Economic Manuscripts: Theories of Surplus-Value, Chapter 20

Marx-Engels |  Lenin  | Stalin |  Home Page

Theories of Surplus Value, Marx 1861-3

[Chapter XX]  Disintegration of the Ricardian School

<"vol32-p258"> 

1.  [Robert Torrens]

[a) Smith and Ricardo on the Relation Between the Average Rate of Profit and the Law of Value]

||782|Robert Torrens, An Essay on the Production of Wealth etc., London, 1821.

Observation of competition—the phenomena of production—shows that capitals of equal size yield an equal amount of profit on the average, or that, given the average rate of profit (and the term, average rate of profit, has no other meaning), the amount of profit depends on the amount of capital advanced.

Adam Smith has noted this fact.  Its connection with the theory of value which he put forward caused him no pangs of conscience—especially since in addition to what one might call his esoteric theory, he advanced many others, and could recall one or another at his pleasure.  The sole reflection to which this question gives rise is his polemic against the view which seeks to resolve profit into “wages of superintendence”, since, apart from any other circumstance, the work of superintendence does not increase in the same measure as the scale of production and, moreover, the value of the capital advanced can increase, for instance, as a result of the dearness of raw materials, without a corresponding growth in the scale of production.  He has no immanent law to determine the average profit or its amount.  He merely says that competition reduces this x.

Ricardo (apart from a few merely chance remarks) directly identifies profit with surplus-value everywhere.  Hence with him, commodities sell at a profit not because they are sold above their value, but because they are sold at their value.  Nevertheless, in considering value (in Chapter I of the Principles) he is the first to reflect at all on the relationship between the determination of the value of commodities and the phenomenon that capitals of equal size yield equal profits.  They can only do this inasmuch <"tsv3p70">as the commodities they produce—although they are not sold at equal prices (one can, however, say that their output has equal prices provided the value of that part of constant capital which is not consumed is added to the product)—yield the same surplus-value, the same surplus of price over the price of the capital outlay.  Ricardo moreover is the first to draw attention to the fact that capitals of equal size are by no means of equal organic composition.  The difference in this composition he defined in the way traditional since Adam Smith, namely as circulating and fixed capital, that is, he saw only the differences arising from the process of circulation.

He certainly does not directly say that it is a prima facie contradiction of the law of value that capitals of unequal organic composition, which consequently set unequal amounts of immediate labour in motion, produce commodities of the same value and yield the same surplus-value (which he identifies with profit).  On the contrary he begins his investigation of value by assuming capital and a general rate of profit.  He identifies cost-price with value from the very outset, and does not see that from the very start this assumption is a prima facie contradiction of the law of value.  It is only on the basis of this assumption—which contains the main contradiction and the real difficulty—that he comes to a particular case, changes in the level of wages, their rise or fall.  For the rate of profit to remain uniform the rise or fall in wages, to which corresponds a fall or rise in profit, must have unequal effects on capitals of different organic composition.  If wages rise, then profits fall, and also the prices of commodities in whose production a relatively large amount of fixed capital is employed.  Where the opposite is the case, the results are likewise opposite.  Under these Circumstances, therefore, the “exchangeable values” of the various commodities are not determined by the labour-time required for their respective production.  In other words, this definition of an equal rate of profit (and Ricardo arrives at it only in individual cases and in this roundabout way) yielded by capitals of different organic composition contradicts the law of value or, as Ricardo says, constitutes an exception to it, whereupon Malthus rightly remarks that in the progress of ||783| industry, the rule becomes the exception and the exception the rule.[a] The contradiction itself is not clearly expressed by Ricardo, namely, not in the form: although one of the commodities contains <"tsv3p71">more unpaid labour than the other—for the amount of unpaid labour depends on the amount of paid labour, that is, the amount of immediate labour employed provided the rate of exploitation of the workers is equal—they nevertheless yield equal values, or the same surplus of unpaid over paid labour.  The contradiction however occurs with him in a particular form: in certain cases, wages, variations in wages, affect the cost-price (he says, the exchangeable values) of commodities.

Equally, differences in the time of turnover of capital—whether the capital remains in the process of production (even if not in the labour process) or in circulation for a longer period, requiring not more work, but more time for its turnover—these differences have just as little effect on the equality of profit, and this again contradicts (is, according to Ricardo, an exception to) the law of value.

He has therefore presented the problem very one-sidedly.  Had he expressed it in a general way, he would also have had a general solution.

But his great contribution remains: Ricardo has a notion that there is a difference between value and cost-price, and, in certain cases, even though he calls them exceptions to the law of value, he formulates the contradiction that capitals of unequal organic composition (that is, in the last analysis, capitals which do not exploit the same amount of living labour) yield equal surplus-value (profit) and—if one disregards the fact that a portion of the fixed capital enters into the labour process without entering into the process that creates value—equal values, commodities of equal value (or rather [of equal] cost-price, but he confuses this).

[b) Torrens’s Confusion in Defining the Value of Labour and the Sources of Profit]

As we have seen,[b] Malthus uses this [the contradiction described by Ricardo] in order to deny the validity of the Ricardian law of value.

At the very beginning of his book, Torrens takes this discovery of Ricardo as his point of departure, not, however, to solve the problem, but to present the “phenomenon” as the law of the phenomenon.

Supposing that capitals of different degrees of durability are employed: “If a woollen and a silk manufacturer were each to employ a capital of £2000 and if the former were to employ £1,500 in durable machines, and £500 in wages and materials; while the latter employed only £500 in durable machines, and £1,500 in wages and materials… Supposing that a tenth of these fixed capitals is annually consumed, and that the rate of profit is ten per cent, then, as the results of the woollen manufacturer’s capital of £2,000, must, to give him this profit, be £2,200, and as the value of his fixed capital has been reduced by the progress of production from £1,500 to £1,350, the goods produced must sell for £850.  And, in like manner, as the fixed capital of the silk manufacturer is by the process of production reduced one-tenth, or from £500 to £450, the silks produced must, in order to yield him the customary rate of profit upon his whole capital of £2,000, sell for £1,750 … when capitals equal in amount, but of different degrees of durability, are employed, the articles produced, together with the residue of capital, in one occupation, will be equal in exchangeable value to the things produced, and the residue of capital, in another occupation” ([R. Torrens, An Essay on the Production of Wealth, London, 1821,] pp. 28-29).

Here the phenomenon manifested in competition is merely mentioned, registered.  Similarly a “customary rate of profit” is presupposed without explaining how it comes about, or even the feeling that this ought to be explained.

Equal capitals, or, in other words, equal quantities of accumulated labour, will often put in motion different quantities of immediate labour; but neither does this furnish any exception to our general principle” (loc. cit., pp. 29-30),

namely, to the fact that the value of the product plus the residue of the capital not consumed, yield equal values, or, what is the same thing, equal profits.

The merit of this passage does not consist in the fact that Torrens here merely registers the phenomenon once again without explaining it, but in the fact that he defines the difference by stating that equal capitals set in motion unequal quantities of living labour, though he immediately spoils it by declaring it to be a “special” case.  If the value is equal to the labour worked up, embodied in a commodity, then it is clear that—if the commodities are sold at their value—the surplus-value contained in them can only be equal to the unpaid, or surplus labour, which they contain.  But this surplus labour—given the same rate of exploitation of the worker—cannot be equal in the case of capitals which put in motion different quantities of immediate labour, whether it is the immediate production process or the period of circulation which is the cause of this difference.  It is therefore to Torrens’s credit that he expresses this.  What does he conclude from it?  That here ||784| within capitalist production the law of value suddenly changes.  That is, that the law of value, which <"tsv3p73">is abstracted from capitalist production, contradicts capitalist phenomena.  And what does he put in its place?  Absolutely nothing but the crude, thoughtless, verbal expression of the phenomenon which has to be explained.

“In that early period of society”

(that is, precisely when exchange-value in general, the product as commodity, is hardly developed at all, and consequently when there is no law of value either)

the total quantity of labour, accumulated and immediate, expended on production, is that […] which […] determines the quantity of one commodity which shall be received for a given quantity of another.  When stock has accumulated, when capitalists became a class distinct from labourers, […] when the person who undertakes any branch of industry, does not perform his own work, but advances subsistence and materials to others, then it is the amount of capital, or the quantity of accumulated labour expended in production, […] which determines the exchangeable power of commodities” (op. cit., pp. 33-34).

“As long as [these] two capitals [are] equal [the law of competition, always tending to equalise the profits of stock, will keep] their products of equal […] value, however we may vary the quantity of immediate labour which they put in motion, or which their products may require […] if we render these capitals unequal in amount, [the same law must render] their products of unequal value, though the total quantity of labour expended upon each, should be precisely equal” (op. cit., p. 39).

“… after the separation of capitalists and labour[ers], it is […] the amount of capital, or quantity of accumulated labour, and not as before this separation, the sum of accumulated and immediate labour, expended on production, which determines the exchangeable value…” (loc. cit., pp. 39-40).

Here again, he merely states the phenomenon that capitals of equal size yield equal profits or that the cost-price of commodities is equal to the price of the capital advanced plus the average profit; there is at the same time a hint that—since equal capitals put in motion different quantities of immediate labour—this phenomenon is, prima facie, inconsistent with the determination of the value of commodities by the amount of labour-time embodied in them.  The remark [made by Torrens] that this phenomenon of capitalist production only manifests itself when capital comes into existence—[when] the classes of capitalists and workers [arise, and] the objective conditions of labour acquire an independent existence as capital—is tautology.

But how the separation of the [factors necessary] for the production of commodities—into capitalists and workers, capital <"tsv3p74">and wage-labour—upsets the law of value of commodities is merely “inferred” from the uncomprehended phenomenon.

Ricardo sought to prove that, apart from certain exceptions, the separation between capital and wage-labour does not change anything in the determination of the value of commodities.  Basing himself on the exceptions noted by Ricardo, Torrens rejects the law.  He reverts to Adam Smith (against whom the Ricardian demonstration is directed) according to whom the value of commodities was determined by the labour-time embodied in them “in that early period” when men confronted one another simply as owners and exchangers of goods, but not when capital and property in land have been evolved.  This means (as I observed in Part I) that the law which applies to commodities qua commodities, no longer applies to them once they are regarded as capital or as products of capital, or as soon as there is, in general, an advance from the commodity to capital.  On the other hand, the product wholly assumes the form of a commodity only—as a result of the fact that the entire product has to be transformed into exchange-value and that also all the ingredients necessary for its production enter it as commodities—in other words it wholly becomes a commodity only with the development and on the basis of capitalist production.  Thus the law of value is supposed to be valid for a type of production which produces no commodities (or produces commodities only to a limited extent) and not to be valid for a type of production which is based on the product as a commodity.  The law itself, as well as the commodity as the general form of the product, is abstracted from capitalist production and yet it is precisely in respect of capitalist production that the law is held to be invalid.

The proposition regarding the influence of the separation of “capital and labour” on the determination of value—apart from the tautology that capital cannot determine prices so long as it does not as yet exist—is moreover a quite superficial translation of a fact manifesting itself on the surface of capitalist production.  So long as each person works himself with his own tools and sells his product himself <but in reality, the necessity to sell products on a ||785| social scale never coincides with production carried on with the producer’s own means of production>, his costs comprise the cost of both the tools and the labour he performs.  The cost to the capitalist consists in the capital he advances—in the sum of values he expends on production—not in labour, which he does not perform, and which only costs him <"tsv3p75">what he pays for it.  This is a very good reason for the capitalists to calculate and distribute the (social) surplus-value amongst themselves according to the size of their capital outlay and not according to the quantity of immediate labour which a given capital puts in motion.  But it does not explain where the surplus-value—which has to be distributed and is distributed in this way—comes from.

Torrens adheres to Ricardo insofar as he maintains that the value of a commodity is determined by the quantity of labour, but he declares that [it is] only the “quantity of accumulated labour” expended upon the production of commodities which determines their value.  Here, however, Torrens lands himself in a fine mess.

For example, the value of woollen cloth is determined by the accumulated labour contained in the loom, the wool, etc., and the wages, which constitute the ingredients of its production, accumulated labour, which, in this context, means nothing else but embodied labour, materialised labour-time.  However, once the woollen cloth is ready and production is over, the immediate labour expended on the woollen cloth has likewise been transformed into accumulated or materialised labour.  Then why should the value of the loom and of the wool be determined by the materialised labour (which is nothing but immediate labour embodied in an object, in a result, in a useful thing) they contain, and the value of the woollen cloth not be so determined?  If the woollen cloth in turn becomes a component part of production in say dyeing or tailoring, then it is “accumulated labour”, and the value of the coat is determined by the wages of the workers, their tools and the woollen cloth, the value of which is determined by the “accumulated labour” contained in it.  If I regard a commodity as capital, that means in this context as a condition of production, then its value resolves itself into immediate labour, which is called “accumulated labour” because it exists in a materialised form.  On the other hand, if I regard the same commodity as a commodity, as a product and result of the [production] process, then it is definitely not determined by the labour which is accumulated in it, but by the labour accumulated in its conditions of production.

It is indeed a fine vicious circle to seek to determine the value of a commodity by the value of the capital, since the value of the capital is equal to the value of the commodities of which it is made up.

<"tsv3p76">James Mill is right as against this fellow when he says:

Capital is commodities.  If the value of commodities, then, depends upon the value of capital, it depends upon the value of commodities…” [James Mill, Elements of Political Economy, London, 1821, p. 74].

One thing more is to be noted here.  Since [according to Torrens] the value of a commodity is determined by the value of the capital which produces it, or, in other words, by the quantity of labour, the labour accumulated and embodied in this capital, then only two possibilities ensue.

The commodity contains: first, the value of the fixed capital used up; second, the value of the raw material or the quantity of labour contained in the fixed capital and raw material; third, the quantity of labour which is materialised in the money or in the commodities which function as wages.

Now there are two [possibilities]:

The “accumulated” labour contained in the fixed capital and raw material remains the same after the process of production as it was before.  As far as the third part of the “accumulated labour” advanced is concerned, the worker replaces it by his “immediate labour”, that is, the “immediate labour” added to the raw material, etc., represents just as much accumulated labour in the commodity, in the product, as was contained in the wages.  Or it represents more.  If it represents more, the commodity contains more accumulated labour than the capital advanced did.  Then profit arises precisely out of the surplus of accumulated labour contained in the commodity over that contained in the capital advanced.  And the value of ||786| the commodity is determined, as previously, by the quantity of labour (accumulated plus immediate) contained in it (in the commodity the latter type of labour likewise constitutes accumulated, and no longer immediate, labour.  It is immediate labour in the production process, and accumulated labour in the product).

Or [i.e., in the first case] immediate labour only represents the quantity [of labour] embodied in the wage, is only an equivalent of it.  (If it were less than this, the point to be explained would not be why the capitalist makes a profit but how it comes about that he makes no loss.)  Where does the profit come from in this case?  Where does the surplus-value, i.e., the excess of the value of the commodity over the value of the component parts of production, or over that of the capital outlay, arise?  Not in the production process itself—so that merely its realisation takes <"tsv3p77">place in the process of exchange, or in the circulation process—but in the exchange process, in the circulation process.  We thus come back to Malthus and the crude mercantilist conception of “profit upon expropriation”.  And it is this conception at which Mr. Torrens consistently arrives, although he is, on the other hand, sufficiently inconsistent to explain this payable value not by means of an inexplicable fund dropped down from the skies, namely, a fund which provides not only an equivalent for the commodity, but a surplus over and above this equivalent, and is derived from the means of the purchaser, who is always able to pay for the commodity above its value without selling it above its value—thus reducing the whole thing to thin air.  Torrens, who is not as consistent as Malthus, does not have recourse to such a fiction, but, on the contrary, asserts that “effectual demand”—the sum of values paid for the product—arises from supply alone, and is therefore likewise a commodity; and thus, since the two sides are both buyers and sellers, it is impossible to see how they can mutually cheat one another to the same extent.

“The effectual demand for any commodity is always determined, and under any given rate of profit, is constantly commensurate with the quantity of the ingredients of capital, or of the things required in its production, which consumers may be able and willing to offer in exchange for it” (Torrens, An Essay on the Production of Wealth, London, 1821, p. 344).

“… increased supply is the one and only cause of increased effectual demand” (op. cit., p. 348).

Malthus, who quotes this passage from Torrens, is quite justified in protesting against it(Definitions in Political Economy, London, 1827, p. 59).[c]

But the following passages about production costs, etc., demonstrate that Torrens does indeed arrive at such absurd conclusions.

Market price” (Malthus calls it “purchasing value”) “must always include the customary rate of profit for the time being; [but] natural price, consisting of the cost of production or, in other words, of the capital expended in raising or fabricating commodities, cannot include the rate of profit” ([Torrens], op. cit., p. 51).

“The farmer […] expends one hundred quarters of corn in cultivating his fields, and obtains in return one hundred and twenty quarters.  In this case, twenty quarters, being the excess of produce above expenditure, constitute the farmer’s profit; but it would be absurd to call this excess, or profit, a part of the expenditure”…  Likewise “the master manufacturer […] obtains in return a quantity of finished work.  This finished work must possess a higher exchangeable value than the materials etc.” (loc. cit., pp. 51-53).

“<"tsv3p78">Effectual demand consists in the power and inclination, on the port of consumers to give for commodities, either by immediate or circuitous barter, some greater portion[d] of all the ingredients of capital than their production costs” (op. cit., p. 349).

120 quarters of corn are most certainly more than 100 quarters.  But—if one merely considers the use-value and the process it goes through, that is, in reality, the vegetative or physiological ||787| process, as is the case here—it would be wrong to say, not indeed, with regard to the 20 quarters, but with regard to the elements which go to make them up, that they do not enter into the production process.  If this were so, they could never emerge from it.  In addition to the 100 quarters of corn—the seeds—various chemical ingredients supplied by the manure, salts contained in the soil, water, air, light, are all involved in the process which transforms 100 quarters of corn into 120.  The transformation and absorption of the elements, the ingredients, the conditions—the expenditure of nature, which transforms 100 quarters into 120—takes place in the production process itself and the elements of these 20 quarters enter into this process itself as physiological “expenditure”, the result of which is the transformation of 100 quarters into 120.

Regarded merely from the standpoint of use-value, these 20 quarters are not mere profit.  The inorganic components have been merely assimilated by the organic components and transformed into organic material.  Without the addition of matter—and this is the physiological expenditure—the 100 qrs. would never become 120.  Thus it can in fact be said even from the point of view of mere use-value, that is, regarding corn as corn—what enters into corn in inorganic form, as expenditure, appears in organic form, as the actual result, the 20 quarters, i.e.,  as the surplus of the corn harvested over the corn sown.

But these considerations, in themselves, have as little to do with the question of profit, as if one were to say that lengths of wire which, in the production process, are stretched to a thousand times the length of the metal from which they are fabricated, yield a thousandfold profit since their length has been increased a thousandfold.  In the case of the wire, the length has been increased, in the case of corn, the quantity.  But neither increase in length nor increase in quantity constitutes profit, which is <"tsv3p79">applicable solely to exchange-value, although exchange-value manifests itself in a surplus product.

As far as exchange-value is concerned, there is no need to explain further that the value of 90 quarters of corn can be equal to (or greater than) the value of 100 quarters, that the value of 100 quarters can be greater than that of 120 quarters, and that of 120 quarters greater than that of 500.

Thus, on the basis of one example which has nothing to do with profit, with the surplus in the value of the product over the value of the capital outlay.  Torrens draws conclusions about profit.  And even considered physiologically, as use-value, his example is wrong since, in actual fact, the 20 quarters of corn which form the surplus product already exist in one way or another in the production process, although in a different form.

Finally, Torrens blurts out the brilliant old conception that profit is profit upon expropriation.

[c) Torrens and the Conception of Production Costs]

One of Torrens’s merits is that he has at all raised the controversial question: what are production costs.  Ricardo continually confuses the value of commodities with their production costs (insofar as they are equal to the cost-price) and is consequently astonished that Say, although he believes that prices are determined by production costs, draws different conclusions.  Malthus, like Ricardo, asserts that the price of a commodity is determined by the cost of production, and, like Ricardo, he includes the profit in the production costs.  Nevertheless, he defines value in a different way, not by the quantity of labour contained in the commodity, but by the quantity of labour it can command.

The ambiguities surrounding the concept of production costs arise from the very nature of capitalist production.

Firstly: The cost to the capitalist of the commodity (he produces) is, naturally, what it costs him.  It costs him nothing—that is, he expends no value upon it—apart from the value of the capital advanced.  If he lays out £100 on raw materials, machinery, wages, etc., in order to produce the commodity, it costs him £100, neither more nor less.  Apart from the labour embodied in these advances, apart from the accumulated labour that is contained in the capital expended and determines the value of the commodities expended [in the production process], it costs him no labour.  What the immediate labour costs him is the wages he pays <"tsv3p80">for it.  Apart from these wages, the immediate labour costs him nothing, and apart from immediate labour he advances nothing except the value of the constant capital.

||788| It is in this sense that Torrens understands production costs, and this is the sense in which every capitalist understands them when he calculates his profit, whatever its rate may be.

Production costs are here equated with the outlay of the capitalist, which is equal to the value of the capital advanced, i.e., to the quantity of the labour contained in the advanced commodities.  Every economist, including Ricardo, uses this definition of production costs, whether they are called advances or expenses, etc.  This is what Malthus calls the producing price as opposed to the purchaser’s price.  The transformation of surplus-value into profit corresponds to this definition of expenses.

Secondly: According to the first definition, the production costs are the price which the capitalist pays for the manufacture of the commodity during the process of production, therefore they are what the commodity costs him.  But what the production of a commodity costs the capitalist and what the production of the commodity itself costs, are two entirely different things.  The labour (both materialised and immediate) which the capitalist pays for the production of the commodity and the labour which is necessary in order to produce the commodity are entirely different.  Their difference constitutes the difference between the value advanced and the value earned; between the purchase price of the commodity for the capitalist and its selling price (that is, if it is sold at its value).  If this difference did not exist, then neither money nor commodities would ever be transformed into capital.  The source of profit would disappear together with the surplus-value.  The production costs of the commodity itself consist of the value of the capital consumed in the process of its production, that is, the quantity of materialised labour embodied in the commodity plus the quantity of immediate labour which is expended upon it.  The total amount of “materialised” plus “immediate labour” consumed in it constitutes the production costs of the commodity itself.  The commodity can only be produced by means of the industrial consumption of this quantity of materialised and immediate labour.  This is the pre-condition for its emergence out of the process of production as a product, as a commodity and even as a use-value.  And no matter how profit and wages may vary, these immanent production costs of the commodity remain the same so long as the technological conditions <"tsv3p81">of the real labour process remain the same, or, what amounts to the same thing, as long as there is no variation in the existing development of labour productivity.  In this sense, the production costs of a commodity are equal to its value.  The living labour expended upon the commodity and the living labour paid by the capitalist are two different things.  From the outset, therefore, the production costs of a commodity to the capitalist (his advances) differ from the production costs of the commodity itself, its value.  The excess of its value (that is, what the commodity itself costs) over and above the value of the capital expended (that is, what it costs the capitalist) constitutes the profit which, therefore, results not from selling the commodity above its value, but from selling it above the value of the advances the capitalist made.

The production costs thus defined, the immanent production costs of the commodity, which are equal to its value, i.e., to the total amount of labour-time (both objectified and immediate) required for its production, remain the fundamental condition for its production and remain unchangeable so long as the productive power of labour remains unchanged.

Thirdly.  I have however previously shown that, in each separate branch of production or particular occupation, the capitalist does not by any means sell his commodities—which are also the product of a particular trade, occupation or sphere of production—at the value contained in them, and that, therefore, the amount of profit is not identical with the amount of surplus-value, surplus labour or unpaid labour embodied in the commodities he sells.  On the contrary, he can, on the average, only realise as much surplus-value in the commodity as devolves on it as the product of an aliquot part of the social capital.  If the social capital comes to 1,000 and the capital in a particular ||789| branch of production amounts to 100, and if the total amount of surplus-value (hence of the surplus product in which that surplus-value is embodied) equals 200, that is, 20 per cent, then the capital of 100 in this particular branch of production would sell its commodity for 120, whatever the value of the commodity, whether it is 120, or less or more; whether, therefore, the unpaid labour contained in his commodity forms a fifth of the labour expended upon it or not.

This is the cost-price, and when one speaks of production costs in the proper sense (in the economic, capitalist sense), then the term denotes the value of the capital outlay plus the value of the average profit.

<"tsv3p82">It is clear that, however much the cost-price of an individual commodity may diverge from its value, it is determined by the value of the total product of the social capital.  It is through the equalisation of the profits of the different capitals that they are connected with one another as aliquot parts of the aggregate social capital, and as such aliquot parts they draw dividends out of the common funds of surplus-value (surplus product), or surplus labour, or unpaid labour.  This does not alter in any way the value of the commodity; it does not alter the fact that, whether its cost-price is equal to, or greater or smaller than, its value, it [the commodity] can never be produced without its value being produced, that is to say, without the total amount of materialised and immediate labour required for its production being expended upon it.  This quantity of labour, not only of paid, but of unpaid labour, must be expended on it, and nothing in the general relationship between capital and labour is altered by the fact that in some spheres of production a part of the unpaid labour is appropriated by “brother capitalists” and not by the capitalist who puts the labour in motion in that particular branch of industry.  Further, it is clear that whatever the relation between the value and the cost-price of a commodity, the latter will always change, rise or fall, in accordance with the changes of value, that is to say, the quantity of labour required for the production of the commodity.  It is furthermore clear that part of the profit must always represent surplus-value, unpaid labour, embodied in the commodity itself, because, on the basis of capitalist production, every commodity contains more labour than has been paid by the capitalist putting that labour in motion.  Some part of the profit may consist of labour not worked up in a commodity produced in the particular branch of industry, or resulting from the given sphere of production; but, then, there is some other commodity, resulting from some other sphere of production, whose cost-price falls below its value, or in whose cost-price less unpaid labour is accounted for, paid for, than is contained in it.

It is clear, therefore, that although the cost-prices of most commodities must differ from their values, and hence the “costs of production” of these commodities must differ from the total quantity of labour contained in them, nevertheless, those costs of production and those cost-prices are not only determined by the values of the commodities and confirm the law of value instead of contradicting it, but, moreover, that the very existence <"tsv3p83">of costs of production and cost-prices can be comprehended only on the basis of value and its laws, and becomes a meaningless absurdity without that premise.

At the same time one perceives how economists who, on the one hand, observe the actual phenomena of competition and, on the other hand, do not understand the relationship between the law of value and the law of cost-price, resort to the fiction that capital, not labour, determines the value of commodities or rather that there is no such thing as value.

||790| Profit enters into the production costs of commodities; it is rightly included in the “natural price” of commodities by Adam Smith, because, in conditions of capitalist production, the commodity—in the long run, on the average—is not brought to the market if it does not yield the cost-price, which is equal to the value of the advances plus the average profit.  Or, as Malthus puts it—although he does not understand the origin of profit, its real cause—because the profit, and therefore the cost-price which includes it, is (on the basis of capitalist production) a condition of the supply of the commodity.  To be produced, to be brought to the market, the commodity must at least fetch that market price, that cost-price to the seller, whether its own value be greater or smaller than that cost-price.  It is a matter of indifference to the capitalist whether his commodity contains more or less unpaid labour than other commodities, if into its price enters as much of the general stock of unpaid labour, or the surplus product in which it is fixed, as every other equal quantity of capital will draw from that common stock.  In this respect, the capitalists are “communists”.  In competition, each naturally tries to secure more than the average profit, which is only possible if others secure less.  It is precisely as a result of this struggle that the average profit is established.

A part of the surplus-value realised in profit, i.e., that part which assumes the form of interest on capital laid out (whether borrowed or not), appears to the capitalist as outlay, as production cost which he has as a capitalist, just as profit in general is the immediate aim of capitalist production.  But in interest (especially on borrowed capital), this appears also as the actual precondition of his production.

At the same time, this reveals the significance of the distinction between the phenomena of production and of distribution.  Profit, a phenomenon of distribution, is here simultaneously a phenomenon of production, a condition of production, a necessary constituent <"tsv3p84">part of the process of production.  How absurd it is, therefore, for John Stuart Mill and others to conceive bourgeois forms of production as absolute, but the bourgeois forms of distribution as historically relative, hence transitory.  I shall return to this later.  The form of production is simply the form of distribution seen from a different point of view.  The specific features—and therefore also the specific limitation—which set bounds to bourgeois distribution, enter into bourgeois production itself, as a determining factor, which overlaps and dominates production.  The fact that bourgeois production is compelled by its own immanent laws, on the one hand, to develop the productive forces as if production did not take place on a narrow restricted social foundation, while, on the other hand, it can develop these forces only within these narrow limits, is the deepest and most hidden cause of crises, of the crying contradictions within which bourgeois production is carried on and which, even at a cursory glance, reveal it as only a transitional, historical form.

This is grasped rather crudely but none the less correctly by Sismondi, for example, as a contradiction between production for the sake of production and distribution which makes absolute development of productivity impossible.

<"vol32-p274"> 

2.  James Mill [Futile Attempts to Resolve the Contradictions of the Ricardian System]

||791| James Mill, Elements of Political Economy, London, 1821 (second ed., London, 1824).

Mill was the first to present Ricardo’s theory in systematic form, even though he did it only in rather abstract outlines.  What he tries to achieve is formal, logical consistency.  The disintegration of the Ricardian school “therefore” begins with him.  With the master what is new and significant develops vigorously amid the “manure” of contradictions out of the contradictory phenomena.  The underlying contradictions themselves testify to the richness of the living foundation from which the theory itself developed.  It is different with the disciple.  His raw material is no longer reality, but the new theoretical form in which the master had sublimated it.  It is in part the theoretical disagreement of opponents of the new theory and in part the often paradoxical relationship of this theory to reality which drive him to seek to refute his opponents and explain away reality.  In doing so, he entangles himself in contradictions and with his attempt to solve <"tsv3p85">these he demonstrates the beginning disintegration of the theory which he dogmatically espouses.  On the one hand, Mill wants to present bourgeois production as the absolute form of production and seeks therefore to prove that its real contradictions are only apparent ones.  On the other hand, [he seeks] to present the Ricardian theory as the absolute theoretical form of this mode of production and to disprove the theoretical contradictions, both the ones pointed out by others and the ones he himself cannot help seeing.  Nevertheless in a way Mill advances the Ricardian view beyond the bounds reached by Ricardo.  He supports the same historical interests as Ricardo—those of industrial capital against landed property—and he draws the practical conclusions from the theory—that of rent for example—more ruthlessly, against the institution of landed property which he would like to see more or less directly transformed into State property.  This conclusion and this side of Mill do not concern us here.

[a) Confusion of surplus-value with Profit]

Ricardo’s disciples, just as Ricardo himself, fail to make a distinction between surplus-value and profit.  Ricardo only becomes aware of the problem as a result of the different influence which the variation of wages can exercise on capitals of different organic composition (and he considers different organic composition only with regard to the circulation process).  It does not occur to them that, even if one considers not capitals in different spheres of production but each capital separately, insofar as it does not consist exclusively of variable capital, i.e., of capital laid out in wages only, rate of profit and rate of surplus-value are different things, that therefore profit must be a more developed, specifically modified form of surplus-value.  They perceive the difference only insofar as it concerns equal profits—average rate of profit—for capitals in different spheres of production and differently composed of fixed and circulating ingredients.  In this connection Mill only repeats in a vulgarised form what Ricardo says in Chapter I, “On Value” [Principles of Political Economy].  The only new consideration which occurs to him in relation to this question is this:

Mill remarks that “time as such” (i.e. not labour-time, but simply time) produces nothing, consequently it does not produce “value”.  How does this fit in with the law of value according to which capital, because it requires a longer time for its returns [<"tsv3p86">to the manufacturer], yields, as Ricardo says, the same profit as capital which employs more immediate labour but returns more rapidly?  One perceives that Mill deals here only with a quite individual case which, expressed in general terms, would read as follows.  How does the cost-price, and the average rate of profit which it presupposes ||792 | (and therefore also equal value of commodities containing very unequal quantities of labour), fit in with the fact that profit is nothing but a part of the labour-time contained in the commodity, the part which is appropriated by the capitalist without an equivalent?  On the other hand, in the case of the average rate of profit and cost-price, criteria which are quite extrinsic and external to the determination of value are advanced, for example, that the capitalist whose capital takes longer to make its return because, as in the case of wine, it must remain longer in the production process (or, in other cases, longer in the circulation process) must be compensated for the time in which he cannot use his capital to produce value.  But how can the time in which no value is produced create value?

Mill’s passage concerning “time” reads:

“… time does nothing.[e] How then can it create value?  [f] Time is a mere abstract term.  It is a word, a sound.  And it is the very same logical absurdity, to talk of an abstract unit measuring value, and of time creating it” (Elements of Political Economy, second ed., London, 1824, p. 99).

In reality, what is involved in the grounds for compensation between capitals in different spheres of production is not the production of surplus-value, but its division between different categories of capitalists.  Viewpoints are here advanced which have nothing whatever to do with the determination of value as such.  Everything which compels capital in a particular sphere of production to renounce conditions which would produce a greater amount of surplus-value in other spheres, is regarded here as grounds for compensation.  Thus, if more fixed and less circulating capital is employed, if more constant than variable capital is employed, if it must remain longer in the circulation process, and finally, if it must remain longer in the production process without being subjected to the labour process—a thing which always happens when breaks of a technological character occur in the production process in order to expose the developing product to the working of natural forces, for example, wine in the <"tsv3p87">cellar.  Compensation ensues in all these cases and the last mentioned is the one which Mill seizes on, thus tackling the difficulty in a very circumscribed and isolated way.  A part of the surplus-value produced in other spheres is transferred to the capitals more unfavourably placed with regard to the direct exploitation of labour, simply in accordance with their size (competition brings about this equalisation so that each separate capital appears only as an aliquot part of social capital).  The phenomenon is very simple as soon as the relationship of surplus-value and profit as well as the equalisation of profit in a general rate of profit is understood.  If, however, it is to be explained directly from the law of value without any intermediate link, that is, if the profit which a particular capital yields in a particular branch of production is to be explained on the basis of the surplus-value contained in the commodities it produces, in other words on the basis of the unpaid labour (consequently also on the basis of the labour directly expended in the production of the commodities), this is a much more difficult problem to solve than that of squaring the circle, which can be solved algebraically.  It is simply an attempt to present that which does not exist as in fact existing.  But it is in this direct form that Mill seeks to solve the problem.  Thus no solution of the matter is possible here, only a sophistic explaining away of the difficulty, that is, only scholasticism.  Mill begins this process.  In the case of an unscrupulous blockhead like McCulloch, this manner assumes a swaggering shamelessness.

Mill’s solution cannot be better summed up than it is in the words of Bailey:

“The author[g] […] has made a curious attempt to resolve the effects of time into expenditure of labour.  ‘If,’ says he,” (p. 97 of the Elements, second ed., 1824) “‘the wine which is put in the cellar is increased in value one-tenth by being kept a year, one-tenth more of labour may be correctly considered as having been expended upon it.’… a fact can be correctly considered as having taken ||793| place only when it really has taken place.  In the instance adduced, no human being, by the terms of the supposition, has approached the wine, or spent upon it a moment or a single motion of his muscles” ([Samuel Bailey,] A Critical Dissertation on the Nature, Measures, and Causes of Value etc., London, 1825, pp. 219-20).

Here the contradiction between the general law and further developments in the concrete circumstances is to be resolved not by the discovery of the connecting links but by directly subordinating and immediately adapting the concrete to the abstract.

