according to the proportion of
their organic component parts capitals of equal size
must produce in different branches of production,
irrespective of the circulation process.
Ricardo should have drawn the following conclusions:
[Firstly:] Capitals of equal size produce
commodities of unequal values and therefore yield
unequal surplus-values or profits, because
value is determined by labour-time, and the amount of
labour-time realised by a capital does not depend on its
absolute size but on the size of the variable capital, the
capital laid out in wages. Secondly: Even
assuming that capitals of equal size produce equal
values (although the inequality in the sphere of
production usually coincides with that in the sphere of
circulation), the period within which they
appropriate equal quantities of unpaid labour and
convert these into money, still varies in
accordance with their turnover period. Thus
arises a second difference in the values, surplus-values and
profits which capitals of equal size must yield in
different branches of production in a given period of
time.
Hence, if profits as a percentage of capital are
to be equal over a period, say of a year, so that capitals
of equal size yield equal profits in the same period of
time, then the prices of the commodities must be
different from their values. The sum total of
these cost-prices of all the commodities taken together will
be equal to their value. Similarly the total
profit will be equal to the total surplus-value which all
these capitals yield, for instance, during one year.
If one did not take the definition of value as the basis,
the average profit, and therefore also the
cost-prices, would be purely imaginary and untenable.
The equalisation of the surplus-values in different spheres
of production does not affect the absolute size of this
total surplus-value; but merely alters its
distribution among the different spheres of
production. The determination of this
surplus-value itself, however, only arises out of the
determination of value by labour-time. Without this,
the average profit is the average of nothing, pure
fancy. And it could then equally well be 1,000 per
cent or 10 per cent.
All Ricardo’s illustrations only serve him as a means to
smuggle in the presupposition of a general rate of
profit. And this happens in the first chapter
“On Value”, while wages are supposed to be dealt
with only in the fifth chapter and profits in the
sixth. How from the mere determination of the
“value” of the commodities their
surplus-value, the profit and even a general rate of
profit are derived remains obscure with
Ricardo. In fact the only thing which he proves in the
above illustrations is that the prices of the
commodities, in so far as they are determined by the general
rate of profit, are entirely different from their
values. And he arrives at this difference by
postulating the rate of profit to be law. One
can see that though Ricardo is accused of being too
abstract, one would be justified in accusing him of the
opposite: lack of the power of abstraction, inability, when
dealing with the values of commodities, to forget profits, a
factor which confronts him as a result of competition.
Because Ricardo, instead of deriving the difference
between cost-prices and values from the determination of
value itself, admits that “values” themselves
(here it would have been appropriate to define the concept
of “absolute” or “real value” or
“value” as such) are determined by influences
that are independent of labour-time and that the law of
value is sporadically invalidated by these influences, this
was used by his opponents, such as Malthus, in order to
attack his whole ||537| theory
of value. Malthus correctly remarks that the
differences between the organic component parts of capital
and the turnover periods of capitals in different branches
of production develop simultaneously with the progress of
production, so that one would arrive at Adam Smith’s
standpoint, that the determination of value by labour-time
was no longer applicable to “civilised”
times. (See also Torrens.) On the other
hand his disciples have resorted to the most pitiful
scholastic inventions, to make these phenomena consistent
with the fundamental principle (see [James] Mill and
the miserable McCulloch).
Ricardo does not dwell on the conclusion which
follows from his own illustrations, namely,
that—quite apart from the rise or fall of
wages—on the assumption of constant wages, the
cost-prices of commodities must differ from their values, if
cost-prices are determined by the same percentage of
profit. But he passes on, in this section, to the
influence which the rise or fall of wages exerts on
cost-prices to which the values have already been
levelled out.
The matter is in itself extraordinarily simple.
The farmer lays out £5,000 at 10 per cent; his
commodity equals £5,500. If the profit falls by
1 per cent from 10 to 9, because wages have risen and the
rise in wages has brought about this reduction, then he
continues to sell at £5,500 (since it is assumed that
he lays out the whole of his capital in wages). But of
these £5,500 only £454
14/109 belong to him and not
£500. The capital of the manufacturer consists
of £5,500 for machinery and £5,000 for
labour. As before, the latter £5,000 results in
a product of £5,500, except that now the manufacturer
does not lay out £5,000 but £5,045
95/109 and on this he makes a profit
of only £454 14/109, like the
farmer. On the other hand he can no longer reckon 10
per cent or £550 on his fixed capital of £5,500
but only 9 per cent or £ 495. He will therefore
sell his commodity at £5,995 instead of at
£6,050. Thus, as a result of the rise in wages,
the money price of the farmer’s commodity has remained the
same, while that of the manufacturer has fallen, the value
of the farmer’s commodity compared with that of the
manufacturer has therefore risen. The whole point of
the matter is that if the manufacturer sold his commodity at
the same value as before, he would make a higher profit than
the average, because only the part of his capital that has
been laid out in wages is directly affected by the rise in
wages. This illustration in itself already
assumes cost-prices regulated by an average profit of
10 per cent and differing from the values of
the commodities. The question is, how are these
cost-prices affected by the rise or fall in profit, when the
capitals employed contain different proportion of fixed and
circulating capital. This illustration (Ricardo, l.c.,
pp. 31-32) has nothing to do with the essential question of
the transformation of values into cost-prices.
But it is a nice point because Ricardo in fact demonstrates
here that, if the composition of the capitals were the same,
a rise in wages—contrary to the vulgar
view—would only bring about a lowering of profits
without affecting the values of the commodities; if the
composition of the capitals is unequal, then it will only
bring about a fall in the price of some commodities
instead of—as vulgar opinion maintains—a rise in
the price of all commodities. Here the fall in
the prices of commodities results from a fall in the rate of
profit or, which amounts to the same thing, a rise in
wages. In the case of the manufacturer a large part of
the cost-price of the commodity is determined by the
average profit which he reckons on his fixed capital.
If therefore this rate of profit falls or rises as a result
of the rise or fall in wages, then the price of these
commodities will fall or rise correspondingly—that is
in accordance with that part of the price which results from
the profit calculated upon the fixed capital. The same
applies to “circulating capitals returnable at
distant periods, and vice versa.
(J.R. McCulloch [The Principles of Political Economy,
Edinburgh, 1825, p. 300].) If the capitalists who
employ less variable capital were to continue to chalk up
their fixed capital at the same rate of profit, and add it
to the price of the commodity then their rate of profit
would rise and it would rise in the proportion in which they
employ more fixed capital than those whose capital consists
to a greater extent of variable capital. This would be
levelled out by competition.
“Ricardo,” says Mac.,
“was the first who endeavoured to analyse and discover
the effects of fluctuations in the rate of wages on the
value of commodities, when the capitals employed in their
production were not of the same degree of durability.”
“Ricardo has not only shown that it is impossible for
any rise of wages to raise the price of all
commodities; but…that in many cases a rise of
wages necessarily leads to a fall of prices, and
a fall of wages to a rise of prices”
(l.c., pp. 298-99).
Ricardo proves his point by firstly postulating
cost-prices regulated by a general rate of
profit.
Secondly: “There can be no rise in the value of
labour without a fall of profits”. (David
Ricardo, On the Principles of Political Economy, and
Taxation, third edition, London, 1821, p. 31.)
Thus already in Chapter I “On Value”,
those laws are presupposed, which in chapters V and VI
“On Wages” and “On Profits” should
be deduced from the Chapter “On
Value”. Incidentally, ||538| Ricardo concludes quite
wrongly, that because “there can be no rise in the
value of labour without a fall of profits”, there can
be no rise of profits without a fall in the value of
labour. The first law refers to surplus-value.
But since profit equals the proportion of surplus-value to
the total capital advanced, profit can rise though the value
of labour remains the same, if the value of constant capital
falls. Altogether Ricardo mixes up surplus-value and
profit. Hence he arrives at erroneous laws on profit
and the rate of profit.
The general conclusion of the last illustration is as
follows:
“The degree of alteration in the
relative value of goods, on account of a rise or fall of
labour” (or, which amounts to the same thing, rise or
fall in the rate of profit), “would depend on the
proportion which the fixed capital bore to the whole capital
employed. All commodities which are produced by very
valuable machinery, or in very valuable buildings, or which
require a great length of time before they can be brought to
market, would fall in relative value, while all those which
were chiefly produced by labour, or which would be speedily
brought to market would rise in relative value” (l.c.,
p. 32).
Again Ricardo comes to the one point with which he is
really concerned in his investigation. These
variations in the cost-prices of commodities resulting from
a rise or fall in wages are insignificant compared with
those variations in the same cost-prices which are brought
about by changes in the values of commodities, that is
changes in the quantity of labour employed in their
production (Ricardo is far from expressing this truth in
these adequate terms). One can therefore, by and
large, “abstract” from this and, accordingly,
the law of value remains virtually correct. (He should
have added that the cost-prices remain unintelligible
without values determined by labour-time.) This is the
true course of his investigation. In fact it is clear
that despite the transformation of the values of commodities
into cost-prices, the latter having been assumed, a
change in cost-prices—in so far as it does not
arise from a permanent fall or rise, a permanent alteration,
in the rate of profit which can only establish itself in the
course of many years—can only and solely be caused by
a change in the values of commodities, in the
labour-time necessary for their production. {And these
cost-prices must not be confused with market-prices:
they are the average market-prices of the commodities in the
different branches of production. Market-price
itself already includes an average in so far as commodities
of the same sphere are determined by the prices of
those commodities which are produced under the mean,
average conditions of production of this sphere.
By no means under the worst conditions, as Ricardo
assumes with rent, because the average demand is related to
a certain price, even with corn. A certain amount of
the supply is therefore not sold above this
price. Otherwise the demand would fall. Those
whose conditions of production are not average but
below average, must therefore often sell their
commodity not only below its value but below its cost
price.}
“The reader, however, should remark,
that this cause of the variation of commodities” (this
should read variations of cost-prices or, as he calls
them, relative va1ues of commodities) “is
comparatively slight in its effects Not so
with the other great cause of the variation in the value of
commodities, namely, the increase or diminution in the
quantity of labour necessary to produce them…An
alteration in the permanent rate of profits, to any great
amount, is the effect of causes which do not operate but in
the course of years; whereas alterations in the quantity of
labour necessary to produce commodities, are of daily
occurrence. Every improvement in machinery, in tools,
in buildings, in raising the raw material, saves labour, and
enables us to produce the commodity to which the improvement
is applied with more facility, and consequently its
value alters. In estimating, then, the causes
of the variations in the value of commodities, although it
would be wrong wholly to omit the consideration of the
effect produced by a rise or fall of labour, it would be
equally incorrect to attach much importance to
it…“ (l.c., pp. 32-33).
He therefore takes no further account of this.
The whole of this Section IV of Chapter I “On
Value” is so extraordinarily confused, that,
although Ricardo announces at the start that he intends to
consider the variations in the va1ues of
commodities brought about by the rise or fall in
wages in conjunction with different composition of
capital, he actually does this only occasionally. In
fact, he fills the major part of Section IV with
illustrations which prove that, quite independently
of the rise or fall of wages—he himself assumes
that wages remain constant—the postulation
||539| of a general rate of
profit must result in cost-prices which differ from the
values of the commodities and, moreover, that this does not
even depend on the difference [in the proportion] of fixed
and circulating capital. He forgets this again at the
end of the section.
He announces the subject of his inquiry in Section IV
with the words:
“This difference in the degree of
durability of fixed capital, and this variety in
the proportion in which the two sorts of capital may be
combined, introduce another cause, besides the
greater or less quantity of labour necessary to produce
commodities, for the variations in their relative
value—this cause is the rise or fall in the value
of labour” (l.c., pp. 25-26).
In fact, he shows by his illustrations, in the first
place, that it is only the general rate of profit
which enables the different combinations of types of capital
(namely, variable and constant etc.) to differentiate the
prices of commodities from their values, that therefore the
cause of those variations is the general rate of
profit and not the value of labour, which is assumed to be
constant. Then—only in the second place—he
assumes cost-prices already differentiated from values as a
result of the general rate of profit and he examines how
variations in the value of labour affect these. Number
1, the main point, he does not investigate; he loses sight
of it altogether and he closes the section as he began
it:
“…it being shown in this
section that without any variation in the quantity of
labour, the rise of its value merely will occasion a
fall in the exchangeable value of those goods, in the
production of which fixed capital is employed; the
larger the amount of fixed capital, the greater will he the
fall” (l.c., p. 35).