<"tsv3p88">This moreover is to be brought about by a verbal fiction, by changing the correct names of things.  (These are indeed “verbal disputes”, they are “verbal”, however, because real contradictions which are not resolved in a real way, are to be solved by phrases.)  When we come to deal with McCulloch, it will be seen that this manner, which appears in Mill only in embryo, did more to undermine the whole foundation of the Ricardian theory than all the attacks of its opponents.

Mill resorts to this type of argument only when he is quite unable to find any other expedient.  But as a rule his method is quite different.  Where the economic relation—and therefore also the categories expressing it—includes contradictions, opposites, and likewise the unity of the opposites, he emphasises the aspect of the unity of the contradictions and denies the contradictions.  He transforms the unity of opposites into the direct identity of opposites.

For example, a commodity conceals the contradiction of use-value and exchange-value.  This contradiction develops further, presents itself and manifests itself in the duplication of the commodity into commodity and money.  This duplication appears as a process in the metamorphosis of commodities in which selling and buying are different aspects of a single process and each act of this process simultaneously includes its opposite.  In the first part of this work, I mentioned that Mill disposes of the contradiction by concentrating only on the unity of buying and selling; consequently he transforms circulation into barter, then, however, smuggles categories borrowed from circulation into [his description of] barter.  See also what I wrote there about Mill’s theory of money, in which he employs similar methods.

In James Mill we find the unsatisfactory divisions—“Production”, “Distribution”, “Interchange”, “Consumption”.

[b) Mill’s Vain Efforts to Bring the Exchange Between Capital and Labour into Harmony with the Law of Value]

Wages:

“Instead, however, of waiting till the commodity is produced, and […] the value of it is realised, it has been found to suit much better the convenience of the labourers to receive their share in advance.  The shape under which it has been found most convenient for all parties that they should receive it, is that of wages.  When the share of the commodity which belongs to the labourer has been all received in the shape of wages, the commodity itself belongs to the capitalist, he having, in reality, bought the share of the <"tsv3p89">labourer and paid for it in advance” ( [James Mill, Elements of Political Economy, second ed., 1824, p. 41] Elémens d’économie politique, traduit de l’anglais par J. T. Parisot, Paris, 1823, pp. 33-34).[h]

It is highly characteristic of Mill that, just as money for him is an expedient invented for convenience’ sake, capitalist relations are likewise invented for the same reason.  These specific social relations of production are invented for “convenience’” sake.  Commodities and money are transformed into capital because the worker has ceased to engage in exchange as a commodity producer and commodity owner; instead of selling commodities he is compelled to sell his labour itself (to sell directly his labour-power) as a commodity to the owner of the objective conditions of labour.  This separation is the prerequisite for the relationship of capital and wage-labour in the same way as it is the prerequisite for the transformation of money (or of the commodities by which it is represented) into capital.  Mill presupposes the separation, the division; he presupposes the relationship of capitalist and wage-worker, in order to present as a matter of convenience the situation in which the worker sells no product, no commodity, but his share of the product (in the production of which he has no say whatsoever and which proceeds independently of him) before he has produced it.  ||794| Or, more precisely, the worker’s share of the product is paid for—transformed into money—by the capitalist before the capitalist has disposed of, or realised, the product in which the worker has a share.

This view is aimed at circumventing the specific difficulty, along with the specific form of the relationship.  Namely, the difficulty of the Ricardian system according to which the worker sells his labour directly (not his labour-power).  The [difficulty can be expressed as follows]: the value of a commodity is determined by the labour-time required for its production; how does it happen that this law of value does not hold good in the greatest of all exchanges, which forms the foundation of capitalist production, the exchange between capitalist and labourer?  Why is the quantity of materialised labour received by the worker as wages not equal to the quantity of immediate labour which he gives in exchange for his wages?  To shift this difficulty, Mill transforms the labourer into a commodity owner who sells the <"tsv3p90">capitalist his product, his commodity—since his share of the product, of the commodity, is his product, his commodity, in other words, a value produced by him in the form of a particular commodity.  He resolves the difficulty by transforming the transaction between capitalist and labourer, which includes the contradiction between materialised and immediate labour, into a common transaction between commodity owners, owners of materialised labour.

Although by resorting to this artifice Mill has indeed made it impossible for himself to grasp the specific nature, the specific features, of the proceedings which take place between capitalist and wage-worker, he has not reduced the difficulty in any way, but has increased it, because the peculiarity of the result is now no longer comprehensible in terms of the peculiarity of the commodity which the worker sells (and the specific feature of this commodity is that its use-value is itself a factor of exchange-value, its use therefore creates a greater exchange-value than it itself contained).

According to Mill, the worker is a seller of commodities like any other.  For example, he produces 6 yards of linen.  Of these 6, 2 yards are assumed to be equal to the value of the labour which he has added.  He thus sells 2 yards of linen to the capitalist.  Why then should he not receive the full value of the 2 yards, like any other seller of 2 yards of linen, since he is now a seller of linen like any other?  The contradiction with the law of value now expresses itself much more crassly than before.  He does not sell a particular commodity differing from all other commodities.  He sells labour embodied in a product, that is, a commodity which as such is not specifically different from any other commodity.  If now the price of a yard [of linen]—that is, the quantity of money containing the same amount of labour-time as the yard [of linen]—is 2 shillings, why then does the worker receive 1 shilling instead of 2?  But if the worker received 2 shillings, the capitalist would not secure any surplus-value and the whole Ricardian system would collapse.  We would have to return to profit upon expropriation.  The 6 yards would cost the capitalist 12 shillings, i.e., their value, but he would sell them for 13 shillings.

Or linen, and any other commodity, is sold at its value when the capitalist sells it, but below its value when the worker sells it.  Thus the law of value would be destroyed by the transaction between worker and capitalist.  And it is precisely in order to avoid this that Mill resorts to his fictitious argument.  He wants to transform <"tsv3p91">the relationship between worker and capitalist into the ordinary one between sellers and buyers of commodities.  But why should not the ordinary law of value of commodities apply to this transaction?  [It may be said however that] the worker is paid “in advance”.  Consequently this is not after all the ordinary relationship of buying and selling commodities.  What does this “payment in advance” mean in this context?  The worker who, for example, is paid weekly, “advances” his labour and produces the share of the weekly product which belongs to him—his weekly labour embodied in a product—(both according to Mill’s assumption and in practice) before he receives “payment” from the capitalist.  The capitalist “advances” raw materials and machines, the worker the “labour”, and as soon as the wages are paid at the end of the week, he sells a commodity, his commodity, his share of the total commodity, to the capitalist.  But, Mill will say, the capitalist pays the 2 yards ||795| of linen due to the worker, i.e., turns them into cash, transforms them into money, before he himself sells the 6 yards and transforms them into money.  But what if the capitalist is working on orders, if he sells the goods before he produces them?  Or to express it more generally, what difference does it make to the worker—in this case the seller of 2 yards of linen—if the capitalist buys these 2 yards from him in order to sell them again, and not to consume them?  Of what concern are the buyer’s motives to the seller?  And how can motives, moreover, modify the law of value?  To be consistent, each seller would have to dispose of his commodities below their value, for he is disposing of his products to the buyer in the form of a use-value, whereas the buyer hands over value in the form of money, the cash form of the product.  In this case, the linen manufacturer would also have to underpay the yarn merchant and the machine manufacturer and the colliery owner and so on.  For they sell him commodities which he only intends to transform into money, whereas he pays them “in advance” the value of the component parts entering into his commodity not only before the commodity is sold, but before it is even produced.  The worker provides him with linen, a commodity in a marketable form, in contrast to other sellers whose commodities, machinery, raw materials, etc., have to go through a process before they acquire a saleable form.  It is a pretty kettle of fish for such an inveterate Ricardian as Mill, according to whom purchase and sale, supply and demand are identical terms, and money a mere formality, if the transformation of the commodity into money—and nothing <"tsv3p92">else takes place when the 2 yards of linen are sold to the capitalist—includes the fact that the seller has to sell the commodity below its value, and the buyer, with his money, has to buy it above its value.

[Mill’s argument] therefore amounts to the absurdity that, in this transaction, the buyer buys the commodity in order to resell it at a profit and that, consequently, the seller must sell the commodity below its value—and with this the whole theory of value falls to the ground.  This second attempt by Mill to resolve a Ricardian contradiction, in fact destroys the whole basis of the system, especially its great merit that it defines the relationship between capital and wage-labour as a direct exchange between hoarded and immediate labour, that is, that it grasps its specific features.

In order to extricate himself, Mill would have to go further and to say that it is not merely a question of the simple transaction of the purchase and sale of commodities; that, on the contrary, insofar as it involves payment or the turning into money of the worker’s product, which is equal to his share of the total product, the relationship between worker and capitalist is similar to that prevailing between the lending capitalist or discounting capitalist (the moneyed capitalist) and the industrial capitalist.  It would be a pretty state of affairs to presuppose interest-bearing capital—a special form of capital—in order to deduce the general form of capital, capital which produces profit; that is, to present a derived form of surplus-value (which already presupposes capital) as the cause of the appearance of surplus-value.  In that case, moreover, Mill would have to be consistent and in place of all the definite laws concerning wages and the rate of wages elaborated by Ricardo, he would have to derive them from the rate of interest, and if he did that it would indeed be impossible to explain what determines the rate of interest, since, according to the Ricardians and all other economists worth naming, the rate of interest is determined by the rate of profit.

The proposition concerning the “share” of the worker in his own product is in fact based on this: If one considers not simply the isolated transaction between capitalist and worker, but the exchange which takes place between, both in the course of reproduction, and if one considers the real content of this process instead of the form in which it appears, then it is in fact evident that what the capitalist pays the worker (as well as the part of capital which confronts the worker as constant capital) is nothing <"tsv3p93">but a part of the worker’s product itself and, indeed, a part which does not have to be transformed into money, but which has already been sold, has already been transformed into money, since wages are paid in money, not in kind.  Under slavery, etc., the false appearance brought about by the previous transformation of the product into money—insofar as it is expended on wages—does not arise; it is therefore obvious that what the slave receives as wages is, in fact, nothing that the slave-owner “advances” him, but simply the portion of the realised labour of the slave that returns to him in the form of means of subsistence.  The same applies to the capitalist.  He “advances” something only in appearance.  Since he pays for the work only after it has been done, he advances or rather ||796| pays the worker as wages a part of the product produced by the worker and already transformed into money.  A part of the worker’s product which the capitalist appropriates, which is deducted beforehand, returns to the worker in the form of wages—as an advance on the new product, if you like.

It is quite unworthy of Mill to cling to this appearance of the transaction in order to explain the transaction itself (this sort of thing might suit McCulloch, Say or Bastiat).  The capitalist can advance the worker nothing except what he has taken previously from the worker, i.e., what has been advanced to him by other people’s labour.  Malthus himself says that what the capitalist advances consists not “of cloth” and “other commodities”, but “of labour”, that is, precisely of that which he himself does not perform.  He advances the worker’s own labour to the worker.

However, the whole paraphrase is of no use to Mill, for it does not help him to avoid resolving the question: how can the exchange between hoarded and immediate labour (and this is the way the exchange process between capital and labour is perceived by Ricardo and by Mill and others after him) correspond to the law of value, which it contradicts directly?  One can see from the following passage that it is of no help to Mill:

What determines the share of the labourer, or the portion in which the commodity, or commodity’s worth, is divided between him and the capitalist.  Whatever the share of the labourer, such is the rate of wages…  It is very evident, that the share of the two parties is the subject of a bargain between them [&hellip]  All bargains, when left in freedom, are determined by competition, and the terms alter according to the state of supply and demand” ([Mill, Elements, pp. 41-42; Parisot,] pp. 34-35).

The worker is paid for his “share” of the product.  This is said in order to transform him into an ordinary seller of a commodity (<"tsv3p94">a product) vis-à-vis the capitalist and to eliminate the specific feature of this relationship.  [According to Mill] the worker’s share of the product is his product, that is, the share of the product in which his newly applied labour is realised.  But this is not the case.  On the contrary, we now ask which is his “share” of the product, that is, which is his product?  For the part of the product which belongs to him is his product, which he sells.  We are now told that his product and his product are two quite different things.  We must establish, first of all, what his product (in other words, his share of the product, that is, the part of the product that belongs to him) is.  His product is thus a mere phrase, since the quantity of value which he receives from the capitalist is not determined by his own production.  Mill has thus merely removed the difficulty one step.  He has got no farther than he was at the beginning.

There is a quid pro quo here.  Supposing that the exchange between capital and wage-labour is a continuous activity—as it is if one does not isolate and consider one individual act or element of capitalist production—then the worker receives a part of the value of his product which he has replaced, plus that part of the value which he has given the capitalist for nothing.  This is repeated continuously.  Thus he receives in fact continuously a portion of the value of his own product, a part of, or a share in, the value he has produced.  Whether his wages are high or low is not determined by his share of the product but, on the contrary, his share of the product is determined by the amount of his wages.  He actually receives a share of the value of the product.  But the share he receives is determined by the value of labour, not conversely, the value of labour-by his share in the product.  The value of labour, that is, the labour-time required by the worker for his own reproduction, is a definite magnitude; it is determined by the sale of his labour power to the capitalist.  This virtually determines his share of the product as well.  It does not happen the other way round, that his share of the product is determined first, and as a result, the amount or value of his wages.  This is precisely one of Ricardo’s most important and most emphasised propositions, for otherwise the price of labour would determine the prices of the commodities it produces, whereas, according to Ricardo, the price of labour determines nothing but the rate of profit.

And how does Mill determine the “share” of the product which the worker receives?  By demand and supply, competition between workers and capitalists.  What Mill says applies to all commodities:

“…<"tsv3p95">It is very evident, that the share” (read: in the value of commodities) “of the two Parties” (seller and buyer) “is the subject of a bargain between ||797| them […]  All bargains, when left in freedom, are determined by competition, and the terms alter according to the state of supply and demand” [Mill, Elements, pp. 41-42; Parisot, pp. 34-35].

Here we have the gist of the matter.  [This is said by] Mill who, as a zealous Ricardian, proves that although demand and supply can, to be sure, determine the vacillations of the market price either above or below the value of the commodity, they cannot determine that value itself, that these are meaningless words when applied to the determination of value, for the determination of demand and supply presupposes the determination of value.  In order to determine the value of labour, i.e., the value of a commodity, Mill now resorts to something for which Say had already reproached Ricardo: determination by demand and supply.

But even more.

Mill does not say which of the two parties represents supply and which demand—which is of no importance to the matter here.  Still, since the capitalist offers money and the worker offers something for the money, we will assume that demand is on the side of the capitalist and supply on that of the worker.  But what then does the worker “sell”?  What does he supply?  His “share” of the product which does not [yet] exist?  But it is just his share in the future product which has to be determined by competition between him and the capitalist, by the “demand and supply” relationship.  One of the sides of this relationship—supply—cannot be something which is itself the result of the struggle between demand and supply.  What then does the worker offer for sale?  His labour? If this is so, then Mill is back again at the original difficulty he sought to evade, the exchange between hoarded and immediate labour.  And when he says that what is happening here is not the exchange of equivalents, or that the value of labour the commodity sold, is not measured by “the labour-time” itself, but by competition, by demand and supply, then he admits that Ricardo’s theory breaks down, that his opponents are right, that the determination of the value of commodities by labour-time is false, because the value of the most important commodity, labour itself, contradicts this law of value of commodities.  As we shall see later, Wakefield says this quite explicitly.

Mill can turn and twist as he will, he cannot extricate himself from the dilemma.  At best, to use his own mode of expression, competition causes the workers to offer a definite quantity of labour <"tsv3p96">for a price which, according to the relation of demand and supply, is equal to a larger or smaller part of the product which they will produce with this quantity of labour.  That this price, this sum of money, which they receive in this way, is equal to a larger or smaller part of the value of the product to be manufactured, does not, however, as a matter of course, in any way prevent a definite amount of living labour (immediate labour) from being exchanged for a greater or lesser amount of money (accumulated labour, existing moreover in the form of exchange-value).  It does not therefore prevent the exchange of unequal quantities of labour, that is, of less hoarded labour for more immediate labour.  This was precisely the phenomenon that Mill had to explain and he wished to clear the problem up without violating the law of value.  The phenomenon is not changed in the slightest, much less explained, by declaring that the proportion in which the worker exchanges his immediate labour for money is expressed at the end of the production process in the ratio of the value paid him to the value of the product he has produced.  The original unequal exchange between capital and labour thus only appears in a different form.

How Mill boggles at direct exchange between labour and capital—which Ricardo takes as his point of departure without any embarrassment at all—is also shown by the way he proceeds.  Thus he says:

||798| “Let us begin by supposing that there is a certain number of capitalists […] that there is also a certain number of labourers; and that the proportion, in which the commodities produced ore divided between them, has fixed itself at some particular point.”

“Let us next suppose that the labourers have increased in number […] without any increase in the quantity of capital…  To prevent their being left out of employment” the additional labourers “have but one resource; they must endeavour to supplant those who have forestalled the employment; that is, they must offer to work for a smaller reward.  Wages, therefore, decline.  If we suppose … that the quantity of capital has increased, while the number of labourers remains the same, the effect will be reversed…  if the ratio which capital and population bear to one another remains the same, wages will remain the same” ([Mill, Elements, pp. 42-44 passim; Parisot,] p. 35 et seq. passim).

What has to be determined is “the proportion in which they” (capitalists and workers) “divide the product”.  In order to establish this by competition, Mill assumes that this proportion “has fixed itself at some particular point”.  In order to establish the “share” of the worker by means of competition, he assumes <"tsv3p97">that it is determined before competition “at some particular point”.  Moreover, in order to demonstrate how competition alters the division of the product which is determined “at some particular point”, he assumes that workers “offer to work for a smaller reward” when their number grows more rapidly than the quantity of capital.  Thus he says here outright that what the workers supply consists of “labour” and that they offer this labour for a “reward”, i.e., money, a definite quantity of “hoarded labour”.  In order to avoid direct exchange between labour and capital, direct sale of labour, he has recourse to the theory of the “division of the product”.  And in order to explain the proportion in which the product is divided, he presupposes direct sale of labour for money, so that this original exchange between capital and labour is later expressed in the proportion of [the share] the worker receives of his product, and not that the original exchange is determined by his share of the product.  And finally, if the number of workers and the amount of capital remain the same, then the “wage rate” will remain the same.  But what is the wage rate when demand and supply balance?  That is the point which has to be explained.  It is not explained by declaring that this rate is altered when the equilibrium between demand and supply is upset.  Mill’s tautological circumlocutions only demonstrate that he feels there is a snag here in the Ricardian theory which he can only overcome by abandoning the theory altogether.

***

Against Malthus, Torrens, and others, against the determination of the value of commodities by the value of capital, Mill remarks correctly:

“Capital is commodities.  If the value of commodities, then, depends upon the value of capital, it depends upon the value of commodities; the value of commodities depends upon itself” ([James Mill,] Elements of Political Economy, London, 1821, p. 74).

***

<Mill does not gloss over the contradiction between capital and labour.  The rate of profit must be high so that the social class which is free from immediate labour may be important; and for that purpose wages must be relatively low.  It is necessary that the mass of the labourers should not be masters of their <"tsv3p98">own time and slaves of their own needs, so that human (social) capacities can develop freely in the classes for which the working class serves merely as a basis.  The working class represents lack of development in order that other classes can represent human development.  This in fact is the contradiction in which bourgeois ||799| society develops, as has every hitherto existing society, and this is declared to be a necessary law, i.e., the existing state of affairs is declared to be absolutely reasonable.

“All the blessings which flow from that grand and distinguishing attribute of our nature, its progressiveness, the power of advancing continually from one degree of knowledge, one degree of command over the means of happiness, to another, seem, in a great measure, to depend upon the existence of a class of men which have their time at their commend; that is, who are rich enough to be freed from all solicitude with respect to the means of living in a certain state of enjoyment.  It is by this class of men that knowledge is cultivated and enlarged; it is also by this class that it is diffused; it is this class of men whose children receive the best education, and are prepared for all the higher and more delicate functions of society, as legislators, judges, administrators, teachers, inventors in all the arts, and superintendents in all the more important works, by which the dominion of the human species is extended over the powers of nature…  to enable a considerable proportion of the community to enjoy the advantages of leisure, the return to capital must evidently be large” ([James Mill, Elements, pp. 64-65, 65-66; Parisot,] pp. 65, 67).>

***

In addition to the above.

Mill, as a Ricardian, defines labour and capital simply as different forms of labour.

“… Labour and Capital […] the one, immediate labour, … the other, hoarded labour” ([James Mill, Elements,] first Engl. ed., London, 1821, p. 75).

In another passage he says:

“… of these two species of labour, two things are to be observed … they are not always paid according to the same rate” ([James Mill, Elements, p.100;] Parisot, p.100).

Here he comes to the point.  Since what pays for immediate labour is always hoarded labour, capital, the fact that it is not paid at the same rate means nothing more than that more immediate labour is exchanged for less hoarded labour, and that this is “always” the case, since otherwise hoarded labour would not be exchanged as “capital” for immediate labour and would not <"tsv3p99">only fail to yield the very high interest desired by Mill, but would yield none at all.  The passage quoted thus contains the admission (since Mill along with Ricardo regards the exchange between capital and labour as a direct exchange of hoarded and immediate labour), that they are exchanged in unequal proportions, and that in respect of them the law of value—according to which equal quantities of labour are exchanged for one another—breaks down.

[c) Mill’s Lack of Understanding of the Regulating Role of Industrial Profit]

Mill advances as a basic law what Ricardo actually assumes in order to develop his theory of rent.

“All other profits … must sink to the level of agricultural profits” ( [Elements,] second ed., London, 1824, p. 78).

This is fundamentally wrong, since capitalist production develops first of all in industry, not in agriculture, and only embraces the latter by degrees, so that it is only as a result of the advance of capitalist production that agricultural profits become equalised to industrial profits and only as a result of this equalisation do the former influence the latter.  Hence it is in the first place wrong historically.  But secondly, once this equalisation is an accomplished fact—that is, presupposing a level of development of agriculture in which capital, in accordance with the rate of profit, flows from industry to agriculture and vice versa—it is equally wrong to state that from this point on agricultural profits become the regulating force, instead of the influence being reciprocal.  Incidentally, in order to develop the concept of rent, Ricardo himself assumes the opposite.  The price of corn rises; as a result agricultural profits do not fall (as long as there are no new supplies either from inferior land or from additional, less productive investments of capital)—for the rise in the price of corn more than compensates the farmer for the loss he incurs by the rise in wages following on the rise in the price of corn—but profits fail in industry, where no such compensation or over-compensation takes place.  Consequently the industrial profit rate falls and capital which yields this lower rate of profit can therefore be employed on inferior lands.  This would not be the case if the old profit rate prevailed.  Only because the decline of industrial profits thus reacts on the agricultural profit yielded by the worse land, does agricultural profit generally fall, ||800| <"tsv3p100">and a part of it is detached in the form of rent from the profit the better land yields.  This is the way Ricardo describes the process, according to which, therefore, industrial profit regulates profit in agriculture.

If agricultural profits were to rise again as a result of improvements in agriculture, then industrial profits would also rise.  But this does not by any means exclude the fact that—as originally the decline in industrial profit causes a decline in agricultural profit—a rise in industrial profit may bring about a rise in agricultural profit.  This is always the case when industrial profit rises independently of the price of corn and of other agricultural necessaries which enter into the wages of the workers, that is, when it rises as a result of the fall in the value of commodities which constitute constant capital, etc.  Rent moreover cannot possibly be explained if industrial profit does not regulate agricultural profit.  The average rate of profit in industry is established as a result of equalisation of the profits of the different capitals and the consequent transformation of the values into cost-prices.  These cost-prices—the value of the capital advances plus average profit—are the prerequisite received by agriculture from industry, since the equalisation of profits cannot take place in agriculture owing to landownership.  If then the value of agricultural produce is higher than the cost-price determined by the industrial average profit would be, the excess of this value over the cost-price constitutes the absolute rent.  But in order that this excess of value over cost-price can be measured, the cost-price must be the primary factor; it must therefore be imposed on agriculture as a law by industry.

***

A passage from Mill must be noted:

“That which is productively consumed is always capital.  This is a property of productive consumption which deserves to be particularly marked…  Whatever is consumed productively becomes capital” ([James Mill, Elements, p. 217;] Parisot, pp. 241-42).

[d)] Demand, supply, Over-Production

“A demand means, the will to purchase, and the means of purchasing…  The equivalent” (means of purchasing) “which a man brings is the instrument of demand.  The extent of his demand is measured by the extent of his equivalent.  The demand and the equivalent are convertible terms, <"tsv3p101">and one may be substituted for the other…  His” (a man’s) “will, therefore, to purchase, and his means of purchasing, in other words his demand, is exactly equal to the amount of what he has produced and does not mean to consume” ([James Mill, Elements, pp. 224-25;] Parisot, pp. 252-53).

One sees here how the direct identity of demand and supply (hence the impossibility of a general glut) is proved.  The product constitutes demand and the extent of this demand, moreover, is measured by the value of the product.  The same abstract “reasoning” with which Mill demonstrates that buying and selling are but identical and do not differ; the same tautological phrases with which he shows that prices depend on the amount of money in circulation; the same methods used to prove that supply and demand (which are only more developed forms of buyer and seller) must balance each other.  The logic is always the same.  If a relationship includes opposites, it comprises not only opposites but also the unity of opposites.  It is therefore a unity without opposites.  This is Mill’s logic, by which he eliminates the “contradictions”.

Let us begin with supply.  What I supply is commodities, a unity of use-value and exchange-value, for example, a definite quantity of iron worth £3 (which is equal to a definite quantity of labour-time).  According to the assumption I am a manufacturer of iron.  I supply a use-value—iron—and I supply a value, namely, the value expressed in the price of the iron, that is, in £3.  But there is the following little difference.  A definite quantity of iron is in reality placed on the market by me.  The value of the iron, on the other hand, exists only as its price which must first be realised by the buyer of the iron, who represents, as far as I am concerned, the demand for iron.  The demand of the seller of iron consists in the demand for the exchange-value of the iron, which, although it is embodied in the iron, is not realised.  It is possible for the same exchange-value to be represented by very different quantities of iron.  The supply of use-value and the supply of value to be realised are thus by no means identical, since quite different quantities of use-value ||801| can represent the same quantity of exchange-value.

The same value—£3—can be represented by one, three or ten tons of iron.  The quantity of iron (use-value) which I supply and the quantity of value I supply, are by no means proportionate to one another, since the latter quantity can remain unchanged no matter how much the former changes.  No matter how large or small the quantity of iron I supply may be, it is assumed that <"tsv3p102">I always want to realise the value of the iron, which is independent of the actual quantity of iron and in general of its existence as a use-value.  The value supplied (but not yet realised) and the quantity of iron which is realised, do not correspond to each other.  No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market.  For the buyer, my commodity exists, above all, as use-value.  He buys it as such.  But what he needs is a definite quantity of iron.  His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.

It is true that the man who buys has in his possession merely the converted form of a commodity—money—i.e., the commodity in the form of exchange-value, and he can act as a buyer only because he or others have earlier acted as sellers of commodities which now exist in the form of money.  This, however, is no reason why he should reconvert his money into my commodity or why his need for my commodity should be determined by the quantity of it that I have produced.  Insofar as he wants to buy my commodity, he may want either a smaller quantity than I supply, or the entire quantity, but below its value.  His demand does not have to correspond to my supply any more than the quantity I supply and the value at which I supply it are identical.

However, the inquiry into demand and supply does not belong here.

Insofar as I supply iron, I do not demand iron, but money.  I supply a particular use-value and demand its value.  My supply and demand are therefore as different as use-value and exchange-value.  Insofar as I supply a value in the iron itself, I demand the realisation of this value.  My supply and demand are thus as different as something conceptual is from something real.  Further, the quantity I supply and its value stand in no proportion to each other.  The demand for the quantity of use-value I supply is however measured not by the value I wish to realise, but by the quantity which the buyer requires at a definite price.

Yet another passage from Mill:

“But it is evident, that each man contributes to the general supply the whole of what he has produced and does not mean to consume.  In whatever shape any part of the annual produce has come into his hands, if he proposes to consume no part of it himself, he wishes to dispose of the whole; and the whole, therefore, becomes matter of supply: if he consumes a part, he wishes to dispose of all the rest, and all the rest becomes matter of supply” ([James Mill, Elements, p. 225;] Parisot, p. 253).

<"tsv3p103">In other words, this means nothing else but that all commodities placed on the market constitute supply.

“As every man’s demand, therefore, is equal to that part of the annual produce, or of the property generally, which he has to dispose of”

<Stop!  His demand is equal to the value (when it is realised) of the portion of products which he wants to dispose of.  What he wants to dispose of is a certain quantity of use-value; what he wishes to have is the value of this use-value.  Both things are anything but identical>

“and each man’s supply is exactly the same thing”

<by no means; his demand does not consist in what he wishes to dispose of, i.e., the product, but in the demand for the value of this product; on the other hand, his supply really consists of this product, whereas the value is only conceptually supplied>

“the supply and demand of every individual are of necessity equal” ([James Mill, Elements, pp. 225-26;] Parisot, pp. 253-54).

(That is, the value of the commodity supplied by him and the value which he asks for it but does not possess are equal; provided he sells the commodity at its value, the value supplied (in the form of commodity) and the value received (in the form of money) are equal.  But it does not follow that, because he wants to sell the commodity at its value, he actually does so.  A quantity of commodities is supplied by him, and is on the market.  He tries to get the value for it.)

“Demand and supply are terms ||802| related in a peculiar manner.  A commodity which is supplied, is always, at the same time, a commodity which is the instrument of demand.  A commodity which is the instrument of demand, is always, at the same time, a commodity added to the stock of supply.  Every commodity is always at one and the same time matter of demand and matter of supply.  Of two men who perform an exchange, the one does not come with only a supply, the other with only a demand; each of them comes with both a demand and a supply.  The supply which he brings is the instrument of his demand; and his demand and supply are of course exactly equal to one another.”

“But if the demand and supply of every individual are always equal to one another, and demand and supply of all the individuals in the nation, taken aggregately, must be equal.  Whatever, therefore, be the amount of the annual produce, it never can exceed the amount of the annual demand.  The whole of the annual produce is divided into a number of shares equal to that of the people to whom it is distributed.  The whole of the demand is equal to as much of the whole of the shares as the owners do not keep for <"tsv3p104">their own consumption.  But the whole of the shares is equal to the whole of the produce” ([James Mil], Elements, pp. 226-27;] Parisot, pp. 254-55).

Once Mill has assumed that supply and demand are equal for each individual, then the whole long-winded excursus to the effect that supply and demand are also equal for all individuals, is quite superfluous.

***

How Mill was regarded by contemporary Ricardians can be seen, for instance, from the following:

“There is thus at least one case” <writes Prévost with regard to Mill’s definition of the value of labour> “in which the price” (i.e., the price of labour) “is permanently determined by supply and demand relations” (Prévost, Réflexions sur le systéme de Ricardo [p. 187] appended to Discours sur l’économie politique.  Par McCulloch, traduit par G-me Prévost, Genève-Paris, 1825).

In the work cited, McCulloch says that Mill’s object is:

“… to give a strictly logical deduction of the principles of Political Economy….  Mr. Mill touches on almost every topic of discussion: He has disentangled and simplified the most complex and difficult questions; has placed the various principles which compose the science in their natural order” (op. cit., p. 88[i]).

One can conclude from his logic that he takes over the quite illogical Ricardian structure, which we analysed earlier, and naïvely regards it on the whole as a “natural order”.

[e)] Prévost [Rejection of some of the Conclusions of Ricardo and James Mill.  Attempts to Prove That a Constant Decrease of Profit Is Not Inevitable]

As far as the above-mentioned Prévost is concerned, who made Mill’s exposition of the Ricardian system the basis of his Réflexions, a number of his objections are founded on sheer, callow misunderstanding of Ricardo.

But the following remark about rent is noteworthy:

“One may entertain a doubt about the influence of inferior land on the determination of prices, if one bears in mind, as one should, its relative area” (Prévost, op. cit., p. 177).

Prévost cites the following from Mill, which is also important for my argument, since Mill himself here thinks of one example <"tsv3p105">where differential rent arises because the new demand, the additional demand, is supplied by a better, not a worse soil, consequently, the ascending line.

Mr. Mill uses this comparison: Suppose that all the land cultivated in the country were of one uniform quality, and yielded the same return to every portion of the capital employed upon it, with the exception of one acre: that acre, we shall suppose, yields six times as much as any other acre (Mill, Elements, second ed., p. 71).  It is certain—as Mr. Mill demonstrates—that the farmer who rents this last acre, cannot increase his rent” (that is, cannot make a higher profit than the other farmers; it is very badly expressed) “and that five-sixths of the product will go to the landowner.”

(Thus there is here differential rent without the lowering of the rate of profit and without any increase in the price of agricultural products) (this must happen all the more frequently, since the situation ||803| must improve continuously with the industrial development of the country, the growth of its means of communication and the increase in population, irrespective of the natural fertility, and the relatively better location has the same effect as [greater] natural fertility.)

“But had the ingenious author thought of making a similar supposition in the opposite case, he would have realised that the result would be different.  Let us suppose that all the land was of equal quality with the exception of one acre of inferior land.  The profit on the capital on this single acre amounted to one-sixth of the profit yielded by every other acre.  Does he believe that the profit on several million acres would be reduced to one-sixth of their accustomed level?  It is probable that this solitary acre would have no effect at all, because the various products (particularly corn), when they come onto the market, would not be markedly affected by such a minute amount.  That is why we say that the assertions of Ricardo’s supporters about the effect of inferior soil should be modified by taking the relative areas of land of different quality into account” (Prévost, loc. cit., pp. 177-78).

***

<Say, in his notes to Ricardo’s book translated by Constancio, makes only one correct remark about foreign trade.  Profit can also be made by cheating, one person gaining what the other loses.  Loss and gain within a single country cancel each other out.  But not so with trade between different countries.  And even according to Ricardo’s theory, three days of labour of one country can be exchanged against one of another country—a point not noted by Say.  Here the law of value undergoes essential modification.  The relationship between labour days of different countries may be similar to that existing between skilled, complex labour and unskilled, simple labour within a country.  In <"tsv3p106">this case, the richer country exploits the poorer one, even where the latter gains by the exchange, as John Stuart Mill explains in his Some Unsettled Questions.>

***

[Prévost says the following about the relationship between agricultural and industrial profit:]

“We admit that, in general, the rate of agricultural profit determines that of industrial profit.  But at the same time we must point out that the latter also reacts of necessity on the former.  If the price of corn rises to a certain point, industrial capitals turn to agriculture, and necessarily depress agricultural profits” (loc. cit., p. 179).

The point is correct, but is conceived in a much too limited sense.  See above.[j]

The Ricardians insist that profit can fall only as a result of a rise in wages, because necessaries rise in price with [the growth of] population, this, however, is a consequence of the accumulation of capital, since inferior soils are cultivated as a result of this accumulation.  But Ricardo himself admits that profits can also fall when capitals increase faster than population, when the competition of capitals causes wages to rise.  This [corresponds to] Adam Smith’s theory.  Prévost says:

“When the growing demand of the capitals increases the price of the labourer, that is, wages, does it not then appear that there are no grounds for asserting that the growing supply of these selfsame capitals never causes the price of capitals, in other words, profit, to fall?” (op. cit., p. 188.)

Prévost builds on the false Ricardian foundation which can only explain falling profits as a result of decreasing surplus-value, and therefore decreasing surplus labour, and consequently as a result of greater value or rising cost of the necessaries consumed by the worker, that is, increasing value of labour, although the real wages of the labourer may not rise but decline; on this basis he seeks to prove that a continual decline in profits is not inevitable.

He says first:

“To begin with, the state of prosperity increases profits”

(namely, agricultural profits, for the population increases with the state of prosperity, the demand for agricultural produce <"tsv3p107">therefore grows and consequently the farmer makes additional profits)

“and this happens long before new land is taken into cultivation.  The increased area under cultivation does indeed affect rent and decreases profits.  But although profit is thus directly decreased, it still remains as high as before the advance…  Why is the cultivation of land of inferior quality undertaken at certain times?  It is undertaken in the expectation of a profit which is at least equal to the customary profit.  And what circumstance can lead to the realisation of such a profit on this kind of land?  Increase ||804| of population.  It presses on … the existing means of subsistence, thereby raising the prices of food (especially of corn) so that agricultural capitals obtain high profits.  The other capitals pour into agriculture, but since the soil is limited in area, this competition has its limits and the point is reached when even higher profits can be made than in trade or manufacture through the cultivation of inferior soils.  If there is a sufficient area of inferior land available, then agricultural profit must be adjusted to the last capitals applied to the land.  If one proceeds from the rate of profit prevailing at the beginning of the increasing prosperity” (division of profit into profit and rent), “then it will be found that profit has no tendency to decline.  It rises with the increase in the population until agricultural profit rises to such a degree that it can suffer a considerable reduction as a result of the cultivation [of new land] without ever sinking below its original rate, or, to be more precise, below the average rate determined by various circumstances” (op. cit., pp. 190-92).

Prévost obviously misunderstands the Ricardian view.  As a result of prosperity, the population increases, thus raising the price of agricultural products and hence agricultural profits.  (Although it is not easy to see why, if this rise is constant, rents should not be increased after the leases run out and why these additional agricultural profits should not be collected in the form of rent even before the inferior land is cultivated.)  But the same rise in [the price of] agricultural produce which causes agricultural profits to go up, increases wages in all industries and consequently brings about a fall in industrial profits.  Thus a new rate of profit arises in industry.  If at the existing market prices the inferior lands even pay only this lower rate of profit, capitals can be transferred to the inferior land.  They will be attracted to it by the high agricultural profits and the high market price of corn.  As Prévost says, they may, before a sufficient amount of capital has been transferred, even yield higher profits than the industrial profits, which have declined.  But as soon as the additional supply is adequate, the market price falls, so that the inferior soils only yield the ordinary industrial profit.  The additional amount yielded by the product of the better [soils] is converted into rent.  This is the Ricardian conception, whose <"tsv3p108">basic premises are accepted by Prévost and from which he reasons.  Corn is now dearer than it was before the rise in agricultural profit.  But the additional profit which it brought the farmer is transformed into rent.  In this way, therefore, profit also declines on the better land to the lower rate of industrial profit brought about by the rise in the price of agricultural produce.  There is no reason for assuming that as a consequence profits do not have to fall below their “original rate” if no other modifying circumstances intervene.  Other circumstances may, of course, intervene.  According to the assumption, after the increase in the price of necessaries, agricultural profit is in any case higher than industrial profit.  If, however, as a result of the development of productive power, the part of the workers’ necessaries supplied by industry has fallen to such a degree that wages (even though they are paid at their average value) do not rise as much as they would have done without the intervention of these paralysing circumstances, proportionally to the increased [price of] agricultural produce; if, furthermore, the same development of productive power has reduced the prices of the products of the extractive industries, and also of agricultural raw materials which are not used as food (although the supposition is not very likely), industrial profit need not fall, though it would be lower than agricultural profit.  A decline of the latter as a result of a transfer of capital to agriculture and the building-up of rent, ||805| would only restore the old rate of profit.

[Secondly,] Prévost tries a different approach.

“Soils of inferior quality … are only put into cultivation if they yield profits as high as—or even higher than—the profit yielded by industrial capitals.  Under these conditions, the price of corn or of other agricultural products often remains very high despite the newly cultivated land.  These high prices press on the working population, since rises in wages do not correspond exactly to rises in the prices of the goods used by workers.  They are more or less a burden to the whole population, since nearly all commodities are affected by the rise in wages and in the prices of essential goods.  This general pressure, linked with the increasing mortality brought about by too large a population, results in a decline in the number of wage-workers and, consequently, in a rise in wages and a decline in agricultural profits.  Further development now proceeds in the opposite direction to that taken previously.  Capitals are withdrawn from the inferior soils and reinvested in industry.  But the population principle soon begins to operate once again.  As soon as poverty has been ended, the number of workers increases, their wages decline, and profits rise as a consequence.  Such fluctuations follow one another repeatedly without bringing about a change in the average rate of profit.  Profit may decline or rise for other reasons or as a result of these causes; it may alternately go up and down, and yet it may not be possible <"tsv3p109">to attribute the average rise or fall to the necessity for cultivating new soils.  The population is the regulator which establishes the natural order and keeps profit within certain limits” (op. cit., pp. 194-96).

Although confused, this is correct according to the “population principle”.  It is however not in line with the assumption that agricultural profits rise until the additional supply required by the population has been produced.  If this presupposes a constant increase in the prices of agricultural produce, then it leads not to a decrease in population, but to a general lowering of the rate of profit, hence of accumulation, and, consequently, to a decrease of population.  According to the Ricardian-Malthusian view, the population would grow more slowly.  But Prévost’s basis is: that the process would depress wages below their average level, this fall in wages and the poverty of the workers causes the price of corn to fall and hence profits to rise again.

This latter argument, however, does not belong here, for here it is assumed that the value of labour is always paid; that is, that the workers receive the means of subsistence necessary for their reproduction.

This [exposition] of Prévost is important, because it demonstrates that the Ricardian view—along with the view he adopted from Malthus—can indeed explain fluctuations in the rate of profit, but cannot explain (constant) falls in the same without repercussions, for upon reaching a certain level the rise in corn prices and the drop in profit would force wages below their level, bringing about a violent decrease in the population, and therefore a fall in the prices of corn and other necessaries, and this would lead again to a rise in profits.

<"vol32-p298"> 

3.  Polemical Writings

||806| The period between 1820 and 1830 is metaphysically speaking the most important period in the history of English political economy—theoretical tilting for and against the Ricardian theory, a whole series of anonymous polemical works, the most important of which are quoted here, especially in relation to those matters which concern our subject.  At the same time, however, it is a characteristic of these polemical writings that all of them, in actual fact, merely revolve around the definition of the concept of value and its relation to capital.

<"vol32-p298a"> 

a) [“Observations on certain Verbal Disputes”.  Scepticism in Political Economy]

<"tsv3p110">Observations on certain Verbal Disputes in Political Economy, particularly relating to Value, and to Demand and Supply, London, 1821.

This is not without a certain acuteness.  The title Verbal Disputes is characteristic.

Directed in part against Smith and Malthus, but also against Ricardo.

The real sense of this work lies in the following:

“… disputes … are entirely owing to the use of words in different senses by different persons; to the disputants looking, like the knights in the story, at different sides of the shield” (Observations etc., London, 1821, pp. 59-60).

This kind of scepticism always heralds the dissolution of a theory, it is the harbinger of a frivolous and unprincipled eclecticism designed for domestic use.

First of all in relation to Ricardo’s theory of value:

“There is an obvious difficulty in supposing that labour is what we mentally allude to, when we talk of value or of real price, as opposed to nominal price; for we often want to speak of the value or price of labour itself.  Where by labour, as the real price of a thing, we mean the labour which produced the thing, there is another difficulty besides; for we often want to speak of the value or price of land; but land is not produced by labour.  This definition, then, will only apply to commodities” (op. cit., p. 8).

As far as labour is concerned, the objection to Ricardo is correct insofar as he presents capital as the purchaser of immediate labour and consequently speaks directly of the value of labour, while what is bought and sold is the temporary use of labour-power, itself a product.  Instead of the problem being resolved, it is only emphasised here that a problem remains unsolved.

It is also quite correct that “the value or price of land”, which is not produced by labour, appears directly to contradict the concept of value and cannot be derived directly from it.  This proposition is [all the more] insignificant when used against Ricardo, since its author does not attack Ricardo’s theory of rent in which precisely Ricardo sets forth how the nominal value of land is evolved on the basis of capitalist production and does not contradict the definition of value.  The value of land is nothing but the price which is paid for capitalised ground-rent.  Much more far-reaching developments have therefore to be presumed here than can be deduced prima facie from the simple consideration <"tsv3p111">of the commodity and its value, just as from the simple concept of productive capital one cannot evolve fictitious capital, the object of gambling on the stock exchange, which is actually nothing but the selling and buying of entitlement to a certain part of the annual tax revenue.

The second objection—that Ricardo transforms value, which is a relative concept, into an absolute concept—is made the chief point of the attack on the whole Ricardian system in another polemical work (written by Bailey), which appeared later.  In considering this latter work, we will also cite relevant passages from the Observations.

A very pertinent observation about the source from which capital, which pays labour, arises, is contained in an incidental remark unconsciously made by the author, who on the contrary wants to use it to prove what is said in the following sentence not underlined [by me], namely, that the supply of labour itself constitutes a check on the tendency of labour to sink to its natural price.

“<An increased supply of labour is an increased supply of that which is to purchase labour.> If we say, then, with Mr. Ricardo, that labour is at every moment tending to what he calls its natural price, we must only recollect, that the increase made in its supply, in order to tend to that, is itself one cause of the counteracting power, which prevents the tendency from being effectual” (op. cit., pp. 72-73).

No analysis is possible unless the average price of labour, i.e., the value of labour, is made the point of departure; just as little would it be possible if one failed to take the value of commodities in general as the point of departure.  Only on this basis is it possible to understand the real phenomena of price fluctuations.

||807| “… it is not meant to be asserted by him” (Ricardo), “that two particular lots of two different articles, as a hat and a pair of shoes, exchange with one another when those two particular lots were produced by equal quantities of labour.  By ‘commodity’, we must here understand ‘description of commodity’, not a particular individual hat, pair of shoes, etc.  The whole labour which produces all the hats in England is to be considered, to this purpose, as divided among all the hats.  This seems to me not to have been expressed at first, and in the general statements of his doctrine” (op. cit., pp. 53-54).

… for example, Ricardo says that “a portion of the labour of the engineer” who makes the machines (Ricardo, On the Principles of Political Economy, and Taxation, third ed., London, 1821, quoted from the Observations) is contained, for instance, in a pair of stockings.  “Yet the ‘total labour’ that produced each single pair of stockings, if it is of a single pair we are <"tsv3p112">speaking, includes the whole labour of the engineer; not a ‘portion’; for one machine makes many pairs, and none of those pairs could have been done without any part of the machine…” (Observations etc., London, 1821, p. 54).

The last passage is based on a misunderstanding.  The whole machine enters into the labour process, but only a part of it enters the formation of value.

Apart from this, some things in the remark are correct.

We start with the commodity, this specific social form of the product, as the foundation and prerequisite of capitalist production.  We take individual products and analyse those distinctions of form which they have as commodities, which stamp them as commodities.  In earlier modes of production—preceding the capitalist mode of production—a large part of the output never enters into circulation, is never placed on the market, is not produced as commodities, and does not become commodities.  On the other hand, at that time a large part of the products which enter into production are not commodities and do not enter into the process as commodities.  The transformation of products into commodities only occurs in individual cases, is limited only to the surplus of products, etc., or only to individual spheres of production (manufactured products), etc.  A whole range of products neither enter into the process as articles to be sold, nor arise from it as such.  Nevertheless, the prerequisite, the starting-point, of the formation of capital and of capitalist production is the development of the product into a commodity, commodity circulation and consequently money circulation within certain limits, and consequently trade developed to a certain degree.  It is as such a prerequisite that we treat the commodity, since we proceed from it as the simplest element in capitalist production.  On the other hand, the product, the result of capitalist production, is the commodity.  What appears as its element is later revealed to be its own product.  Only on the basis of capitalist production does the commodity become the general form of the product and the more this production develops, the more do the products in the form of commodities enter into the process as ingredients.  The commodity, as it emerges in capitalist production, is different from the commodity taken as the element, the starting-point of capitalist production.  We are no longer faced with the individual commodity, the individual product.  The individual commodity, the individual product, manifests itself not only as a real product but also as a commodity, as a part both really and <"tsv3p113">conceptually of production as a whole.  Each individual commodity represents a definite portion of capital and of the surplus-value created by it.

The value of the capital advanced plus the surplus labour appropriated, for example, a value of £120 (if it is assumed that £100 is the value of the capital and £20 that of surplus labour), is, as far as its value is concerned, contained in the total product let us say, in 1,200 yards of cotton.  Each yard, therefore, equals £120/1200 or 1/10 of £1 or 2s.  It is not the individual commodity which appears as the result of the process, but the mass of the commodities in which the value of the total capital has been reproduced plus a surplus-value.  The total value produced divided by the number of products determines the value of the individual product and it becomes a commodity only as such an aliquot part.  It is no longer the labour expended on the individual particular commodity (in most cases, it can no longer be calculated, and may be greater in the case of one commodity than in that of another) but a proportional part of the total labour—i.e., the average of the total value [divided] by the number of products—which determines the value of the individual product and establishes it as a commodity.  Consequently, the total mass of commodities must also be sold, each commodity at its value, determined in this way, in order to replace the total capital together with a surplus-value.  If only 800 out of the 1,200 yards were sold, then the capital would not be replaced, still less would there be a profit.  But each yard would also have been sold below its value, for its value is determined not in isolation but as an aliquot part of the total product.

|808| “If you call labour a commodity, it is not like a commodity which is first produced in order to exchange, and then brought to market where it must exchange with other commodities according to the respective quantities of each which there may be in the market at the time; labour is created at the moment it is brought to market; nay, it is brought to market, before it is created” (op. cit., pp. 75-76).

What is in fact brought to market is not labour, but the labourer.  What he sells to the capitalist is not his labour but the temporary use of himself as a working power.  This is the immediate object of the contract which the capitalist and the worker conclude, the purchase and sale which they transact.

Where payment is for piece-work, task-work, instead of according to the, time for which the labour-power is placed at the disposal of the employer, this is only another method of determining <"tsv3p114">the time.  It is measured by the product, a definite quantity of products being considered as a standard representing the socially necessary labour-time.  In many branches of industry in London where piece-work is the rule, payment is thus made by the hour, but disputes often arise as to whether this or that piece of work constitutes “an hour” or not.

Irrespective of the individual form, it is the case not only with regard to piece-work, but in general, that, although labour-power is sold on definite terms before its use, it is only paid for after the work is completed, whether it is paid daily, weekly, and so on.  Here money becomes the means of payment after it has served previously as an abstract means of purchase, because the nominal transfer of the commodity to the buyer is distinct from the actual transfer.  The sale of the commodity—labour-power—the legal transfer of the use-value and its actual alienation, do not occur at the same time.  The realisation of the price therefore takes place later than the sale of the commodity (see the first part of my book, p. 122).  It can also be seen that here it is the worker, not the capitalist, who does the advancing, just as in the case of the renting of a house, it is not the tenant but the landlord who advances use-value.  The worker will indeed be paid (or at least he may be, if the goods have not been ordered beforehand and so on) before the commodities produced by him have been sold.  But his commodity, his labour-power, has been consumed industrially, i.e., has been transferred into the hands of the buyer, the capitalist, before he, the worker, has been paid.  And it is not a question of what the buyer of a commodity wants to do with it, whether he buys it in order to retain it as a use-value or in order to sell it again.  It is a question of the direct transaction between the first buyer and seller.

[Ricardo says in the Principles:]

“In different stages of society, the accumulation of capital, or of the means of employing labour, is more or less rapid, and must in all cases depend on the productive powers of labour.  The productive powers of labour are generally greatest where there is an abundance of fertile land” (David Ricardo, Principles of Political Economy, third ed., London, 1821, p. 92).  [Quoted from Observations on certain Verbal Disputes in Political Economy etc., London, 1821, p. 74.]

[The author of the Observations makes] the following remark on this passage of Ricardo’s:

“If, in the first sentence, the productive powers of labour mean the smallness of that aliquot part of any produce that goes to those whose manual labour <"tsv3p115">produced it, the sentence is nearly identical, because the remaining aliquot part is the fund whence capital can, if the owner pleases, be accumulated” [Observations, London, 1821, p. 74].

(This is a tacit admission that from the standpoint of the capitalist “productive powers of labour mean the smallness of that aliquot part of any produce that goes to those whose manual labour produced it”.  This sentence is very nice.)

“But then this does not generally happen where there is most fertile land” [loc. cit., p. 74].

(This is silly.  Ricardo presupposes capitalist production.  He does not investigate whether it develops more freely with fertile or relatively unfertile land.  Where it exists, it is most productive where land is most fertile.)  Just as the social productive forces, the natural productive forces of labour, that is, those labour finds in inorganic nature, appear as the productive power of capital.  (Ricardo himself, in the passage cited above, rightly identifies productive power of labour with labour productive of capital, productive of the wealth that commands labour, not of the wealth that belongs to labour.  His expression “capital, or the means of employing labour” is, in fact, the only one in which he grasps the real nature of capital.  He himself is so much the prisoner of a ||809| capitalist standpoint that this conversion, this quid pro quo, is for him a matter of course.  The objective conditions of labour—created, moreover, by labour itself—raw materials and working instruments, are not means employed by labour as its means, but, on the contrary, they are the means of employing labour.  They are not employed by labour; they employ labour.  For them labour is a means by which they are accumulated as capital, not a means to provide products, wealth for the worker.)

“It does in North America, but that is an artificial state of things”(that is, a capitalistic state of things).

“It does not in Mexico.  It does not in New Holland.  The productive powers of labour are, indeed, in another sense, greatest where there is much fertile land, viz. the power of man, if he chooses it, to raise much raw produce in proportion to the whole labour he performs.  It is, indeed, a gift of nature, that men can raise more food than the lowest quantity that they could maintain and keep up the existing population on…” [loc. cit., pp. 74-75].

(This is the basis of the doctrine of the Physiocrats.  The physical basis of surplus-value is this “gift of nature”, most obvious in agricultural labour, which originally satisfied nearly all human <"tsv3p116">needs.  It is not so in manufacturing labour, because the product must first be sold as a commodity.  The Physiocrats, the first to analyse surplus-value, understand it in its natural form.)

“… but ‘surplus produce’ (the term used by Mr. Ricardo, page 93), generally means the excess of the whole price of a thing above that part of it which goes to the labourers who made it… ”

(the fool does not see that where the land is fertile, the part of the price of the produce that goes to the labourer, although it may be small, buys a sufficient quantity of necessaries; the part that goes to the capitalist is great)

“a point, which  is settled by human arrangement, and not fixed by nature” (loc. cit., pp. 74-75).

If the last, concluding passage has any meaning at all, it is that “surplus produce” in the capitalist sense must be strictly distinguished from the productivity of industry as such.  The latter is of interest to the capitalist only insofar as it realises profit for him.  Therein lies the narrowness and limitation of capitalist production.

“When the demand for an article exceeds […] that which is, with reference to the present rate[k] of supply, the effectual demand; and when, consequently, the price has risen, either additions can be made to the rate of supply at the same rate of cost of production as before; in which case they will be made till the article is brought to exchange at the same rate as before with other articles […]: or, 2ndly, no possible additions can be made to the former rate of supply: and then the price, which has risen, will not be brought down […], but continue to afford, as Smith says, a greater rent, or profits, or wages (or all three), to the particular land, capital, or labour, employed in producing the article, […] or, 3rdly, the additions which can be made will require proportionally more land, or capital, or labour, or all three, than were required for the periodical production” (note these words) “of the amount previously supplied.  Then the addition will not be made till the demand is strong enough, 1st, to pay this increased price for the addition; 2ndly, to pay the same increased price upon the old amount of supply.  For the person who has produced the additional quantity will be no more able to get a high price for it, than those who produced the former quantity…  There will then be surplus profits in this trade…  The surplus profits will be either in the hands of some particular producers only … or, if the additional produce cannot be distinguished from the rest, will be a surplus shared by all…  People will give something to belong to a trade in which surplus profit can be made…  What they so give, is rent” (op. cit., pp. 79-81).

Here, one need only say that in this book rent is for the first time regarded as the general form of consolidated surplus profit.

||810| “‘<"tsv3p117">Conversion of revenue into capital’ is another of these verbal sources of controversy.  One man means by it, that the capitalist lays out part of the profits he bas made by his capital, in making additions to his capital, instead of spending it for his private use, as he might else have done: another man means by it, that a person lays out as capital something which he never got as profits, or any capital of his own, but received as rent, wages, salary” (op. cit., pp. 83-84).

This last passage—“another of these verbal sources of controversy.  One man means by it … another man means by it… ”—testifies to the method used by this smart alec.

<"vol32-p305"> 

b) “An Inquiry into those Principles…” [The Lack of Understanding of the Contradictions of the capitalist Mode of production Which Cause Crises]

An Inquiry into those Principles, respecting the Nature of Demand and the Necessity of Consumption, lately advocated by Mr. Malthus etc., London, 1821.

A Ricardian work.  Good against Malthus.  Demonstrates the infinite narrow-mindedness to which the perspicacity of these fellows is reduced as soon as they examine not landed property, but capital.  Nevertheless, it is one of the best of the polemical works of the decade mentioned.

“If the capital employed in cutlery is increased as 100:101, and can only produce an increase of cutlery in the same proportion, the degree in which it will increase the command which its producers have over things in general, no increased production of them having by the supposition taken place, will be in a less proportion; and this, and not the increase of the quantity of cutlery, constitutes the employers’ profits, or the increase of their wealth.  But if the like addition of one per cent had been making at the same time to the capitals of all other trades […] and with the like result as to produce, this […] would not follow: for the rate at which each article would exchange with the rest would remain unaltered, and therefore a given portion of each would give the same command as before over the rest” ([An Inquiry into those Principles, London, 1821,] p. 9).

First of all, if there has been no increase of production (and of the capital devoted to production) except in the cutlery trade, as is assumed, then the return will not be “in a less proportion”, but an absolute loss.  There are then only three courses open to the cutlery producer.  Either he must exchange his increased product as he would have done his smaller product, and his increased production would thus result in a positive loss.  Or he must try to get new consumers; if amongst the old circle, this could only be done by withdrawing customers from another trade and shifting his loss upon other shoulders; or he must enlarge his market <"tsv3p118">beyond his former limits; but neither the one nor the other operation depends on his good will; nor on the mere existence of an increased quantity of knives.  Or, in the last instance, he must carry over his production to another year and diminish his new supply for that year, which, if his addition of capital did exist not only in additional wages, but in additional fixed capital, will equally result in a loss.[l]

Furthermore: If all other capitals have accumulated at the same rate, it does not follow at all that their production has increased at the same rate.  But if it has, it does not follow that they want one per cent more of cutlery, as their demand for cutlery is not at all connected, either with the increase of their own produce, or with their increased power of buying cutlery.  What follows is merely the tautology: If the increased capital used in each particular branch of production is proportionate to the rate in which the wants of society increase the demand for each particular commodity, then the increase of one commodity se-cures a market for the increased supply of other commodities.

Here, therefore, is presupposed 1. capitalist production, in which the production of each particular industry and its increase are not directly regulated and ||811| controlled by the wants of society, but by the productive forces at the disposal of each individual capitalist, independent of the wants of society.  2. It is assumed that nevertheless production is proportional [to the requirements] as though capital were employed in the different spheres of production directly by society in accordance with its needs.

On this assumption—if capitalist production were entirely socialist production—a contradiction in terms—no over-production could, in fact, occur.

By the way, in the various branches of industry in which the same accumulation of capital takes place (and this too is an unfortunate assumption that capital is accumulated at an equal rate in different spheres), the amount of products corresponding to the increased capital employed may vary greatly, since the productive forces in the different industries or the total use-values produced in relation to the labour employed differ considerably.  The same value is produced in both cases, but the quantity of commodities in which it is represented is very different.  It is <"tsv3p119">quite incomprehensible, therefore, why industry A, because the value of its output has increased by 1 per cent while the mass of its products has grown by 20 per cent, must find a market in B where the value has likewise increased by 1 per cent, but the quantity of its output only by 5 per cent.  Here, the author has failed to take into consideration the difference between use-value and exchange-value.

Say’s earth-shaking discovery that “commodities can only be bought with commodities” simply means that money is itself the converted form of the commodity.  It does not prove by any means that because I can buy only with commodities, I can buy with my commodity, or that my purchasing power is related to the quantity of commodities I produce.  The same value can be embodied in very different quantities [of commodities].  But the use-value—consumption—depends not on value, but on the quantity.  It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.  Apart from the fact that the workers do not sell commodities, but labour, a great number of people who do not produce commodities at all buy things with money.  Buyers and sellers of commodities are not identical.  The landlord, the moneyed capitalist and others obtain in the form of money commodities produced by other people.  They are buyers without being sellers of “commodities”.  Buying and selling occurs not only between industrial capitalists, but they also sell to workers; and likewise to owners of revenue who are not commodity producers.  Finally, the purchases and sales transacted by them as capitalists are very different from the purchases they make as revenue-spenders.

“Mr. Ricardo (p. 359, second ed.), after quoting the doctrine of Smith about the cause of the fall of profits, adds, ‘M. Say has, however, most satisfactorily shown, that there is no amount of capital which may not be employed in a country, because demand is only limited by production’” [An Inquiry into those Principles, London, 1821, p. 18].

(This is very wise.  Limited, indeed.  Nothing can be demanded which cannot be produced upon demand, or which the demand does not find ready made in the market.  Hence, because demand is limited by production, it by no means follows that production is, or was, limited by demand, and can never exceed the demand, particularly the demand at the market price.  This is Say-like acumen.)

“‘<"tsv3p120">There cannot be accumulated (p. 360) in a country any amount of capital which cannot be employed productively’ (meaning, I presume,”—says the author in brackets—“‘with profit to the owner’) ‘until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases’” [loc. cit., pp. 18-19].

(Ricardo here equates “productively” and “profitably”, whereas it is precisely the fact that in capitalist production “profitably” alone is “productively”, that constitutes the difference between it and absolute production, as well as its limitations.  In order to produce “productively”, production must be carried on in such a way that the mass of producers are excluded from the demand for a part of the product.  Production has to be carried on in opposition to a class ||812| whose consumption stands in no relation to its production—since it is precisely in the excess of its production over its consumption that the profit of capital consists.  On the other hand, production must be carried on for classes who consume without producing.  It is not enough merely to give the surplus product a form in which it becomes an object of demand for these classes.  On the other hand, the capitalist himself, if he wishes to accumulate, must not himself consume as much of his own products, insofar as they are consumer goods, as he produces.  Otherwise he cannot accumulate.  That is why Malthus opposes to the capitalist classes whose task is not accumulation but expenditure.  And while on the one hand all these contradictions are assumed, it is assumed on the other that production proceeds without any friction just as if these contradictions did not exist at all.  Purchase is divorced from sale, commodity from money, use-value from exchange-value.  It is assumed however that this separation does not exist, but that there is barter.  Consumption and production are separated; [there are] producers who do not consume and consumers who do not produce.  It is assumed that consumption and production are identical.  The capitalist directly produces exchange-value in order to increase his profit, and not for the sake of consumption.  It is assumed that he produces directly for the sake of consumption and only for it.  [If it is] assumed that the contradictions existing in bourgeois production—which, in fact, are reconciled by a process of adjustment which, at the same time, however, manifests itself as crises, violent fusion of disconnected factors operating independently of one another and yet correlated—if it is assumed that the contradictions existing in bourgeois production <"tsv3p121">do not exist, then these contradictions obviously cannot come into play.  In every industry each individual capitalist produces in proportion to his capital irrespective of the needs of society and especially irrespective of the supply of competing capitalists in the same industry.  It is assumed that he produces as if he were fulfilling orders placed by society.  If there were no foreign trade, then luxuries could be produced at home, whatever their cost.  In that case, labour, with the exception of [the branches producing] necessaries, would, in actual fact, be very unproductive.  Hence accumulation of capital [would proceed at a low rate].  Thus every country would be able to employ all the capital accumulated there, since according to the assumption very little capital would have been accumulated.)

“The latter sentence limits (not to say contradicts) the former, if ‘which may not be employed’, in the former, means ‘employed productively’, or rather, ‘profitably’.  And if it means simply ‘employed’, the proposition is useless; because neither Adam Smith nor any body else, I presume, denied that it might ‘be employed’ if you did not care what profit is brought” (loc. cit., p. 19).

Ricardo says indeed that all capital in a given country, at whatever rate accumulated, may be employed profitably; on the other hand he says that the very fact of the accumulation of capital checks its “profitable” employment, because it must result in lessening profits, that is, the rate of accumulation.

“… the very meaning of an increased demand by them” (the labourers) “is a disposition to take less themselves, and leave a larger share for their employers; and if it be said that this, by diminishing consumption, increases glut, I can only answer, that glut […] is synonymous with high profits…” (op. cit., p. 59).

This is indeed the secret basis of glut.

“… the labourers do not, considered as consumers, derive any benefit from machines, while flourishing” (as Mr. Say says in his Traité d’économie politique, fourth ed., Vol. I, p. 60) “unless the article, which the machines cheapen, is one that can be brought, by cheapening, within their use.  Threshing-machines, windmills, may be a great thing for them in this view; but the invention of a veneering machine, or a block machine, or a lace frame, does not mend their condition much” (op. cit., pp. 74-75).

“The habits of the labourers, where division of labour has been carried very far, are applicable only to the particular line they have been used to; they are a sort of machines.  Then, there is a long period of idleness, that is, of labour lost; of wealth cut off at its root.  It is quite useless to repeat, like a parrot, that things have a tendency to find their level.  We must look about us, and see they ||813| cannot for a long time find a level; that when they do, it will be a far lower level than they set out from” (op. cit.; p.72).

<"tsv3p122">This Ricardian, following Ricardo’s example, recognises correctly crises resulting from sudden changes in the channels of trade.  This was the case in England after the war of 1815.  And consequently, whenever a crisis occurred, all later economists declared that the most obvious cause of the particular crisis was the only possible cause of all crises.

The author also admits that the credit system may be a cause of crises (p. 81 et seq.)  (as if the credit system itself did not arise out of the difficulty of employing capital “productively”, i.e., “profitably”).  The English, for example, are forced to lend their capital to other countries in order to create a market for their commodities.  Over-production, the credit system, etc., are means by which capitalist production seeks to break through its own barriers and to produce over and above its own limits.  Capitalist production, on the one hand, has this driving force; on the other hand, it only tolerates production commensurate with the profitable employment of existing capital.  Hence crises arise, which simultaneously drive it onward and beyond [its own limits] and force it to put on seven-league boots, in order to reach a development of the productive forces which could only be achieved very slowly within its own limits.

What the author writes about Say is very true.  This should be dealt with in connection with Say (see p. 134, notebook VII).

“He” (the worker) “will agree to work part of his time for the capitalist, or, what comes to the same thing, to consider part of the whole produce, when raised and exchanged, as belonging to the capitalist, He must do so, or the capitalist would not have afforded him this[m] assistance” [op. cit., p. 102].

(Namely capital.  Very fine that it comes to the same thing whether the capitalist owns the whole produce and pays part of it as wages to the labourer, or whether the labourer leaves, makes over to the capitalist part of his (the labourer’s) produce.)

“But as the capitalist’s motive was gain, and as these advantages always depend, in a certain degree, on the will to save, as well as on the power, the capitalist will be disposed to afford an additional portion of these assistances; and as he will find fewer people in want of this additional portion, than were in want of the original portion, he must expect to have a less share of the benefit to himself; he must be content to make a present” (!!!) “(as it were) to the labourer, of part of the benefit his assistance occasions, or else he would not get the other part: the profit is reduced, then, by competition” (loc. cit., pp. 102-03).

<"tsv3p123">This is very fine.  If, as a consequence of the development of labour productivity, capital accumulates so quickly that the demand for labour increases wages and the worker works for a shorter time gratis for the capitalist and shares to some degree in the benefits of his more productive labour—the capitalist makes him a “present”.

The same author demonstrates in great detail that high wages are bad, a discouragement for workers, although, speaking of the landlords, he considers that low profit is a discouragement for the capitalists (see p. 13, notebook XII).

“Adam Smith thought […] that accumulation or increase of stock in general lowered the rate of profit in general, on the same principle which makes the increase of stock in any particular trade lower the profits of that trade.  But such increase of stock in a particular trade means an increase more in proportion than stock is at the same time increased in other trades” (op. cit., p. 9).

Against Say.  (Notebook XII, p. 12.)

“The immediate market for capital, or field for capital may be said to be labour.  The amount of capital which can be invested at a given moment, in a given country, or the world, so as to return not less than a given rate of profits, seems principally to depend on the quantity of labour, which it is possible, by laying out that capital, to induce the then existing number of human beings to perform” (op. cit., p. 20).

||814|Profits do not depend on price, they depend on price compared with outgoings” (op. cit., p. 28).

“The proposition of M. Say does not at all prove that capital opens a market for itself, but only that capital and labour open a market for one another” (op. cit., p. 111).

c) Thomas De Quincey [Failure to Overcome the Real Flaws in the Ricardian Standpoint]

<"vol32-p311"> 

Dialogues of Three Templars on Political Economy, chiefly in relation to the Principles of Mr. Ricardo (London Magazine, Vol. IX, 1824) (author: Thomas De Quincey).

Attempt at a refutation of all the attacks made on Ricardo.  That he is aware of what is at issue is to be seen from this sentence:

“… all […] difficulties” of political economy “will be found reducible” [to] “this: What is the ground of exchangeable value?”([De Quincey, Dialogues of Three Templars, 1824,] p. 347.)

In this work, the inadequacies of the Ricardian view are often pointedly set forth, although the dialectical depth is more affected than real.  The real difficulties, which arise not out of the determination <"tsv3p124">of value, but from Ricardo’s inadequate elaboration of his ideas on this basis, and from his arbitrary attempt to make concrete relations directly fit the simple relation of value, are in no way resolved or even grasped.  But the work is characteristic of the period in which it appeared.  It shows that in political economy consistency and thinking were still taken seriously at that time.

(A later work by the same author: The Logic of Political Economy, Edinburgh, 1844, is weaker.)

De Quincey very clearly outlines the differences between the Ricardian view and those which preceded it, and does not seek to mitigate them by re-interpretation or to abandon the essential features of the problems in actual fact while retaining them in a purely formal, verbal way as happened later on, thus opening the door wide to easy-going, unprincipled eclecticism.

One point in the Ricardian doctrine which is especially emphasised by De Quincey and which should be mentioned here because it plays a role in the polemic against Ricardo to which we shall refer below, is that the command which one commodity has over other commodities (its purchasing power; in fact, its value expressed in terms of another commodity) is altogether different from its real value.

It is quite wrong to conclude “that the real value is great because the quantity it buys is great, or small because the quantity it buys is small…  If A double its value, it will not therefore command double the former quantity of B.  It may do so: and it may also command five hundred times more, or five hundred times less…  No man has ever denied that A by doubling its own value will command a double quantity of all things which have been stationary in value.  […] But the question is whether universally, from doubling its value, A will command a double quantity…” ([Dialogues of Three Templars,] pp. 552-54 passim).

<"vol32-p312"> 

d) Samuel Bailey

[α) Superficial Relativism on the Part of the Author of “Observations on certain Verbal Disputes” and on the Part of Bailey in Treating the Category of Value.  The Problem of the Equivalent.  Rejection of the Labour Theory of Value as the Foundation of Political Economy]

A Critical Dissertation on the Nature, Measures, and Causes of Value; chiefly in Reference to the Writings of Mr. Ricardo and his FollowersBy the Author of Essays on the Formation and Publication of Opinions (Samuel Bailey), London, 1825.

<"tsv3p125">This is the main work directed against Ricardo.  (Also aimed against Malthus.)  It seeks to overturn the foundation of the doctrine—value.  It is definitely worthless except for the definition of the “measure of value”, or rather, of money in this function.  Compare also the same author’s: A Letter to a Political Economist; occasioned by an Article in the Westminster Review on the Subject of Value etc., London, 1826.