And in the following Section V (Chapter I) he continues
on the same lines, in other words, he only investigates how
the cost-prices of commodities can be altered by a
variation in the value of labour, or wages,
not when the proportion of fixed and circulating capitals is
different in two capitals of equal size employed in two
different spheres of production, but when there is
“unequal durability of the capital”[c] or “unequal
rapidity with which it is returned to its
employer”[d] [l.c., p. 36]. The correct
surmise implied in Section IV, regarding the difference
between cost-prices and values brought about by the
general rate of profit is here no longer noticeable.
Only a secondary question is examined here, namely, the
variation in the cost-prices themselves. This
section, therefore, is in fact of hardly any theoretical
interest, apart from the occasional mention of differences
in the form of capital arising from the circulation
process.
“In proportion as fixed capital is
less durable, it approaches to the nature of circulating
capital. It will be consumed and its value
reproduced in a shorter time, in order to preserve the
capital of the manufacturer” (l.c., p. 36).
Thus the lesser durability and the difference between
fixed and circulating capital in general, are reduced to the
difference in the period of reproduction. This
is certainly a factor of decisive importance. But by
no means the only one. Fixed capital enters wholly
into the labour-process and only in successive stages and by
instalments into the process of creating value. This
is another major distinction in their form of
circulation. Furthermore: fixed capital
enters—necessarily enters—only as
exchange-value into the process of circulation, while
its use-value is consumed in the labour-process and
never goes outside it. This is another important
distinction in the form of circulation. Both
distinctions in the form of circulation also concern the
period of circulation; but they are not identical with the
degrees [of durability of fixed capital] and the differences
[in the period of circulation].
Less durable capital constantly requires a greater
quantity of labour,
“to keep it in its original state of
efficiency; but the labour so bestowed may be considered as
really expended on the commodity manufactured, which must
bear a value in proportion to such labour”.
(l.c., pp. 36-37.)”…if the wear and tear of the
machine were great, if the quantity of labour requisite to
keep it in an efficient state were that of fifty men
annually, I should require an additional price for my goods,
equal to that which would be obtained by any other
manufacturer who employed fifty men in the production of
other goods, and who used no machinery at all. But a
rise in the wages of labour would not equally affect
commodities produced with machinery quickly consumed, and
commodities produced with machinery slowly consumed, In the
production of the one, a great deal of labour would be
continually transferred to the commodity
produced…” [l.c., p. 37].
<but he is so occupied with his general rate of
profit, that he does not see that thereby a relatively great
deal of surplus-labour would be continually transferred to
the commodity>
“in the other very little would be so
transferred” [l.c., p. 37].
<Hence very little surplus-labour, hence much less
[surplus]-value, if the commodities exchanged according to
their values.>
“Every rise of wages, therefore, or,
which is the same thing, ||540|
every fall of profits, would lower the relative value of
those commodities which were produced with a capital of a
durable nature, and would proportionally elevate those which
were produced with capital more perishable. A fall of
wages would have precisely the contrary effect” (l.c.,
pp. 37-38).
In other words: The manufacturer who employs fixed
capital of less durability employs relatively less fixed
capital and more capital expended in wages, than the one who
employs capital of greater durability. This case is
therefore identical with the previous one, illustrating how
a variation in wages affects capitals, one of which consists
of relatively, proportionately, more fixed capital than the
other, There is nothing new [here].
What Ricardo further says about machinery on
pp. 38-40 should be held over until we come to Chapter XXXI
“On Machinery”.
It is curious how Ricardo, at the end, almost expresses
the correct idea in a passing phrase only to let it
go again and after touching upon it in the passages we are
about to quote, returns again to his dominating idea of the
effect of a change in the value of labour on cost-prices and
finally concludes the investigation with this secondary
consideration.
The passage containing the allusion is the following:
“It will be seen, then, that in the
early stages of society, before much machinery or durable
capital is used, the commodities produced by equal
capitals will he nearly of equal value, and will
rise or fall only relatively to each other on account of
more or less labour being required for their
production” [l.c., p. 40].
<The final clause is badly worded; it refers moreover
not to value but to commodities, and is meaningless,
unless it refers to their prices; for to say that
values fall in proportion to labour-time means that
values fall or rise as they fall or rise.>
“but after the introduction of these
expensive and durable instruments, the commodities
produced by the employment of equal capitals will be of very
unequal value; and although they will still he liable to
rise or fall relatively to each other, as more or less
labour becomes necessary to their production, they will he
subject to another, though a minor variation, also, from the
rise or fall of wages and profits. Since goods which
sell for £5,000 may be the produce of a capital equal
in amount to that from which are produced other goods which
sell for £10,000, the profits on their manufacture
will be the same; but those profits would be
unequal, if the prices of the goods did not vary
with a rise or fall in the rate of profits”
(l.c., pp. 40-41).
In fact Ricardo says:
Capitals of equal size produce commodities of
equal values, if the ratio of their organic component
parts is the same; if equally large portions of them
are expended on wages and on means of production. The
same quantities of labour, therefore equal values (apart
from the difference which might arise through the
circulation process) are then embodied in their
commodities. On the other hand, capitals of equal
size produce commodities of very unequal value,
when their organic composition is different, namely, when
the proportion between the part existing as fixed capital
and the part laid out in wages differs considerably.
Firstly, only a part of the fixed capital enters into the
commodity as a component part of value, consequently the
magnitude of their values will greatly vary
according to whether much or little fixed capital is
employed in the production of the commodity. Secondly,
the part laid out in wages—calculated as a percentage
on capital of equal size—is much smaller, therefore
also the total [newly added] labour embodied in the
commodity, and consequently the surplus-labour (given a
working-day of equal length) which constitutes the
surplus-value. If, therefore, these capitals of equal
size—whose commodities are of unequal values
and these unequal values contain unequal
surplus-values, and therefore unequal
profits—if these capitals because of their equal
size are to yield equal profits, then the prices of
commodities (as determined by the general rate of profit
on a given outlay) must be very different from the values
of the commodities. Hence it follows, not that the
values have altered their nature, but that the prices
are different from the values. It is all the
more surprising that Ricardo did not arrive at this
conclusion, for he sees that even if one presupposes
cost-prices determined by the general rate of profit, a
change in the rate of profit (or rate of wages) must change
these cost-prices, so that the rate of profit ||541| in the different spheres of
production may remain the same. How much more
therefore must the establishment of a general rate of profit
change unequal values since this general rate of
profit is in fact nothing other than the levelling out
of the different rates of surplus-value in different
commodities produced by equal capitals.
Having thus, if not set forth and comprehended, at any
rate virtually demonstrated, the difference between cost and
value, cost-prices and values of commodities, Ricardo ends
with the following sentence:
“Mr. Malthus appears to think that it
is a part of my doctrine, that the cost and
value of a thing should be the same;—it
is, it he means by cost, ‘cost of
production’ including profits” (l.c., p. 46,
note). (That is, outlay plus profit as determined by
the general rate of profit.)
With this erroneous confusion of cost-prices and values,
which he has himself refuted, he then proceeds to consider
rent.
With regard to the influence of the variations in the
value of labour upon the cost-price of gold, Ricardo says
the following in Section VI, Chapter I:
“May not gold be considered as a
commodity produced with such proportions of the two kinds of
capital as approach nearest to the average quantity employed
in the production of most commodities? May not these
proportions be so nearly equally distant from the two
extremes, the one where little fixed capital is used, the
other where little labour is employed, as to form a just
mean between them?” (l.c., p. 44).
This is far more applicable to those commodities into
whose composition the various organic constituents enter in
the average proportion, and whose period of circulation and
reproduction is also of average length. For these,
cost-price and value coincide, because for them, and only
for them, average profit coincides with their actual
surplus-value.
As inadequate as sections IV and V of Chapter I appear in
their consideration of the influence of the variations in
the value of labour on “relative values”,
theoretically a secondary matter compared with the
transformation of values into cost-prices through the
average rate of profits, so important is the conclusion
which Ricardo draws from this, thereby demolishing one of
the major errors that had persisted since Adam Smith,
namely, that the raising of wages, instead of reducing
profits, raises the prices of commodities. This is
indeed already implied in the very concept of values
and is in no way altered by the transformation of values
into cost-prices, since this, in any case, only affects the
distribution of the surplus-value made by the total
capital among the various branches of production or
different capitals in different spheres of production.
But it was important that Ricardo stressed this point and
even proved the opposite to be the case. He is
therefore justified in saying in Section VI, Chapter I:
“Before I quit this subject, it may
be proper to observe, that Adam Smith, and all the writers
who have followed him, have, without one exception that I
know of, maintained that a rise in the price of labour would
be uniformly followed by a rise in the price of all
commodities” [l.c., p. 45].
<This corresponds to Adam Smith’s second explanation
of value, according to which it is equal to the quantity of
labour a commodity can purchase.>
“I hope I have succeeded in showing
that there are no grounds for such an opinion and that only
those commodities would rise which had less fixed capital
employed upon them than the medium in which price was
estimated,” (here relative value is equivalent to
the expression of the value in money), “and that all
those which had more, would positively fall in price when
wages rose. On the contrary, if wages fell, those
commodities only would fall, which had a less proportion of
fixed capital employed on them, than the medium in which
price was estimated; all those which had more, would
positively rise in price” (l.c., p. 45).
With regard to money prices this seems
wrong. When gold rises or falls in value, from
whatever causes, then it does so to the same extent for all
commodities which are reckoned in gold. Since it thus
represents a relatively unchangeable medium despite its
changeability, it is not at all clear how any relative
combination of fixed capital and circulating capital in
gold, compared with commodities, can bring about a
difference. But this is due to Ricardo’s false
assumption that money, in so far as it serves as a
medium of circulation, exchanges as a commodity for
commodities. Commodities are assessed in gold before
it circulates them. Supposing wheat were the medium
instead of gold. If, for example, consequent upon a
rise in wages, wheat as a commodity into which enters more
than the average variable instead of constant capital, were
to rise relatively in its price of production, then all
commodities would be assessed in wheat of higher
“relative value”. The commodities into
which more fixed capital entered, would be expressed in less
wheat than before, not because their specific price had
fallen compared with wheat but because their price had
fallen in general. A commodity which contained just as
much [living] labour—as against accumulated
labour—as wheat, would show its rise [in price] by
being expressed in more wheat ||542| than a commodity whose price
had fallen as compared with wheat. If the same causes
which raised the price of wheat, raised, for example, the
price of clothes, then although the clothes would not be
expressed in more wheat than previously, those
[commodities], whose price had fallen compared with wheat,
for instance cotton, would be expressed in less. Wheat
would be the medium in which the difference in the price of
cotton and clothes would be expressed.
But what Ricardo means is something different. He
means that: because of a rise in wages, wheat has risen as
against cotton but not as against clothes. Thus
clothes would exchange for wheat at the old price, whereas
cottons would exchange against wheat at the higher
price. In itself, the assumption that variations in
the price of wages in England, for instance, would alter the
cost-price of gold in California where wages have not risen,
is utterly absurd. The levelling out of values
by labour-time and even less the levelling out of
cost-prices by a general rate of profit does not take
place in this direct form between different countries.
But take even wheat, a home product. Say that the
quarter of wheat has risen from 40s. to 50s., i.e., by 25
per cent. If the dress has also risen by 25 per cent,
then it is worth 1 quarter of wheat as before. If the
cotton has fallen by 25 per cent, then the same amount of
cotton which was previously worth 1 quarter is now only
worth 6 bushels of wheat. And this expression in wheat
represents exactly the ratio of the prices of cotton and
clothes, because they are being measured in the same
medium, in 1 quarter wheat.
Moreover, this notion is absurd in another way too.
The price of the commodity which serves as a measure
of value and hence as money, does not exist at all, because
otherwise, apart from the commodity which serves as money I
would need a second commodity to serve as money—a
double measure of values. The relative value of money
is expressed in the innumerable prices of all commodities;
for in each of these prices in which the exchange-value of
the commodity is expressed in money, the exchange-value of
money is expressed in the use-value of the commodity.
There can therefore be no talk of a rise or fall in
the price of money. I can say: the price of
money in terms of wheat or of clothes has remained the same;
its price in terms of cotton has risen, or, which is the
same, that the money price of cotton has fallen. But I
cannot say that the price of money has risen or
fallen. But Ricardo actually maintains that, for
instance, the price of money in terms of cotton has risen or
the price of cotton in terms of money has fallen, because
the relative value of money has risen as against that of
cotton while it has retained the same value as against
clothes or wheat, Thus the two are measured with an
unequal measure.
This Section VI “On an Invariable Measure of
Value” [l.c., p. 41] deals with the
“measure of value” but contains nothing
important. The connection between value, its immanent
measure—i.e., labour-time—and the necessity for
an external measure of the values of commodities is
not understood or even raised as a problem.
The very opening of this section shows the superficial
manner in which it is handled.
“When commodities varied in relative
value, it would be desirable to have the means of
ascertaining which of them fell and which rose in real
value, and this could be effected only by comparing them one
after another with some invariable standard measure
[…], which should itself be subject to none of the
fluctuations to which other commodities are exposed.”
(l.c., pp. 41-42). But “…there is no
commodity which is not itself exposed to the same variations
…that is, there is none which is not subject to
require more or less labour for its production” (l.c.,
p. 42).
Even if there were such a commodity, the influence of the
rise or fall in wages, the different combinations of fixed
and circulating capital, the different degrees of durability
of the fixed capital employed and the [different] length of
time before the commodity can be brought to market, etc.,
would prevent it from being:
“…a perfect measure of value,
by which we could accurately ascertain the variations in all
other things… “It would be a perfect
measure of value for all things produced under the same
circumstances precisely as itself, but for no others”
(l.c., p. 43).
That is to say, if the [prices of this latter group of]
“things” varied, we could say (provided the
value of money did not rise or fall) that the variations
were caused by the rise or fall “in their
values”, in the labour-time necessary for their
production. With regard to the other things, we could
not know whether the “variations” in their money
prices were due to other reasons, etc. Later we
shall have to come back to this matter which is quite
unsatisfactory. (During a subsequent revision of the
theory of money.)
Chapter I, Section VII. Apart from the
important doctrine on “relative” wages,
profits and rents, to which we shall return later, this
section contains nothing but the theory that a fall or rise
in the value of money accompanied by a corresponding rise or
fall in wages etc. does not alter the relations but only
their monetary expression. If the same commodity is
expressed in double the number of pounds sterling, so also
is that part of it which resolves into profit, wages or
rent. But the ratio of these three to one another and
the real values they represent, remain the same. The
same applies when the profit is expressed by double the
number of pounds, £ 100 is then however represented by
£ 200 so that the relation between profit and capital,
the rate of profit, remains unaltered. The changes in
the monetary expression affect profit and capital
simultaneously, ditto profit, wages and rent. This
applies to rent as well in so far as it is not calculated on
the acre but on the capital advanced in agriculture
etc. In short, in this case the variation is not in
the commodities etc.
“A rise of wages from this cause
will, indeed, be invariably accompanied by a rise in the
price of commodities; but in such cases, it will be found
that labour and all commodities have not varied in regard to
each other, and that the variation has been confined to
money” (l.c., p. 47).
[5.] Average or Cost-Prices and Market-Prices
[a) Introductory Remarks: Individual Value and
Market-Value; Market-Value and Market-Price]
||543| In developing his
theory of differential rent, in Chapter II, “On
Rent”, Ricardo puts forward the following
thesis:
“The exchangeable value of all
commodities, whether they be manufactured, or the
produce of the mines, or the produce of land, is always
regulated, not by the less quantity of labour that will
suffice for their production under circumstances highly
favourable, and exclusively enjoyed by those who have
peculiar facilities of production; but by the greater
quantity of labour necessarily bestowed on their production
by those who have no such facilities; by those who
continue to produce them under the most unfavourable
circumstances; meaning—by the most unfavourable
circumstances, the most unfavourable under which the
quantity of produce required, renders it necessary to
carry on the production” (l.c., pp. 60-61).
The last sentence is not entirely correct. The
“quantity of produce required” [is] not a fixed
magnitude. [It would be correct to say:] A certain
quantity of produce required within certain limits of
price. If the latter rises above these limits then the
“quantity required” falls with the demand.
The thesis set out above can be expressed in general
terms as follows: The value of the commodity—which is
the product of a particular sphere of production—is
determined by the labour which is required in order to
produce the whole amount, the total sum of the
commodities appertaining to this sphere of production and
not by the particular labour-time that each individual
capitalist or employer within this sphere of production
requires. The general conditions of production and the
general productivity of labour in this particular sphere of
production, for example in cotton manufacture, are the
average conditions of production and the average
productivity in this sphere, in cotton-manufacture, The
quantity of labour by which, for example, [the value of] a
yard of cotton is determined is therefore not the quantity
of labour it contains, the quantity the manufacturer
expended upon it, but the average quantity with which all
the cotton-manufacturers produce one yard of cotton for the
market. Now the particular conditions under which the
individual capitalists produce, for example, in cotton
manufacture, necessarily fall into three categories.
Some produce under medium conditions, i.e., the
individual conditions of production under which they produce
coincide with the general conditions of production in
the sphere. The average conditions are their actual
conditions. The productivity of their labour is at
the average level. The individual value of
their commodities coincides with the general value of
these commodities. If, for example, they sell the yard
of cotton at 2s.—the average value—then they
sell it at the value which the yards they produce
represent in natura. Another category produces
under better than average conditions. The
individual value of their commodities is below
their general value. If they sell their commodities at
the general value, they sell them above their
individual value. Finally, a third category produces
under conditions of production that are below the
average.
Now the “quantity of produce required” from
this particular sphere of production is not a fixed
magnitude. If the rise of the value of the commodities
above the average value exceeds certain limits, the
“quantity of produce required” falls, that is,
this quantity is only required at a given price—or at
least within certain limits of price. Hence it is just
as possible that the last-mentioned category has to
sell below the individual value of its commodities as
the better placed category always sells its products
above their individual value, Which of the categories
has a decisive effect on the average value, will in
particular depend on the numerical ratio or the proportional
size of the categories. If numerically the middle
category greatly outweighs the others it will determine [the
average value]. If this group is numerically weak and
that which works below the average conditions is
numerically strong and predominant, then the latter
determines the general value of the produce of this sphere,
although this by no means implies and it is even very
unlikely, that the individual capitalist who is the most
unfavourably placed in the last group, is the
determining factor. (See Corbet.)
But let us leave this aside. The general result is
that: the general value of the products of this group
is the same for all, whatever may be its relation to
the particular value of each individual commodity.
This common value is the market-value of these
commodities, the value at which they appear on the
market. Expressed in money, this market-value is the
market-price, just as in general, value expressed in
money is price. The actual market-price is now above,
now below this market-value and coincides with it only by
chance. Over a certain period, however, the
fluctuations equal each other out and it can be said that
the average of the actual market-prices is the
market-price which represents the
market-value. Whether, at a given moment, the
actual market-price corresponds to this market-value in
magnitude, i.e., quantitatively or not, at any rate
it shares the qualitative characteristic with it,
that all commodities of the same sphere of production
available on the market have the same price (assuming
of course that they are of the same quality), that is, in
practice , they represent the general value of the
commodities of this sphere.
||544| The above thesis put
forward by Ricardo for the purpose of his theory of rent has
therefore been interpreted by his disciples to mean that
two different market-prices cannot exist
simultaneously on the same market or: products of the
same kind found on the market
simultaneously, have the same price or—since we
can leave out of account here the accidental features of
this price—the same market-value.
Thus competition, partly among the capitalists
themselves, partly between them and the buyers of the
commodity and partly among the latter themselves, brings it
about here that the value of each individual commodity in a
particular sphere of production is determined by the
total mass of social labour-time required by the
total mass of the commodities of this particular
sphere of social production and not by the individual
values of the separate commodities or the labour-time
the individual commodity has cost its particular
producer and seller.
It obviously follows from this, however, that, whatever
the circumstances, the capitalists belonging to the first
group—whose conditions of production are more
favourable than the average—make an excess profit, in
other words their profit is above the general rate of
profit of this sphere. Competition, therefore , does
bring about the market-value or market-price
by the equalisation of profits within a particular
sphere of production. (For the purpose of this
investigation, the distinction [between market-value and
market-price] is irrelevant since the differences in the
conditions of production—hence the different rates of
profit for the individual capitalist—in the same
sphere, remain, whatever may be the relationship of
market-price to market-value.) On the contrary,
competition here equalises the different individual
values to the same, equal, undifferentiated market-value,
by permitting differences between individual
profits, profits of individual capitalists, and their
deviations from the average rate of profit in the
sphere. It even creates differences by establishing
the same market-value for commodities produced under
unequal conditions of production, therefore with unequal
productivity of labour, the commodities thus represent
individual unequal quantities of labour-time.
The commodity produced under more favourable conditions,
contains less labour-time than that produced under less
favourable conditions, but it sells at the same price, and
has the same value, as if it contained the same labour-time
though this is not the case.
[b) Ricardo Confuses the Process of the Formation of
Market-Value and the Formation of Cost-Prices]
For the establishment of his theory of rent, Ricardo
needs two propositions which express not only
different but contradictory effects of
competition. According to the first, the products of
the same sphere sell at one and the same
market-value, competition therefore enforces different
rates of profit, i.e., deviations from the general
rate of profit. According to the second, the rate
of profit must be the same for each capital
investment, that is competition brings about a general
rate of profit. The first law applies to
the various independent capitals invested in the same
sphere of production. The second applies to
capitals in so far as they are invested in different
spheres of production. By the first action,
competition creates the market-value, that is, the
same value for commodities of the same sphere of
production, although this identical value must result
in different profits, it thus creates the same
value despite of, or rather by means of, different rates
of profit. The second action (which, incidentally,
is brought about in a different way; namely, the competition
between capitalists of different spheres throws the
capital from one sphere into another, while the other
competition, in so far as it is not competition between
buyers, occurs between capitals of the same sphere)
enables competition to create the cost-price, in
other words the same rate of profit in the various
spheres of production, although this identical rate of
profit is contrary to the inequality of values, and can
hence only be enforced by prices which are different
from values.
Since Ricardo needs both these propositions—equal
value or price with unequal rate of profit,
and equal rate of profit with unequal
values,—for his theory of rent, it is most
remarkable that he does not sense this twofold determination
and that even in the Section where he deals ex
professo with market-price, in Chapter IV
“On Natural Price and Market-Price”, he does
not deal with market-price or market-value at
all, although in the above-quoted passage he uses it as a
basis to explain differential rent, the excess profit
crystallised in the form of rent. ||545| But he deals here merely with
the reduction of the prices in the different
spheres of production to cost-prices or
average prices, i.e., with the relationship between
the market-values of the different spheres of production and
not with the establishment of the market-value in each
particular sphere, and unless this is established
market-values do not exist at all.
The market-values of each particular sphere,
therefore the market-prices of each particular sphere
(if the market-price corresponds to the “natural
price”, in other words if it merely represents the
value in the form of money) would yield very different rates
of profit, for of equal size in different
“spheres—quite apart from the differences
arising from their different processes of
circulation—employ very unequal proportions of
constant and variable capita and therefore yield very
unequal surplus—values, hence very unequal
profits. The levelling out of the various
market-values, so that the same rate of profit is
produced in the different spheres of production, and
capitals of equal size yield equal average profits, is
therefore only possible by the transformation of
market-values into cost-prices which are
different from the actual values.*
What competition within the same sphere of
production brings about, is the determination of the
value of the commodity in a given sphere by the
average labour-time required in it, i.e., the creation of
the market-value. What competition between the
different spheres of production brings about is the
creation of the same general rate of profit in the
different spheres through the levelling out of the
different market-values into market prices, which are
cost-prices that are different from the actual
market-values. Competition in this second instance by
no means tends to assimilate the prices of the commodities
to their values, but on the contrary, to reduce their values
to cost-prices that differ from these values, to abolish the
differences between their values and cost-prices.