Since, as has been mentioned,[n] this work basically agrees with Observations on certain Verbal Disputes in Political Economy, it is here necessary to add the relevant passages from these Observations.

The author of the Observations accuses Ricardo of having transformed value from a relative attribute of commodities in their relationship to one another, into something absolute.

The only thing that Ricardo can be accused of in this context is that, in elaborating the concept of value, he does not clearly distinguish between the various aspects, between the exchange-value of the commodity, as it manifests itself, appears in the process of commodity exchange, and the existence of the commodity as value as distinct from its existence as an object, product, use-value.

||815| It is said in the Observations:

“If the absolute quantity of labour, which produces the greater part of commodities, or all except one, is increased, would you say that the value of that one is unaltered?  In what sense?  since it will exchange for less of every commodity besides.  If, indeed, it is meant to be asserted that the meaning of increase or diminution of value is increase or diminution in the quantity of labour that produced the commodity spoken of, the conclusions I have just been objecting to might be true enough.  But to say, as Mr. Ricardo does, that the comparative quantities of labour that produce two commodities are the cause of the rate at which these two commodities will exchange with each other, i.e., of the exchangeable value of each, understood in relation to the other, is very different from saying that the exchangeable value of either means the quantity of labour which produced it, understood without any reference to the other, or to the existence of any other” (Observations etc., p. 13).

“Mr. Ricardo tells us indeed […] that ‘the inquiry to which he wishes 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’; as if be there considered that there is such a thing as exchangeable value which is not relative” (op. cit., pp. 9-10).

“That Mr. Ricardo has departed from his original use of the term value, and has made of it something absolute, instead of relative, is still more evident <"tsv3p126">in his chapter entitled ‘Value and Riches, their distinctive Properties’.  The question there discussed, has been discussed also by others, and is purely verbal and useless…” (op. cit., pp. 15-16).

Before dealing with this author, we shall add the following about Ricardo.  In his chapter on “Value and Riches”, he argues that social wealth does not depend on the value of the commodities produced, although this latter point is decisive for every individual producer.  It should have been all the more clear to him that a mode of production whose exclusive aim is surplus-value, in other words, which is based on the relative poverty of the mass of the producers, cannot possibly be the absolute form of the production of wealth, as he constantly asserts.

Now to the Observations of the “verbal” wiseacre.

If all commodities except one increase in value because they cost more labour-time than they did before, smaller amounts of these commodities will be exchanged for the single commodity whose labour-time remains unchanged.  Its exchange-value, insofar as it is realised in other commodities—that is, its exchange-value expressed in the use-values of all other commodities—has been reduced.  “Would you then say that the value of that one is unaltered?” This is merely a formulation of the point at issue, and it calls neither for a positive nor for a negative reply.  The same result would occur if the labour-time required for the production of the one commodity were reduced and that of all the others remained unchanged.  A given quantity of this particular commodity would exchange for a reduced quantity of all the other commodities.  The same phenomenon occurs in both cases although from directly opposite causes.  Conversely, if the labour-time required for the production of commodity A remained unchanged, while that of all others were reduced, then it would exchange for larger amounts of all the other commodities.  The same would happen for the opposite reason, if the labour-time required for the production of commodity A increased and that required for all other commodities remained unchanged.  Thus, sometimes commodity A exchanges for smaller quantities of all the other commodities, and this for either of two different and opposite reasons.  At other times it exchanges for larger quantities of all the other commodities, again for two different and opposite reasons.  But it should be noted that it is assumed that it always exchanges at its value, consequently for an equivalent.  It always realises its value in the quantity of use-values of the <"tsv3p127">other commodities for which it exchanges, no matter how much the quantity of these use-values varies.

From this it obviously follows: that the rate at which commodities exchange for one another as use-values, although it is an expression of their value, their realised value, is not their value itself, since the same proportion of value can be represented by quite different quantities of use-values.  Value as an aspect of the commodity is not expressed in its own use-value, or in its existence as use-value.  Value manifests itself when commodities are expressed in other use-values, that is, it manifests itself in the rate at which these other use-values are exchanged for them.  If one ounce of gold equals a ton of iron, that is, if a small quantity of gold exchanges for a large quantity of iron, is therefore the value of the gold expressed in iron greater than the value of the iron expressed in gold?  That commodities exchange for one another in proportion to the labour embodied in them, means that they are equal, alike, insofar as they constitute the same quantity of labour.  Consequently it means likewise that every commodity, considered in itself, is something different from its own use-value, ||816| from its own existence as use-value.

The value of the same commodity can, without changing, be expressed in infinitely different quantities of use-values, always according to whether I express it in the use-value of this or of that commodity.  This does not alter the value, although it does alter the way it is expressed.  In the same way, all the various quantities of different use-values in which the value of commodity A can be expressed, are equivalents and are related to one another not only as values, but as equal values, so that when these very unequal quantities of use-value replace one another, the value remains completely unchanged, as if it had not found expression in quite different use-values.

When commodities are exchanged in the proportion in which they represent equal amounts of labour-time, then it is their aspect as materialised labour-time, as embodied labour-time, which manifests their substance, the identical element they contain.  As such, they are qualitatively the same, and differ only quantitatively, according to whether they represent smaller or larger quantities of the same substance, i.e., labour-time.  They are values as expressions of the same element; and they are equal values, equivalents, insofar as they represent an equal amount of labour-time.  They can only be compared as magnitudes, because <"tsv3p128">they are already homogeneous magnitudes, qualitatively identical.

It is as manifestations of this substance that these different things constitute values and are related to one another as values; their different magnitudes of value, their immanent measure of value are thus also given.  And only because of this can the value of a commodity be represented, expressed, in the use-values of other commodities as its equivalents.  Hence the individual commodity as value, as the embodiment of this substance, is different from itself as use-value, as an object, quite apart from the expression of its value in other commodities.  As the embodiment of labour-time, it is value in general, as the embodiment of a definite quantity of labour-time, it is a definite magnitude of value.

It is therefore typical of our wiseacre when he says: If we mean that, we do not mean that and vice versa.  Our “meaning” has nothing at all to do with the essential character of the thing we consider.  If we speak of the value in exchange of a thing, we mean in the first instance of course the relative quantities of all other commodities that can be exchanged for the first commodity.  But, on further consideration, we shall find that for the proportion, in which one thing exchanges for an infinite mass of other things which have nothing in common with it—and even if there are natural or other similarities between those things, they are not considered in the exchange—for the proportion to be a fixed proportion, all those various heterogeneous things must be considered as proportionate representations, expressions of the same common unity, [of] an element quite different from their natural existence or appearance.  We shall furthermore find, that if our views have any sense, the value of a commodity is something which not only distinguishes it from or relates it to other commodities, but is a quality differentiating it from its own existence as a thing, a value in use.[o]

“The rise of value of article A, only meant value estimated in articles B, C, etc., i.e., value in exchange for articles B, C, etc.” ([Observations, London, 1821,] p. 16).

To estimate the value of A, a book for instance, in B, coals, and C, wine, A, B and C must be as value something different from their existence as books, coals or wine.  To estimate the value <"tsv3p129">of A in B, A must have a value independent of the estimation of that value in B, and both must be equal to a third thing expressed in both of them.

It is quite wrong to say that the value of a commodity is thereby transformed from something relative into something absolute.  On the contrary, as a use-value, the commodity appears as something independent.  On the other hand, as value it appears as something merely contingent, something merely determined by its relation to socially necessary, equal, simple labour-time.  It is to such an extent relative that when the labour-time required for its reproduction changes, its value changes, although the labour-time really contained in the commodity has remained unaltered.

||817| How deeply our wiseacre has sunk into fetishism and how he transforms what is relative into something positive, is demonstrated most strikingly in the following passage:

Value is a property of things, riches of men.  Value, in this sense, necessarily implies exchange, riches do not” (loc. cit., p. 16).

Riches here are use-values.  These, as far as men are concerned, are, of course, riches, but it is through its own properties, its own qualities, that a thing is a use-value and therefore an element of wealth for men.  Take away from grapes the qualities that make them grapes, and their use-value as grapes disappears for men and they cease to be an element of wealth for men.  Riches which are identical with use-values are properties of things that are made use of by men and which express a relation to their wants.  But “value” is supposed to be a “property of things”.

As values, commodities are social magnitudes, that is to say, something absolutely different from their “properties” as “things”.  As values, they constitute only relations of men in their productive activity.  Value indeed “implies exchanges”, but exchanges are exchanges of things between men, exchanges which in no way affect the things as such.  A thing retains the same “properties” whether it be owned by A or by B.  In actual fact, the concept “value” presupposes “exchanges” of the products.  Where labour is communal, the relations of men in their social production do not manifest themselves as “values” of “things”.  Exchange of products as commodities is a method of exchanging labour, [it demonstrates] the dependence of the labour of each upon the labour of the others [and corresponds to] a certain mode of social labour or social production.

<"tsv3p130">In the first part of my book, I mentioned that it is characteristic of labour based on private exchange that the social character of labour “manifests” itself in a perverted form—as the “property” of things; that a social relation appears as a relation between things (between products, values in use, commodities).  This appearance is accepted as something real by our fetish-worshipper, and he actually believes that the exchange-value of things is determined by their properties as things, and is altogether a natural property of things.  No scientist to date has yet discovered what natural qualities make definite proportions of snuff tobacco and paintings “equivalents” for one another.

Thus he, the wiseacre, transforms value into something absolute, “a property of things”, instead of seeing in it only something relative, the relation of things to social labour, social labour based on private exchange, in which things are defined not as independent entities, but as mere expressions of social production.

But to say that “value” is not an absolute, is not conceived as an entity, is quite different from saying that commodities must impart to their exchange-value a separate expression which is different from and independent of their use-value and of their existence as real products, in other words, that commodity circulation is bound to evolve money.  Commodities express their exchange-value in money, first of all in the price, in which they all present themselves as materialised forms of the same labour, as only quantitatively different expressions of the same substance.  The fact that the exchange-value of the commodity assumes an independent existence in money is itself the result of the process of exchange, the development of the contradiction of use-value and exchange-value embodied in the commodity, and of another no less important contradiction embodied in it, namely, that the definite, particular labour of the private individual must manifest itself as its opposite, as equal, necessary, general labour and, in this form, social labour.  The representation of the commodity as money implies not only that the different magnitudes of commodity values are measured by expressing the va1ues in the use-value of one exclusive commodity, but at the same time that they are all expressed in a form in which they exist as the embodiment of social labour and are therefore exchangeable for every other commodity, that they are translatable at will into any use-value desired.  Their representation as money—in the price—therefore appears first only as something nominal, a representation <"tsv3p131">which is realised only through actual sale.  Ricardo’s mistake is that he is concerned only with the magnitude of value.  Consequently his attention is concentrated on ||818| the relative quantities of labour which the different commodities represent, or which the commodities as values embody.  But the labour embodied in them must be represented as social labour, as alienated individual labour.  In the price this representation is nominal; it becomes reality only in the sale.  This transformation of the labour of private individuals contained in the commodities into uniform social labour, consequently into labour which can be expressed in all use-values and can be exchanged for them, this qualitative aspect of the matter which is contained in the representation of exchange-value as money, is not elaborated by Ricardo.  This circumstance—the necessity of presenting the labour contained in commodities as uniform social labour, i.e., as money—is overlooked by Ricardo.

For its part, the development of capital already presupposes the full development of the exchange-value of commodities and consequently its independent existence as money.  The point of departure in the process of the production and circulation of capital, is the independent form of value which maintains itself, increases, measures the increase against the original amount, whatever changes the commodities in which it manifests itself may undergo, and quite irrespective of whether it presents itself in the most varied use-values and moves from commodity to commodity.  The relation between the value antecedent to production and the value which results from it—capital as antecedent value is capital in contrast to profit—constitutes the all-embracing and decisive factor in the whole process of capitalist production.  It is not only an independent expression of value as in money, but dynamic value, value which maintains itself in a process in which use-values pass through the most varied forms.  Thus in capital the independent existence of value is raised to a higher power than in money.

From this we can judge the wisdom of our “verbal” wiseacre, who treats the independent existence of exchange-value as a figure of speech, a manner of talking, a scholastic invention.

“Value, or valeur in French, is not only used absolutely instead of relatively as a quality of things, but is even used by some […] as […] a measurable commodity, ‘Possessing a value’, ‘transferring a portion of value’” (a very important factor with regard to fixed capital), “‘the sum, or totality of values’ (valeurs), etc.  I do not know what this means” (op. cit., p. 57).

<"tsv3p132">The fact that the value which has become independent acquires only a relative expression in money, because money itself is a commodity, and hence has a changeable value, makes no difference but is a shortcoming which arises from the nature of the commodity and the necessity of expressing its exchange-value, as distinct from its use-value.  Our author has made it abundantly clear that he does “not know” this.  This is shown by the kind of criticism which would like to talk out of existence the difficulties innate in the contradictory functions of things themselves, by declaring them to be the result of reflexions or of conflicting definitions.

“‘The relative value of two things’ […] is open to two meanings: the rate at which two things exchange or would exchange with each other, or the comparative portions of a third for which each exchanges or would exchange” (op. cit., p. 53).

To begin with, this is a fine definition, If 3 lbs. of coffee exchange for 1 lb. of tea today or would do so tomorrow, it does not at all mean that equivalents have been exchanged for each other.  According to this, a commodity could always be exchanged only at its value, for its value would constitute any quantity of some other commodity for which it had been accidentally exchanged.  This, however, is not what people generally mean, when they say that 3 lbs. of coffee have been exchanged for their equivalent in tea.  They assume that after, as before, the exchange, a commodity of the same value is in the hands of either of the exchangers.  The rate at which two commodities exchange does not determine their value, but their value determines the rate at which they exchange.  If value were nothing more than the quantity of commodities for which commodity A is accidentally exchanged, how is it possible to express the value of A in terms of commodity B, or C, etc.?  Because ||819| then, since there is no immanent measure common to the two commodities, the value of A could not be expressed in terms of B before it had been exchanged against B.

Relative value means first of all magnitude of value in contradistinction to the quality of having value at all.  For this reason, the latter is not something absolute.  It means, secondly, the value of one commodity expressed in the use-value of another commodity.  This is only a relative expression of its value, namely, in relation to the commodity in which it is expressed.  The value of a pound of coffee is only relatively expressed in <"tsv3p133">tea; to express it absolutely—even in a relative way, that is to say, not in regard to labour-time, but to other commodities—it ought to be expressed in an infinite series of equations with all other commodities.  This would be an absolute expression of its relative value; its absolute expression would be its expression in terms of labour-time and this absolute expression would express it as something relative, but in the absolute relation, by which it is value.

***

Let us now turn to Bailey.

His book has only one positive merit—that he was the first to give a more accurate definition of the measure of value, that is, in fact, of one of the functions of money, or money in a particular, determinate form.  In order to measure the value of commodities—to establish an external measure of value—it is not necessary that the value of the commodity in terms of which the other commodities are measured, should be invariable.  (It must on the contrary be variable, as I have shown in the first part, because the measure of value is, and must be, a commodity since otherwise it would have no immanent measure in common with other commodities.)  If, for example, the value of money changes, it changes to an equal degree in relation to all other commodities.  Their relative values are therefore expressed in it just as correctly as if the value of money had remained unchanged.

The problem of finding an “invariable measure of value” is thereby eliminated.  But this problem itself (the interest in comparing the value of commodities in different historical periods, is, indeed, not an economic interest as such, [but] an academic interest) arose out of a misunderstanding and conceals a much more profound and important question.  “Invariable measure of value” signifies primarily a measure of value which is itself of invariable value, and consequently, since value itself is a predicate of the commodity, a commodity of invariable value.  For example, if gold and silver or corn, or labour, were such commodities, then it would be possible to establish, by comparison with them, the rate at which other commodities are exchanged for them, that is, to measure exactly the variations in the values of these other commodities by their prices in gold, silver, or corn, or their relation to wages.  Stated in this way, the problem therefore presupposes from the outset that in the “measure of <"tsv3p134">value” we are dealing simply with the commodity in which the values of all other commodities are expressed, whether it be the commodity by which they are really represented—i.e., money, the commodity which functions as money—or a commodity which, because its value remains invariable, would function as the money in terms of which the theoretician makes his calculations.  It thus becomes evident that in this context it is in any case a question only of a kind of money which as the measure of value—either theoretically or practically—would itself not be subject to changes in value.

But for commodities to express their exchange-value independently in money, in a third commodity, the exclusive commodity, the values of commodities must already be presupposed.  Now the point is merely to compare them quantitatively.  A homogeneity which makes them the same—makes them values—which as values makes them qualitatively equal, is already presupposed in order that their value and their differences in value can be represented in this way.  For example, if all commodities express their value in gold, then this expression in gold, their gold price, their equation with gold, is an equation on the basis of which it is possible to elucidate and compute their value relation to one another, for they are now expressed as different quantities of gold and in this way the commodities are represented in their prices, ||820| as comparable magnitudes of the same common denominator.

But in order to be represented in this way, the commodities must already be identical as values.  Otherwise it would be impossible to solve the problem of expressing the value of each commodity in gold, if commodity and gold or any two commodities as values were not representations of the same substance, capable of being expressed in one another.  In other words, this presupposition is already implicit in the problem itself.  Commodities are already presumed as values, as values distinct from their use-values, before the question of representing this value in a special commodity can arise.  In order that two quantities of different use-values can be equated as equivalents, it is already presumed that they are equal to a third, that they are qualitatively equal and only constitute different quantitative expressions of this qualitative equality.

The problem of an “invariable measure of value” was simply a spurious name for the quest for the concept, the nature, of value itself, the definition of which could not be another value, <"tsv3p135">and consequently could not be subject to variations as value.  This was labour-time, social labour, as it presents itself specifically in commodity production.  A quantity of labour has no value, is not a commodity, but is that which transforms commodities into values, it is their common substance; as manifestations of it commodities are qualitatively equal and only quantitatively different.  They [appear] as expressions of definite quantities of social labour-time.

Let us assume that gold has an invariable value.  If the value of all commodities were then expressed in gold one could measure variations in the values of commodities by their gold prices.  But in order to express the value of commodities in gold, commodities and gold must be identical as values.  Gold and commodities can only be considered to be identical as definite quantitative expressions of this value, as definite magnitudes of value.  The invariable value of gold and the variable value of the other commodities would not prevent them, as value, from being the same, [Consisting of] the same substance.  Before the invariable value of gold can help us to make a step forward, the value of commodities must first be expressed, assessed, in gold—that is, gold and commodities must be represented as equivalents, as expressions of the same substance.

{In order that the commodities may be measured according to the quantity of labour embodied in them—and the measure of the quantity of labour is time—the different kinds of labour contained in the different commodities must be reduced to uniform, simple labour, average labour, ordinary, unskilled labour.  Only then can the amount of labour embodied in them be measured according to a common measure, according to time.  The labour must be qualitatively equal so that its differences become merely quantitative, merely differences of magnitude.  This reduction to simple, average labour is not, however, the only determinant of the quality of this labour to which as a unity the values of the commodities are reduced.  That the quantity of labour embodied in a commodity is the quantity socially necessary for its production—the labour-time being thus necessary labour-time—is a definition which concerns only the magnitude of value.  But the labour which constitutes the substance of value is not only uniform, simple, average labour; it is the labour of a private individual represented in a definite product.  However, the product as value must be the embodiment of social labour and, as such, be directly convertible from one use-value into all others. (<"tsv3p136">The particular use-value in which labour is directly represented is irrelevant so that it can be converted from one form into another.)  Thus the labour of individuals has to be directly represented as its opposite, social labour; this transformed labour is, as its immediate opposite, abstract, general labour, which is therefore represented in a general equivalent, only by its alienation does individual labour manifest itself as its opposite.  The commodity, however, must have this general expression before it is alienated.  This necessity to express individual labour as general labour is equivalent to the necessity of expressing a commodity as money.  The commodity receives this expression insofar as the money serves as a measure and expresses the value of the commodity in its price.  It is only through sale, through its real transformation into money, that the commodity acquires its adequate expression as exchange-value.  The first transformation is merely a theoretical process, the second is a real one.

||821| Thus, in considering the existence of the commodity as money, it is not only necessary to emphasise that in money commodities acquire a definite measure of their value—since all commodities express their value in the use-value of the same commodity—but that they all become manifestations of social, abstract, general labour; and as such they all possess the same form, they all appear as the direct incarnation of social labour and as such they all act as social labour, that is to say, they can be directly exchanged for all other commodities in proportion to the size of their value; whereas in the hands of the people whose commodities have been transformed into money, they exist not as exchange-value in the form of a particular use-value, but as use-value (gold, for example) which merely represents exchange-value.  A commodity may be sold either below or above its value.  This is purely a matter of the magnitude of its value.  But whenever a commodity is sold, transformed into money, its exchange-value acquires an independent existence, separate from its use-value.  The commodity now exists only as a certain quantity of social labour-time, and it proves that it is such by being directly exchangeable for any commodity whatsoever and convertible (in proportion to its magnitude) into any use-value whatsoever.  This point must not be overlooked in relation to money any more than the formal transformation undergone by the labour a commodity contains as its element of value.  But an examination of money—of that absolute exchangeability which the commodity possesses as money, of its absolute effectiveness as exchange-value <"tsv3p137">which has nothing to do with the magnitude of value—shows that it is not quantitatively, but qualitatively determined and that as a result of the very process through which the commodity itself passes, its exchange-value becomes independent, and is really represented as a separate aspect alongside its use-value as it is already nominally in its price.

This shows, therefore, that the “verbal observer” understands as little of the value and the nature of money as Bailey, since both regard the independent existence of value as a scholastic invention of economists.  This independent existence becomes even more evident in capital, which, in one of its aspects, can be called value in process—and since value only exists independently in money, it can accordingly be called money in process, as it goes through a series of processes in which it preserves itself, departs from itself, and returns to itself increased in volume.  It goes without saying that the paradox of reality is also reflected in paradoxes of speech which are at variance with common sense and with what vulgarians mean and believe they are talking of.  The contradictions which arise from the fact that on the basis of commodity production the labour of the individual presents itself as general social labour, and the relations of people as relations between things and as things—these contradictions are innate in the subject-matter, not in its verbal expressions.}

Ricardo often gives the impression, and sometimes indeed writes, as if the quantity of labour is the solution to the false, or falsely conceived problem of an “invariable measure of value” in the same way as corn, money, wages, etc., were previously considered and advanced as panaceas of this kind, In Ricardo’s work this false impression arises because for him the decisive task is the definition of the magnitude of value.  Because of this he does not understand the specific form in which labour is an element of value, and fails in particular to grasp that the labour of the individual must present itself as abstract general labour and, in this form, as social labour.  Therefore he has not understood that the development of money is connected with the nature of value and with the determination of this value by labour-time.

Bailey’s book has rendered a good service insofar as the objections he raises help to clear up the confusion between “measure of value” expressed in money as a commodity along with other commodities, and the immanent measure and substance of value.  But if he had analysed money as a “measure of value”, not only <"tsv3p138">as a quantitative measure but as a qualitative transformation of commodities, he would have arrived at a correct analysis of value.  Instead of this, he contents himself with a mere superficial consideration of the external “measure of value”—which already presupposes value—and remains rooted in a purely frivolous approach to the question.

||822| There are, however, occasional passages in Ricardo in which he directly emphasises that the quantity of labour embodied in a commodity constitutes the immanent measure of the magnitude of its value, of the differences in the amount of its value, only because labour is the factor the different commodities have in common, which constitutes their uniformity, their substance, the intrinsic foundation of their value.  The thing however he failed to investigate is the specific form in which labour plays that role.

“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” ([David Ricardo, The Principles of Political Economy, and Taxation,] third ed., 1821, p. 80).

Destutt de Tracy says that “To measure … is to find how many times they” (the things measured) “contain […] unities of the same description.  A franc is not a measure of value for any thing, but for a quantity of the same metal of which francs are made, unless francs, and the thing to be measured, can be referred to some other measure which is common to both.  This, I think, they can be, for they are both the result of labour; and, therefore” (because labour is their effective cause) “labour is a common measure, by which their real as well as their relative value may be estimated” (op. cit., pp. 333-34).

All commodities can be reduced to labour as their common element.  What Ricardo does not investigate is the specific form in which labour manifests itself as the common element of commodities.  That is why he does not understand money.  That is why in his work the transformation of commodities into money appears to be something merely formal, which does not penetrate deeply into the very essence of capitalist production.  He says however: only because labour is the common factor of commodities, only because they are all mere manifestations of the same common element, of labour, is labour their measure.  It is their measure only because it forms their substance as values.  Ricardo does not sufficiently differentiate between labour insofar as it is represented in use-values or in exchange-value.  Labour as the foundation of value is not any particular labour, with particular <"tsv3p139">qualities.  Ricardo continuously confuses the labour which is represented in use-value and that which is represented in exchange-value.  It is true that the latter species of labour is only the former species expressed in an abstract form.

By real value, Ricardo, in the passage cited above, understands the commodity as the embodiment of a definite amount of labour-time.  By relative value, he understands the labour-time the commodity contains expressed in the use-values of other commodities.

Now to Bailey.

Bailey clings to the form in which the exchange-value of the commodity—as commodity—appears, manifests itself.  It manifests itself in a general form when it is expressed in the use-value of a third commodity, in which all other commodities likewise express their value—a commodity which serves as money—that is, in the money price of the commodity.  It manifests itself in a particular form when the exchange-value of any particular commodity is expressed in the use-value of any other, that is, as the corn price, cotton price, etc.  In actual fact, the exchange-value of the commodity always appears, manifests itself with regard to other commodities, only in the quantitative relationship in which they exchange.  The individual commodity as such cannot express general labour-time, or it can only express it in its equation with the commodity which constitutes money, in its money price.  But then the value of commodity A is always expressed in a certain quantity of the use-value of the commodity which functions as money.

This is how matters appear directly.  And Bailey clings to this.  The most superficial form of exchange-value, that is the quantitative relationship in which commodities exchange with one another, constitutes, according to Bailey, their value.  The advance from the surface to the core of the problem is not permitted.  He even forgets the simple consideration that if y yards of linen equal x lbs. of straw, this [implies] a parity between two unequal things—linen and straw—making them equal magnitudes.  This existence of theirs as things that are equal must surely be different ||823| from their existence as straw and linen.  It is not as straw and linen that they are equated, but as equivalents.  The one side of the equation must, therefore, express the same value as the other.  The value of straw and linen must, therefore, be neither straw nor linen, but something common to both and different from both commodities considered as straw <"tsv3p140">and linen.  What is it?  He does not answer this question.  Instead, he wanders off into all the categories of political economy in order to repeat the same monotonous litany over and over again, namely, that value is the exchange relation of commodities and consequently is not anything different from this relation.

If the value of an object is its power of purchasing, there must be something to purchase.  Value denotes consequently nothing positive or intrinsic, but merely the relation in which two objects stand to each other as exchangeable commodities” ([Samuel Bailey, A Critical Dissertation an the Nature, Measures, and Causes of Value, London, 1825,] pp. 4-5).

His entire wisdom is, in fact, contained in this passage.  “If value is nothing but power of purchasing” (a very fine definition since “purchasing” presupposes not only value, but the representation of value as “money”), “it denotes”, etc.  However let us first clear away from Bailey’s proposition the absurdities which have been smuggled in.  “Purchasing” means transforming money into commodities.  Money already presupposes value and the development of value.  Consequently, out with the expression “purchasing” first of all.  Otherwise we are explaining value by value.  Instead of purchasing we must say “exchanging against other objects”.  It is quite superfluous to say that “there must be something to purchase”.  If the “object” was to be consumed by its producers as a use-value, if it was not merely a means of appropriating other objects, not a “commodity”, then obviously there could be no question of value.

First, it is a matter of objects.  But then the relation “in which two objects stand to each other” is transformed into “the relation in which two objects stand to each other as exchangeable commodities”.  After all, the objects stand only in relation of exchange or as exchangeable objects to each other.  That is why they are “commodities”, which is something different from “objects”.  On the other hand, the “relation of exchangeable commodities” is either nonsense, since “not exchangeable objects” are not commodities, or Mr. Bailey has beaten himself.  The objects are not to be exchanged in any arbitrary proportion, but are to be exchanged as commodities, that is, they are to stand to one another as exchangeable commodities, that is, as objects each of which has a value, and which are to be exchanged with one another in proportion to their equivalence.  Bailey thereby admits that the rate at which they are exchanged, that is, the power of each of the commodities to purchase the other, is determined <"tsv3p141">by its value, but this value however is not determined by this power, which is merely a corollary.

If we strip the passage of everything that is wrong, nonsensical or smuggled in, then it will read like this.

But wait: we must dispose of yet another snare and piece of nonsense.  We have two sorts of expression.  An object’s “power” of exchanging, etc. (since the term “purchasing” is unjustified and makes no sense without the concept of money), and the “relation in which” an object exchanges with others.  If “power” is to be regarded as something different from “relation”, then one ought not to say that “power of exchanging” is “merely the relation”, etc.  If it is meant to be the same thing, then it is confusing to describe the same thing with two different expressions which have nothing in common with each other.  The relation of a thing to another is a relation of the two things and cannot be said to belong to either.  Power of a thing, on the contrary, is something intrinsic to the thing, although this, its intrinsic quality, may only ||824| manifest itself in its relation to other things.  For instance, power of attraction is a power of the thing itself although that power is “latent” so long as there are no things to attract.  Here an attempt is made to represent the value of the “object” as something intrinsic to it, and yet as something merely existing as a “relation”.  That is why Bailey uses first the word “power” and then the word “relation”.

Accurately expressed it would read as follows:

If the value of an object is the relation in which it exchanges with other objects, value denotes, consequently” (viz., in consequence of the “if”), “nothing but the relation in which two objects stand to each other as exchangeable objects.”

Nobody will contest this tautology.  What follows from it, by the way, is that the “value” of an object “denotes nothing”.  For example, 1 lb. of coffee=4 lbs. of cotton.  What then is the value of 1 lb. of coffee?  4 lbs. of cotton.  And of 4 lbs. of cotton?  1 lb. of coffee, Since the value of 1 lb. of coffee is 4 lbs. of cotton, and, on the other hand, the value of 4 lbs. of cotton is 1 lb. of coffee, then it is clear that the value of 1 lb. of coffee is 1 lb. of coffee (since 4 lbs. of cotton=1 lb. of coffee), a=b, b=a, hence a=a.  What arises from this explanation is, therefore, that the value of a use-value is equal to a [certain] quantity of the same use-value.  Consequently, the value of 1 lb. of coffee is nothing else than 1 lb. of coffee.  If 1 lb. of coffee=4 lbs. of cotton, then it is <"tsv3p142">clear that 1 lb. of coffee > 3 lbs. of cotton and 1 lb. of coffee < 5 lbs. of cotton.  To say that 1 lb. of coffee > 3 lbs. of cotton and < 5 lbs. of cotton, expresses a relation between coffee and cotton just as well as saying that 1 lb. of coffee=4 lbs. of cotton.  The symbol = does not express any more of a relation than does the symbol > or the symbol <, but simply a different relation.  Why is it then precisely the relation represented by the sign of equality, by =, which expresses the value of the coffee in cotton and that of the cotton in coffee?  Or is this sign of equality the result of the fact that these two amounts exchange for one another at all?  Does this sign = merely express the fact of exchange?  It cannot be denied that if coffee exchanges for cotton in any proportion whatever, they are exchanged for one another, and if the mere fact of their exchange constitutes the relation between the commodities, then the value of the coffee is equally well expressed in cotton whether it exchanges for 2, 3, 4 or 5 lbs. of cotton.  But what is then the word “relation” supposed to mean?  Coffee in itself has no “intrinsic positive” quality which determines the rate at which it exchanges for cotton.  It is not a relation which is determined by any kind of determinant intrinsic to coffee and separate from real exchange.  What is then the purpose of the word “relation”?  What is the relation?  The quantity of cotton against which a quantity of coffee is exchanged.  Then one could not speak of a relation in which it exchanges but only of a relation in which it is or has been exchanged.  For if the relation were determined before the exchange, then the exchange would be determined by “the relation” and not the relation by the exchange.  We must therefore drop the relation as signifying something which stands over and above the coffee and the cotton and is distinct from them.

[Thus the passage from Bailey cited above takes the following form:]

If the value of an object is the quantity of another object exchanged with it, value denotes, consequently, nothing but the quantity of the other object exchanged with it.”

As a commodity, a commodity can only express its value in other commodities, since general labour-time does not exist for it as a commodity.  [Bailey believes that] if the value of one commodity is expressed in another commodity, the value of one commodity is nothing apart from this equation with another commodity.  Bailey flaunts this piece of wisdom tirelessly—<"tsv3p143">and all the more tiresomely.  As he conceives it, it is a tautology, for he says [in essence]: If the value of any commodity is nothing but its exchange relation with another commodity, it is nothing apart from this relation.

He reveals his philosophical profundity in the following passage:

“As we cannot speak of the distance of any object without implying some other object, between which and the former this relation exists, so we cannot speak of the value of a commodity but in reference to another commodity ||825| compared with it.  A thing cannot be valuable in itself without reference to another thing” (Is social labour, to which the value of a commodity is related, not another thing?)  “any more than a thing can be distant in itself without reference to another thing” (loc. cit., p. 5).

If[p] a thing is distant from another, the distance is in fact a relation between the one thing and the other; but at the same time, the distance is something different from this relation between the two things.  It is a dimension of space, it is a certain length which may as well express the distance of two other things besides those compared.  But this is not all.  If we speak of the distance as a relation between two things, we presuppose something “intrinsic”, some “property” of the things themselves, which enables them to be distant from each other.  What is the distance between the syllable A and a table?  The question would be nonsensical.  In speaking of the distance of two things, we speak of their difference in space.  Thus we suppose both of them to be contained in space, to be points of space.  Thus we equalise them as being both existences of space, and only after having them equalised sub specie spatii[q] we distinguish them as different points of space.  To belong to space is their unity.*

<"tsv3p144">But what is this unity of objects exchanged against each other?  This exchange is not a relation which exists between them as natural things.  It is likewise not a relation which they bear as natural things to human needs, for it is not the degree of their utility that determines the quantities in which they exchange.  What is therefore their identity, which enables them to be exchanged in certain proportions for one another?  As what do they become exchangeable?

In fact, in all this Bailey merely follows the author of the Verbal Observations.

“… it” (value) “cannot alter as to one of the objects compared, without altering as to the other…” (loc. cit., p. 5).

This again simply means that the expression of the value of one commodity in another commodity can only change as such an expression.  And the expression as such presupposes not one but two commodities.

Mr. Bailey is of the opinion that if one were to consider only two commodities—in exchange with one another—one would automatically discover the mere relativity of value, in his sense.  The fool.  As if it were not just as necessary to say, in connection with [two] commodities which exchange with one another—two products which are related to one another as commodities—in what they are identical, as it would be in the case of a thousand.  For that matter, if only two products existed, the products would never become commodities, and consequently the exchange-value of commodities would never evolve either.  The necessity for the labour in product I to manifest itself as social labour would not arise.  Because the product is not produced as an immediate object of consumption for the producers, but only as a bearer of value, as a claim, so to speak, to a certain quantity <"tsv3p145">of all materialised social labour, all products as values are compelled to assume a form of existence distinct from their existence as use-values, And it is this development of the labour embodied in them as social labour, it is the development of their value, which determines the formation of money, the necessity for commodities to represent themselves in respect of one another as money—which means merely as independent forms of existence of exchange-value—and they can only do this by setting apart one commodity from the mass of commodities, and all of them measuring their values in the use-value of this excluded commodity, thereby directly transforming the labour embodied in this exclusive commodity into general, social labour.

Mr. Bailey, with his queer way of thinking which only grasps the surface appearance of things, concludes on the contrary: Only because, besides commodities, money exists, and we are so used to regarding the value of commodities not in their relation to one another but as a relation to a third, as ||826| a third relation distinct from the direct relation, is the concept of value evolved—and consequently value is transformed from the merely quantitative relation in which commodities are exchanged for one another into something independent of this relation (and this, he thinks, transforms the value of commodities into something absolute, into a scholastic entity existing in isolation from the commodities).  According to Bailey, it is not the determination of the product as value which leads to the establishment of money and which expresses itself in money, but it is the existence of money which leads to the fiction of the concept of value.  Historically it is quite correct that the search for value is at first based on money, the visible expression of commodities as value, and that consequently the search for the definition of value is (wrongly) represented as a search for a commodity of “invariable value”, or for a commodity which is an “invariable measure of value”.  Since Mr. Bailey now demonstrates that money as an external measure of value—and expression of value—has fulfilled its purpose, even though it has a variable value, he thinks he has done away with the question of the concept of value—which is not affected by the variability of the magnitudes of value of commodities—and that in fact it is no longer necessary to attribute any meaning at all to value.  Because the representation of the value of a commodity in money—in a third, exclusive commodity—does not exclude variation in the value of this third commodity, because the problem of an “invariable <"tsv3p146">measure of value” disappears, the problem of the determination of value itself disappears.  Bailey carries on this insipid rigmarole for hundreds of pages, with great self-satisfaction.

The following passages, in which he constantly repeats the same thing, are, in part, illicitly copied from the “Verbal Disputes”.

Supposing that only two commodities existed, both exchangeable in proportion to the amount of labour [they contained], “If […] A should, at a subsequent period, require double the quantity of labour for its production, while B continued to require only the same, A would become of double value to B…  But although B continued to be produced by the same labour, it would not continue of the same value, for it would exchange for only half the quantity of A, the only commodity, by the supposition, with which it could be compared” (loc. cit., p. 6).

It is from this circumstance of constant reference to other commodities” (instead of regarding value merely as a relation between two commodities) “or to money, when we are speaking of the relation between any two commodities, that the notion of value, as something intrinsic and absolute, has arisen” (op. cit., p. 8).

“What I assert is, that if all commodities were produced under exactly the same circumstances, as for instance, by labour alone, any commodity, which always required the same quantity of labour, could not be invariable in value” <that is, invariable when its value is expressed in other commodities—a tautology> “while every other commodity underwent alteration” (op. cit., pp. 20-21).

Value is nothing intrinsic and absolute… (op. cit., p. 23).[r]

“It is impossible to designate, or express the value of a commodity, except by a quantity of some other commodity” (op. cit., p. 26).

(As impossible as it is to “designate” or “express” a thought except by a quantity of syllables.  Hence Bailey concludes that a thought is—syllables.)

“Instead of regarding value as a relation between two objects, they” (Ricardo and his followers) “seem to consider it as a positive result produced by a definite quantity of labour” (op. cit., p. 30).

“Because the values of A and B, according to their doctrine, are to each other as the quantities of producing labour, or … are determined by the quantities of producing labour, they appear to have concluded, that the value of A alone, without reference to any thing else, is as the quantity of its producing labour.  There is no meaning certainly in this last proposition…” (op. cit., pp. 31-32).

They speak of “value as a sort of general and independent property” (op. cit., p. 35).

“The value of a commodity must be its value in something” (loc. cit.).

<"tsv3p147">We can see why it is so important for Bailey to limit value to two commodities, to understand it as the relation between two commodities, But a difficulty now arises:

“The value of a commodity denoting its relation of exchange to some other commodity”

(what is in this context the purpose of the “relation ||827| of exchange”?  Why not its “exchange”? But at the same time exchange is intended to express a definite relation, not merely the fact of exchange, Hence value is equal to relation in exchange)

“… we may speak of it as money-value, corn-value, cloth-value, according to the commodity with which it is compared; and hence there are a thousand different kinds of value, as many kinds of value as there are commodities in existence, and all are equally real and equally nominal” (op. cit., p.39).

Here we have it.  Value equals price.  There is no difference between them.  And there is no “intrinsic” difference between money price and any other expression of price, although it is the money price and not the cloth price, etc., which expresses the nominal value, the general value of the commodity.

But although the commodity has a thousand different kinds of value, or a thousand different prices, as many kinds of value as there are commodities in existence, all these thousand expressions always express the same value.  The best proof of this is that all these different expressions are equivalents which not only can replace one another in this expression, but do replace one another in exchange itself.  This relation of the commodity, with the price of which we are concerned, is expressed in a thousand different “relations in exchange” to all the different commodities and yet always expresses the same relation.  Thus this relation, which remains the same, is distinct from its thousand different expressions, or value is different from price, and the prices are only expressions of value: money price is its general expression, other prices are particular expressions.  It is not even this simple conclusion that Bailey arrives at.  In this context Ricardo is not a fictionist but Bailey is a fetishist in that he conceives value, though not as a property of the individual object (considered in isolation), but as a relation of objects to one another, while it is only a representation in objects, an objective expression, of a relation between men, a social relation, the relationship of men to their reciprocal productive activity.

[β) Confusion with Regard to Profit and the Value of Labour]

[<"tsv3p148">Bailey says the following about the value of labour.]

“Hence Mr. Ricardo, ingeniously enough, avoids a difficulty, which, on a first view, threatens to encumber his doctrine, that value depends on the quantity of labour employed in production.  If this principle is rigidly adhered to, it follows, that the value of labour depends on the quantity of labour employed in producing it—which is evidently absurd.  By a dexterous turn, therefore, Mr. Ricardo makes the value of labour depend on the quantity of labour required to produce wages, or, to give him the benefit of his own language, he maintains, that the value of labour is to be estimated by the quantity of labour required to produce wages, by which he means, the quantity of labour required to produce the money or commodities given to the labourer.  This is similar to saying, that the value of cloth is to be estimated, not by the quantity of labour bestowed on its production, but by the quantity of labour bestowed on the production of the silver for which the cloth is exchanged” (op. cit., pp. 50-51).

This is a justified criticism of Ricardo’s mistake of making capital exchange directly with labour instead of with labour-power.  It is the same objection which we have already come across in another form.[s] Nothing else.  Bailey’s comparison cannot be applied to labour-power.  It is not cloth, but an organic product such as mutton, that he ought to compare with living lab our-power.  Apart from the labour involved in tending live-stock and that required for the production of their food, the labour required for their production is not to be understood as meaning the labour which they themselves perform in the act of consumption, the act of eating, drinking, in short, the appropriation of those products or means of subsistence.  It is just the same with labour-power.  [What does] the labour required for its production consist of?  Apart from the labour involved in developing a person’s labour—power, his education, his apprenticeship—and this hardly arises in relation to unskilled labour—its reproduction costs no labour apart from that involved in the reproduction of the means of subsistence which the labourer consumes.  The appropriation of these means of subsistence is not “labour”.  ||828| Any more than the labour contained in the cloth, in addition to the labour of the weaver and the labour which is contained in the wool, the dye-stuff, etc., comprises the chemical or physical action of the wool in absorbing the dye-stuff, <"tsv3p149">etc., an action which corresponds to the appropriation of the means of subsistence by the worker or the cattle.

Bailey then seeks to invalidate Ricardo’s law that the value of labour and profit stand in inverse proportion to one another.  He seeks, moreover, to invalidate that part of it which is correct.  Like Ricardo, he identifies surplus-value with profit.  He does not mention the one possible exception to this law, namely, when the working-day is lengthened and workers and capitalists share equally in that prolongation, but even then, since the value of the working power will be consumed more quickly—in fewer years—the surplus-value rises at the expense of the working-man’s life, and his working power depreciates in comparison with the surplus-value it yields to the capitalist.

Bailey’s reasoning is most superficial.  Its starting-point is his conception of value.  The value of the commodity is the expression of its value in a certain quantity of other values in use (the use-value of other commodities).  The value of labour is thus equal to the quantity of other commodities (use-values) for which it is exchanged.  (The real problem, how it is possible to express the value in exchange of A in the value in use of B—does not even occur to him.)  So long, therefore, as the worker receives the same quantity of commodities, the value of labour remains unchanged, because, as before, it is expressed in the same quantity of other useful things.  Profit, on the other hand, expresses a relation to capital, or else to the total product.  The portion received by the worker can, however, remain the same although the proportion received by the capitalist rises if the productivity of labour increases.  It is not clear why, in dealing with capital, we suddenly come to a proportion and of what use this proportion is supposed to be to the capitalist, since the value of what he receives is determined not by the proportion, but by its “expression in other commodities”.

The point he makes here has, in fact, already been mentioned by Malthus.[t] Wages are equal to a quantity of use-values.  Profit, on the other hand, is (but Bailey must avoid saying so) a relation of value.  If I measure wages according to use-value and profit according to exchange-value, it is quite evident that neither an inverse nor any other kind of relation exists between them, because I should then be comparing incommensurable magnitudes, things which have nothing in common.

<"tsv3p150">But what Bailey says here about the value of labour applies—according to his principle—to the value of every other commodity as well.  It is nothing but a certain quantity of other things exchanged against it.  If I receive 20 lbs. of twist for £1, then [according to this theory] the value of the £1 always remains the same, and will therefore be always paid, although the labour required to produce 1 lb. of twist can on one occasion be double that required on another.  The most ordinary merchant does not believe that he is getting the same value for his £1 when he receives 1 quarter of wheat for it in a period of famine and the same amount in a period of glut.  But the concept of value ends here.  And there remains only the unexplained and inexplicable fact that a quantity of A is exchanged against a quantity of B in an arbitrary proportion.  And whatever that proportion may be it is an equivalent.  Even Bailey’s formula, the value of A expressed in B, thus becomes quite meaningless.  If the value of A is expressed in B, the same value is supposed to be expressed, at one time in A, and at another time in B, so that, when it is expressed in B, the value of A remains the same as it was before.  But according to Bailey there is no value of A that could be expressed in B, because neither A nor B have a value apart from that expression.  The value of A expressed in B must be something quite different from the value of A in C, as different as B and C are.  It is not the same value, identical in both expressions, but there are two relations of A which have nothing in common with each other, and of which it would be nonsense to say that they are equivalent expressions.[u]

||829| “… a rise or fall of labour implies an increase or decrease in the quantity of the commodity given in exchange for it” (op. cit., p. 62).

Nonsense!  [From Bailey’s standpoint] there can be no rise or fall in the value of labour, nor in the value of any other thing.  For one A I get today 3 Bs, tomorrow 6 Bs and the day after tomorrow 2 Bs.  But [according to Bailey] in all these cases the value of A is nothing but the quantity of B for which it has been exchanged.  It was 3 Bs, it is now 6 Bs.  How can its value be said to have risen or fallen?  The A expressed in 3 Bs had a different value from that expressed in 6 Bs or 2 Bs.  But then it is not the identical A which at the identical time has been exchanged for <"tsv3p151">3 or 2 or 6 Bs.  The identical A at the identical time has always been expressed in the same quantity of B.  It is only with regard to different moments of time that it could be said the value of A had changed.  But it is only with “contemporaneous” commodities that A can be exchanged, and it is only the fact (not even the mere possibility of exchange) of exchange with other commodities which makes [according to Bailey] A a value.  It is only the actual “relation in exchange” which constitutes its value; and the actual “relation in exchange” can of course only take place for the same A at the identical time.  Bailey therefore declares the comparison of commodity values at different periods to be nonsense.  But at the same time he should also have declared the rise or fall of value—which is impossible if there is no comparison between the value of a commodity at one time and its value at another time—to be nonsense and consequently, also, the “rise or fall in the value of labour”.

“Labour is an exchangeable thing, or one which commands other things in exchange; but the term profits denotes only a share or proportion of commodities, not an article which can be exchanged against other articles.  When we ask whether wages have risen, we mean, whether a definite portion of labour exchanges for a greater quantity of other things than before” (loc. cit., pp. 62-63).

(Thus when corn becomes dearer, the value of labour falls because less corn is exchanged for it.  On the other hand, if cloth becomes cheaper at the same time, the value of labour rises simultaneously, because more cloth can be exchanged for it.  Thus the value of labour both rises and falls at the same time and the two expressions of its value—in corn and in cloth—are not identical, not equivalent, because its increased value cannot be equal to its reduced value.)

“… but when we ask whether profits have risen, we … mean … whether the gain of the capitalist bears a higher ratio to the capital employed…” (loc. cit., p. 63).

“… the value of labour does not entirely depend on the proportion of the whole produce which is given to the labourers in exchange for their labour, but also on the productiveness of […] labour” (loc. cit., pp. 63-64).

“The proposition, that when labour rises profits must fall, is true only when its rise is not owing to an increase in its productive powers” (loc. cit., p. 64).

“… if this productive power be augmented, that is, if the same labour produce more commodities in the same time, labour may rise in value without a fall, nay even with a rise of profits” (loc. cit., p. 66).

(Accordingly it can also be said of every other commodity that a rise in its value does not imply a fall in the value of the other <"tsv3p152">commodity with which it exchanges, nay, may even imply a rise in value on the other side.  For instance, supposing the same labour which produced 1 quarter of corn, now produces 3 quarters.  The 3 quarters cost £1, as the one quarter did before.  If 2 quarters are now exchanged for £1, the value of money has risen, because it is expressed in 2 quarters instead of one.  Thus the purchaser of corn gets a greater value for his money.  But the seller who sells for £1 what has cost him only 2/3 [of £1] gains 1/3.  And thus the value of his corn has risen at the same time that the money price of corn has fallen.)

||830| “Whatever the produce of the labour of six men might be, whether 100 or 200 or 300 quarters of corn, yet so long as the proportion of the capitalist was one-fourth of the produce, that fourth part estimated in labour would be invariably the same.”

(And so would the 3/4 of the produce accruing to the labourer, if estimated in labour.)

“Were the produce 100 quarters, then, as 75 quarters would be given to 6 men, the 25 accruing to the capitalist would command the labour of 2 men;”

(and that given to the labourers would command the labour of 6 men)

“if the produce were 300 quarters, the 6 men would obtain 225 quarters, and the 75 falling to the capitalist would still command 2 men and no more.”

(Likewise the 225 quarters falling to the 6 men would still command 6 men and no more.)  (Why does the almighty Bailey then forbid Ricardo to estimate the portion of the men, as well as that of the capitalist, in labour, and compare their mutual value as expressed in labour?)

“Thus a rise in the proportion which went to the capitalist would be the same as an increase of the value of profits estimated in labour,”

(How can he speak of the value of profits and an increase in their value, if “profit … does not denote an article which can be exchanged against other articles” (see above) and, consequently, denotes no “value”?  And, on the other hand, is a rise in the proportion which went to the capitalist possible without a fall in the proportion that goes to the labourer?)

“or, in other words, an increase in their power of commanding labour” (op. cit., p. 69).

(<"tsv3p153">And is this increase in the power of the capitalist to appropriate the labour of others not exactly identical with the decrease in the power of the labourer to appropriate his own labour?)

“Should it be objected to the doctrine of profits and the value of labour rising at the same time, that as the commodity produced is the only source whence the capita list and the labourer can obtain their remuneration, it necessarily follows that what one gains the other loses, the reply is obvious.  So long as the product continues the same, this is undeniably true; but it is equally undeniable, that if the product be doubled the portion of both may be increased, although the proportion of one is lessened and that of the other augmented” (loc. cit., p. 70).

(This is just what Ricardo says.  The proportion of both cannot increase, and if the portion of both increases, it cannot increase in the same proportion, as otherwise portion and proportion would be identical.  The proportion of the one cannot increase without that of the other decreasing.  However, that Mr. Bailey calls the portion of the labourer “value” of “wages”, and the proportion [of the capitalist] value of “profits”, in other words, that the same commodity has two values for him, one in the hands of the labourer, and the other in the hands of the capitalist, is nonsense of his own.)

“So long as the product continues the same, this is undeniably true; but it is equally undeniable, that if the product be doubled the portion of both may be increased, although the proportion of one is lessened and that of the other augmented.  Now it is an increase in the portion of the product assigned to the labourer which constitutes a rise in the value of his labour…”

(because here we understand by value a certain quantity of articles)

“… but it is an increase in the proportion assigned to the capitalist which constitutes a rise in […] profits,”

(because here we understand by value the same articles not estimated by their quantity, but by the labour worked up in them)

whence

(that is, because of the absurd use of two measures, in the one case articles, in the other case the value of the same articles)

“it clearly follows, that there is nothing inconsistent in the supposition of a simultaneous rise in both” (loc. cit., p. 70).

This absurd argument against Ricardo is quite ||831| futile since he merely declares that the value of the two portions must <"tsv3p154">rise and fall in inverse proportion to one another.  It merely amounts to a repetition by Bailey of his proposition that value is the quantity of articles exchanged for an article.  In dealing with profit he was bound to find himself in an embarrassing position.  For here, the value of capital is compared with the value of the product.  Here he seeks refuge in taking value to mean the value of an article estimated in labour (in the Malthusian manner).

“Value is a relation between contemporary commodities, because such only admit of being exchanged for each other; and if we compare the value of a commodity at one time with its value at another, it is only a comparison of the relation in which it stood at these different times to some other commodity” (op. cit., p. 72).

Consequently, as has been stated, value can neither rise nor fall, for this always involves comparing the value of a commodity at one time with its value at another.  A commodity cannot be sold below its value any more than above it, for its value is what it is sold for.  Value and market price are identical.  In fact one cannot speak either of “contemporary” commodities, or of present values, but only of past ones.  What is the value of 1 quarter of wheat?  The £1 for which it was sold yesterday.  For its value is only what one gets in exchange for it, and as long as it is not exchanged, its “relation to money” is only imaginary.  But as soon as the exchange has been transacted, we have £1 instead of the quarter of wheat and we can no longer speak of the value of the quarter of wheat.  In comparing values at different periods, Bailey has in mind merely academic researches into the different values of commodities, for example in the eighteenth and the sixteenth centuries.  There the difficulty arises from the fact that the same monetary expression of value—owing to the vicissitudes of the value of money itself—denotes different values [at different times].  The difficulty here lies in reducing the money price to value.  But what a fool he is!  Is it not a fact that, in the process of circulation or the process of reproduction of capital, the value of one period is constantly compared with that of another period, an operation upon which production itself is based?

Mr. Bailey does not understand at all what the expressions—to determine the value of commodities by labour-time or by the value of labour—mean.  He simply does not understand the difference.

“… I beg not to be understood as contending, either that the values of commodities are to each other as the quantities of labour necessary for their production, or that the values of commodities are to each other as the values <"tsv3p155">of the labour: all that I intend to insist upon is, that if the former is true, the latter cannot be false…” (op. cit., p. 92).

The determination of the value of commodities by the value of another commodity (and insofar as they are determined by the “value of labour”, they are determined by another commodity; for value of labour presupposes labour as a commodity) and its determination by a third entity, which has neither value nor is itself a commodity, but is the substance of value, and that which turns products into commodities, are for Bailey identical.  In the first case, it is a question of a measure of the value of commodities, that is, in fact, of money, of a commodity in which the other commodities express their value.  In order that this can happen, the values of the commodities must already be presupposed.  The commodity which measures as well as that to be measured must have a third element in common.  In the second case, this identity itself is first established; later it is expressed in the price, either money price or any other price.

Bailey identifies the “invariable measure of value” with the search for an immanent measure of value, that is, the concept of value itself.  So long as the two are confused it is even a reasonable instinct which leads to the search for an “invariable measure of value”.  Variability is precisely the characteristic of value.  The term “invariable” expresses the fact that the immanent measure of value must not itself be a commodity, a value, but rather something which constitutes value and which is therefore also the immanent measure of value.  Bailey demonstrates ||832| that commodity values can find a monetary expression and that, if the value relation of commodities is given, all commodities can express their value in one commodity, although the value of this commodity may change.  But it nevertheless always remains the same for the other commodities at a given time, since it changes simultaneously in relation to all of them.  From this he concludes that no value relation between commodities is necessary nor is there any need to look for one.  Because he finds it reflected in the monetary expression, he does not need to “understand” how this expression becomes possible, how it is determined, and what in fact it expresses.

These remarks, in general, apply to Bailey as they do to Malthus, since he believes that one is concerned with the same question, on the same plane, whether one makes quantity of labour or value of labour the measure of value.  In the latter case, one presupposes the values whose measure is being sought, that is <"tsv3p156">to say, their external measure, their representation as value.  In the first case one investigates the genesis and immanent nature of value itself.  In the second, the development of the commodity into money or the form which exchange-value acquires in the process of the exchange of commodities.  In the first, we are concerned with value, independent of this representation, or rather antecedent to this representation.  Bailey has this in common with the other fools: to determine the value of commodities means to find their monetary expression, an external measure of their value.  They say, however, impelled by an instinctive thought, that this measure then must have invariable value, and must itself therefore stand outside the category of value, whereas Bailey says that one does not need to understand it, since one does in fact find the expression of value in practice, and this expression itself has and can have variable value without prejudice to its function.

In particular, he himself has informed us that 100, 200 or 300 quarters can be the product of the labour of 6 men, that is, of the same quantity of labour, whereas “value of labour” only means for him the portion of the 100, 200 or 300 quarters which the 6 men receive.  This could be 50, 60 or 70 quarters per man.  The quantity of labour and the value of the same quantity of labour are therefore, according to Bailey himself, very different expressions.  And how can it be the same if the value is expressed first in one thing and then in something essentially different?  If the same labour which formerly produced 3 quarters of corn now produces 1 quarter, while the same labour which formerly produced 20 yards of cloth (or 3 quarters of corn) still produces 20 yards, then, reckoned according to labour-time, 1 quarter of corn is now equal to 20 yards of cloth, or 20 yards of cloth to 1 quarter of corn, and 3 quarters of corn equal 60 yards of cloth instead of 20.  Thus the values of the quarter of corn and the yard of linen have been altered relatively.  But they have by no means been altered according to the value of labour, for 1 quarter of corn and 20 yards of cloth remain the same use-values as before.  And it is possible that 1 quarter of corn does not command a larger quantity of labour than before.

If we take a single commodity, then Bailey’s assertion makes no sense whatever.  If the labour-time required for the production of shoes decreases and now only one-tenth of the labour-time formerly required is necessary, then the value of shoes drops to one-tenth of the former value; and this also holds true <"tsv3p157">when the shoes are compared with, or expressed in, other commodities, provided the labour required for their production has remained the same or has not decreased at the same rate.  Nevertheless, the value of labour—for example the daily wage in shoemaking as well as in all other industries—may have remained the same; or it may even have increased.  Less labour is contained in the individual shoe, hence also less paid labour.  But when one speaks of the value of labour, one does not mean that for one hour’s labour, i.e., for a smaller quantity of labour, less is paid than for a greater quantity.  Bailey’s proposition could have meaning only in relation to the total product of capital.  Suppose 200 pairs of shoes are the product of the same capital (and the same labour) which formerly produced 100 pairs.  In this case, the value of the 200 pairs is the same as [previously] that of 100 pairs.  And it could be said that the 200 pairs of shoes are to 1,000 yards of linen (say the product of £200 of capital) as the value of the labour set in motion by the two amounts of capital.  In what sense?  In the sense in which it would also apply ||833| to the relation of the individual shoe to the single yard of linen?

The value of labour is the part of the labour-time contained in a commodity which the worker himself appropriates; it is the part of the product in which the labour-time which belongs to the worker himself is embodied.  If the entire value of a commodity is reduced to paid and unpaid labour-time—and if the rate of unpaid to paid labour is the same, that is, if surplus-value constitutes the same proportion of total value in all commodities—then it is clear that if the ratio of one commodity to another is proportional to the total quantity of labour they contain, they must also represent equal proportionate parts of these total quantities of labour, and their ratio must therefore also be as that of the paid labour-time in one commodity to the paid labour-time in the other.

C [commodity]: C’=TLT (total labour-time [embodied in C]) to TLT’ (total labour-time [embodied in C’]).  TLT/x= the paid labour-time in C, and TLT’/x= the paid labour-time in C’, since it is presupposed that the paid labour-time in both commodities constitutes the same proportional part of the total labour-time.

C:C’=TLT : TLT’

<"tsv3p158">TLT : TLT’ = TLT/x:TLT’/x

therefore C : C’=TLT/x : TLT’/x

or the commodities are to one another as the quantities of paid labour-time contained in them, that is, as the values of the labour contained in them.

The value of labour is then, however, not determined in the way Bailey would like, but by the labour-time [contained in the commodity].

Further, disregarding the conversion of values into prices of production and considering only the values themselves, capitals consist of different proportions of variable and constant capital.  Hence, as far as values are concerned, the surplus-values are not equal, or the paid labour does not form the same proportion of the total labour advanced.

In general, wages—or values of labour—would here be indices of the values of commodities, not as values, not insofar as wages rise or fall, but insofar as the quantity of paid labour—represented by wages—contained in a commodity would be an index of the total quantity of the labour contained in the corresponding commodities.

In a word, the point is that, if the values of commodities are to one another as LT to LT’ (the amounts of labour-time contained in them), then their ratio is likewise as LT/x to LT’/x, i.e., the amounts of paid labour-time embodied in them, if the proportion of the paid labour-time to the unpaid is the same in all commodities, that is, if the paid labour-time is always equal to the total labour-time, whatever this may be, divided by x.  But the “if” does not correspond to the real state of affairs.  Supposing that the workers in different industries work the same amount of surplus labour-time, the relation of paid to actually employed labour-time is nevertheless different in different industries, because the ratio of immediate labour employed to accumulated labour employed is different.  [Let us take two capitals consisting] for example, the one of 50v [variable] and 50c [constant] and the other of 10v and 90c.  In both cases, let the unpaid labour amount to one-tenth.  [The value of] the first commodity would accordingly be 105, [of] the second 101.  The paid labour-time would be equal to one-half of the labour advanced in the first case, and only to one-tenth in the second.

||834|<"tsv3p159">Bailey says:

“… if commodities are to each other as the quantities, they must also be to each other as the va1ues of the producing labour; for the contrary would necessarily imply, that the two commodities A and B might be equal in value, although the value of the labour employed in one was greater or less than the value of the labour employed in the other; or that A and B might be unequal in value, if the labour employed in each was equal in value.  But this difference in the value of two commodities, which were produced by labour of equal value, would be inconsistent with the acknowledged equality of profits, which Mr. Ricardo maintains in common with other writers” (op. cit., pp. 79-80).

In this last phrase, Bailey stumbles unconsciously on a real objection to Ricardo, who directly identifies profit with surplus-value and values with cost-prices.  Correctly stated, it is-if the commodities are sold at their value, they yield unequal profits, for then profit is equal to the surplus-value embodied in them.  And this is correct.  But this objection does not refer to the theory of value, but to a blunder of Ricardo’s in applying this theory.

How little Bailey himself, in the above passage, can have correctly understood the problem, is shown in the following statement:

Ricardo on the other hand maintains “that labour may rise and fall in value without affecting the value of the commodity.  This is obviously a very different proposition from the other, and depends in fact on the falsity of the other, or on the contrary proposition” (loc. cit., p. 81).

The fool himself previously asserted that the result of the same labour may be 100, 200 or 300 quarters [of corn].  This determines the relation of a quarter to other commodities irrespective of the changing value of labour, that is, irrespective of how much of the 100, 200 or 300 quarters falls to the labourer himself.  The fool would have shown some consistency if he had said: the values of labour may rise or fall, nevertheless the values of commodities are as the values of labour, because—according to a false assumption—the rise or fall of wages is general, and the value of wages always forms the same proportionate part of the total quantity of labour employed.

[γ) Confusion of Value and Price.  Bailey’s Subjective Standpoint]

[Bailey says:]

“…the capability of expressing the values of commodities has nothing to do with the constancy of their values…”

<<"tsv3p160">Indeed not!  but it has much to do with first finding the value, before expressing it; finding in what way the values in use, so different from each other, fall under the common category and denomination of value, so that the value of one commodity may be expressed in the other>

“… either to each other or to the medium employed; neither has the capability of comparing these expressions of value anything to do with it.”

<If the values of different commodities are expressed in the same third commodity, however variable its value may be, it is of course very easy to compare these expressions, which already have a common denomination.>

“Whether A is worth 4 B or 6 B”

<the difficulty consists in equating A with a portion of B; and this is only possible if there exists a common element for A and B, or if A and B are different representations of the same element.  If all commodities are to be expressed in gold, or money, the difficulty remains the same.  There must be an element common to gold and to each of the other commodities>

“… and whether C is worth 8 B or 12 B, are circumstances which make no difference in the power of expressing the value of A and C in B, and certainly no difference in the power of comparing the value of A and C when expressed” (op. cit., pp. 104-05).

But how [is it possible] to express A in B or C?  In order to express “ them” in each other, or, what amounts to the same thing, to treat them as equivalent expressions of the same unity, A, B, C must all be considered as something different from what they are as things, as products, as values in use.  A=4 B.  Then the value of A is expressed in 4 B, and the value of 4 B in A, so that both sides express the same.  They are equivalents.  They are both equal expressions of value.  It would be the same if they were unequal ones or A greater than 4 B, A smaller than 4 B.  In all these cases they are, insofar ||835| as they are values, only different or equal in quantity, but they are always quantities of the same quality.  The difficulty is to find this quality.

“The requisite condition in the process is, that the commodities to be measured should be reduced to a common denomination

<for example, in order to compare a triangle with any of the other polygons it is only necessary to transform the latter into triangles, to express them in triangles.  But to do this the triangle and the polygon are in fact supposed to be something identical, different figures of the same thing—space>

“… which may be done at all times with equal facility; or rather it is ready done to our hands, since it is the prices of commodities which are recorded, or their relations in value to money” (op. cit., p. 112).

Estimating value is the same thing as expressing it…” (op. cit., p. 152).

We have the fellow here.  We find the values measured, expressed in the prices.  We can therefore [asserts Bailey] content ourselves with not knowing what value is.  He confuses the development of the measure of value into money and further the development of money as the standard of price with the discovery of the concept of value itself in its development as the immanent measure of commodities in exchange.  He is right in thinking that this money need not be a commodity of invariable value; from this he concludes that no separate determination of value independent of the commodity itself is necessary.

As soon as the value of commodities, as the element they have in common, is given, the measurement of their relative value and the expression of this value coincide.  But we can never arrive at the expression so long as we do not find the common factor, which is different from the immediate existence of the commodities.

This is shown by the very example he gives, the distance between A and B.[v] When one speaks of their distance one already presupposes that they are points (or lines) in space.  Having been reduced to points, and points of the same line, their distance may be expressed in inches, or feet, etc.  The element the two commodities A and B have in common is, at first sight, their exchangeability.  They are “exchangeable” objects.  As “exchangeable” objects they are magnitudes of the same denomination.  But this “their” existence as “exchangeable” objects must be different from their existence as values in use.  What is it?

Money is already a representation of value, and presupposes it.  As the standard of price money, for its part, already presupposes the (hypothetical) transformation of the commodity into money.  If the values of all commodities are represented in money prices, then one can compare them, they are in fact already compared.  But for the value to be represented as price, the value of commodities must have been expressed previously as money.  Money is merely the form in which the value of commodities <"tsv3p162">appears in the process of circulation.  But how can one express x cotton in y money?  This question resolves itself into this—how is it at all possible to express one commodity in another, or how to present commodities as equivalents?  Only the elaboration of value, independent of the representation of one commodity in another, provides the answer.

It is a “…  mistake …  that the relation of value can exist between commodities at different periods, which is in the nature of the case impossible; and if no relation exists there can be no measurement of it” (op. cit., p. 113).

We have already had the same nonsense before.[w] “The relation of value between commodities at different periods” already exists when money acts as means of payment.  The whole circulation process is a perpetual comparison of values of commodities at different periods.

“… if […] it” (money) “is not a good medium of comparison between commodities at different periods [it asserts] its incapability of performing a function in a case where there is no function for it to perform”[x] (op. cit., p. 118).

Money has this function to perform as means of payment and as treasure.

All this is simply copied from the “verbal observer” and in fact the secret of the whole nonsense oozes out in the following phrase which has also convinced me that the Verbal Observations,[y] which were very carefully concealed by Bailey, were used by him in the manner of a plagiarist.

||836| “Riches are the attribute of men, value is the attribute of commodities.  A man or a community is rich; a pearl or a diamond is valuable” (op. cit., p. 165).

A pearl or a diamond is valuable as a pearl or a diamond, that is, by their qualities, as values in use for men, that is, as riches.  But there is nothing in a pearl or a diamond by which a relation of exchange between them is given, etc.

Bailey now becomes a profound philosopher:

Difference between labour as cause and measure, and in general between cause and measure of value (op. cit., p. 170 et seq.).[z]

<"tsv3p163">There is, in actual fact, a very significant difference (which Bailey does not notice) between “measure” (in the sense of money) and “cause of value”.  The “cause” of value transforms use-values into value.  The external measure of value already presupposes the existence of value.  For example, gold can only measure the value of cotton if gold and cotton—as values—possess a common factor which is different from both.  The “cause” of value is the substance of value and hence also its immanent measure.

“Whatever circumstances … act with assignable influence, whether mediately or immediately, on the mind in the interchange of commodities, may be considered as causes of value” (op. cit., pp. 182-83).

This in fact means nothing more than: the cause of the value of a commodity or of the fact that two commodities are equivalent are the circumstances which cause the seller, or perhaps both the buyer and the seller, to consider something to be the value or the equivalent of a commodity.  The “circumstances” which determine the value of a commodity are by no means further elucidated by being described as circumstances which influence the “mind” of those engaging in exchange, as circumstances which, as such, likewise exist (or perhaps they do not, or perhaps they are incorrectly conceived) in the consciousness of those engaging in exchange.

These same circumstances (independent of the mind, but influencing it), which compel the producers to sell their products as commodities—circumstances which differentiate one form of social production from another—provide their products with an exchange-value which (also in their mind) is independent of their use-value.  Their “mind”, their consciousness, may be completely ignorant of, unaware of the existence of, what in fact determines the value of their products or their products as values.  They are placed in relationships which determine their thinking but they may not know it.  Anyone can use money as money without necessarily understanding what money is.  Economic categories are reflected in the mind in a very distorted fashion.  He [Bailey] transfers the problem into the sphere of consciousness, because his theory has got stuck.

Instead of explaining what he himself understands by “value” (or “cause of value”) Bailey tells us that it is something which buyers and sellers imagine in the act of exchange.

In fact, however, the following considerations are the basis of the would-be philosophical proposition.

<"tsv3p164">1) The market price is determined by various circumstances which express themselves in the relation of demand and supply and which, as such, influence “the mind” of the operators on the market.  This is a very important discovery!

2)  In connection with the conversion of commodity values into cost-prices, “various circumstances” are taken into account which as “reasons for compensation” influence the mind or are reflected in the mind.  All these reasons for compensation, however, affect only the mind of the capitalist as capitalist and stem from the nature of capitalist production itself, and not from the subjective notions of buyers and sellers.  In their mind they exist rather as self-evident “eternal truths”.

Like his predecessors, Bailey catches hold of Ricardo’s confusion of values and cost-prices in order to prove that value is not determined by labour, because cost-prices are deviations from values.  Although this is quite correct in relation to Ricardo’s identification [of values with cost-prices], it is incorrect as far as the question itself is concerned.

In this context, Bailey quotes first from Ricardo himself about the change in the relative values of ||837| commodities in consequence of a rise in the value of labour.  He quotes further the “effect of time” (different times of production though the labour-time remains unchanged), the same case which aroused scruples in Mill.[aa] He does not notice the real general contradiction—the very existence of an average rate of profit, despite the different composition of capital [in different industries], its different times of circulation, etc.  He simply repeats the particular forms in which the contradiction appears, and which Ricardo himself—and his followers—had already noticed.  Here he merely echoes what has been previously said but does not advance criticism a step forward.