It is only this latter process which Ricardo considers in
Chapter IV and, oddly enough, he regards it as the reduction
of the prices of commodities—through
competition—to their values, the reduction of the
market-price (a price which is different from value) to the
natural price (the value expressed in terms of money).
This blunder, however, arises from the error he committed
already in Chapter I “On Value”, where he
identified cost-price and value, this in turn was due to the
fact that at a point where as yet he was only concerned with
explaining “value”, where he, therefore, as yet,
only had to deal with “commodity”, he
plunged in with the general rate of profit and all
the conditions arising from the more developed capitalist
relations of production.
Ricardo’s whole procedure in Chapter IV is therefore
quite superficial. He starts out from the
“…accidental and temporary variations of [the]
price” (l.c., p. 80) of commodities resulting from
the fluctuating relations between demand and supply.
“With the rise or fall of price,
profits are elevated above, or depressed below
their general level, and capital is either encouraged
to enter into, or is warned to depart from the particular
employment in which the variation has taken place”
(l.c., p. 80).
Here the general level of profit prevailing
between the particular spheres of production, between
“the particular employments” is already
presupposed. But he should have considered first, how
the general level of price in the same employment and
the general level of profit between different
employments is brought about. Ricardo would then have
seen that the latter operation already presupposes movements
of capital in all directions—or a distribution,
determined by competition, of the whole social capital
between its different spheres of employment. Once
it is assumed that the market-values or average
market-prices in the different spheres are reduced to
cost-prices yielding the same average rate of profit
(this is however only the case in spheres where landed
property does not interfere; where it interferes,
competition—within the same sphere—can convert
the price to the value and the value to the market-price,
but it cannot reduce the market-price to the cost-price),
persistent deviations of the market-price from the
cost-price, when it rises above or falls below it in
particular spheres, will bring about new migrations and a
new distribution of social capital. The first
migration occurs in order to establish cost-prices
which differ from values. The second migration
occurs in order to equalise the actual market-prices
with the cost-prices—as soon as they rise above or
fall below the latter. The first is a transformation
of the values into cost-prices. The second is a
rotation of the actual ||546|
market-prices of the moment in the various spheres, around
the cost-price, which now appears as the natural
price, although it is different from the value and only
the result of social action.
It is this latter, more superficial movement which
Ricardo examines and at times unconsciously confuses with
the other. Both are of course brought about by
“the same principle”, namely, the principle that
while
“every man” [is] “free to
employ his capital where he pleases,” [he] “will
naturally seek for it that employment which is most
advantageous; he will naturally be dissatisfied with a
profit of 10 per cent, if by removing his capital he can
obtain a profit of 15 per cent. This restless
desire on the part of all the employers of stock, to
quit a less profitable for a more advantageous business, has
a strong tendency to equalise the rate of profits of
all, or to fix them in such proportions, as may,
in the estimation of the parties, compensate for any
advantage which one may have, or may appear to have over the
other” (l.c., p. 81).
This tendency has the effect of distributing the total
mass of social labour-time among the various spheres of
production according to the social need. In this
way, the values in the different spheres of production are
transformed into cost-prices, and on the other hand, the
variations of the actual prices in particular spheres from
the cost-prices are levelled out.
All this is contained in Adam Smith’s work. Ricardo
himself says:
“No writer has more satisfactorily
and ably shewn than Dr. Smith, the tendency of capital to
move from employments in which the goods produced do not
repay by their price the whole expenses, including the
ordinary profits,” (that is to say, the
cost-price) “of producing and bringing them to
market” (l.c., p. 342, note).
The achievement of Ricardo, whose blunder is on the whole
caused by his lack of criticism of Adam Smith in this
respect, consists in his more precise exposition of this
migration of capital from one sphere to the other, or rather
of the manner in which this occurs. He was, however,
only able to do this because the credit system was more
highly developed in his time than in the time of Adam Smith,
Ricardo says:
“It is perhaps very difficult to
trace the steps by which this change is
effected: it is probably effected, by a manufacturer
not absolutely changing his employment, but only
lessening the quantity of capital he has in that
employment. In all rich countries, there is a
number of men forming what is called the monied
class*; these men
are engaged in no trade, but live on the interest of
their money, which is employed in discounting bills, or in
loans to the more industrious part of the
community. The bankers too employ a large capital on
the same objects. The capital so employed forms a
circulating capital of a large amount, and is employed, in
larger or smaller proportions, by all the different trades
of a country. There is perhaps no manufacturer,
however rich, who limits his business to the extent that his
own funds alone will allow: he has always some portion of
this floating capital, increasing or diminishing according
to the activity of the demand for his commodities.
When the demand for silks increases, and that for cloth
diminishes, the clothier does not remove with his capital to
the silk trade, but he dismisses some of his workmen, he
discontinues his demand for the loan from bankers and monied
men; while the case of the silk manufacturer is the reverse:
[…] he borrows more, and thus capital is
transferred from one employment to another, without the
necessity of a manufacturer discontinuing his usual
occupation. When we look to the markets of a large
town, and observe how regularly they are supplied both with
home and foreign commodities, in the quantity in which they
are required, under all the circumstances of varying demand,
arising from the caprice of taste, or a change in the amount
of population, without often producing either the effects of
a glut from a too abundant supply, or an enormously high
price from the supply being unequal to the demand, we must
confess that the principle which apportions capital to
each trade in the precise amount that it is required, is
more active than is generally supposed” (l.c.,
pp. 81-82).
Credit therefore is the means by which the capital
of the whole capitalist class is placed at the disposal of
each sphere of production, not in proportion to the capital
belonging to the capitalists in a given sphere but in
proportion to their production requirements—whereas in
competition the individual capitals appear to be independent
of each other. Credit is both the result and the
condition of capitalist production and this provides us with
a convenient transition from the competition between
capitals to capital as credit.
[c) Ricardo’s Two Different Definitions of “Natural
Price”. Changes in Cost-Price Caused by Changes
in the Productivity of Labour]
At the beginning of Chapter IV, Ricardo says that by
natural price he understands the value of the
commodities, that is, the price as determined by
their relative labour-time, and that by market-price
he understands the accidental and temporary deviations from
this natural price or value ||547|. Throughout the further
course of the chapter—and he is quite explicit in
this— he understands something quite different by
natural price, namely, cost-price which is
different from value. Thus, instead of showing how
competition transforms values into cost-prices, i.e.,
creates permanent deviations from values, he shows,
following Adam Smith, how competition reduces the
market-prices in different trades to cost-prices.
Thus Chapter IV opens like this:
“In making labour the
foundation of the value of commodities, and the
comparative quantity of labour which is necessary to
their production, the rule which determines the respective
quantities of goods which shall be given in exchange for
each other, we must not be supposed to deny the
accidental and temporary deviations of the actual or
market price of commodities from this, their
primary and natural price” (l.c., p. 80).
Here therefore natural price equals value
and market-price is nothing but the deviation of actual
price from value.
As against this:
“Let us suppose that all commodities
are at their natural price, and consequently
that the profits of capital in all employments
are exactly at the same rate, or differ only so much
as, in the estimation of the parties, is equivalent to any
real or fancied advantage which they possess or
forego” (l.c., p. 83).
Here therefore, natural price equals
cost-price, that is, the price at which the relation
between the profit and the advances embodied in the
commodity is the same, although equal values of
commodities produced by capitals in different spheres of
production, contain very unequal surplus-values, and
thus unequal profits. If the price is to yield
the same profit, it must therefore be different from the
value of the commodity. On the other hand, capitals of
equal size produce commodities of very unequal value,
according to whether a larger or a smaller portion of the
fixed capital enters into the commodity. But more
about this when dealing with the circulation of
capitals.
By equalisation through competition, Ricardo therefore
understands only the rotation of the actual prices or actual
market-prices around the cost-prices or the
natural price as distinct from the value, the
levelling out of the market-price in different branches of
production to general cost-prices, i.e., precisely to prices
which are different from the real values in different
trades.:
“It is then the desire, which every
capitalist has, of diverting his funds from a less to a more
profitable employment, that prevents the market-price
of commodities from continuing for any length of time either
much above, or much below their natural price, It is
this competition which so adjusts the changeable value
of commodities,” <and also the different
real values> “that after paying the wages for
the labour necessary to their production, and all other
expenses required to put the capital employed in its
original state of efficiency, the remaining value or
overplus will in each trade be in proportion to
the value of the capital employed”
(l.c., p. 84).
This is exactly the case. Competition adjusts the
prices in the different trades so that “the
remaining value or overplus”, the profit,
corresponds to the value of the capital employed, but
not to the real value of the commodity, not to the real
overplus which it contains after the deduction of
expenses. To bring this adjustment about the price of
one commodity must be raised above, and that of the other
must be depressed below their respective real values, It is
not the value of the commodities but their cost-price, i.e.,
the expenses they contain plus the general rate of profit,
around which competition forces the market-prices in the
different trades to rotate.
Ricardo continues:
“In the 7th Chap. of the Wealth of
Nations, all that concerns this question is most ably
treated” (l.c., p. 84).
In fact it is his uncritical belief in the Smithian
tradition, which here leads Ricardo astray.
As usual, Ricardo closes the chapter by saying that in
the following investigations, he wants to
“…leave […] entirely out of […]
consideration” (l.c., p. 85) the accidental deviations
of market-prices from the cost-price; but he overlooks the
fact that he has paid no regard at all to the
constant deviations of market-prices, in so far as
they correspond to cost-prices, from the real values of the
commodities and that he has substituted cost-price for
value.
Chapter XXX “On the Influence of Demand and
Supply on Prices”. Here Ricardo defends the
proposition that the permanent price is determined by the
cost-price, and not by supply or demand: that,
therefore, the permanent price is determined by the
value of the commodities only in so far as this value
determines the cost-price. Provided that the prices of
the commodities are so adjusted that they all yield a profit
of 10 per cent, then every lasting change in these prices
will be determined by a change in their values, in the
labour-time required for their production. As this
value continues to determine the general rate of profit, so
the changes in it continue to determine the variations in
cost-prices, although of course the difference between
cost-prices and values is thereby not superseded.
What is superseded is only that the difference between value
and actual price should not ||548| be greater than the
difference between cost-prices and values, a difference that
is brought about by the general rate of profit.
With the changes in the values of commodities, their
cost-prices also change. A “new natural
price” (p. 460) is formed. If, for example,
the worker can now produce twenty hats in the same period of
time which it previously took him to produce ten hats, and
if wages accounted for half the cost of the hat, then the
expenses, the costs of production, of the twenty hats, in so
far as they consist of wages, have fallen by half. For
the same wages are now paid for the production of twenty
hats as previously for ten. Thus each hat now contains
only half the expenditure for wages. If the hat
manufacturer were to sell the hats at the same price he
would sell them above the cost-price. If the profit
had previously been 10 per cent then it would now be 46
2/3 per cent, assuming the outlay for
the manufacture of a certain quantity of hats was originally
50 for raw material, etc. and 50 for labour. [The
outlay] would now be 50 for raw material etc. and 25 for
wages. If the commodity is sold at the old price then
the profit is 35/75 or 46
2/3 per cent. As a result of the
fall in value, the new natural price will therefore fall to
such an extent that the price only yields 10 per cent
profit. The fall in the value or in the labour-time
necessary for the production of the commodity reveals itself
in the fact that less labour-time is used for the same
amount of commodity, hence also less paid
labour-time, less wages and, consequently, the
costs, the wages paid (i.e., the amount of wages;
this does not presuppose a fall in the rate of
wages) proportionately decline for the production of
each individual commodity.
This is the case if the change in value has taken place
in the hat making itself. Had it occurred in the
production of the raw material or of the tools, then this
would have been similarly expressed as a diminution of
outlay in wages for the production of a certain given
quantity of product in these spheres; but to the hat
manufacturer it would denote that his constant capital had
cost him less. The cost-prices or
“natural prices” (which have nothing to
do with “nature”) can fall in two ways as a
result of a change—here a fall—in the
value of the commodities:
[Firstly] because the wages laid out in the
production of a given quantity of commodities fall, owing to
a fall in the aggregate absolute amount of labour, paid
labour and unpaid labour, expended on this quantity of
commodities.
Secondly: If, as a result of the increased or
diminished productivity of labour (both can occur, the one
when the proportion of variable capital to constant capital
falls, the other when wages rise owing to the means of
subsistence becoming dearer), the ratio of surplus-value to
the value of the commodity or to the value of the labour
contained in it, changes, then the rate of profit rises or
falls, and the amount of labour is differently divided
up.
In the latter case, the prices of production or
cost-prices could change only in so far as they are affected
by variations in the value of labour. In the first
case, the value of labour remains the same. In the
second case, however, it is not the values of the
commodities which alter, but only the division between
[necessary] labour and surplus-labour. A change in the
productivity and therefore in the value of the
individual commodity would nevertheless take place in
this case. The same capital will produce more
commodities than previously in the one case and less in the
other. The aggregate volume of the commodities in
which it is materialised would have the same value,
but the individual commodity would have a different
value. Although the value of the wage does not
determine the value of the commodities, the value of the
commodities (which enter into the consumption of the worker)
determines the value of the wage.
Once the cost-prices of the commodities in the various
branches of production are established, they rise or fall
relatively to each other with any change in the values of
the commodities. If the productivity of labour rises,
the labour-time required for the production of a
particular commodity decreases and therefore its
value falls; whether this change in productivity
occurs in the labour used in the final process or in the
constant capital, the cost-price of this commodity must also
fall correspondingly. The absolute amount of labour
employed on it has been reduced, hence also the amount
of paid labour it contains and the amount of wages expended
on it, even though the rate of wages has remained the
same. If the commodity were sold at its former
cost-price, then it would yield a higher profit than the
general rate of profit, since formerly, this profit was
equal to 10 per cent on the higher outlay. It would
therefore be now more than 10 per cent on the diminished
outlay. If on the contrary the productivity of labour
decreases, the real values of the commodities rise.
When the rate of profit is given—or, which is the same
thing, the cost-prices are given—the relative rise or
fall of the cost-prices is dependent on the rise or fall,
the variation, in the real values of the commodities, As a
result of this variation, new cost-prices or, as Ricardo
says, following Smith, “new natural prices” take
the place of the old.
In Chapter XXX, from which we have just been quoting,
Ricardo expressly identifies natural price, that is,
cost-price, with natural value, i.e., value as determined by
labour-time.
“Their price” (of monopolised
commodities) “has no necessary connexion with their
natural value: but the prices of commodities,
which are subject to competition, …will ultimately
depend …on [the] …cost of their
production” (l.c., p. 465).
Here therefore are cost-prices or natural prices directly
||549| identified with
“natural value”, that is, with
“value”.
This confusion explains how later a whole lot of fellows
post Ricardum, like Say himself, could accept “the
cost of production” as the ultimate regulator of
prices, without having the slightest inkling of the
determination of value by labour-time, indeed they directly
deny the latter while maintaining the former.
This whole blunder of Ricardo’s and the consequent
erroneous exposition of rent etc., as well as the erroneous
laws about the rate of profit etc. spring from his
failure to distinguish between surplus-value and
profit; and in general his treatment of
definitions is crude and uncomprehending, just as that
of the other economists. The following will show how
he allowed himself to be ensnared by Smith. |549||
***
||XII-636| Just to add a
further comment to what has already been said: Ricardo knows
no other difference between value and natural
price than that the latter is the monetary expression of
value, and that it can therefore change because of a change
in value of the precious metals, without value itself
changing. This change, however, only affects the
evaluation or the expression of value in money. Thus,
he says, for instance:
“It” (foreign trade) “can
only he regulated by altering the natural price, not
the natural value, at which commodities can he
produced in those countries, and that is effected by
altering the distribution of the precious metals”
(l.c., p. 409). |XII-636|| .
[B. Adam Smith’s Theory of Cost-price]
[1. Smith’s False Assumptions in the Theory of
Cost-Prices. Ricardo’s Inconsistency Owing to His
Retention of the Smithian Identification of Value and
Cost-Price]
||XI-549| It must first be
noted that according to Adam Smith as well,
“there are always a few commodities
of which the price resolves itself into two parts
only, the wages of labour, and the profits of
stock”. ([The Wealth of Nations, Oxford
University Press, London, 1928, Vol. I, p. 56; Garnier,] t.
1, l. 1, ch. VI, p. 103.[e])
This difference between Ricardo’s and Smith’s
views can therefore be ignored here.
Adam Smith first explains that exchange-value resolves
itself into a certain quantity of labour and that after
deducting raw materials etc., the value contained in
exchange-value is resolved into that part of labour for
which the labourer is paid and that part for which he is not
paid, the latter part consists of profit and rent (the
profit in turn may be resolved into profit and
interest). Having shown this, he suddenly turns about
and instead of resolving exchange-value into wages, profit
and rent, he declares these to be the elements forming
exchange-value, he makes them into independent
exchange-values that form the exchange-value of the product;
he constructs the exchange-value of the commodity from the
values of wages, profit and rent, which are determined
independently and separately. Instead of having their
source in value, they become the source of value.
“Wages, profit, and
rent, are the three original sources of all
revenue as well as of all exchangeable value”
([O.U.P., Vol. I, p. 57; Garnier,] t, 1, l. 1, ch. VI,
p. 105).
Having revealed the intrinsic connection, he is suddenly
obsessed again with the aspect of the phenomenon, with the
connection, as it appears in competition, and in
competition everything always appears in inverted[f] form, always standing
on its head.
Now it is from this latter inverted starting-point that
Smith develops the distinction between the “natural
price of the commodities” and their
“market-price”. Ricardo accepts
this from him, but forgets that Adam Smith’s “natural
price” is, according to Smith’s premises, nothing
other than the cost-price resulting from competition
and that for Smith himself, this cost-price is only
identical with the “value” of the
commodity, in so far as he forgets his more profound
conception and sticks to the false concept derived from the
external appearance, namely that the exchange-value
of commodities is formed by putting together the
independently determined values of wages, profit and
rent. While Ricardo contests this concept throughout,
he accepts Smith’s confusion or identification of
exchange-value with cost-price or natural
price, which is based on that very concept.
In the case of Adam Smith this confusion is legitimate,
because his whole examination of natural price starts
out from his second, false conception of
value. But in Ricardo’s case, it is wholly
unjustifiable, because he nowhere accepts this wrong
conception of Adam Smith’s, but contests it ex
professo as an inconsistency. Adam Smith, however,
succeeded in ensnaring him again with his natural
price .
Having compounded the value of the commodity from
the separate and independently determined values of
wages, profit and rent, Adam Smith now asks
himself how these primary va1ues are determined. And
here he starts out from the phenomena as they appear in
competition.
[In] Chapter VII, Book I “Of the Natural and
Market Price of Commodities” [he says:]
“There is in every society or
neighbourhood an ordinary or average rate of
… wages and profit … and rent…
These ordinary or average rates may be called the natural
rates of wages, profit, and rent, at the time and place
in which they commonly prevail” ([OUP., Vol. I, p.
60; Garnier,] l.c., t. I, pp. 110-11). “When the
price of any commodity is neither more nor less than
what is sufficient to pay the rent […] the wages
[…] and the profits […] according to their
natural rates, the commodity is then sold for
[…] its natural price” ([O.U.P., Vol. I,
p. 61; Garnier,] l.c., p. 111).
This natural price is then the cost-price of the
commodity and the cost-price coincides with the value
of the commodity, since it is presupposed that the value of
the commodity is compounded of the values of wages, profit
and rent.
“The commodity is then ||550| sold precisely for what it
is worth” (the commodity is sold at its
value) “or for what it really
costs the person who brings it to market” (at
its v a l u e or at the c o s t-p r i c e for
the person who brings it to market) “for though, in
common language, what is called the prime cost of any
commodity does not comprehend the profit of the
person who is to sell it again, yet, if he sells it at a
price which does not allow him the ordinary
rate of profit in his neighbourhood, he is evidently a
loser by the trade; since by employing his stock in some
other way, he might have made that profit”
([O.U.P., Vol. I, p. 61; Garnier,] l.c., p. 111).
Here we have the whole genesis of natural price and,
besides, set out in quite appropriate language and logic,
since the value of the commodity is composed of the prices
of wages, profit and rent, while the true value of the
latter is, in turn, constituted by their natural
rates; thus it is clear that the value of the
commodity is identical with its cost-price and
the latter with the natural price of the
commodity. The rate of profit, as of wages, is
presupposed. They are indeed given for the
formation of the cost-price. They are
antecedent to the cost-price. To the individual
capitalist therefore they also appear as given. The
hows, whys and wherefores do not concern him. Adam
Smith here adopts the standpoint of the individual
capitalist, the agent of capitalist production, who fixes
the cost-price of his commodity. So much for wages
etc., so much for the general rate of profit.
Ergo: This is how this capitalist sees the
operation by which the cost-price of the commodity is
fixed or, as it further seems to him, the value of
the commodity, for he also knows that the market-price is
now above, now below, this cost-price, which therefore
appears to him as the ideal price of the commodity, its
absolute price as distinct from its price fluctuations, in
short as its value, in so far as he has any time at
all to reflect on matters of this sort. And since
Smith transports himself right into the midst of
competition, he immediately reasons and argues with the
peculiar logic of the capitalist caught up in this
sphere. He interjects: In common language,
costs do not include the profit made by the
seller (which necessarily forms a surplus above his
expenses). Why then do you include profit in the
cost-price? Adam Smith answers like the profound
capitalist to whom this question is put:
Profit in general must enter into cost-price,
because I would be cheated if only a profit of 9
instead of 10 per cent were to enter into cost-price.
The naïve way in which Adam Smith on the one hand
expresses the thoughts of the agent of capitalist production
and presents things boldly and comprehensively, as they
appear to and are thought of by the latter, as they
influence him in practice, and as, indeed, they appear on
the surface, while, on the other hand, he sporadically
reveals their more profound relationships, gives his book
its great charm.
One can see here too why Adam Smith—despite his
considerable scruples on this point—resolves the
entire value of the commodity into rent, profit and wages
and omits constant capital, although of course he admits its
existence for each “individual”
capitalist. For otherwise he would have to say: The
value of a commodity consists of wages, profit, rent and
that part of the value of the commodity which does not
consist of wages, profit, rent. It would therefore be
necessary to determine value independently of wages, profit
and rent.
If, besides the outlay on average wages etc., the price
of the commodity also covers the average profit and—if
rent enters into the commodity—the average rent, then
the commodity is sold at its natural or
cost-price, and this cost-price is equal to its
value, for its value is nothing but the sum of the
natural values of wages, profit and rent.
||551| Having taken his
stand in competition and assumed the rate of profit
etc. as given, Adam Smith for the rest interprets
correctly natural price or cost-price,
namely, the cost-price as distinct from the
market-price.
“… the natural price of
the commodity, o r the whole value of the rent,
labour, and profit, which must he paid in order to bring
it” to market ([O.U.P., Vol. I, pp. 61-62; Garnier,]
l.c., p. 112).
This cost-price of the commodity is different from the
actual price or market-price of the
commodity. ([O.U.P., Vol. I, p. 62; Garnier,] l.c.,
p. 112.) The latter is dependent on demand and
supply.
The [sum of the] costs of production or the
cost-price of the commodity is precisely “the
whole value of the rent, labour, and profit, which
must be paid in order to bring it” to market
([O.U.P., Vol. I, p. 62; Garnier,] p. 113). If demand
corresponds to supply, then the market-price is equal to the
natural price.
“When the quantity brought to market
is just sufficient to supply the effectual demand, and no
more, the market-price naturally comes to he exactly
… the same with the natural price”
([O.U.P., Vol. I, p. 63; Garnier,] l.c., p. 114).
“The natural price, therefore, is, as it were,
the central price, to which the prices of all commodities
are continually gravitating. Different accidents may
sometimes keep them suspended a good deal above it, and
sometimes force them down even somewhat below it”
([O.U.P., Vol. I, p. 64; Garnier,] l.c., p. 116).