He emphasises further that the costs of production are the main cause of “value”, and therefore the main element in value.  However, he stresses correctly—as was done [by other writers] after Ricardo—that the concept of production costs itself varies.  He himself in the last analysis expresses his agreement with Torrens that value is determined by the capital advanced, which is correct in relation to cost-prices but meaningless if it is not evolved on the basis of value itself, that is, if the value of a commodity <"tsv3p165">is to be derived from a more developed relationship, the value of capital, and not the other way round.

His last objection is this: The value of commodities cannot be measured by labour-time if the labour-time in one trade is not the same as in the others, so that the commodity in which, for example, 12 hours of an engineer’s labour is embodied has perhaps twice the value of the commodity in which 12 hours of the labour of an agricultural labourer is embodied.  What this amounts to is the following: A simple working-day, for example, is not a measure of value if there are other working-days which, compared with days of simple labour, have the effect of composite working-days.  Ricardo showed that this fact does not prevent the measurement of commodities by labour-time if the relation between unskilled and skilled labour is given.  He has indeed not described how this relation develops and is determined.  This belongs to the definition of wages, and, in the last analysis, can be reduced to the different values of labour power itself, that is, its varying production costs (determined by labour-time).

The passages in which Bailey expresses what has been summarised above are:

“It is not, indeed, disputed, that the main circumstance, which  determines the quantities in which  articles of this class” (that is, where no monopoly exists and where it is possible to increase output by expanding industry)

“are exchanged, is the cost of production; but our best economists do not exactly agree on the meaning to be attached to this term; some contending that the quantity of labour expended on the production of an article constitutes its cost; others, that the capital employed upon it is entitled to that appellation” (op. cit., p. 200).

“What the labourer produces without capital, costs him his labour; what the capitalist produces costs him his capital” (p. 201).

(This is the factor which determines Torrens’s views.  The labour which the capitalist employs, costs him nothing apart from the capital he lays out in wages.)

“ … the mass of commodities are determined in value by the capital expended upon them”  (p. 206).

[Bailey raises the following objections] to the determination of the value of commodities simply by the quantity of labour contained in them:

“Now this cannot be true if we can find any instances of the following nature: 1) Cases in which two commodities have been produced by an equal quantity of labour, and yet sell for different quantities of money.  2) Cases in which two commodities, once equal in value, have become unequal in <"tsv3p166">value, without any change in the quantity of labour respectively employed in each” (p. 209).

“It is no answer” (with regard to cases of the first kind) “to say, with Mr. Ricardo, that ‘the estimation in which different qualities of labour are held, comes soon to be adjusted in the market with sufficient precision for all practical purposes’; or with Mr. Mill, that ‘in estimating equal quantities of labour, an allowance would, of course, be included for different degrees of hardness and skill’.  Instances of this kind entirely destroy the integrity of the rule” (p. 210).

“There are only two possible methods of comparing one quantity of labour with another; one is to compare them by the time expended, the other by the results produced” (the latter is done in the piece-rate system).  “The former is applicable to all kinds of labour; the latter can be used only in comparing labour bestowed on similar articles.  If therefore, in estimating two different sorts of work, the time spent will not determine the proportion between the ||839| quantities of labour, it must remain undetermined and undeterminable” (p. 215).

With reference to 2: “Take any two commodities of equal value, A and B, one produced by fixed capital and the other by labour, without the intervention of machinery; and suppose, that without any change whatever in the fixed capital or the quantity of labour, there should happen to be a rise in the value of labour; according to Mr. Ricardo’s own showing, A and B would be instantly altered in their relation to each other; that is, they would become unequal in value” (pp. 215-16).

“To these cases we may add the effect of time on value.  If a commodity take more time than another for its production, although no more capital and labour, its value will be greater.  The influence of this cause is admitted by Mr. Ricardo, but Mr. Mill contends…” and so on (loc. cit. [p. 217]).

Finally Mr. Bailey remarks, and this is the only new contribution he makes in this respect:

“… although we have arranged commodities under three divisions,”[bb]  <this, i.e., the three divisions, is again taken from the author of the Verbal Observations> (these three divisions depend on the existence of absolute monopoly, limited monopoly, as is the case with corn, or completely free competition) “yet they are all, not only promiscuously exchanged for each other, but blended in production.  A commodity, therefore, may owe part of its value to monopoly, and part to those causes which determine the value of unmonopolised products.  An article, for instance, may be manufactured amidst the freest competition out of a raw material, which a complete monopoly enables its producer to sell at six times the actual cost” (p. 223).

“In this case it is obvious, that although the value of the article might be correctly said to be determined by the quantity of capital expended upon it by the manufacturer, yet no analysis could possibly resolve the value of the capital into quantity of labour” (pp. 223-24).

This remark is correct.  But monopoly does not concern us here, where we are dealing with two things only, value and <"tsv3p167">cost-price.  It is clear that the conversion of value into cost-price works in two ways.  First, the profit which is added to the capital advanced may be either above or below the surplus-value which is contained in the commodity itself, that is, it may represent more or less unpaid labour than the commodity itself contains.  This applies to the variable part of capital and its reproduction in the commodity.  But apart from this, the cost-price of constant capital—or of the commodities which enter into the value of the newly produced commodity as raw materials, auxiliary materials and machinery [or] labour conditions—may likewise be either above or below its value.  Thus the commodity comprises a portion of the price which differs from value, and this portion is independent of the quantity of labour newly added, or of the labour whereby these conditions of production with given cost-prices are transformed into a new product.  It is clear that what applies to the difference between the cost-price and the value of the commodity as such—as a result of the production process—likewise applies to the commodity insofar as, in the form of constant capital, it becomes an ingredient, a pre-condition, of the production process.  Variable capital, whatever difference between value and cost-price it may contain, is replaced by a certain quantity of labour which forms a constituent part of the value of the new commodity, irrespective of whether its price expresses its value correctly or stands above or below the value.  On the other hand, the difference between cost-price and value, insofar as it enters into the price of the new commodity independently of its own production process, is incorporated into the value of the new commodity as an antecedent element.

The difference between the cost-price and the value of the commodity is thus brought about in two ways: by the difference between the cost-price and the values of commodities which constitute the pre-conditions of the process of production of the new commodity; by the difference between the surplus-value which is really added to the conditions of production and the profit which is calculated [on the capital advanced].  But every commodity which enters into another commodity as constant capital, itself emerges as the result, the product, of another production process.  And so the commodity appears alternately as a pre-condition for the production of other commodities and as the result of a process in which the existence of other commodities is the pre-condition for its own production.  In agriculture (<"tsv3p168">cattle-breeding), the same commodity appears at one point of time as a product and at another as a condition of production.

This important deviation of cost-prices from values brought about by capitalist production does not alter the fact that cost-prices continue to be determined by values.

<"vol32-p353"> 

4.  McCulloch

[a) Vulgarisation and Complete Decline of the Ricardian System under the Guise of Its Logical Completion.  Cynical Apologia for Capitalist Production.  Unprincipled Eclecticism]

||840| McCulloch, the vulgariser of Ricardian political economy and simultaneously the most pitiful embodiment of its decline.

He vulgarises not only Ricardo but also James Mill.

He is moreover a vulgar economist in everything and an apologist for the existing state of affairs.  His only fear, driven to ridiculous extremes, is the tendency of profit to fall; he is perfectly contented with the position of the workers, and in general, with all the contradictions of bourgeois economy which weigh heavily upon the working class.  Here everything is green.  He even knows that

“the introduction of machines into any employment necessarily occasions an equal or greater demand for the disengaged labourers in some other employment” [J. R. McCulloch, The Principles of Political Economy, Edinburgh, 1825, pp. 181-82; quoted by Cazenove in Outlines of Political Economy, London, 1832, pp. 119-20].

In this question he deviates from Ricardo, and in his later writings, he also becomes very mealy-mouthed about the landowners.  But his whole tender anxiety is reserved for the poor capitalists, in view of the tendency of the rate of profit to fall.

Mr. McCulloch, unlike other exponents of science, seems to look not for characteristic differences, but only “for resemblances; and proceeding upon this principle, he is led to confound material with immaterial objects; productive with unproductive labour; capital with revenue; the food of the labourer with the labourer himself; production with consumption; and labour with profits”[cc] (T. R. Malthus, Definitions in Political Economy, London, 1827, pp. 69-70).

“<"tsv3p169">Mr. McCulloch, in his Principles of Political Economy, divides value into real and exchangeable;[dd] the former, he says, (page 225)[ee] is dependent on the quantity of labour required for the production of any commodity,[ff] and the latter on the quantity of labour, or of any other commodity, for which it will exchange; and these two values are, he says, (page 215), identical, in the ordinary state of things, that is, when the supply of commodities in the market is exactly proportioned to the effectual demand for them.  Now, if they be identical, the two quantities of labour which he refers to must be identical also; but, at page 221, he tells us that they are not, for that the one includes profits, while the other excludes them” ( [John Cazenove,] Out- lines of Political Economy, London, 1832, p. 25).

McCulloch says [in a note] on page 221 of his Principles of Political Economy:

“In point of fact, it” (the commodity) “will always exchange for more”<labour than has been required for its production> “and it is this excess that constitutes profits.”

This is a brilliant example of the methods used by this arch-humbug of a Scotsman.

The arguments of Malthus, Bailey, etc., compel him to differentiate between real value and exchangeable or relative value.  But he does so, basically, in the way he finds the difference dealt with by Ricardo.  Real value means the commodity examined with regard to the labour required for its production; relative value implies the consideration of the proportions of different commodities which can be produced in the same amount of time, which are consequently equivalents, and the value of one of which can therefore be expressed in the quantity of use-value of the other which costs the same amount of labour-time.  The relative value of commodities, in this Ricardian sense, is only another expression for their real value and means nothing more than that the commodities exchange with one another in proportion to the labour-time embodied in them, in other words, that the labour-time embodied in both is equal.  If, therefore, the market price of a commodity is equal to its exchange-value (as is the case when supply and demand are in equilibrium), then the commodity bought contains as much labour as that <"tsv3p170">which is sold.  It merely realises its exchange-value, or it is only sold at its exchange-value when one receives the same amount of labour in exchange for it as one hands over.

McCulloch relates all this, correctly repeating what has already been said.  But he goes too far here since the Malthusian definition of exchange-value—the quantity of wage-labour which a commodity commands—already sticks in his throat.  He therefore defines relative value as the “quantity of labour, or of any other commodity, for which it” (a commodity) “will exchange”.  Ricardo, in dealing with relative value, always speaks only of commodities and does not include labour, since in the exchange of commodities a profit is only realised because in the exchange between commodity and labour unequal quantities of labour are exchanged.  By putting the main emphasis right at the beginning of his book on the fact that the determination of the value ||841| of a commodity by the labour-time embodied in it differs immensely from the determination of this value by the quantity of labour which it can buy, Ricardo, on the one hand, establishes the difference between the quantity of labour contained in a commodity and the quantity of labour which it commands.  On the other hand, he excludes the exchange of commodity and labour from the relative value of a commodity.  For if a commodity is exchanged for a commodity, equal quantities of labour are exchanged; but if a commodity is exchanged for labour, unequal quantities of labour are exchanged, and capitalist production rests on the inequality of this exchange.  Ricardo does not explain how this exception fits in with the concept of value.  This is the reason for the arguments amongst his followers.  But his instinct is sound when he makes the exception.  (In actual fact, there is no exception; it exists only in his formulation.)  Thus McCulloch goes farther than Ricardo and is apparently more consistent than he.

There is no flaw in his system; it is all of a piece.  Whether a commodity is exchanged for a commodity or for labour, this ratio of exchange is the relative value of the commodity.  And if the commodities exchanged are sold at their value (i.e., if demand and supply coincide), this relative value is always the expression of the real value.  That is, there are equal quantities of labour at both poles of the exchange.  Thus “in the ordinary state of things” a commodity only exchanges for a quantity of wage-labour equal to the quantity of labour contained in it.  The workman receives in wages just as much materialised labour <"tsv3p171">as he gives back to capital in the form of immediate labour.  With this the source of surplus-value disappears and the whole Ricardian theory collapses.

Thus Mr. McCulloch first destroys it under the appearance of making it more consistent.

And what next?  He then flits shamelessly from Ricardo to Malthus, according to whom the value of a commodity is determined by the quantity of labour which it buys and which must always be greater than that which the commodity itself contains.  The only difference is that in Malthus this is plainly stated to be what it is, opposition to Ricardo, and Mr. McCulloch adopts this opposite viewpoint after he has adopted the Ricardian formula with an apparent consistency (that is, with the consistency of incogitancy) which destroys the whole sense of the Ricardian theory.  McCulloch therefore does not understand the essential kernel of Ricardo’s teaching—how profit is realised because commodities exchange at their value—and abandons it.  Since exchangeable value—which “in the ordinary state of […] the market” is, according to McCulloch, equal to the real value but “in point of fact” is always greater, since profit is based on this surplus (a fine contradiction and a fine discourse based on a “point of fact”)—is “the quantity of labour, or of any other commodity”, for which the commodity is exchanged, hence what applies to “labour” applies to “any other commodity”.  This means that the commodity is not only exchanged for a greater amount of immediate labour than it itself contains, but for more materialised labour in the other commodities than it itself contains; in other words, profit is “profit upon expropriation” and with this we are back again amongst the Mercantilists.  Malthus draws this conclusion.  With McCulloch this conclusion follows naturally but with the pretence that this constitutes an elaboration of the Ricardian system.

And this total decline of the Ricardian system into twaddle—a decline which prides itself on being its most consistent exposition—has been accepted by the mob, especially by the mob on the Continent (with Herr Roscher naturally amongst them), as the conclusion of the Ricardian system carried too far, to its extreme limit; they thus believe Mr. McCulloch that the Ricardian mode of “coughing and spitting”, which he uses to conceal his helpless, thoughtless and unprincipled eclecticism, is in fact a scientific attempt to set forth Ricardo’s system consistently.

McCulloch is simply a man who wanted to turn Ricardian <"tsv3p172">economics to his own advantage—an aim in which he succeeded in a most remarkable degree.  In the same way Say used Smith, but Say at least made a contribution by bringing Smith’s theories into a certain formal order and, apart from misconceptions, he occasionally also ventured to advance theoretical objections.  Since McCulloch first obtained a professorial chair in London on account of Ricardian economics, in the beginning he had to come forward as a Ricardian and especially to participate in the struggle against the landlords.  As soon as he had obtained a foothold and climbed to a position on Ricardo’s shoulders, ||842| his main effort was directed to expounding political economy, especially Ricardian economics, within the framework of Whiggism and to eliminate all conclusions which were distasteful to the Whigs.  His last works on money, taxes, etc., are mere pleas on behalf of the Whig Cabinet of the day.  In this way the man secured lucrative jobs.  His statistical writings are merely catch-penny efforts.  The incogitant decline and vulgarisation of the theory likewise reveal the fellow himself as a vulgarian, a matter to which we shall have to return before we have done with that speculating Scotsman.

In 1828 McCulloch published Smith’s Wealth of Nations, and the fourth volume of this edition contains his own “notes” and “dissertations” in which, to pad out the volume, he reprints in part some mediocre essays which he had published previously, e.g., on “entail”, and which have absolutely nothing to do with the matter, and in part, his lectures on the history of political economy repeated almost verbatim; he himself says that he “largely draws upon them”; in part, however, he tries in his own way to assimilate the new ideas advanced in the interim by Mill and by Ricardo’s opponents.

In his Principles of Political Economy, Mr. McCulloch presents us with nothing more than a copy of his “notes” and “dissertations” which he had already copied from his earlier “scattered manuscripts”.  But things turned out slightly worse in the Principles, for inconsistencies are of less importance in notes than in an allegedly methodical treatment.  Thus the passages quoted above, though they are, in part, taken verbatim from the “notes”, look rather less inconsistent in these “notes” than they do in the Principles.  <In addition the Principles contain plagiarisms of Mill amplified by absurd illustrations, and reprints of articles on corn trade, etc., which he has repeatedly published, maybe verbatim, under twenty different <"tsv3p173">titles in different periodicals, often even in the same periodical at different periods.>

In the above-mentioned Volume IV of his edition of Adam Smith (London, 1828), Mac says (he repeats the same thing word for word in his Principles of Political Economy but without making the distinctions which he still felt to be necessary in the “notes”):

“… it is necessary to distinguish between the exchangeable value, and the real or cost value of commodities or products.  By the first, or the exchange able value of a   commodity or product, is meant its power or capacity of exchanging either for other commodities or for labour; and by the second, or its real or cost value, is meant the quantity of labour which it required for its production or appropriation, or rather the quantity which would be required for the production or appropriation of a similar commodity at the time when the investigation is made” ([J. R. McCulloch in: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Vol. IV, London, 1828,] pp. 85-86 [Note II]).

“A commodity produced by a certain quantity of labour will” <when the supply of commodities is equal to the effectual demand> “uniformly exchange for, or buy any other commodity produced by the same quantity of labour.  It will never, however, exchange for, or buy exactly the same quantity of labour that produced it; but though it will not do this, it will always exchange for, or buy the same quantity of labour as any other commodity produced under the same circumstances, or by means of the same quantity of labour, as itself” (op. cit., pp. 96-97).

In point of fact” (this phrase is repeated literally in the Principles, since, in point of fact, this “in point of fact” constitutes the whole of his deduction), “it” (the commodity) “will always exchange for more” (viz., for more labour than that by which it was produced) “and it is this excess that constitutes profits.  No capitalist could have any motive” (as if the “motive” of the buyer was the point in question when dealing with the exchange of commodities and the investigation of their value) “to exchange the produce of a given quantity of labour already performed ||843| for the produce of the same quantity of labour to be performed.  This would be to lend” (“to exchange” would be “to lend”) “without receiving any interest on the loan” (loc. cit., p. 96 [note to Note II]).

Let us start at the end.

If the capitalist did not get back more labour than the amount he advances in wages, he would “lend” without receiving a “profit”.  What has to be explained is how profit is possible if commodities (labour or other commodities) are exchanged at their value.  And the answer is that no profit would be possible if equivalents were exchanged.  It is assumed, first of all, that capitalist and worker “exchange”.  And then, in order to explain profit, it is assumed that they do “not” exchange, but that one of the parties lends (i.e., gives commodities) and the other borrows, that is, pays only after he has received the commodities. <"tsv3p174">In other words, in order to explain profit, it is said that the capitalist secures “no interest” if he makes no profit.  This is [putting] the thing wrongly.  The commodities in which the capitalist pays wages and the commodities which he gets back as a result of the labour, are different use-values.  He does not therefore receive back what he advanced, any more than he does when he exchanges one commodity for another.  Whether he buys another commodity, or whether he buys the specific [commodity] labour which produces the other commodity for him, amounts to the same.  For the use-value he advances he receives back another use-value, as happens in all exchanges of commodities.  If, on the other hand, one pays attention only to the value of the commodity, then it is no longer a contradiction to exchange “a given quantity of labour already performed” for “the same quantity of labour to be performed” (although the capitalist in fact pays only after the labour has been performed), nor is it a contradiction to exchange a quantity of labour performed for the same quantity of labour performed.  This latter is an insipid tautology.  The first part of the passage implies that “the labour to be performed” will be embodied in a use-value different from that in which the labour performed is embodied.  In this case there is thus a difference [between the objects to be exchanged] and, consequently, a motive for exchange arising out of the relationship itself, but this is not so in the other case, since A only exchanges for A insofar as in this exchange it is a matter of the quantity of labour.  This is why Mr. Mac has recourse to the motive.  The motive of the capitalist is to receive back a greater “quantity of labour” than he advances.  Profit is here explained by the fact that the capitalist has the motive to make “profit”.  But the same thing can be said about the sale of goods by the merchant and about every sale of commodities not for consumption but for gain.  The seller has no motive to exchange a quantity of performed labour for the same quantity of performed labour.  His motive is to get in return more performed labour than he gives away.  Hence he must get more performed labour in the form of money or commodities than he gives away in the form of a commodity or of money.  He must, therefore, buy cheaper than he sells, and sell dearer than he has bought.  Profit upon alienation is thus explained, not by the fact that it corresponds to the law of value, but by declaring that buyers and sellers have no “motive” for buying and selling in accordance with the law of value.  This is Mac’s <"tsv3p175">first “sublime” discovery, it fits beautifully into the Ricardian system, which seeks to show how the law of value asserts itself despite the “motives” of seller and buyer.

||844| For the rest, Mac’s presentation in the “notes” differs from the one in the Principles only in the following:

In the Principles he makes a distinction between “real value” and “relative value” and says that both are equal “under ordinary circumstances” but “in point of fact” they cannot be equal if there is to be a profit.  He therefore says merely that the “fact” contradicts the “principle”.

In the “notes” he distinguishes three sorts of value: “real value”, the “relative value” of a commodity in its exchange with other commodities, and the relative value of a commodity exchanged with labour.  The “relative value” of a commodity in its exchange with another commodity is its real value expressed in another commodity, or in an “equivalent”.  On the other hand, its relative value in exchange with labour is its real value expressed in another real value that is greater than itself.  That means, its value is the exchange with a greater value, with a non-equivalent.  If it were exchanged for an equivalent in labour, then there would be no profit.  The value of a commodity in its exchange with labour is a greater value.

Problem: The Ricardian definition of value conflicts with the exchange of commodities with labour.

Mac’s solution: In the exchange of a commodity with labour the law of value does not exist, but its contrary.  Otherwise profit could not be explained.  Profit for him, the Ricardian, is to be explained by the law of value.

Solution: The law of value (in this case) is profit.  “In point of fact” Mac only reiterates what the opponents of the Ricardian theory say, namely, that there would be no profit if the law of value applied to exchange between capital and labour.  Consequently, they say, the Ricardian theory of value is invalid.  He [McCulloch] says that in this case, which he must explain by the Ricardian law, the law does not exist and that in this case “value” “means” something else.

From this it is obvious how little he understands of the Ricardian law.  Otherwise he would have had to say that profit arising in exchange between commodities which are exchanged in proportion to the labour-time [embodied in them], is due to the fact that “unpaid” labour is contained in the commodities.  In other words, the unequal exchange between capital and <"tsv3p176">labour explains the exchange of commodities at their value and the profit which is realised in the course of this exchange.  Instead of this he says: Commodities which contain the same amount of labour-time command the same amount of surplus labour, which is not contained in them.  He believes that in this way he has reconciled Ricardo’s propositions with those of Malthus, by establishing an identity between the determination of the value of commodities by labour-time and the determination of the value of commodities by their command over labour.  But what does it mean when he says that commodities which contain the same amount of labour-time command the same amount of surplus labour in addition to the labour contained in them?  It means nothing more than that a commodity in which a definite amount of labour-time is embodied commands a definite quantity of surplus labour [that is, more labour] than it itself contains.  That this applies not only to commodity A, in which x hours of labour-time are embodied, but also to commodity B, in which x hours of labour-time are likewise embodied, follows by definition from the Malthusian formula itself.

The contradiction is therefore solved by Mac in this way: If the Ricardian theory of value were really a valid one, then profit, and consequently capital and capitalist production, would be impossible.  This is exactly what Ricardo’s opponents assert.  And this is what Mac answers them, how he refutes them.  And in so doing, he does not notice the beauty of an explanation of exchangeable value in [exchange with] labour which amounts to saying that value is exchange for something which has no value.

[b) Distortion of the Concept of Labour Through Its Extension to Processes of Nature.  Confusion of Exchange-Value and Use-Value]

||845| After Mr. Mac has thus abandoned the basis of Ricardian political economy, he proceeds even further and destroys the basis of this basis.

The first difficulty in the Ricardian system was [to present] the exchange of capital and labour so that it corresponded to the “law of value”.

The second difficulty was that capitals of equal magnitude, no matter what their organic composition, yield equal profits or the general rate of profit.  This is indeed the unrecognised problem of how values are converted into cost-prices.

<"tsv3p177">The difficulty arose because capitals of equal magnitude, but of unequal composition—it is immaterial whether the unequal composition is due to the capitals containing unequal proportions of constant and variable capital, or of fixed and circulating capital, or to the unequal period of circulation of the capitals—set in motion unequal quantities of immediate labour, and therefore unequal quantities of unpaid labour; consequently they cannot appropriate equal quantities of surplus-value or surplus product in the process of production.  Hence they cannot yield equal profit if profit is nothing but the surplus-value calculated on the value of the whole capital advanced.  If, how-ever, the surplus-value were something different from (unpaid) labour, then labour could after all not be the “foundation and measure” of the value of commodities.

The difficulties arising in this context were discovered by Ricardo himself (although not in their general form) and set forth by him as exceptions to the law of value.  Malthus used these exceptions to throw the whole law overboard on the grounds that the exceptions constituted the rule.  Torrens, who also criticised Ricardo, indicated the problem at any rate when he said that capitals of equal size set unequal quantities of labour in motion, and nevertheless produce commodities of equal “values”, hence value cannot be determined by labour.  Ditto Bailey, etc.  Mill for his part accepted the exceptions noted by Ricardo as exceptions, and he had no scruples about them except with regard to one single form.  One particular cause of the equalisation of the profits of the capitalists he found incompatible with the law.  It was the following.  Certain commodities remain in the process of production (for example, wine in the cellar) without any labour being applied to them; there is a period during which they are subject to certain natural processes (for example, prolonged breaks in labour occur in agriculture and in tanning before certain new chemicals are applied—these cases are not mentioned by Mill).  These periods are nevertheless considered as profit-yielding.  The period of time during which the commodity is not being worked on by labour [is regarded] as labour-time (the same thing in general applies where a longer period of circulation time is involved).  Mill “lied” his way—so to speak—out of the difficulty by saying that one can consider the time in which the wine, for example, is in the cellar as a period when it is soaking up labour, although according to the assumption this is, in point of fact, not the case.  Otherwise one <"tsv3p178">would have to say that “time” creates profit and [according to Mill] time as such is “sound and fury”.  McCulloch uses this balderdash of Mill as a starting-point, or rather he reproduces it in his customary affected, plagiarist manner in a general form in which the latent nonsense becomes apparent and the last vestiges of the Ricardian system, as of all economic thinking whatsoever, are happily discarded.

On closer consideration, all the difficulties mentioned above resolve themselves into the following difficulty.

That part of capital which enters into the production process in the form of commodities, i.e., as raw materials or tools, does not add more value to the product than it possessed before production.  For it only has value insofar as it is embodied labour and the labour contained in it is in no way altered by its entry into the production process.  It is to such an extent independent of the production process into which it enters and dependent on the socially determined labour required for its own production that its own value changes when more labour or less labour than it itself contains is required for its reproduction.  As value, this part of capital therefore enters unchanged into the production process and emerges from it unchanged.  Insofar as it really enters into the production process and is changed, this change affects only its use-value, i.e., it undergoes a change as use-value.  And all operations undergone by the raw material or carried out by the instrument of labour are merely processes to which they are submitted as specific kinds of raw material, etc., and particular tools (spindles, etc.), processes which affect their use-value, but which, as processes, have nothing to do with their exchange-value.  Exchange-value is maintained in this ||846| change.  That is all.

It is different with that part of capital which is exchanged against labour-power.  The use-value of labour-power is labour, the element which produces exchange-value.  Since the labour provided by labour-power in industrial consumption is greater than the labour which is required for the reproduction of the labour-power, i.e., it provides more than an equivalent of the wages the worker receives, the value which the capitalist receives from the worker in exchange is greater than the price he pays for this labour.  It follows from this that, if equal rates of exploitation are assumed, of two capitals of equal size, that which sets less living labour in motion—whether this is due to the fact that the proportion of variable <"tsv3p179">capital is less from the start, or to the fact that it has a [longer] period of circulation or period of production during which it is not exchanged against labour, does not come into contact with it, does not absorb it—will produce less surplus-value, and, in general, commodities of less value.  How then can the values created be equal and the surplus-values proportional to the capital advanced?  Ricardo was unable to answer this question because, put in this way, it is absurd since, in fact, neither equal values nor [equal] surplus-values are produced.  Ricardo, however, did not understand the genesis of the general rate of profit nor, consequently, the transformation of values into cost-prices which differ specifically from them.

Mac, however, eliminates the difficulty by basing himself on Mill’s insipid “evasion”.  One gets round the inconvenience by talking out of existence by means of a phrase the characteristic difference out of which it arose.  This is the characteristic difference: The use-value of labour-power is labour; it consequently produces exchange-value.  The use-value of the other commodities is use-value as distinct from exchange-value, therefore no change which this use-value undergoes can change the predetermined exchange-value.  McCulloch gets round the difficulty by calling the use-values of commodities—exchange-value, and the operations in which they are involved as use-values, the services they render as use-values in production—labour.  For after all, in ordinary life we speak of labouring animals, working machines, and even say poetically that the iron works in the furnace, or works under the blows of the hammer.  It even screams.  And nothing is easier than to prove that every “operation” is labour, for labour is—an operation.  In the same way one can prove that everything material experiences sensation, for everything which experiences sensation is—material.

“… labour may properly be defined to be any sort of action or operation, whether performed by man, the lower animals, machinery, or natural agents, that tends to bring about any[gg] desirable result” (op. cit., p. 75, Note I).

And this does not by any means apply [solely] to instruments of labour.  It is in the nature of things that this applies equally to raw materials.  Wool undergoes a physical action or operation when it is dyed.  In general, nothing can be acted upon physically, mechanically, chemically, etc., in order “to bring about <"tsv3p180">any desirable result” without the thing itself reacting.  It cannot therefore be worked upon without itself working.  Thus all commodities which enter into the production process bring about an increase in value not only by retaining their own value, but by creating new value, because they “work” and are not merely materialised labour.  In this way, all the difficulties are naturally eliminated.  In reality, this is merely a paraphrase, a new name for Say’s “productive services of capital”, “productive services of land”, etc., which Ricardo attacked continuously and against which Mac—strange to say—himself polemises in the same “dissertation” or “note” where he pompously presents his discovery, borrowed from Mill and embellished still further.  In criticising Say, McCulloch makes lavish use of recollected passages from Ricardo and remembers that these “productive services” are in fact only the attributes displayed by things as use-values in the production process.  But naturally, all this is changed when he calls these “productive services” by the sacramental name of “labour”.

||847| After Mac has happily transformed commodities into workers, it goes without saying that these workers also draw wages and that, in addition to the value they possess as “accumulated labour”, they must be paid wages for their “operations” or “action”.  These wages of the commodities are pocketed by the capitalists per procurationem; they are “wages of accumulated labour”—alias profit.  And this [according to McCulloch] is proof that equal profit on equal capitals, whether they set large or small amounts of labour in motion, follows directly from the determination of value by labour-time.

The most extraordinary thing about all this, as we have already noted, is the way Mac, at the very moment when he is basing himself on Mill and appropriating Say, hurls Ricardian phrases against Say.  How literally he copies Say—except that where Say speaks of action, he [McCulloch] calls this action labour—can best be seen from the following passages from Ricardo where the latter is criticising Say.

“M. Say … imputes to him” (Adam Smith) “as an error, that ‘he attributes to the labour of man alone, the power of producing value.  A more correct analysis shows us that value is owing to the action of labour, or rather the industry of man, combined with the action of those agents which nature supplies, and with that of capital.  His ignorance of this principle prevented him from establishing the true theory of the influence of machinery in the production of riches.’ In contradiction to the opinion of Adam Smith, M. Say … speaks of the value which is given to commodities by natural <"tsv3p181">agents…  But those natural agents, though they add greatly to value in use, never add exchangeable value, of which M. Say is speaking…” (David Ricardo, Principles of Political Economy, and Taxation, third ed., London, 1821, pp. 334-36).

“… machines and natural agents might very greatly add to the riches of a country,” but they do “not … add any thing to the value of those riches” (loc. cit., p. 335 [note]).

Like all economists worth naming, [including] Adam Smith (although in a fit of humour he once called the ox a productive labourer), Ricardo emphasises that labour as human activity, even more, as socially determined human activity, is the sole source of value.  It is precisely through the consistency with which he treats the value of commodities as merely “representing” socially determined labour, that Ricardo differs from the other economists.  All these economists understand more or less clearly, but Ricardo more clearly than the others, that the exchange-value of things is a mere expression, a specific social form, of the productive activity of men, something entirely different from things and their use as things, whether in industrial or in non-industrial consumption.  For them, value is, in fact, simply an objectively expressed relation of the productive activity of men, of the different types of labour to one another.  When he argues against Say, Ricardo explicitly quotes the words of Destutt de Tracy, as expressing his own views.

“As it is certain that our physical and moral faculties are alone our original riches, the employment of those faculties” (the faculties of men), “labour of some kind” (that is, labour as the realisation of the faculties of men), “is our only original treasure, and that it is always from this employment, that all those things are created which we call riches…  It is certain too, that all those things only represent the labour which has created them, and if they have a value, or even two distinct values, they can only derive them from that of the labour from which they emanate” ( [Destutt do Tracy, Elémens d’idéologie, IV-e et V-e parties.  “Traité de la volonté et de ses effets”, Paris, 1826, pp. 35-36; quoted by Ricardo in his Principles of Political Economy, and Taxation, third ed., London, 1821,] p. 334).

Thus commodities, things in general, have value only because they represent human ||848| labour, not insofar as they are things in themselves, but insofar as they are incarnations of social labour.

And yet some persons have had the temerity to say that the miserable Mac has taken Ricardo to extremes, he who, in his incogitant efforts to “utilise” the Ricardian theory eclectically along with those opposed to it, identifies its basic principle and that of all political economy—labour itself as human activity <"tsv3p182">and as socially determined human activity—with the physical action, etc., which commodities possess as use-values, as things.  He who abandons the very concept of labour itself!

Rendered insolent by Mill’s “evasion”, he plagiarises Say while arguing against him with Ricardian phrases and copies precisely those phrases of Say which Ricardo in Chapter 20 of his book, entitled “Value and Riches”, attacks as being fundamentally opposed to his own ideas and those of Smith.  (Roscher naturally repeats that Mac has carried Ricardo to extremes.)  Mac, however, is sillier than Say, who does not call the “action” of fire, machinery, etc., labour.  And more inconsistent.

While Say attributes the creation of “value” to wind, fire, etc., Mac considers that only those use-values, things, which can be monopolised create value, as if it were possible to utilise the wind, or steam, or water as motive power without the possession of windmills, steam-driven machinery or water-wheels!  As if those who own, monopolise, the things, whose possession alone enables them to employ the natural agents, did not also monopolise the natural agents.  I can have as much air, water, etc., as I like.  But I possess them as productive agents only if I have the commodities, the things, by the use of which these agents will operate as such.  Thus Mac is even lower than Say.

This vulgarisation of Ricardo represents the most complete and most frivolous decline of Ricardo’s theory.

“In so far, however, as that result” (i.e., the result produced by the action or operation of any thing) “is effected by the labour or operation of natural agents, that can neither be monopolised nor appropriated by a greater or smaller number of individuals to the exclusion of others, it has no value.  What is done by these agents is done gratuitously” (J. R. McCulloch [in: Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Vol. IV, London, 1828], p. 75 [Note I]).

As if what is done by cotton, wool, iron or machinery, were not also done “gratuitously”.  The machine costs money, but the operation of the machine is not paid for.  No use-value of any kind of commodity costs anything after its exchange-value has been paid.

“The man who sells oil makes no charge for its natural qualities.  In estimating its cost he puts down the value of the labour employed in its pursuit, and such is its value” (H. C. Carey, Principles of Political Economy…  Part I, Philadelphia, 1837, p. 47).

In arguing against Say, Ricardo emphasises precisely that <"tsv3p183">the action of the machine, for example, costs just as little as that of wind and water.

“… the services which … natural agents and machinery perform for us … are serviceable to us … by adding to value in use; but as they perform their work gratuitously … the assistance which they afford us, adds nothing to value in exchange” (David Ricardo, [Principles of Political Economy, and Taxation, third ed., London, 1821,] pp. 336-37).

Thus Mac has not understood the most elementary propositions of Ricardo.  But the sly dog thinks: if the use-value of cotton, machinery, etc., costs nothing, is not paid for apart from its exchange-value, then, on the other hand, this use-value is sold by those who use cotton, machinery, etc.  They sell what costs them nothing.

||849| The brutal thoughtlessness of this fellow is evident, for after accepting Say’s “principle”, he sets forth rent with great emphasis, plagiarising extensively from Ricardo.

Land is a

“natural agent” that can be “monopolised or appropriated by a greater or smaller number of individuals to the exclusion of others” [J. R. McCulloch, loc. cit., p. 75, Note I],

and its natural, vegetative action or “labour”, its productive power, consequently has value, and rent is thus ascribed to the “productive power” of land, as is done by the Physiocrats.  This is an outstanding example of Mac’s way of vulgarising Ricardo.  On the one hand, he copies Ricardo’s arguments, which only make sense if they are based on the Ricardian assumptions, and on the other hand, he takes from others the direct negation of these assumptions (with the reservation that he uses his “nomenclature” or makes some small changes in the propositions).  He should have said: “Rent is the wages of land” pocketed by the landowner.

“If a capitalist expends the same sum in paying the wages of labourers, and maintaining horses, or in hiring a machine, and if the men, the horses, and the machine can all perform the same piece of work, its value will obviously be the same by whichever of them it may have been performed” (op. cit., p. 77 [Note I]).

In other words: the value of the product depends on the value of the capital laid out.  This is the problem to be solved.  The formulation of the problem is, according to Mac, “obviously” the solution of it.  But since the machine, for example, performs a greater piece of work than the men displaced by it, it is even <"tsv3p184">more “obvious” that the product of the machine will not fall but rise in value compared with the value of the product of the men who “perform the same work”.  Since the machine can produce 10,000 units of work where a man can only produce one, and every unit has the same value, the product of the machine should be 10,000 times as dear as that “of man”.

Moreover, in his anxiety to distinguish himself from Say by stating that value is produced not by the action of natural agents but only by the action of monopolised agents, or agents produced by labour, Mac gets into difficulties and falls back on Ricardian phrases.  For example, the labour of the wind produces the desired effect on the ship (produces a change in it).

“… but the value of that change is not increased by, and is in no degree dependent on, the operation or labour of the natural agents concerned, but on the amount of capital, or the produce of previous labour, that cooperated in the production of the effect; just as the cost of grinding corn does not depend on the action of the wind or water that turns the mill, but on the amount of capital wasted in the operation” (op. cit., p. 79 [Note I]).

Here, all of a sudden, grinding is viewed as adding value to the corn insofar only as capital—“the produce of previous labour”—is “wasted” in the act of grinding.  That is, it is not due to the millstone “working”, but to the fact that along with the “waste” of the millstone, the value contained in it, the labour embodied in it, is also “wasted”.

After these pretty arguments, Mac sums up the wisdom (borrowed from Mill and Say) in which he brings the concept of value into harmony with all kinds of contradictory phenomena, in the following way:

“… the word labour means … in all discussions respecting value … either the immediate labour of man, or the labour of the capital produced by man, or both” (op. cit., p. 84 [note to Note II]).

Hence labour ||850| is to be understood as meaning the labour of man, then his accumulated labour, and finally, the practical application, that is, the physical, etc., properties of use-values evolved in (industrial) consumption.  Apart from these properties, use-value means nothing at all.  Use-value operates only in consumption.  Consequently, by the exchange-value of the products of labour, we [are to] understand the use-value of these products, for this use-value consists only in its action, or, as Mac calls it, “labour”, in consumption, regardless of whether this is industrial consumption or not.  However, the types <"tsv3p185">of  “operation”, “action”, or “labour” of use-values, as well as their physical measures, are as varied as the use-values themselves.  But what is the unity, the measure by means of which we compare them?  This is established by the general word “labour” which is substituted for these quite different applications of use-values, after labour itself has been reduced to the words “operation” or “action”.

Thus, with the identification of use-value and exchange-value ends this vulgarisation of Ricardo, which we must therefore consider as the last and most sordid expression of the decline of the Ricardian school as such.

“The profits of capital are only another name for the wages of accumulated labour” (J. R. McCulloch, The Principles of Political Economy, London, 1825, p. 291),

that is, for the wages paid to commodities for the services they render as use-values in production.

In addition, these wages of accumulated labour have their own mysterious connotation as far as Mr. McCulloch is concerned.  We have already mentioned that, apart from his plagiarism of Ricardo, Mill, Malthus and Say, which constitutes the real basis of his writings, he himself continually reprints and sells his “accumulated labour” under various titles, always “largely drawing” upon writings for which he has been paid before.  This method of drawing “the wages of accumulated labour” was discussed at great length as early as 1826 in a special work, and what has not McCulloch done since then—from 1826 to 1862—with regard to drawing wages for accumulated labour!  (This miserable phrase has also been adopted by Roscher in his role of Thucydides.)

The book referred to is called: Some illustrations of Mr. McCulloch’s Principles of Political Economy, Edinburgh, 1826, by Mordecai Mullion.  It traces how our chevalier d’industrie made a name for himself.  Nine-tenths of his work is copied from Adam Smith, Ricardo and others, the remaining tenth being culled repeatedly from his own accumulated labour which he repeats most shamelessly and contemptibly.  Mullion shows, for example, not only that McCulloch sold the same articles to The Edinburgh Review and The Scotsman and the Encyclopaedia Britannica as his own “dissertations” and as new works, but also that he published the same articles word for word and with only a few transpositions and under new titles in different issues of The Edinburgh Review over the years.

<"tsv3p186">In this respect Mullion says the following about “this most incredible cobbler”, “this most Economical of all Economists”:

“Mr. McCulloch’s articles are as unlike as may be to the heavenly bodies […] but, in one respect, they resemble such luminaries—they have stated times of return” ([Mordecai Mullion,] (op. cit., p. 21).

No wonder he believes in “the wages of accumulated labour.”

Mr. McCulloch’s fame illustrates the power of fraudulent baseness.

||850a| In order to perceive how McCulloch exploits some of Ricardo’s propositions to give himself airs, see, inter alia, The Edinburgh Review for March 1824, where this friend of the wages of accumulated labour gives vent to a veritable jeremiad about the fall in the rate of profit.  (This claptrap is called “Considerations on the Accumulation of Capital”.)

“The author … expresses the fears in him by the decline in profit as follows:”

‘…the condition of’ (England) ‘however prosperous in appearance, is had and unsound at bottom; […] the plague of poverty is secretly creeping on the mass of her citizens; […] the foundations of her power and greatness have been shaken… ’

‘… where […] the rate of interest is low, as in [Holland and] England, […] the profits of stock are also low […], those are countries […] that […] are approaching the termination of their career.’

“These observations must surprise everybody acquainted with England’s splendid situation” ([McCulloch, Discours sur l’économie, traduit par] Prévost, p. 197[hh]).

There was no need for Mr. Mac to distress himself over the fact that “land” gets better “wages” than “iron, bricks, etc.” The cause must be that it “labours” harder.  |XIV-850a||

***

||XV-925| <Even a blind sow sometimes finds an acorn and so does McCulloch in the following passages.  But even this, as he presents it, is only an inconsistency, since he does not distinguish surplus-value from profit.  Secondly, it is again one of his thoughtless, eclectic acts of plagiarism.  According to fellows like Torrens, for whom value is determined by capital—and the same applies to Bailey—profit is proportionate to the capital advanced.  Unlike Ricardo, they do not consider that profit and surplus-value are identical concepts, but only <"tsv3p187">because they have no need whatsoever to explain profit on the basis of value, since they regard the visible form of surplus-value—profit as the relation of surplus-value to the capital advanced—as the original form and, in fact, they merely trans-late the apparent form into words.

The passages in Mac’s work, who is (1) a Ricardian and (2) plagiarises Ricardo’s opponents—without attempting to reconcile [the conflicting ideas]—read:

Ricardo’s law [that a rise in profits can be brought about in no other way than by a fall in wages, and a fall in profits only by a rise in wages] is only true “in those cases in which the productiveness of industry […] remains constant”[ii] (J. R. McCulloch, The Principles of Political Economy, London, 1825, p. 373), that is, the productiveness of the industry which produces constant capital.

“… profits depend on the proportion which they bear to the capital by which they are produced, and not on the proportion […] to wages”[jj] (loc.cit., pp. 373-74).  If the productivity of industry in general is doubled and the additional product thus obtained is divided between capitalists and workers, then the proportion of the share of the capitalists to that of the workers remains unchanged, although the rate of profit calculated on the capital advanced has risen.[kk]

Even in this case, as Mac also notes, one can say that wages have fallen relatively as compared with the product, because profits have risen.  (But in this case it is the rise in profits which Is the cause of the fall in wages.)  This calculation, however, rests on the incorrect method of calculating wages as a share in the product, and, as we saw previously, Mr. John Stuart Mill seeks to generalise the Ricardian law in this sophistical manner.> |XV-925||

<"vol32-p371"> 

5.  Wakefield [Some Objections to Ricardo’s Theory Regarding the “Value of Labour” and Rent]

||XIV-850a| Wakefield’s real contribution to the understanding of capital has already been dealt with in the previous section on the Conversion of Surplus-Value into Capital.  Here we shall only deal with what is directly relevant to the “topic”.

“Treating labour as a commodity, and capital, the produce of labour, as another, then, if the value of these two commodities were regulated by equal quantities of labour, a given amount of labour would, under all circumstances, <"tsv3p188">exchange for that quantity of capital which had been produced by the same amount of labour; antecedent labour […] would always exchange for the same amount of present labour […] the[ll] value of labour in relation to other commodities, in so far, at least, as wages depend upon share, is determined, not by equal quantities of labour, but by the proportion between supply and demand” (Wakefield’s edition of Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Vol. I, London, 1835, pp. 230-31, note).

Thus, according to Wakefield, profit would be inexplicable if wages corresponded to the value of labour.

In Vol. II of his edition of Adam Smith’s work Wakefield remarks:

“Surplus produce […] always constitutes rent: still rent may be paid, which does not consist of surplus produce” (p. 216).

“If” (as in Ireland) “the bulk of a people be brought to live upon potatoes, and in hovels and rags, and to pay, for permission so to live, all that they can produce beyond hovels, rags, and potatoes, then, in proportion as they put up with less, the owner of the land on which they live, obtains mole, even though the return to capital or labour should remain unaltered.  What the miserable tenants give up, the landlord gathers.  […] A[mm] fall in the standard of living amongst the cultivators of the earth is another cause of surplus produce… When wages fall, the effect upon surplus produce is the same as a fall in the standard of living: the whole produce remaining the same, the surplus part is greater; the producers have less, and the landlord more” (pp.220-21).

In this case, profit is called rent, just as it is called interest when, for example, as in India, the worker (although nominally independent) works with advances he receives from the capitalist and has to hand over all the surplus produce to the capitalist.

<"vol32-p371a"> 

6.  Stirling [Vulgarised Explanation of Profit by the Interrelation of Supply and Demand]

Patrick lames Stirling, The Philosophy of Trade etc., Edinburgh, 1846.

“… the quantity of every commodity […] must be so regulated that the supply of each commodity shall bear a less proportion to the demand for it than the supply of labour bears to the demand for labour.  The difference between the price or value of the commodity, and the price or value of the labour worked up in it […] constitutes the […] profits”[nn] (op. cit., pp. 72-73).

||851|The same author informs us:

When the values of commodities are exchanged with one another according to their production costs, “the value of these commodities may be said to be at par” (p. 18).[oo]

Thus if demand and supply of labour correspond with one another, then labour would be sold at its value (whatever Stirling may understand by value).  And if demand and supply of the commodities in which the labour is worked up do correspond, then the commodities would be sold at their production costs, by which Stirling understands the value of labour.  The price of the commodity would then be equal to the value of the labour worked up in it.  And the price of labour would be on a par with its own value.  The price of the commodity would therefore be equal to the price of the labour worked up in it.  Consequently there would be no profit or surplus.

Stirling explains profit, or the surplus, in this way.

The supply of labour in relation to the demand for it must be greater than the supply of commodities in which the labour is worked up is in relation to the demand for them.  The matter must be so arranged that the commodity is sold at a higher price than that paid for the labour contained in it.

This is what Mr. Stirling calls explaining the phenomenon of the surplus, whereas it is, in fact, nothing but a paraphrase of what is supposed to be explained.  If we go into it further, then there are only three possibilities.  [1] The price of labour is on a par with value, that is, the demand for and supply of labour balance, the price of labour is equal to the value of labour.  In these circumstances, the commodities must be sold above their value, or things must be arranged in such a way that the supply is below the demand.  This is pure “profit upon alienation”, except that the condition is stated under which it is possible.  [2] Or the demand for labour is greater than the supply and the price [of labour] is higher than its value.  In these circumstances, the capitalist has paid the worker more than the value of the commodity, and the buyer must then pay the capitalist a twofold surplus—first to replace the amount he [the capitalist] has already paid to the worker and then his profit.  [3] Or the price of labour is below its value and the supply of labour above the demand for it.  The surplus would then arise from <"tsv3p190">the fact that labour is paid below its value and is sold [embodied in commodities] at its value or, at least, above its price.

If one strips this of all nonsense, then Stirling’s surplus is [here] due to the fact that labour is bought by the capitalist below its value and is sold again above its price in the form of commodities.

The other cases, divested of their ridiculous form—according to which the producer has to “arrange” matters in such a way that he is able to sell his commodity above its value, or above “the par of value”—mean nothing but that the market price of a commodity rises above its value, if the demand for it is greater than the supply.  This is certainly not a new discovery and explains one sort of “surplus” which never caused Ricardo or anyone else the slightest difficulty.  |XIV-851||

7.  John Stuart Mill  [Unsuccessful Attempts to Deduce the Ricardian Theory of the Inverse Proportionality Between the Rate of Profit and the Level of Wages Directly from the Law of Value]

[a) Confusion of the Rate of Surplus-value with the Rate of Profit.  Elements of the Conception of “Profit upon Alienation”.  Confused Conception of the “Profits Advanced” by the Capitalist]

||VII-319| In the booklet mentioned above, which, in fact, contains all that is original in Mr. John Stuart Mill’s writings about political economy (in contrast to his bulky compendium), he says in Essay IV—“On Profits, and Interest”:

“Tools and materials, like other things, have originally cost nothing but labour…  The labour employed in making the tools and materials being added to the labour afterwards employed in working up the materials by the aid of tools, the sum total gives the whole of the labour employed in the production of the completed commodity…  To replace capital, is to replace nothing but the wages of the labour employed” ([John Stuart Mill, Essays on some Unsettled Questions of Political Economy, London, 1844,] p. 94).

This in itself is quite wrong, because the employed labour and the wages paid are by no means identical.  On the contrary, the employed labour is equal to the sum of wages and profit.  To replace capital means to replace the labour for which the capitalist pays (wages) and the labour for which he does not pay but which he nevertheless sells (profit).  Mr. Mill is here confusing “employed labour” and that portion of the employed labour which is paid for by the capitalist who employs it.  This <"tsv3p191">confusion is itself no recommendation for his understanding of the Ricardian theory, which he claims to teach.

Incidentally, it should be noted in relation to constant capital that though each part of it can be reduced to previous labour and therefore one can imagine that at some time it represented profit or wages or both, but once it exists as constant capital, one part of it—for example, seeds, etc.—can no longer be transformed into profit or wages.

Mill does not distinguish surplus-value from profit.  He therefore declares that the rate of profit (and this is correct for the surplus-value which has already been transformed into profit) is equal to the ratio of the price of the product to the price of its means of production (labour included).  (See pp. 92-93.)  At the same time he seeks to deduce the laws governing the rate of profit directly from the Ricardian law, in which Ricardo confuses surplus-value and profit, land to prove] that “profits depend upon wages; rising as wages fall, and falling as wages rise”[p.94].

Mr. Mill himself is not quite clear about the question which he seeks to answer.  We will therefore formulate his question briefly before we hear his answer.  The rate of profit is the ratio of surplus-value to the total amount of the capital advanced (constant and variable capital taken together) while surplus-value itself is the excess of the quantity of labour performed by the labourer over the quantity of labour which is advanced him as wages; that is, surplus-value is considered only in relation to the variable capital, or to the capital which is laid out in wages, not in relation to the whole capital.  Thus the rate of surplus-value and the rate of profit are two different rates, although profit is only surplus-value considered from a particular point of view.  It is correct to say with regard to the rate of surplus-value that it exclusively depends “upon wages; rising as wages fall, and falling as wages rise”.  (But it would be wrong with regard to the total amount of surplus-value, for this depends not only on the rate at which the surplus labour of the individual worker is appropriated but likewise on the number of workers exploited at the same time.)  Since the rate of profit is the ratio of surplus-value to the total amount of capital advanced, it is naturally affected and determined by the fall or rise of surplus-value, and hence, by the rise or fall of wages, but in addition to this, the rate of profit includes factors ||320| which are independent of it and not directly reducible to it.

<"tsv3p192">Mr. John Stuart Mill, who, on the one hand, directly identifies profit and surplus-value, like Ricardo, and, on the other hand (moved by considerations concerning the polemic against the anti-Ricardians), does not conceive the rate of profit in the Ricardian sense, but in its real sense, as the ratio of surplus-value to the total value of the capital advanced (variable capital plus constant capital), goes to great lengths to prove that the rate of profit is determined directly by the law which determines surplus-value and can be simply reduced to the fact that the smaller the portion of the working-day in which the worker works for himself, the greater the portion going to the capitalist, and vice versa.  We will now observe his torment, the worst part of which is that he is not sure which problem he really wants to solve.  If he had formulated the problem correctly, it would have been impossible for him to solve it wrongly in this way.

He says, then:

“Though […] tools, materials, and buildings […] are themselves the produce of labour […] yet the whole of their value is not resolvable into the wages of the labourers by whom they were produced.” <He says above that the replacement of capital is the replacement of wages.>  The profits which the capitalists make on these wages, need to be added.  The last capitalist has to replace from his product “not only the wages paid both by himself and by the tool-maker, but also the profit of the tool-maker, advanced by him himself out of his own capital” (op. cit., p. 98).[pp]  Hence “… profits do not compose merely the surplus after replacing the outlay; they also enter into the outlay itself.  Capital is expended partly in paying or reimbursing wages, and partly in paying the profits of other capitalists, whose concurrence was necessary in order to bring together the means of production” (loc. cit., pp. 98-99).  “An article, therefore, may be the produce of the same quantity of labour as before, and yet, if any portion of the profits which the last producer has to make good to previous producers can be economised, the cost of production of the article is diminished…  It is, therefore, strictly true, that the rate of profit varies inversely as the cost of production of wages” (op. cit., pp. 102-03).

We are naturally always working on the assumption here that the price of a commodity is equal to its value.  It is on this basis that Mr. Mill himself carries on the investigation.

Profit, in the passages quoted, appears first of all to bear a very strong resemblance to profit upon alienation, but let us proceed.  Nothing is more wrong than to say that (if it is sold at its value) an article is “the produce of the same quantity of labour as before” and at the same time that by some circumstance <"tsv3p193">or other “the cost of production of the article” can be diminished.  <Unless it is in the sense I first advanced, i.e., when I distinguished between the [real] production cost of the article and the production cost to the capitalist, since he does not pay a part of the production costs.  In this case, it is indeed true that the capitalist makes his profit out of the unpaid surplus labour of his own workers just as he may also make it by under-paying the capitalist who supplies him with his constant capital, that is, by not paying this capitalist for a part of the sur-plus labour embodied in the commodity and not paid for by this capitalist (and which precisely for that reason constitutes his profit).  This amounts to the fact that he always pays for the commodity less than its value.  The rate of profit (that is, the ratio of surplus-value to the total value of the capital advanced) can increase either because the quantity of capital [goods] advanced by the capitalist becomes objectively cheaper (due to the increased productivity of labour in those spheres of production which produce constant capital) or because it be-comes subjectively cheaper for the buyer, since he pays for the goods at less than their value.  For him, it is then always the result of a smaller quantity of labour.>

||321| What Mill says first of all, is that the constant capital of the capitalist who manufactures the last commodity resolves not into wages alone, but also into profit.  His line of reasoning is as follows:

If it were resolvable into wages alone, then profit would be the surplus accruing to the last capitalist after he has reimbursed himself for all wages paid <and the whole (paid) costs of the product could be reduced to wages>, which would constitute the whole of the capital advanced.  The total value of the capital advanced would be equal to the total value of the wages embodied in the product.  Profit would be the surplus over this.  And since the rate of profit is equal to the ratio of this surplus to the total value of the capital advanced, then the rate of profit would obviously rise and fall in proportion to the total value of the capital advanced, that is, in proportion to the value of wages, the aggregate of which constitutes the capital advanced.  <This objection is, in fact, silly, if we consider the general relation of profits and wages.  Mr. Mill needed only to put on one side that part of the whole product which is resolvable into profit (irrespective of whether it is paid to the last or to the previous capitalists, the co-functionaries in the production of the <"tsv3p194">commodity) and then put that part which resolves into wages on the other, and the amount of profit would still be equal to the surplus over the total amount of wages, and it could be asserted that the Ricardian “inverse ratio” applied directly to the rate of profit.  It is not true, however, that the whole of the capital advanced can be resolved into profit and wages.>  But the capital advanced does not resolve itself into wages alone, but also into profits advanced.  Profit therefore is a surplus not only over and above the wages advanced, but also over the profits advanced.  The rate of profit is therefore determined not only by the surplus over wages, but by the last capitalist’s surplus over the total sum of wages plus profits, the sum of which, according to this assumption, constitutes the whole of the capital advanced.  Hence this rate can obviously be altered not only as a result of a rise or fall in wages, but also as a result of a rise or fall in profit.  And if we disregarded the changes in the rate of profit arising from the rise or fall in wages, that is, if we assumed—as is done innumerable times in practice—that the value of the wages, in other words, the costs of their production, the labour-time embodied in them, remained the same, remained unchanged, then, following the path outlined by Mr. Mill, we would arrive at the pretty law that the rise or fall in the rate of profit depends on the rise or fall of profit.

“…if any portion of the profits which the last producer has to make good to previous producers can be economised, the cost of production of the article is diminished” [loc. cit., p. 102].

This is in fact very true.  If we assume that no portion of the previous producers’ profit was a mere surcharge—“profit upon alienation” as James Stuart says, then every economy in one “portion of profit” (so long as it is not achieved by the latter producer swindling the previous one, that is, by not paying him for the whole of the value contained in his commodity) is an economy in the quantity of labour required for the production of the commodity.  (Here we disregard the profit paid, for instance, for that time during the period of production, etc., when the capital lies idle.)  For example, if two days were required to bring raw materials—coal, for instance—from the pit to the factory, and now only one day is required, then there is an economy of one day’s work, but this applies as much to that part of it which resolves into wages as to that which resolves into profit.

<"tsv3p195">After Mr. Mill has made it clear to himself that the rate of surplus of the last capitalist, or the rate of profit in general, depends not only on the direct ratio of wages to profits, but on the ratio of the last profit, or the profit on every particular capital, to the whole value of the capital advanced, which is equal to the variable capital (that laid out in wages) plus the constant capital—that, in other words, ||322| the rate of profit is determined not only by the ratio of profit to the part of capital laid out in wages, that is, not only by the cost of production or the value of wages, he continues:

“It is, therefore […] true, that the rate of profits varies inversely as the cost of production of wages” [loc. cit., p. 103].

Although it is false, it is nevertheless true.

The illustration which he now gives can serve as a classical example of the way in which economists use illustrations, and it is all the more astonishing since its author has also written a book about the science of logic.

“Suppose, for example, that 60 agricultural labourers, receiving 60 quarters of corn for their wages, consume fixed capital and seed amounting to the value of 60 quarters more, and that the result of their operations is a produce of 180 quarters.  When we analyse the price of the seed and tools into its elements, we find that they must have been the produce of the labour of 40 men: for the wages of those 40, together with profit at the rate previously supposed (50 per cent) make up 60 quarters.  The produce, therefore, consisting of 180 quarters, is the result of the labour altogether of 100 men.”

Now[qq] supposing that the amount of labour required remained the same, but as a result of some discovery no fixed capital and seed were needed.  Whereas previously the outlay of 120 quarters was required to obtain a product of 180 quarters, now an outlay of only 100 quarters is necessary to achieve this result.

“The produce (180 quarters) is still the result of the same quantity of 1abour as before […], the labour of 100 men.  A quarter of corn, therefore, is still, as before, the produce of 10/18 of a man’s labour, […] A[rr] quarter of corn, which is the remuneration of a single labourer, is indeed the produce of the same quantity of labour as before; but its cost of production is nevertheless diminished.  It is now the produce of 10/18 of a man’s labour, and nothing else; whereas formerly it required for its production the conjunction of that quantity of labour with[ss] an expenditure, in the form of reimbursement of profit, amounting to one-fifth more.  If the cost of production of wages had remained the same as before, profits could not have risen.  Each labourer received one quarter of corn; but one quarter of corn at that time was the result of the same cost of production, as 1 1/5 quarter now.  In order, <"tsv3p196">therefore, that each labourer should receive the same cost of production, each must now receive one quarter of corn, plus one-fifth” (op. cit., pp.99-103 passim).

“Assuming, therefore, that the labourer is paid in the very article he produces, it is evident that, when any saving of expense takes place in the production of that article, if the labourer still receives the same cost of production as before, he must receive an increased quantity, in the very same ratio in which the productive power of capital has been increased.  But, if so, the outlay of the capitalist will bear exactly the same proportion to the return as it did before; and profits will not rise.  The variations, therefore, in the rate of profits, and those in the cost of production of wages, go hand in hand, and are inseparable.  Mr. Ricardo’s principle […] is strictly true,[tt] if by low wages be meant not merely wages which are the produce of a smaller quantity of labour, but wages which are produced at less cost, reckoning labour and previous profits together” (loc. cit., p.104).

With regard to this wonderful illustration, we note first of all that, as a result of a discovery, corn is supposed to be produced without seeds (raw materials) and without fixed capital; that is, without raw materials and without tools, by means of mere manual labour, out of air, water and earth.  This ||323| absurd presupposition contains nothing but the assumption that a product can be produced without constant capital, that is, simply by means of newly applied labour.  In this case, what he set out to prove has of course been proved, namely, that profit and surplus-value are identical, and consequently that the rate of profit depends solely on the ratio of surplus labour to necessary labour.  The difficulty arose precisely from the fact that the rate of surplus-value and the rate of profit are two different things because there exists a ratio of surplus-value to the constant part of capital—and this ratio we call the rate of profit.  Thus if we assume constant capital to be zero, we solve the difficulty arising from the existence of constant capital by abstracting from the existence of this constant capital.  Or we solve the difficulty by assuming that it does not exist.  Pro batum est.[uu]

Let us now arrange the problem, or Mill’s illustration of the problem, correctly.

According to the first assumption we have:

Constant capital (fixed capital and seed) Variable capital (capital laid out in wages) Total product Profit
60 quarters 60 quarters (60 workmen) 180 quarters 60 quarters

<"tsv3p197">It is assumed in this example that the labour which is added to the constant capital amounts to 120 quarters and that, since every quarter represents the wages of a working-day (or of a year’s labour, which is merely a working-day of 365 working-days), the 180 quarters contain only 60 working-days, 30 of which account for the wages of the workers and 30 constitute profit.  We thus assume in fact that one working-day is embodied in 2 quarters and that consequently the 60 working-days of the 60 workmen are embodied in 120 quarters, 60 of which constitute their wages and 60 constitute the profit.  In other words, the worker works one half of the working-day for himself, to make up his wages, and one half for the capitalist, thus producing the capitalist’s surplus-value.  The rate of surplus-value is therefore 100 per cent and not 50 per cent.  On the other hand, since the variable capital constitutes only half of the total capital advanced, the rate of profit is not 60 quarters to 60 quarters, that is, not 100 per cent, but 60 quarters to 120 quarters and therefore only 50 per cent.  If the constant part of the capital had equalled zero, then the whole of the capital advanced would have consisted of only 60 quarters, i.e., only of the capital advanced in wages, equalling 30 working-days; in this case, profit and surplus-value, and therefore also their rates, would be identical.  Profit would then amount to 100 per cent and not 50 per cent; 2 quarters of corn would be the product of one working-day, and 120 quarters the product of 60 working-days, even though one quarter of corn would only be the wages of one working-day and 60 quarters the wages of 60 working-days.  In other words, the worker would only receive half, 50 per cent, of his product, while the capitalist would receive twice as much—100% calculated on his outlay.

What is the position with regard to the constant capital, the 60 quarters?  These were likewise the product of 30 working days, and if it is assumed with regard to this constant capital that the elements which went into its production are so made up that one-third consists of constant capital and two-thirds of newly added labour, and that the [rate of] surplus-value and the rate of profit are also the same as before, we get the following calculation:

Constant capital Variable capital Total product Profit
20 quarters 20 quarters (wages for 20 workers) 60 quarters 20 quarters

<"tsv3p198">Here again the rate of profit would be 50 per cent and the rate of surplus-value 100 per cent.  The total product would be ||324| the product of 30 working-days, 10 of which however (equalling 20 quarters) would represent the pre-existing labour (the constant capital) and 20 working-days the newly added labour of 20 workers, each of whom would only receive half his product as wages.  Two quarters would be the product of one man’s labour as in the previous case, although, again as previously, one quarter would represent the wages of one man’s labour and one quarter the capitalist’s profit, the capitalist thus appropriating half of the man’s labour.

The 60 quarters which the last capitalist producer makes as surplus-value mean a rate of profit of 50 per cent, because these 60 quarters of surplus-value are calculated not only on the 60 quarters advanced in wages but also on the 60 quarters expended in seed and fixed capital, which together amount to 120 quarters .

If Mill calculates that the capitalist who produces the seed and the fixed capital—a total of 60 quarters—makes a profit of 50 per cent, if he assumes further that the constant and variable capital enter into the product in the same proportion as in the case of the production of the 180 quarters, then it will be correct to say that the profit equals 20 quarters, wages 20 quarters and the constant capital 20 quarters.  Since wages equal one quarter [a day], then 60 quarters contain 30 working-days in the same way as 120 quarters contain 60 working-days.

But what does Mill say?

“When we analyse the price of the seed and tools into its elements, we find that they must have been the produce of the labour of 40 men: for the wages of those 40, together with profit at the rate previously supposed (50 per cent) make up 60 quarters” [op. cit., p. 99].

In the case of the first capitalist, who employed 60 workers, each of whom he paid one quarter per day as wages (so that he paid out 60 quarters in wages), and laid out 60 quarters in constant capital, the 60 working-days resulted in 120 quarters, of which, however, the workers only received 60 in wages; in other words, wages amounted to only half the product of the labour of 60 men.  Thus the 60 quarters of constant capital were only equal to the product of the labour of 30 men; if they consisted only of profit and wages, then wages would amount to 30 quarters and profit to 30 quarters, thus wages would equal the labour <"tsv3p199">of 15 men and profit as well.  But the profit amounted to only 50 per cent, since it is assumed that of the 30 days embodied in the 60 quarters, 10 represent pre-existing labour (constant capital) and only 10 are allocated to wages.  Thus, 10 days are embodied in constant capital, 20 are newly added working-days, of which, however, the workers only work 10 for themselves, the other 10 being for the capitalist.  But Mr. Mill asserts that these 60 quarters are the product of 40 men, while just previously he said that 120 quarters were the product of 60 men.  In the latter case, one quarter contains half a working-day (although it is the wages paid for a whole working-day); in the former, 3/4 of a quarter would equal half a working-day, whereas the one-third of the product (i.e., the 60 quarters) which is laid out in constant capital has just as much value, that is, it contains just as much labour-time, as any other third part of the product.  If Mr. Mill desired to convert the constant capital of 60 quarters wholly into wages and profit, then this would not make the slightest difference as far as the quantity of labour-time embodied in it is concerned.  It would still be 30 working-days as before, but now, since there would be no constant capital to replace, profit and surplus-value would coincide.  Thus, profit would amount to 100 per cent, not to 50 per cent as previously.  Surplus-value also amounted to 100 per cent in the previous case, but the profit was only 50 per cent precisely because constant capital entered into the calculation.

We have here, therefore, a doubly false manoeuvre on the part of Mr. Mill.

In the case of the first 180 quarters, the difficulty consisted in the fact that surplus-value and profit did not coincide, because the 60 quarters surplus-value had to be calculated not only on 60 quarters (that part of the total product which represented wages) but ||325| on 120 quarters, i.e., 60 quarters constant capital plus 60 quarters wages.  Surplus-value therefore amounted to 100 per cent, and profit only to 50 per cent.  With regard to the 60 quarters which constituted constant capital, Mr. Mill disposes of this difficulty by assuming that, in this case, the whole product is divided between capitalist and worker, i.e., that no constant capital is required to produce the constant capital, that is, the 60 quarters consisting of seed and tools.  The circumstance which had to be explained in the case of capital I, is assumed to have disappeared in the case of capital II, and in this way the problem ceases to exist.

<"tsv3p200">But secondly, after he has assumed that the value of the 60 quarters which constitute the constant capital of capital I contains only [immediate] labour, but no pre-existing labour, no constant capital, that profit and surplus-value therefore coincide, and consequently also the rate of profit and the rate of surplus-value, that no difference exists between them, he then assumes, on the contrary, that just as in the case of capital I, a difference between them does exist, and that therefore the profit is only 50 per cent as in the case of capital I.  If a third of the product of capital I had not consisted of constant capital, then profit would have been the same as surplus-value; the whole product consisted of only 120 quarters, equal to 60 working-days, 30 of which (equal to 60 quarters) are appropriated by the workers and 30 (equal to 60 quarters) by the capitalist.  The rate of profit was the same as the rate of surplus-value, that is, 100 per cent.  It was 50 per cent because the 60 quarters of surplus-value were not calculated on 60 quarters (wages) but on 120 quarters (wages, seed and fixed capital).  In the case of capital II, he assumes that it contains no constant capital.  He also assumes that wages remain the same in both cases—a quarter [of corn].  But he nevertheless assumes that profit and surplus-value are different, that profit amounts only to 50 per cent, although surplus-value amounts to 100 per cent.  In actual fact he assumes that the 60 quarters, one-third of the total product, contain more labour-time than another third of the total product; he assumes that these 60 quarters are the product of 40 working-days while the other 120 quarters were the product of only 60.