Hence Adam Smith concludes that in general, the
“whole quantity of industry annually
employed in order to bring any commodity to market”
will correspond to the needs of society or the
“effectual demand” ([O.U.P., Vol. I, p. 64;
Garnier,] l.c., p. 117).
What Ricardo conceives as the distribution of total
capital among the various branches of production appears
here in the as yet more naive form of the [quantity of]
industry needed in order to produce “a
particular commodity”. The levelling out
of prices among the sellers of the same commodity to
the market-price and the levelling out of the
market-prices of the various commodities to the
cost-price are here as yet jumbled up in complete
confusion.
At this point Smith, only quite incidentally, touches
upon the influence of the variation in the real values of
commodities on the natural prices or cost-prices.
Namely in agriculture
“the same quantity of industry will,
in different years, produce very different quantities of
commodities; while, in others, it will produce always the
same, or very nearly the same. The same number of
labourers in husbandry will, in different years, produce
very different quantities of corn, wine, oil, hops,
etc. But the same number of spinners and weavers will
every year produce the same, or very nearly the same,
quantity of linen and woollen cloth… In the
other” (the non-agricultural) “species of
industry, the produce of equal quantities of labour being
always the same, or very nearly the same”, (i.e.,
so long as the conditions of production remain the
same) “it can be more exactly suited to the
effectual demand” ([O.U.P., Vol. I, pp. 64-65;
Garnier,] l.c., pp. 117-18).
Adam Smith sees here that a mere change in the
productivity of “equal quantities of labour”,
therefore, in the actual values of commodities, alters
cost-prices. But he makes this again more shallow by
reducing it to the relation between supply and demand.
According to his own arguments, the proposition as he
presents it, is wrong. For, while in agriculture, as a
result of varying seasons etc., “equal quantities of
labour” yield different quantities of products, he
himself has demonstrated that as a result of machinery,
division of labour etc. “equal quantities of
labour” yield very different amounts of product in
manufacture etc. It is therefore not this
difference which distinguishes agriculture from the other
branches of industry; but the fact that in industry the
degree of productive power applied is determined beforehand,
while in the former, it depends on accidents of
nature. But the result remains the same: the value
of the commodities or the quantity of labour which,
depending on its productivity, has to be expended on a given
commodity, affects cost-prices.
In the following passage Adam Smith has also [shown] how
the migration of capitals from one sphere of production to
another establishes cost-prices in the various branches of
production. But he is not so clear on this as Ricardo,
For if the ||552| price of the
commodity falls below its natural price then,
according to his argument, this is due to one of the
elements of this price falling below the natural
rate. Thus it is not due to the withdrawal of
capitals alone or to the migration of capitals, but
to the migration of labour, capital or land from one branch
to another, In this respect his view is more consistent than
Ricardo’s, but it is wrong.
“Whatever part of it” (the
natural price) “was paid below the natural
rate, the persons whose interest it affected would
immediately feel the loss, and would immediately withdraw
either so much land, or so much labour, or so much stock,
from being employed about it, that the quantity brought
to market would soon he no more than sufficient to supply
the effectual demand. Its market-price,
therefore, would soon rise to the natural
price. This at least would be the case where there
was perfect liberty” ( [O.U.P., Vol. I, p. 69;
Garnier,] l.c., p. 125).
This represents an essential difference between Smith’s
and Ricardo’s conceptions of the levelling out to the
natural price. Smith’s [conception] is based on
his false assumption, that the three elements independently
determine the value of the commodity, while Ricardo’s is
based on the correct assumption that it is the average
rate of profit (at a given level of wages), which alone
determines the cost-prices.
[2. Adam Smith’s Theory of the “Natural
Rate” of Wages, Profit and Rent]
“The natural price itself
varies with the natural rate of each of its component
parts, of wages, profit, and rent” ([O.U.P., Vol. I,
p. 70; Garnier,] l.c., p. 127).
In chapters VIII, IX, X and XI of Book I, Adam Smith then
seeks to determine the natural rate of these
“component parts”, wages, rent and profit, and
the fluctuations in these rates.
Chapter VIII: “Of the Wages of
Labour”
At the start of the chapter on wages,
Smith—forsaking the illusory standpoint of
competition—in the first place shows the true nature
of surplus-value and [regards] profit and rent as mere forms
of surplus-value.
The basis from which he determines the natural rate of
wages is the value of labour-power itself, the necessary
wage.
“A man must always live by his work,
and his wages must at least be sufficient to maintain him,
They must even upon most occasions he somewhat more,
otherwise it would he impossible for him to bring up a
family, and the race of such workmen could not last beyond
the first generation” ([O.U.P., Vol. I, p. 75;
Garnier,] l.c., p. 136).
This, however, becomes meaningless again because he never
asks himself how the value of the necessary means of
subsistence, i.e., of the commodity in general is
determined. And here, since he has moved away from his
main conception, Adam Smith would have to say: The price of
wages is determined by the price of the means of subsistence
and the price of the means of subsistence is determined by
the price of wages. Having once assumed that the
value of wages is fixed, he gives an exact
description of its fluctuations, as they appear in
competition, and the circumstances that cause these
fluctuations. This belongs to the exoteric part [of
his work] and does not concern us here.
<In particular [he deals with] the accumulation
of capital, but he does not tell us what determines it,
since this accumulation can only be rapid either if the rate
of wages is relatively low and the productivity of labour
high (in this case a rise in wages is always the result of a
permanently low level of wages during the preceding period)
or if the rate of accumulation is low but the productivity
of labour is high. From his standpoint, he would have
to deduce the rate of wages in the first case from the rate
of profit (i.e., from the rate of wages), and in the second
case from the gross amount of profit, but this would in turn
necessitate his investigating the value of the
commodity.)
He tries to derive the value of the commodity from the
value of labour which is one of its constituent parts.
And on the other hand he explains the level of wages by
saying that
“the wages of labour do not…,
fluctuate with the price of provisions” ([O.U.P.,
Vol. 1, p. 82; Garnier,] l.c., p. 149) and that “the
wages of labour vary more from place to place than the price
of provisions” ([O.U.P., Vol. I, p. 82; Garnier,]
l.c., p. 150).
In fact the chapter contains nothing relevant to the
question except the definition of the minimum wage,
alias the value of labour-power. Here Adam Smith
instinctively resumes the thread of his more profound
argument, only to lose it again, so that even the
above-cited definition [signifies] nothing. For how
[does he propose to] determine the value of the
necessary means of subsistence—and therefore of
commodities in general? Partly by the natural price of
labour. And how is this to be determined? By the
value of necessaries, or commodities in general. A
vicious circle. As to the rest, the chapter contains
not a word on the issue, the natural price of labour,
||553| but only investigations
into the rise of wages above the level of the natural rate,
demonstrating that the rise of wages is proportionate to the
rapidity with which capital accumulates, that is, to the
progressive accumulation of capital. Then he examines
the various conditions of society in which this takes place,
and finally he gives a slap in the face to the determination
of the value of the commodity by wages and of wages by the
value of the necessary means of subsistence, by showing that
this does not appear to be the case in England. In
between comes a piece of Malthusian population
theory—because wages are determined by the means of
subsistence necessary, not only to maintain the life of the
worker, but [should be sufficient] for the reproduction of
the population.
Namely after attempting to prove that wages rose
during the eighteenth century, especially in England, Adam
Smith raises the question whether this is to be regarded
“as an advantage, or as an inconveniency, to the
society” ([O.U.P., Vol. I, p. 87; Garnier,] l.c.,
p. 159). In this connection he returns temporarily to his
more profound approach, according to which profit and rent
are merely parts of the product of the worker.
The workmen, he says:
“make up the far greater part of
every great political society. But what improves the
circumstances of the greater part, can never he regarded as
any inconveniency to the whole. No society can surely
he flourishing and happy, of which the far greater part of
the members are poor and miserable. It is but equity,
besides, that they who feed, clothe, and lodge the whole
body of the people, should have such a share of the
produce of their own labour as to be themselves
tolerably well fed, clothed, and lodged” ([O.U.P.,
Vol. I, p. 87; Garnier,] l.c., pp. 159-60).
In this connection he touches upon the theory of
population:
“Poverty, though it no doubt
discourages, does not always prevent marriage. It
seems even to be favourable to generation, …
Barrenness, so frequent among women of fashion, is very rare
among those of inferior station… But poverty,
though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender
plant is produced; but in so cold a soil, and so severe a
climate, soon withers and dies… Every species
of animals naturally multiplies in proportion to the means
of their subsistence, and no species can ever multiply
beyond it. But in civilised society, it is only among
the inferior ranks of people that the scantiness of
subsistence can set limits to the further multiplication of
the human species… The demand for men,
like that for any other commodity, necessarily regulates
the production of men, quickens it when it goes on too
slowly, and stops it when it advances too fast”
([O.U.P., Vol. I, pp. 87-89; Garnier,] l.c., pp. 160-63
passim).
The connection between the wages minimum and the varying
conditions of society is as follows:
“The wages paid to journeymen and
servants of every kind must be such as may enable them, one
with another, to continue the race of journeymen and
servants, according as the increasing, diminishing, or
stationary demand of the society, may happen to
require” ([O.U.P., Vol. I, pp. 89-90; Garnier,] l.c.,
p. 164). (Of the society! That is to
say—of capital.)
He then shows that the slave is “dearer” than
the free labourer, because the latter himself looks after
his “wear and tear” whereas that of the
former is [controlled] “by a negligent master or
careless overseer” ([O.U.P., Vol. I, p. 90; Garnier,]
l.c., p. 164). The “fund” for replacing
the “wear and tear” is frugally used by the free
labourer whereas for the slave it is wastefully and
disorderly administered.
“The fund destined for replacing or
repairing, if I may say so, the wear and tear of the
slave, is commonly managed by a negligent master or careless
overseer. That destined for performing the same office
with regard to the freeman is managed by the freeman
himself. The disorders which generally prevail in the
economy of the rich, naturally introduce themselves into the
management of the former; the strict frugality and
parsimonious attention of the poor as naturally establish
themselves in that of the latter” ([O.U.P., Vol. I,
p. 90; Garnier,] l.c., p. 164).
It is characteristic in the determination of the minimum
wage or the natural price of labour, that it is lower for
the free wage-labourer than for the slave. This occurs
also to Adam Smith:
“The work done by freemen comes
cheaper in the end than that performed by
slaves… The liberal reward of labour,
therefore, as it is the effect of increasing wealth, so it
is the cause of increasing population. To complain of
it, is ||554| to lament over
the necessary cause and effect of the greatest public
prosperity” ([O.U.P., Vol. I, p. 90; Garnier,] l.c.,
p. 165).
Adam Smith continues to plead for a high wage.
It not only “encourages the propagation”, but
also “increases the industry of the common
people. The wages of labour are the encouragement of
industry, which, like every other human quality, improves in
proportion to the encouragement it receives. A
plentiful subsistence increases the bodily strength of the
labourer, and the comfortable hope of bettering his
condition… animates him to exert that strength to the
utmost. Where wages are high, accordingly, we shall
always find the workmen more active, diligent, and
expeditious than where they are low” ([O.U.P., Vol. I,
pp. 90-91; Garnier,] l.c., p. 166).
But high wages spur the workmen on to over-exertion and
to premature destruction of their labour-power.
“Workmen… when they are
liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a
few years” ([O.U.P., Vol. I, p. 91; Garnier,] l.c.,
pp. 166-67). “If masters would always listen to
the dictates of reason and humanity, they have frequently
occasion rather to moderate, than to animate the application
of many of their workmen” ([O.U.P., Vol. I, p. 92;
Garnier,] l.c., p. 168).
He goes on to argue against the view that “a little
more plenty than ordinary may render some workmen
idle” ( [O.U.P., Vol. I, p. 92; Garnier,] l.c.,
p. 169).
Then he examines whether it is true that the workmen are
more idle in years of plenty than in years of scarcity and
what is the general relation between wages and the price of
the means of subsistence. Here again comes the
inconsistency.
“The money price of labour is
necessarily regulated by two circumstances, the demand for
labour, and the price of the necessaries and
conveniencies of life… The money price of
labour is determined by what is requisite for purchasing
this quantity” (of the necessaries and conveniencies
of life) ([O.U.P., Vol. I, pp. 95-96; Garnier,] l.c.,
p. 175).
[He then examines] why—because of the demand for
labour— wages can rise in years of plenty and fall in
years of scarcity. ([O.U.P., Vol. I, p. 96 et seq.;
Garnier,] l.c., p. 176 et seq.)
The causes [of the rise and fall] in good and had years
counterbalance one another.
“The scarcity of a dear year, by
diminishing the demand for labour, tends to lower its price,
as the high price of provisions tends to raise it. The
plenty of a cheap year, on the contrary, by increasing the
demand, tends to raise the price of labour, as the cheapness
of provisions tends to lower it. In the ordinary
variations of the prices of provisions, those two opposite
causes seem to counterbalance one another, which is
probably, in part, the reason why the wages of labour are
everywhere so much more steady and permanent than the price
of provisions” ([O.U.P., Vol. I, p. 96; Garnier,]
l.c., p. 177).
As against the concept of wages as the source of the
value of commodities, he finally, after all this zigzagging,
again advances his original, more profound view, that the
value of commodities is determined by the quantity of
labour; and if in good years, or with the growth of
capital, the worker receives more commodities, then
he also produces far more commodities, that is to say the
individual commodity contains a smaller quantity of
labour. He can therefore receive a greater quantity of
commodities of less value and thus—this is the implied
conclusion— profit can grow, despite rising absolute
wages.
“The increase in the wages of labour
necessarily increases the price of many commodities, by
increasing that part of it which resolves itself into
wages, and so far tends to diminish their consumption,
both at home and abroad. The same cause, however,
which raises the wages of labour, the increase of stock,
tends to increase its productive powers, and to make a
smaller quantity of labour produce a greater quantity of
work.” [This is due to] the division of labour, the
use of machinery, inventions, etc….There are many
commodities, therefore, which, in consequence of these
improvements, come to be produced by so much less labour
than before, that the increase of its price is
more than compensated by the diminution of its
quantity” ([O.U.P., Vol. I, p. 97; Garnier,] l.c.,
pp. 177-78).
The labour is better paid, but less labour is contained
in the individual commodity, hence a smaller amount has to
be paid out. He thus allows his false theory,
according to which the value of the commodity is determined
by the wage as a constituent element of the value, to be
annulled, or rather paralysed, counterbalanced by his
correct theory, according to which the value [of the
commodity] is determined by the quantity of labour it
contains.
||555| Chapter IX:
“Of the Profits of Stock”.
Here accordingly the natural rate of the second element
that determines and constitutes the natural price or
value of the commodities is to be ascertained. What
Adam Smith says about the cause of the fall in the rate
of profit ([Garnier,] l.c., pp. 179, 189, 190, 193, 196,
197, etc.) shall be considered at a later stage.
Adam Smith is confronted here by considerable
difficulties. He says that even the determination of
average wages amounts merely to ascertaining “the most
usual wages” ([O.U.P., Vol. I, p.98; Garnier], l.c.,
p. 179), the actual given rate of wages.
“But even this can seldom be done
with regard to the profits of stock” ([O.U.P.,
Vol. I, p. 98; Garnier,] l.c., p. 179). Apart from the
good or bad fortune of the entrepreneur, this profit
“is affected by every variation of price in the
commodities” ([O.U.P., Vol. I, p. 98; Garnier,] l.c.,
p. 180)
although it is precisely through the natural rate of
profit, as one of the component elements of
“value”, that we are supposed to determine the
natural price of these commodities. This [the
determination of the natural rate of profit] is already
difficult for a single capitalist in a single trade.
“To ascertain what is the average
profit of all the different trades carried on in a great
kingdom, must be much more difficult” ([O.U.P.,
Vol. I, p. 98; Garnier,] l.c., p. 180).
But one may form some notion of the “average
profits of stock” “from the interest of
money”.
“It may be laid down as a maxim, that
wherever a great deal can be made by the use of money, a
great deal will commonly be given for the use of it; and
that, wherever little can be made by it, less will commonly
be given for it” ([O.U.P., Vol. I, p. 98; Garnier]
l.c., pp. 180-81).
Adam Smith does not say the rate of interest determines
profits. He expressly states the reverse. But
there are records of the rate of interest for different
epochs etc.; such records do not exist for the rate of
profit. The rates of interest are therefore indices
from which the approximate level of the rate of profit can
be judged. But the task set was not to compare the
levels of actual rates of profit, but to determine the
natural level of the rate of profit.
Adam Smith seeks refuge in a subsidiary investigation into
the level of the rate of interest in different periods,
which in no way touches upon the problem he has set himself,
He makes a cursory examination of various periods in England
and then compares these with Scotland, France and Holland
and finds that—with the exception of the American
colonies—
“high wages of labour and high
profits of stock … are things, perhaps,[g] which scarce
ever go together, except in the peculiar circumstances of
new colonies” ([O.U.P., Vol. I, p. 102; Garnier,]
l.c., p. 187).
Here Adam Smith tries, like Ricardo—but to a
certain extent with more success—to give some
approximate explanation of high profits:
“A new colony must always, for some
time, be more under-stocked in proportion to the extent of
its territory, and more under-peopled in proportion to the
extent of its stock, than the greater part of other
countries. They have more land than they have stock to
cultivate. What they have, therefore, is applied to
the cultivation only of what is most fertile and most
favourably situated, the land near the sea shore and
along the hanks of navigable rivers. Such land, too,
is frequently purchased at a price below the value even of
its natural produce.” (In fact, therefore, it costs
nothing.) “Stock employed in the purchase
and improvement of such lands must yield a very large
profit, and, consequently, afford to pay a very large
interest. Its rapid accumulation in so profitable an
employment enables the planter to increase the number of his
hands faster than he can find them in a new
settlement. Those whom he can find, therefore, are
very liberally rewarded. Asthe colony increases,
the profits of stock gradually diminish. When the most
fertile and best situated lands have been all occupied, less
profit can be made by the cultivation of what is inferior
both in soil and situation, and less interest can be
afforded for the stock which is so employed, In the greater
part of our colonies, accordingly, the … rate of
interest has been considerably reduced during the course of
the present century” ([O.U.P., Vol. I, pp. 102-03;
Garnier,] l.c., pp. 187-89).
This is one of the foundations of the Ricardian
explanation of why profits fall, although it is presented in
a different way. On the whole, Smith explains
everything here by the competition between capitals; as
capitals grow, profit falls and as they diminish, profit
grows, and accordingly wages rise or fall conversely.
||556| “The diminution
of the capital stock of the society, or of the funds
destined for the maintenance of industry, however, as it
lowers the wages of labour, so it raises the profits of
stock, and consequently the interest of money. By the
wages of labour being lowered, the owners of what stock
remains in the society can bring their goods at less expense
to market than before, and less stock being employed in
supplying the market than before, they can sell them
dearer” ([O.U.P., Vol. I, p. 104; Garnier,] l.c., pp.
191-92).
Then he talks about the highest possible and the lowest
possible rates [of profit].
The “highest rate” is that which, “in
the price of the greater part of commodities, eats up the
whole of what should go to the rent of the land, and leaves
only what is sufficient to pay the labour of preparing and
bringing them to market, according to the lowest rate at
which labour can anywhere be paid, the bare subsistence of
the labourer” ([O.U.P., Vol. I, p. 108; Garnier,]
l.c., pp. 197-98).
“The lowest ordinary rate of profit
must always be something more than what is sufficient to
compensate the occasional losses to which every employment
of stock is exposed. It is this surplus only which is
neat or clear profit” ([O.U.P., Vol. I, p. 107;
Garnier,] l.c., p. 196).
Adam Smith himself in fact characterises what he says
about the “natural rate of profit”:
“Double interest is in Great Britain
reckoned what the merchants call a good, moderate,
reasonable profit; terms which, I apprehend, mean no
more than a common and usual profit” ([O.U.P.,
Vol. I, p. 108; Garnier,] l.c., p. 198).
And indeed, Smith calls this “common and usual
profit” neither moderate nor good, but his term for it
is “the natural rate of profit”.
However, he does not tell us at all what it is or how it is
determined although we are supposed to determine the
“natural price” of the commodity by means of
this “natural rate of profit”.
“In countries which are fast
advancing to riches, the low rate of profit may, in the
price of many commodities, compensate the high wages of
labour, and enable those countries to sell as cheap as their
less thriving neighbours, among whom the wages of labour may
be lower” ([O.U.P., Vol. I, p. 109; Garnier,] l.c.,
p. 199).
Low profits and high wages are not reciprocally opposed
here, but the same cause—the quick growth or
accumulation of capital—produces both. Both
enter into the price; they constitute it. If
therefore one is high while the other is low, the price
remains the same, and so on.
Adam Smith here regards profit purely as a surcharge, for
at the end of the chapter he says:
“In reality, high profits tend much
more to raise the price of work than high
wages” ([O.U.P., Vol. I, p. 109; Garnier,] l.c.,
p. 199). If, for example, the wages of all the working
people in linen manufacture were to rise by twopence a day,
this would only raise the price of the “piece of
linen” by the number of twopences equal to the number
of people employed, “multiplied by the number of days
during which they had been so employed, That part of the
price of the commodity which resolved itself into wages
would, through all the different stages of the manufacture,
rise only in arithmetical proportion to this rise of
wages. But if the profits of all the different
employers of those working people should be raised five per
cent, that part of the price of the commodity which resolved
itself into profit would, through all the different stages
of manufacture, rise in geometrical proportion to
this rise of profit… In raising the price of
commodities the rise of wages operates in the same manner as
simple interest does in the accumulation of debt, The rise
of profit operates like compound interest” ([O.U.P.,
Vol. I, pp. 109-10; Garnier,] l.c., pp. 200-01).
At the end of this chapter Adam Smith also tells us
the source of the whole notion, that the price of the
commodity, or its value, is made up out of the values of
wages and profits—namely, the amis du
commerce,[h] the
faithful practitioners of competition:
“Our merchants and
master-manufacturers complain much of the had effects of
high wages in raising the price, and thereby lessening the
sale of their goods, both at home and abroad. They say
nothing concerning the bad effects of high profits.
They are silent ||557| with
regard to the pernicious effects of their own gains.
They complain only of those of other people” ([O.U.P.,
Vol. 1, p. 110; Garnier,] l.c., p. 201).
Chapter X [is entitled] “Of Wages and Profit in
the Different Employments of Labour and Stock.”
This is only concerned with detail and therefore belongs
into the chapter on competition. In its way, it is
very good. It is completely exoteric.
{Productive and unproductive labour:
“The lottery of the law … is
very far from being a perfectly fair lottery; and that, as
well as many other liberal and honourable professions, is,
in point of pecuniary gain, evidently
under-recompensed” ([O.U.P., Vol. I, p. 118; Garnier,]
Book I, Chapter X, pp. 216-17).
Similarly he says of soldiers:
“Their pay is less than that of
common labourers, and, in actual service, their fatigues are
much greater” ([O.U.P., Vol. I, pp. 121-22; Garnier,]
l.c., p. 223).
And of sailors in the navy:
“Though their skill and dexterity are
much superior to that of almost any artificers; and though
their whole life is one continual scene of hardship and
danger … their wages are not greater than those of
common labourers at the port which regulates the rate of
seamen’s wages” ([O.U.P., Vol. I, p. 122; Garnier,]
l.c., p. 224).
Ironically:
“It would be indecent, no doubt, to
compare either a curate or a chaplain with a journeyman in
any common trade, The pay of a curate or chaplain, however,
may very properly be considered as of the same nature with
the wages of a journeyman” ([O.U.P., Vol. I, p. 148;
Garnier,] l.c., p. 271).
He expressly says of “men of letters”
that they are underpaid because of their too great numbers
and he recalls that before the invention of printing,
“a scholar and a beggar” ([O.U.P.,
Vol. I, p. 151; Garnier,] l.c., pp. 276-77) were synonymous
and seems to apply this, in a certain sense, to men of
letters.}
The chapter is full of acute observations and important
comments .
“In the same society or
neighbourhood, the average and ordinary rates of profit in
the different employments of stock should be more nearly
upon a level than the pecuniary wages of different sorts of
labour” ([O.U.P., Vol. I, p. 124; Garnier,] l.c.,
p. 228).
“The extent of the market, by
giving employment to greater stocks, diminishes
apparent profit; but by requiring supplies from a
greater distance, it increases prime cost. This
diminution of the one and increase of the other seem, in
most cases, nearly to counterbalance one another” (in
the case of such articles as bread, meat, etc.)
([O.U.P., Vol. I, p. 126; Garnier,] l.c., p. 232).
“In small towns and country villages,
on account of the narrowness of the market, trade
cannot always be extended as stock extends. In such
places, therefore, though the rate of a particular person’s
profits may be very high, the sum or amount of them can
never be very great, nor consequently that of his annual
accumulation. In great towns, on the contrary, trade
can be extended as stock increases, and the credit of a
frugal and thriving man increases much faster than his
stock. His trade is extended in proportion to the
amount of both” ([O.U.P., Vol. I, p. 127; Garnier,]
l.c., p. 233).
Regarding the false statistical presentation of
wages, for instance in the sixteenth and seventeenth
etc. centuries, Adam Smith quite rightly observes that the
wages here were only, for example, the wages of cotters,
who, when not occupied around their cottages or working for
their masters (who gave them a house, “a small garden
for pot-herbs, as much grass as will feed a cow, and,
perhaps, an acre or two of bad arable land”, and, when
he employed them, a very poor wage)
“are said to have been willing to
give their spare time for a very small recompense to
anybody, and to have wrought for less wages than other
labourers… This daily or weekly
recompense, however, seems to have been considered as
the whole of it, by many writers who have collected
the prices of labour and provisions in ancient times, and
who have taken pleasure in representing both as wonderfully
low” ([O.U.P., Vol. I, pp. 131-32; Garnier,] l.c.,
p. 242).
He makes the altogether true observation that:
“this equality in the whole of the
advantages and disadvantages of the different employments of
labour and stock, can take place only in such as are the
sole or principal employments of those who occupy
them” ([O.U.P., Vol. I, p. 131; Garnier,] l.c.,
p. 240).
This point, incidentally, has already been quite well set
forth by Steuart, particularly in relation to agricultural
wages—as soon as time becomes precious.
||558| With regard to
the accumulation of capital in the towns during the Middle
Ages, Adam Smith very correctly notes in this chapter, that
it was principally due to the exploitation of the country
(by trade as well as by manufacture). (There were in
addition the usurers and even haute finance; in short, the
money merchants.)
“In consequence of such
regulations” [i.e., regulations made by the guilds],
“indeed, each class” (within the town corporate)
“was obliged to buy the goods they had occasion for
from every other within the town, somewhat dearer than they
otherwise might have done. But, in recompense, they
were enabled to sell their own just as much dearer; so that,
so far it was as broad as long, as they say; and in the
dealings of the different classes within the town with one
another, none of them were losers by these
regulations. But in their dealings with the country
they were all great gainers; and in these latter dealings
consists the whole trade which supports and enriches every
town.
“Every town draws its whole
subsistence, and all the materials of its industry, from the
country. It pays for these chiefly in two ways.
First, by sending back to the country a part of those
materials wrought up and manufactured; in which case, the
price is augmented by the wages of the workmen, and the
profits of their masters or immediate employers; secondly,
by sending to it a part both of the rude and manufactured
produce, either of other countries, or of distant parts of
the same country, imported into the town; in which case,
too, the original price of those goods is augmented by the
wages of the carriers or sailors, and by the profits of the
merchants who employ them. In what is gained upon the
first of those branches of commerce consists the advantage
which the town makes by its manufactures; in what is gained
upon the second, the advantage of its inland and foreign
trade. The wages of the workmen, and the profits of
their different employers, make up the whole of what is
gained upon both. Whatever regulations, therefore,
tend to increase those wages and profits beyond what they
otherwise would be, tend to enable the town to purchase,
with a smaller quantity of its labour, the produce of a
greater quantity of the labour of the country”
([O.U.P., Vol. I, pp. 140-41; Garnier] l.c.,
pp. 258-59).
{Here, therefore,—l.c., t, 1, l. 1, ch. X,
p.259—Adam Smith returns to the correct determination
of value, the determination of value by the quantity of
labour. This should be quoted as an example when
dealing with his theory of surplus-value. If the
prices of the commodities which are exchanged between town
and country are such that they represent equal quantities of
labour, then they are equal to their values. Profit
and wages on both sides of the exchange cannot, therefore,
determine these values, but the division of these values
determines profit and wages. That is why Adam Smith
finds that the town, which exchanges a smaller quantity of
labour against a greater quantity of labour from the
countryside, draws excess profit and excess wages compared
with the country. This would not be the case if it did
not sell its commodities to the country for more than
their value. In that case “wages and
profits” would not increase “beyond what they
otherwise would be”. If, therefore, wages
and profits are at their natural level, then they do not
determine the value of the commodity, but are determined by
it. Profit and wages can then only arise from the
division of the given value, which is their
precondition, this value however cannot be the result of
preconceived profits and wages.}
“They give the traders and artificers
in the town an advantage over the landlords, farmers, and
labourers in the country, and break down that natural
equality which would otherwise take place in the commerce
which is carried on between them. The whole annual
produce of the labour of the society is annually
divided between those two different sets of
people. By means of those” (town)
“regulations, a greater share of it is given to
the inhabitants of the town than would otherwise fall to
them; and a less to those of the country.
“The price which the town
really pays for the provisions and materials annually
imported into it, is the quantity of manufactures and other
goods annually exported from it. The dearer the
latter are sold, the cheaper the former are
bought. The industry of the town becomes more, and
that of the country less advantageous” ([O.U.P.,
Vol. I, pp. 141-42; Gamier,] l.c., pp. 259-60).
Thus, according to Smith’s presentation of the matter, if
the commodities of the town and those of the country were
sold in proportion to the quantity of labour which
they each contain, then they would be sold at their
values, and consequently the profit and wages on both
sides of the exchange could not determine these
values, but would be determined by them. The
levelling out of profits—which vary because of the
varying organic composition of capitals—does not
concern us here, since it does not lead to differences
between profits; but equalises them.
||559| “The
inhabitants of a town, being collected into one
place, can, easily combine together. The most
insignificant trades carried on in towns have, accordingly,
in some place or other, been incorporated” ([O.U.P.,
Vol. I, p. 142; Garnier] l.c., p. 261). “The
inhabitants of the country, dispersed in distant places,
cannot easily combine together. They have not only
never been incorporated, but the incorporation spirit never
has prevailed among them. No apprenticeship has ever
been thought necessary to qualify for husbandry, the great
trade of the country” ([O.U.P., Vol. I, p. 143;
Garnier,] l.c., p. 262).
In this connection Smith comes to speak of the
disadvantages of the “division of labour”.
The farmer practises a trade requiring more intelligence
than the manufacturing worker, who is subject to the
division of Labour.
“The direction of operations,
besides, which must be varied with every change of the
weather, as well as with many other accidents, requires much
more judgement and discretion, than that of those which are
always the same, or very nearly the same” ([O.U.P.,
Vol. I, p. 143; Garnier,] l.c., p. 263).
The division of labour develops the social
productive power of labour or the productive power of
social labour, but at the expense of the general
productive ability of the worker. This increase in
social productive power confronts the worker
therefore as an increased productive power, not of
his labour, but of capital, the force that
dominates his labour. If the town labourer is more
developed than the country labourer, this is only due to the
circumstance that his mode of work causes him to live in
society, whereas that of the agricultural labourer
makes him live directly with nature.
“The superiority which the industry
of the towns has everywhere in Europe over that of the
country, is not altogether owing to corporations and
corporation laws, It is supported by many other
regulations. The high duties upon foreign
manufactures, and upon all goods imported by alien
merchants, all tend to the same purpose” ([O.U.P.,
Vol. I, p. 144; Garnier,] l.c., p. 265). These
“regulations secure them” (the towns) against
the competition of foreigners.
This is an act, no longer of the town bourgeoisie, but of
the bourgeoisie already legislating on a national scale as
the corps de nation or as the Third Estate of the
State Assembly or the Lower House. The specific acts
of the town bourgeoisie—directed against the
country—are the excise and duties levied at the gates,
and, in general, the indirect taxes, which have their origin
in the towns (see Hüllmann), while the direct taxes are
of country origin. It might appear that the excise,
for example, is a tax which the town imposed indirectly upon
itself. The countryman must advance it, but reimburses
himself in the price of the product. But this was not
the case in the Middle Ages. The demand for his
products—in so far as he converted these into
commodities and money at all—[was, in so far as it
came] from the town, mostly compulsorily restricted to the
area under the jurisdiction of the town, so that he did not
have the power to raise the price of his product by the full
amount of the town tax.
“In Great Britain, the superiority of
the industry of the towns over that of the country seems to
have been greater formerly than in the present times.
The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in
agriculture to those of trading and manufacturing stock,
than they are said to have done in the last century”
(the seventeenth) “or in the beginning of the
present” (the eighteenth). “This change
may be regarded as the necessary, though very late
consequence of the extraordinary encouragement given to the
industry of the towns. The stocks accumulated in them
come in time to he so great, that it can no longer be
employed with the ancient profit in that species of industry
which is peculiar to them. That industry has its
limits like every other; and the increase of stock,
by increasing the competition, necessarily reduces
the profit. The lowering of profit in the town
forces out stock to the country, where, by creating a
new demand for country labour, it necessarily raises its
wages. It then spreads itself, if I may say so,
over the face of the land, and, by being employed in
agriculture, is in part restored to the country, at the
expense of which, in a great measure, it had originally been
accumulated in the town” ([O.U.P., Vol. I, p. 145;
Garnier,] l.c., pp. 266-67).
In Chapter XI of Book I, Smith then seeks to
determine the natural rate of rent, the third element
which constitutes the value of the commodity. We shall
postpone consideration of this and first return again to
Ricardo.
This much is clear from the foregoing: When Adam Smith
identifies the natural price or cost-price of the
commodity with its value, he does so after first
abandoning his correct conception of value, and
substituting for it the view which is evoked by and arises
from the phenomena of competition. In competition, the
cost-price and not the value appears as the
regulator of the market-price—so to speak, as
the immanent price, the value of the commodity.
But in competition this cost-price appears to be represented
by the given average rate of wages, profit and rent.
Hence Adam Smith tries to establish these separately and
independently of the value of the commodity—
rather as elements of the natural price, Ricardo, whose main
concern has been the refutation of this Smithian ||560| aberration, accepts the result
that necessarily follows from it—namely the
identity of values and cost-prices—although with
Ricardo this result is logically impossible.
* Here Herr
Rodbertus can see that in England seeds are
“bought”.
[a] In the
manuscript: “upon”.—Ed.
[b] Marx wrote this
paragraph in English.—Ed.
[c] In the
manuscript: “of fixed capital”.—Ed.
[d] In the
manuscript: “unequal rapidity in the return of the
capitals to their owners”.—Ed.
* it is possible
that the rate of surplus-value is not equalised in
the different spheres of production (for instance because of
unequal length of working time). This is not
necessary because the surplus-values themselves are
equalised.
* Here Roscher could
have seen once again what the Englishman understands by the
term “monied class”. The “monied
class” is here diametrically opposed to the
“industrious part of the community”.
[e] Marx
quotes here from Recherches sur la nature et les causes
de la richesse des nations. Paris, 1802, Garnier’s
translation of Adam Smith’s work. All passages taken
by Marx from the French translation are marked
“Garnier” in this edition and are printed in
English according to A. Smith, An Inquiry into the Nature
and Causes of the Wealth of Nations, Oxford University
Press, London, 1928 (referred to hereafter as O.U.P.).
The French text, as that of all other quotations taken by
Marx from French and German sources, can be found in the
Appendices.—Ed.
[f] In the German
original: “verkehrt” which may mean:
upside down, reversed, or: wrong.—Ed.
[g] In Garnier’s
translation: “naturellement”.—Ed
[h] Friends of
commerce (an expression used by Fourier).—Ed.