In actual fact, however, there peeps out the old delusion of profit upon alienation, which has nothing whatever to do with the labour-time contained in the product and likewise nothing to do with the Ricardian definition of value.  For he [Mill] assumes that the wages a man receives for working for a day are equal to what he produces in a working-day, i.e., that they contain as much labour-time as he works.  If 40 quarters are paid out in wages, and if the profit amounts to 20 quarters, then the 40 quarters embody 40 working-days.  The payment for the 40 working-days is equal to the product of the 40 working-days.  If 50 per cent profit, or 20 quarters, is made on 60 quarters, it follows that 40 quarters are the product of the labour of 40 men, for, according to the assumption, 40 quarters constitute wages and each man receives one quarter per day.  But in that case <"tsv3p201">where do the other 20 quarters come from?  The 40 men work 40 working-days because they receive 40 quarters.  A quarter is therefore the product of one working-day.  The product of 40 working-days is consequently 40 quarters, and not a bushel more.  Where, then, do the 20 quarters which make up the profit come from?  The old delusion of profit upon alienation, of a merely nominal price increase on the product over and above its value, is behind all this.  But here it is quite absurd and impossible, because the value is not represented in money but in a part of the product itself.  Nothing is easier than to imagine that—if 40 quarters of grain are the product of 40 workers,- each one of whom receives one quarter per day or per year, they therefore receive the whole of their product as wages, and if one quarter of grain in terms of money is £3, 40 quarters are therefore £120—the capitalist sells these 40 quarters for £180 and makes £60, i.e., 50 per cent profit, equal to 20 quarters.  But this notion is reduced to absurdity if out of 40 quarters—which have been produced in 40 working-days and for which he pays 40 quarters—the capitalist sells 60 quarters.  He has in his possession only 40 quarters, but he sells 60 quarters, 20 quarters more than he has to sell.

||326| Thus first of all Mill proves the Ricardian law, that is, the false Ricardian law, which confuses surplus-value and profit, by means of the following convenient assumptions:

1) he assumes that the capitalist who produces constant capital does not himself in his turn need constant capital, and thus he assumes out of existence the whole difficulty which is posed by constant capital;

2) he assumes that, although the capitalist does not [need] constant capital, the difference between surplus-value and profit caused by constant capital nevertheless continues to exist although no constant capital exists;

3) he assumes that a capitalist who produces 40 quarters of wheat can sell 60 quarters, because his total product is sold as constant capital to another capitalist, whose constant capital equals 60 quarters, and because capitalist No. II makes a profit of 50 per cent on these 60 quarters.

This latter absurdity resolves itself into the notion of profit upon alienation, which appears here so absurd only because the profit is supposed to stem not from the nominal value expressed in money, but from a part of the product which has been sold.  Thus, Mr. Mill, in seeking to defend Ricardo, has abandoned <"tsv3p202">his basic concepts and fallen far behind Ricardo, Adam Smith and the Physiocrats.

His first defence of Ricardo’s teachings therefore consists in his abandoning them from the outset, namely, abandoning the basic principle that profit is only a part of the value of the commodity, i.e., merely that part of the labour-time embodied in the commodity which the capitalist sells in his product although he has not paid the worker for it.  Mill makes the capitalist pay the worker for the whole of his working-day and still derive a profit.

Let us see how he proceeds.

He does away with the need for seed and agricultural implements in the production of corn by means of an invention, that is, he does away with the need for constant capital in the case of the last capitalist in the same way as he abandoned seed and fixed capital in the case of the producer of the first 60 quarters.  Now he ought to have argued as follows:

Capitalist No. I does not now need to lay out 60 quarters in seed and fixed capital, for we have stated that his constant capital equals zero.  He therefore has to lay out only 60 quarters for the wages of 60 workers who work 60 working-days.  The product of these 60 working-days amounts to 120 quarters.  The workers receive only 60 quarters.  The capitalist therefore makes 60 quarters profit, i.e., 100 per cent.  His rate of profit is exactly equal to the rate of surplus-value, that is, it is exactly equal [to the ratio] of the labour-time the workers [worked for themselves to the labour-time they] worked not for themselves, but for the capitalist.  They worked 60 days.  They produced 120 quarters, they received 60 quarters in wages.  They thus received the product of 30 working-days as wages, although they worked 60 days.  The quantity of labour-time which 2 quarters cost is still equal to one working-day.  The working-day for which the capitalist pays is still equal to one quarter, i.e., it is equal to half the working-day worked.  The product has fallen by a third, from 180 quarters to 120 quarters, but the profit has nevertheless risen by 50 per cent, namely, from 50 per cent to 100 per cent.  Why?  Of the total of 180 quarters, a third merely replaced constant capital, it did not therefore constitute a part of either profit or wages.  On the other hand, the 60 quarters, or the 30 working-days during which the workers produced or worked for the capitalist, were calculated not on the 60 quarters spent on wages, that is, the 30 days during which they worked <"tsv3p203">for themselves, but on the 120 quarters, i.e., the 60 working-days, which were expended on wages, seed and fixed capital.  Thus, although out of the total of 60 days they worked 30 days for themselves and 30 for the capitalist, and although a capital outlay of 60 quarters on wages yielded 120 quarters to the capitalist, his rate of profit was not 100 per cent, but only 50 per cent, because it was calculated differently, in the one case on 2×60 and in the other on 60.  The surplus-value ||327| was the same, but the rate of profit was different.

But how does Mill tackle the problem?

He does not assume that the capitalist [who, as a result of an invention, spends nothing on constant capital] with an outlay of 60 quarters obtains 120 quarters (30 out of 60 working-days), but that he now employs 100 men who produce 180 quarters for him, always on the supposition that the wage for one working-day is one quarter of wheat.  The calculation is therefore as follows:

Capital expended (only variable, only on wages) Total product Profit
100 quarters (wages for 100 working-days) 180 quarters 80 quarters

This means that the capitalist makes a profit of 80 per cent.  Profit is here equal to surplus-value.  Therefore the rate of surplus-value is likewise only 80 per cent.  Previously it was 100 per cent, i.e., 20 per cent higher.  Thus we have the phenomenon that the rate of profit has risen by 30 per cent while the rate of surplus-value has fallen by 20 per cent.

If the capitalist had only expended 60 quarters on wages as he did previously, we would have the following calculation:

100quartersyield80quarterssurplus-value
10""8""
60""48""

But 60 quarters previously yielded 60 quarters [of surplus-value] (that means it has fallen by 20 per cent).  Or to put it another way, previously:

[Capital expended] Total product Profit
60 quarters 120 quarters 60 quarters
100 " 200 " 100 "
100 " 200 " 100 "

<"tsv3p204">Thus the surplus-value has fallen by 20 per cent, from 100 to 80 (we must take 100 as the basis of the calculation in both [cases]).

(60:48=100:80; 60:48=10:8; 60:48=5:4; 4×60=240 and 48 × 5 =240.)

Further, let us consider the labour-time or the value of a quarter.  Previously, 2 quarters were equal to one working-day, or one quarter was equal to half a working-day or 9/18 of a man’s labour.  As against this, 180 quarters are now the product of 100 working-days, one quarter is therefore the product of 100/180 or 10/18 of a working-day.  That is, the product has become dearer by 1/18 of a working-day, or the labour has become less productive, since previously a man required 9/18 of a working-day to produce a quarter, whereas now he requires 10/18 of a working-day.  The rate of profit has risen although the surplus-value has fallen and, consequently, the productivity of labour has fallen or the real value, the cost of production, of wages has risen by 1/18 or by 5 5/9 per cent.  180 quarters were previously the product of 90 working-days (1 quarter, 90/180, equals half a working-day or 9/18 of a working-day).  Now they are the product of 100 working-days (1 quarter = 100/180=10/18 of a working-day).

Let us assume that the working-day lasts 12 hours, i.e., 60×12 or 720 minutes.  ||328| One-eighteenth part of a working-day, that is, 720/18 therefore amounts to 40 minutes.  In the first case, the worker gives the capitalist 9/18 or half of these 720 minutes, that is, 360 minutes.  60 workers will therefore give him 360×60 minutes.  In the second case, the worker gives the capitalist only 8/18, that is, 320 minutes out of the 720.  But the first capitalist employs 60 men and therefore obtains 360×60 minutes.  The second employs 100 men and therefore obtains 100×320, 32,000 minutes.  The first gets 360 × 60, 21,600 minutes.  Thus the second capitalist makes a larger profit than the first because 100 workers at 320 minutes a day amounts to more than 60 [workers] at 360 minutes.  His profit is bigger only because he employs 40 more men, but he obtains relatively less from each worker.  He has a higher profit, although the rate of surplus-value has declined, that is, the productivity of labour has declined, the production costs of real wages have therefore risen, in other words, the quantity of labour embodied in them has risen.  But Mr. Mill wanted to prove the exact opposite.

<"tsv3p205">Assuming that Capitalist No. I, who has not “discovered” how to produce corn without seed or fixed capital, likewise uses 100 working-days (like capitalist No. II), whereas he only uses 90 days in the above calculation.  He must therefore use 10 more working-days, 3 1/3 of which are accounted for by his constant capital (seed and fixed capital) and 3 1/3 by wages.  The product of these 10 working-days on the basis of the old level of production would be 20 quarters, 6 2/3 quarters of which, however, would replace constant capital,[vv]  while 12 4/3 quarters would be the product of 6 2/3 working-days.  Of this, wages would take 6 2/3 quarters and surplus-value 6 2/3 quarters.

We would thus arrive at the following calculation:

Constant capital Wages Total product Surplus-value Rate of Surplus-value
662/3 quarters 662/3 quarters 200 quarters 662/3 quarters 100 per cent
(331/3 working-days) (Wages for 662/3 working-days) (100 working-days) (331/3 working-days)

He makes a profit of 33 1/3 working-days on the total product of 100 working-days.  Or 66 2/3 quarters on 200 quarters.  Or, if We calculate the capital he lays out in quarters, he makes a profit of 66 2/3 quarters on 133 1/3 quarters (the product of 66 2/3 working-days), whereas capitalist No. II makes a profit of 80 quarters on an outlay of 100 quarters.  Thus, the profit of the second capitalist is greater than that of the first.  Since the first capitalist produces 200 quarters in the same labour-time that it takes the second to produce 180, for the first capitalist one quarter is equal to half a working-day and for the second capitalist one quarter is equal to 10/18 or 5/9 of a working-day, that is, it contains 1/18 more labour-time and would consequently be dearer, and the first capitalist would drive the second out of business.  The latter would have to give up his discovery and accommodate himself to using seed and fixed capital in corn production, as before.

<"tsv3p206">Let us assume that the profit of capitalist I amounted to 60 quarters on an outlay of 120 quarters, or to 50 per cent (the same as 66 2/3 quarters on 133 1/3 quarters).

The profit of capitalist II amounted to 80 quarters on 100 quarters, or to 80 per cent.

The profit of the second capitalist compared to that of the first is 80:50, or 8:5, or 1 : 5/8.

As against this, the surplus-value of the second capitalist compared to that of the first is: 80 : 100, or 8 : 10, or 1 : 10/8, or 1 : 1 2/8, or 1 1/4.

The rate of profit of the second capitalist is 30 per cent higher than that of the first.

The surplus-value of the second capitalist is 20 per cent smaller than that of the first.

The second capitalist employs 66 2/3 per cent more workers, while the first one appropriates only 1/8, or 12 1/2 per cent, more labour in a single day.

||329| Mr. Mill has therefore proved that capitalist No. I—who uses a total of 90 days, 1/3 of which [is embodied] in constant capital (seed, machinery, etc.), and employs 60 workers whom, however, he pays only [the product of] 30 days—produces one quarter of corn in half a clay or in 9/18 of a day; so that in 90 working-days he produces 180 quarters, 60 quarters of which represent the 30 working-days contained in the constant capital, 60 quarters the wages for 60 working-days or the product of 30 working-days, and 60 quarters the surplus-value (or the product of 30 working-days).  The [rate of] surplus-value of this capitalist is 100 per cent, his [rate of] profit is 50 per cent, for the 60 quarters of surplus-value are not calculated on the 60 quarters of the capital laid out in wages, but on 120 quarters, i.e., both parts of capital (that is, variable capital plus constant capital).

He has proved further that capitalist No. II, who uses 100 working-days and lays out nothing in constant capital (by virtue of his discovery), produces 180 quarters, one quarter is therefore equal to 10/18 of a day, i.e., it is 1/18 of a day (40 minutes) dearer than that of No. I.  His labour is 1/18 less productive.  Since the worker receives a daily wage of one quarter, as he did previously, his wages have risen by 1/18 in real value, that is, in the labour-time required for their production.  Although the production cost of wages has now risen by 1/18 and the total product is smaller in relation to labour-time, and the surplus-value <"tsv3p207">produced by him amounts only to 80 per cent, whereas that of No. I was 100 per cent, his rate of profit is 80 per cent, while that of the first was 50.  Why?  Because, although the cost of wages has risen for capitalist No. II, he employs more labour, and because the rate of surplus-value is equal to the rate of profit in the case of No. II, since his surplus-value is calculated only on the capital laid out in wages, the constant capital amounting to zero.  But Mill wanted on the contrary to prove that the rise in the rate of profit was due to a reduction in the production cost of wages according to the Ricardian law.  We have seen that this rise took place despite the increase in the production cost of wages, that, consequently, the Ricardian law is false if profit and surplus-value are directly identified with one another, and the rate of profit is understood as the ratio of surplus-value or gross profit (which is equal to the surplus-value) to the total value of the capital advanced.

Mr. Mill continues:

“A return of 180 quarters could not before be obtained but by an outlay of 120 quarters; it can now be obtained by an outlay of not more than 100…”[loc. cit., p. 100].

Mr. Mill forgets that in the first case, the outlay of 120 quarters represents an outlay of 60 working-days.  And that in the second case, the outlay of 100 quarters represents an outlay of 55 6/9 working-days (that is, a quarter equals 9/18 of a working-day in the first case and 10/18 in the second).

“The produce (180 quarters) is still the result of the [same] quantity of labour as before, [namely] the labour of 100 men” [loc. cit., p. 100].

(Pardon me!  The 180 quarters were previously the result of 90 working-days.  Now they are the result of 100.)

“A quarter of corn, therefore, is still […] the produce of 10/18 of a man’s labour” [loc. cit., p. 100].

(Pardon me!  It was previously the produce of 9/18 of a man’s labour.)

A[ww] quarter of corn, which is the remuneration of a single labour, is indeed the produce of the same […] labour as before …”[loc. cit., p. 102].

(Pardon me!  Firstly, now a quarter of corn is “indeed the produce” of 10/18 of a working-day, whereas previously it was the produce of 9/18; it therefore costs 1/18 of a day more labour; <"tsv3p208">and secondly, whether the quarter costs 9/18 or 10/18 of his working-day, the remuneration of an individual worker should never be confused with the product of his labour; since it is always only a part of that product.)

“It is now the produce of 10/18 of a man’s labour, and nothing else” (this is correct); “whereas formerly it required for its production the conjunction of that quantity of labour with[xx] an expenditure, in the form of reimbursement of profit, amounting to one-fifth more” [loc. cit., pp. 102-03].

Stop!  First of all it is wrong, as has been ||330| emphasised repeatedly, to say that one quarter previously cost 10/18 of the working-day.  It only cost 9/18.  It would be even more wrong (if a gradation in absolute falsehood were possible) if there were added to these 9/18 of a working-day “the conjunction […] of reimbursement of profit, amounting to one-fifth more”.  In 90 working-days (taking constant and variable capital together) 180 quarters are produced.  180 quarters are equal to 90 working-days.  One quarter equals 90/180, which equals 9/18, which equals one half of a working-day.  Consequently, no “conjunction” whatsoever is added to these 9/18 of a working-day, or to the half of a working-day which a quarter costs in case No. I.

We here discover the real delusion which is the centre around which the whole of this nonsense revolves.  Mill first of all made a fool of himself by supposing that, if 120 quarters are the product of 60 days of labour, and this product is equally divided between the 60 labourers and the capitalist, the 60 quarters which represent the constant capital could be the product of 40 days of labour.  They could only be the product of 30 days, in whatever proportion the capitalist and the labourers producing the 60 quarters might happen to share in them.  But let us proceed.  In order to make the delusion quite clear, let us assume that not one-third, i.e., 20 quarters of the 60 quarters of constant capital, would be converted into profit, but the whole amount of the 60 quarters.  We can make this assumption all the more readily since it is not in our interest, but in Mill’s, and simplifies the problem.  Moreover it is easier to believe that the capitalist who produces 60 quarters of constant capital, discovers that 30 workers, who produce 60 quarters or an equivalent value in 30 days, can be made to work for nothing, without being paid any wages at all (as happens in the case of statute <"tsv3p209">labour), than to believe in the ability of Mill’s capitalist to produce 180 quarters of corn without seed or fixed capital, simply by means of a “discovery”.  Let us therefore assume that the 60 quarters contain only the profit of capitalist II, the producer of constant capital for capitalist I, since capitalist II has the product of 30 working-days to sell without having paid a single farthing to the 30 workers, each of whom worked one day.  Would it then be correct to say that these 60 quarters, which can be entirely resolved into profit, enter into the production cost of wages on the part of capitalist I, in “conjunction” with the labour-time worked by these workers?

Of course, the capitalist and the workers in case No. 1 could not produce 120 quarters or even one single quarter without the 60 quarters which constitute constant capital and which are resolvable into profit only.  These are conditions of production necessary for them, and conditions of production, moreover, which have to be paid for.  Thus the 60 quarters were necessary to produce 180.  60 of these 180 quarters replace the 60 quarters [constant capital].  Their 120 quarters—the product of 60 working-days—are not affected by this.  If they had been able to produce the 120 quarters without the 60, then their product, the product of the 60 working-days, would have been the same, but the total product would have been smaller, precisely because the 60 pre-existing quarters would not have been reproduced.  The capitalist’s rate of profit would have been greater because his production costs would not have included the expenditure on, or the cost of, the means of production which enable him to make a surplus-value of 60 quarters.  The absolute amount of profit would have been the same—60 quarters.  These 60 quarters, however, would have required an outlay of only 60 quarters.  Now they require an outlay of 120.  This outlay on constant capital therefore enters into the production costs of the capitalist, but not into the production costs of wages.

Let us assume that capitalist III, also without paying his workers, can produce 60 quarters in 15 working-days [instead of 30] by means of some “discovery”, partly because he uses better machines, and so on.  This capitalist III would drive capitalist II out of the market and secure the custom of capitalist I.  The capitalist’s outlay would now have fallen ||331| from 60 to 45 working-days.  The workers would still require 60 working-days to transform the 60 quarters into 180.  And they would need 30 working-days in order to produce their <"tsv3p210">wages.  For them one quarter would be equal to half a working-day.  But the 180 quarters would only cost the capitalist an outlay of 45 working-days instead of 60.  Since however it would be absurd to suggest that corn under the name of seed costs less labour-time than it does under the name of corn pure and simple, we would have to assume that in the case of the first 60 quarters, seed corn costs just as much as it did previously, but that less seed is necessary, or that the fixed capital which forms part of the value of the 60 quarters has become cheaper.

***

Let us write down the results so far obtained from the analysis of Mill’s “illustration”.

First, it has emerged that:

Supposing that the 120 quarters were produced without any constant capital and were the product of 60 working-days as they were previously, whereas formerly, the 180 quarters, 60 quarters of which were constant capital, were the product of 90 working-days.  In this case, the capital of 60 quarters laid out in wages, equal to 30 working-days but commanding 60 working-days, would produce the same product as formerly, namely, 120 quarters.  The value of the product would likewise remain unchanged, that is, one quarter would be equal to half a working-day.  Previously the product was equal to 180 instead of 120 as at present; but the 60 additional quarters represented only the labour-time embodied in the constant capital.  The cost of production of wages has thus remained unchanged, and the wages themselves—in terms of both use-value and exchange-value—have also remained unchanged—one quarter being equal to half a working-day.  Surplus-value would similarly remain unchanged, namely, 60 quarters for 60 quarters, or half a working-day for half a working-day.  The rate of surplus-value in both cases was 100 per cent.  Nevertheless the rate of profit was only 50 per cent in the first case, while it is now 100 per cent.  Simply because 60 : 60=100 per cent, while 60 : 120=50 per cent.  The increase in the rate of profit, in this case, is not [due] to any change in the production cost of wages, but merely to the fact that constant capital has been assumed to be zero.  The position is similar when the value of constant capital diminishes, and with it the value of the capital advanced; that is, the <"tsv3p211">proportion of surplus-value to capital increases, and this proportion is the rate of profit.

To obtain the rate of profit surplus-value is not only calculated on that part of capital which really increases and creates surplus-value, namely, the part laid out in wages, but also on the value of the raw materials and machinery whose value only reappears in the product.  It is calculated moreover on the value of the whole of the machinery, not only on the part which really enters into the process of creating value, i.e., the part whose wear and tear has to be replaced, but also on that part which enters only into the labour process.

Secondly, in the second example it was assumed that capital I yields 180 quarters, equal to 90 working-days, so that 60 quarters (30 working-days) represent constant capital; 60 quarters are variable capital (representing 60 working-days, for 30 of which the workers are paid); thus wages amount to 60 quarters (30 working-days) and surplus-value to 60 quarters (30 working-days on the other hand, the product of capital II represents 100 working-days although it likewise comes to 180 quarters, 100 quarters of which are wages, and 80 surplus-value.  In this case, the whole of the capital advanced is laid out in wages.  Here constant capital is at zero; the real value of wages has risen although the use-value the workers receive has remained the same—one quarter; but a quarter is now equal to 10/18 of a working-day whereas previously it was only worth 9/18.  The [rate of] surplus-value has declined from 100 per cent to 80 per cent, that is, by 1/5 or by 20 per cent.  The rate of profit has increased from 50 per cent to 80 per cent, that is, by 3/5 or by

60 per cent.  In this case, therefore, the real production cost of wages has not simply remained unchanged, but has risen.  Labour has become less productive and consequently the surplus labour has diminished.  And yet the rate of profit has risen.  Why?  First of all, because in this case there is no constant capital and the rate of profit is consequently equal to the rate of surplus-value.  In all cases where capital is not exclusively laid out on wages—an almost impossible contingency in capitalist production—the rate of profit must be smaller than the rate of surplus-value and it must be smaller in the same proportion as the total value of the capital advanced is greater than the value of the part of the capital laid out in wages.  Secondly, [the rate of profit has risen because] capitalist II employs a considerably greater number of workers than capitalist I, thus more <"tsv3p212">than counterbalancing the difference in the productivity of the labour they respectively employ.

Thirdly, from one point of view, the cases outlined under the headings “firstly” and “secondly” are a conclusive proof that variations in the rate of profit can take place quite independently of the cost of production of wages.  For under the heading “firstly” it was demonstrated that the rate of profit can rise although the cost of production of labour remains the same.  Under “secondly” it was demonstrated that the rate of profit for capital II compared with that for capital I rises although the productivity of labour declines, in other words, although the production cost of wages rises.  This case therefore proves ||VIII-332| that if, on the other hand, we compare capital I with capital II, the rate of profit falls although the rate of surplus-value rises, the productivity of labour increases and consequently the production costs of wages fall.  They amount to only 9/18 of a working-day [per quarter] for capital I, whereas for capital II they amount to 10/18 of a working-day; but despite this, the rate of profit is 60 per cent higher in the case of capital II than in the case of capital I.  In all these cases, not only are variations in the rates of profit not determined by variations in the production costs of wages, but they take place in the same proportions.  Here it must be noted that it does not follow from this that the movement of one is the cause of movement of the other (for example, that the rate of profit does not fall because the production costs of wages fall, or that it does not rise because the production costs of wages rise), but only that different circumstances paralyse the opposite movements.  Nevertheless, the Ricardian law that variations in the rate of profit take place in the opposite direction to variations in wages, that one rises because the other falls, and vice versa, is false.  This law applies only to the rate of surplus-value.  At the same time, there exists however a necessary connection (although not always) in the fact that the rate of profit and the value of wages rise and fall not in the opposite but in the same direction.  More manual labour is employed where the labour is less productive.  More constant capital is applied where the labour is more productive.  Thus in this context the same circumstances which bring about an increase or a decline in the rate of surplus-value, must as a consequence bring about a decline or an increase in the rate of profit [i.e., a movement] in the opposite direction.

[b) Apparent Variation in the Rate of Profit Where the Production of Constant Capital Is Combined with Its Working Up by a single Capitalist]

<"tsv3p213">But we shall now outline the case as Mill himself conceived it, although he did not formulate it correctly.  This will at the same time clarify the real meaning of his talk about the profits advanced by the capitalist.

Despite any kind of “discovery” and any possible “conjunction”, the example cannot be left in the form in which Mill puts it forward, because it contains absolute contradictions and absurdities and the various presuppositions he makes cancel one another out.

Of the 180 quarters, 60 quarters (seed and fixed capital) are supposed to consist of 20 quarters for profit and 40 quarters [wages] for 40 working-days, so that if the 20 quarters profit are omitted, the 40 working-days still remain.  According to this presupposition, the workers therefore receive the whole product for their labour, and consequently it is absolutely impossible to see where the 20 quarters profit and their value come from.  If it is assumed that they are merely nominal additions to the price, if they do not constitute labour-time appropriated by the capitalist, their omission would be just as profitable as if 20 quarters wages for workers who had not done any work were included in the 60 quarters.  Furthermore, the 60 quarters here simply express the value of the constant capital.  They are however supposed to be the product of 40 working-days.  On the other hand, it is assumed that the remaining 120 quarters are the product of 60 working-days.  But here working-days must be understood as equal average labour.  The assumption is therefore absurd.

Thus one must assume, firstly, that in the 180 quarters only 90 working-days are embodied and in the 60 quarters, that is, the value of the constant capital, only 30 working-days.  The assumption that the profit—amounting to 20 quarters or to 10 working-days—can be omitted, is once again absurd.  For it must then be assumed that the 30 workers employed in the production of constant capital, although not working for a capitalist, are nevertheless so obliging that they are content to pay themselves wages which only amount to half their labour-time, and not to reckon the other half in their commodity.  In a word, that that they sell their working-day 50 per cent below its value.

Hence this assumption too is absurd.

<"tsv3p214">But let us assume that capitalist I, instead of buying his constant capital from capitalist II and then working it up, combines both the production and the working up of constant capital in his own undertaking.  He thus supplies seed, agricultural implements, etc., to himself.  Let us likewise ignore the discovery which makes seed and fixed capital unnecessary.  Supposing that he expends 20 quarters (equal to 10 working-days) on constant capital (for the production of his constant capital) and 10 quarters on wages for 10 working-days, of which the workers work 5 days for nothing, the calculation would then be as follows:

||333|

Constant Capital Variable capital for 80 workers surplus-value Total product
20 quarters 60+20=80 qrs. (wages for 80 working-days) 60+20=80 qrs. 180 qrs.
(10 working-days) (=40 working-days) (=40 working-days) (=90 working-days)

The actual production costs of wages have remained the same, and consequently the productivity of labour too.  The total product has remained the same, that is, 180 quarters, and the value of the 180 quarters has also remained unchanged.  The rate of surplus-value has remained the same—80 quarters over 80 quarters.  The total amount or quantity of surplus-value has risen from 60 quarters to 80 quarters, that is, by 20 quarters.  The capital advanced has fallen from 120 to 100 quarters.  Previously, 60 quarters were made on 120 quarters, or a rate of profit of 50 per cent.  Now 80 quarters are made on 100 quarters, or a rate of profit of 80 per cent.  The total value of the capital advanced has fallen from 120 quarters by 20 quarters and the rate of profit has risen from 50 per cent to 80 per cent.  The profit itself, irrespective of its rate, now amounts to 80 quarters, whereas previously it was 60 quarters, that is, it has risen by 20 quarters, or as much as the amount (not the rate) of the surplus-value.

Thus there has been no change here, no variation in the production costs of real wages.  The rise in the rate of profit is due:

Firstly, to the fact that although the rate of surplus-value <"tsv3p215">has not risen, the total amount has increased from 60 quarters to 80 quarters, that is, by a third; and it has risen by a third, by 33 1/3 per cent, because the capitalist now employs 80 workers and not 60 as previously, that is, he exploits a third or 33 1/3 per cent more living labour; and obtains the same rate of surplus-value from the 80 workers he now employs as previously when he employed only 60 workers.

Secondly.  While the absolute magnitude of surplus-value (that is, the total profit) has risen by 33 1/3 per cent, i.e., from 60 to 80 quarters, the rate of profit has risen from 50 per cent to 80 per cent, by 30, that is, by 3/5 (since 1/5 of 50 is 10, and 3/5 30), i.e., by 60 per cent.  That is to say, the value of the capital laid out has fallen from 120 [quarters] to 100, although the value of the part of capital laid out in wages has risen from 60 to 80 quarters (from 30 to 40 working-days).  This part of the capital has increased by 10 working-days (20 quarters).  On the other hand, the constant portion of capital has decreased from 60 to 20 quarters (from 30 working-days to 10), that is, by 20 working-days.  If we subtract the 10 working-days by which the part of capital laid out in wages has increased, then the total capital expended decreases by 10 working-days (20 quarters).  Previously, it amounted to 120 quarters (60 working-days).  Now it amounts to only 100 quarters (50 working-days).  It has therefore decreased by a sixth, that is, by 16 2/3 per cent.

Incidentally, this whole variation in the rate of profit is only an illusion, only a transfer from one account book to another.  Capitalist I has 80 quarters profit instead of 60 quarters, that is, an additional profit of 20 quarters.  This, however, is the exact amount of profit that the producer of constant capital made previously and which he has now lost because capitalist I, instead of buying his constant capital, now produces it himself, that is, instead of ||334| paying capitalist II the surplus-value of 20 quarters (10 working-days) which the producer [of constant capital] obtained from the 20 workers employed by him, capitalist I now keeps it for himself.

80 quarters profit is made on 180 quarters as previously, the only difference being that previously it was divided between two people.  The rate of profit appears to be bigger, because previously capitalist I regarded the 60 quarters as constant capital only, which in fact they were for him; he therefore disregarded the profit accruing to the producer of constant capital.  The rate of profit has not altered, any more than the <"tsv3p216">surplus-value or any factor of production, including the productivity of labour.  Previously, the capital laid out by the producer [of constant capital] amounted to 40 quarters (20 working-days); that [variable capital] laid out by capitalist I amounted to 60 quarters (30 working-days), making a total of 100 quarters (50 working-days), and the profit of the first capitalist came to 20 quarters, that of the other to 60, together 80 quarters (40 working-days).  The whole product amounting to 90 working-days (180 quarters) yielded 80 quarters profit on 100 laid out in wages and constant capital.  For society, the revenue deriving from the profit has remained the same as before, and so has the ratio of surplus-value to wages.

The difference arises from the fact that, when the capitalist enters the commodity market as a buyer, he is simply a commodity owner.  He has to pay the full value of a commodity, the whole of the labour-time embodied in it, irrespective of the proportions in which the fruits of the labour-time were divided or are divided between the capitalist and the worker.  If, on the other hand, he enters the labour market as a buyer, he buys in actual fact more labour than he pays for.  If, therefore, he produces his raw materials and machinery himself instead of buying them, he himself appropriates the surplus labour he would otherwise have had to pay out to the seller of the raw materials and machinery.

It certainly makes a difference to the individual capitalist although not to the rate of profit, whether he himself derives a profit or pays it out to someone else.  (In calculating the reduction in the rate of profit as a result of the growth of constant capital, the social average is always taken as the basis, that is, the aggregate amount of constant capital employed by society at a particular moment and the proportion of this amount to the amount of capital laid out directly in wages.)  But this point of view is seldom decisive and can seldom be decisive even for the individual capitalist with regard to such complex enterprises which do occur, for example, when the capitalist is at the same time engaged in spinning and weaving, making his own bricks, etc.  What is decisive here is the real saving in production costs, through saving of time on transport, savings on buildings, on heating, on power, etc., greater control over the quality of the raw materials, etc.  If he himself decided to manufacture the machines he required, he would then produce them on a small scale like a small producer who works to supply his <"tsv3p217">own needs or the individual needs of a few customers, and the machines would cost him more than they would if he bought them from a machine manufacturer who produced them for the market.  Or if he wished at the same time to spin and to weave and to make machines not only for himself, but also for the market, he would require a greater amount of capital, which he could probably invest to greater advantage (division of labour) in his own enterprise.  This point of view can only apply when he provides for himself a market sufficient to enable him to produce his constant capital himself on an advantageous scale.  His own demand must be large enough to achieve this.  In this case, even if his work is less productive than that of the proper producers of constant capital, he appropriates a share of the surplus labour for which he would otherwise have to pay another capitalist.

It can be seen that this has nothing to do with the rate of profit.  If—as in the example cited by Mill—90 working-days and 80 workers were involved previously, then nothing is saved from the production costs by the fact that the surplus labour of 40 days (or 80 quarters) contained in the product is now pocketed by one capitalist instead of by two, as was the case previously.  The 20 quarters profit (10 working-days) simply disappears from one account book in order to appear again in another.

This saving on previous profit, if it does not coincide with a saving in labour-time and thus with a saving in wages, is therefore a pure delusion.

[c) On the Influence a Change in the value of Constant Capital Exerts on surplus-value, Profit and Wages]

||335| Fourthly, there remains the case in which the value of constant capital decreases as a result of the increased productivity of labour, and it remains for us to investigate whether or not, and to what extent, this case is related to the real production cost of wages or to the value of labour.  The question is, therefore, to what extent a real change in the value of constant capital causes at the same time a variation in the ratio of profit to wages.  The value of constant capital, its production costs, can remain constant, yet more or less of it can be embodied in the product.  Even if its value is assumed to be constant, the constant capital will increase in the measure that the productivity of labour and production on a large scale develop. <"tsv3p218">Variations in the relative amount of constant capital employed while the production costs of the constant capital remain stable or rise—variations which all affect the rate of profit—are excluded in advance from this investigation.

Furthermore, all branches of production whose products do not enter directly or indirectly into the consumption of the workers are likewise excluded.  But variations in the real rate of profit (that is, the ratio of the surplus-value really produced in these branches of industry to the capital expended) in these branches of industry affect the general rate of profit, which arises as a result of the levelling of profits, just as much as variations in the rate of profit in branches of industry whose products enter directly or indirectly into the consumption of the workers.

The question moreover must be reduced to the following: How can a change in the value of constant capital retrospectively affect the surplus-value?  For once surplus-value is assumed as given, the ratio of surplus to necessary labour is given, and therefore also the value of wages, i.e., their production cost.  In these circumstances, no change in the value of constant capital can have any effect on the value of wages, any more than on the ratio of surplus labour to necessary labour, although it must always affect the rate of profit, the cost of production of the surplus-value for the capitalist, and in certain circumstances, namely, when the product enters into the consumption of the worker, it affects the quantity of use-values into which wages are resolved, although it does not affect the exchange-value of wages.

Let us assume that wages are given, and that, for example, in a cotton factory they come to 10 working hours and surplus-value to 2 working hours.  The price of raw cotton falls by half as a result of a good harvest.  The same quantity of cotton which previously cost the manufacturer £100, now costs him only £50.  The same amount of cotton requires just the same amount of spinning and weaving as it did before.  With an expenditure of £50 for cotton, the capitalist can now acquire as much surplus labour as he did previously with an expenditure of £100, or, should he continue to spend £100 on cotton, he will now receive, for the same amount of money as he spent before, a quantity of cotton from which he will be able to acquire twice the amount of surplus labour.  In both cases, the rate of surplus-value, that is, the ratio of surplus-value to wages, will be the same, but in <"tsv3p219">the second case the amount of surplus-value will rise, since twice as much labour will be employed at the same rate of surplus labour.  The rate of profit will rise in both cases, although there has been no change in the production cost of wages.  It will rise because, to obtain the rate of profit, the surplus-value is calculated on the production costs of the capitalist, that is, on the total value of the capital he expends, and this has fallen.  He now needs a smaller outlay in order to produce the same amount of surplus-value.  In the second case, not only the rate but also the amount of profit will rise, because surplus-value itself has risen as a consequence of the increased employment of labour, without this increase resulting in an additional cost for raw material.  Here again, increases in the rate and the amount of profit will take place without any kind of change in the value of labour.

Suppose on the other hand that cotton doubles in value as a result of a bad harvest so that the same amount of cotton ||336| which formerly cost £100 now costs £200.  In this case, the rate of profit will fall at all events, but in certain circumstances, the amount or absolute magnitude of profit may fall as well.  If the capitalist employs the same number of workers, who do the same amount of work as they did before, under exactly the same conditions as before, the rate of profit will fall, although the ratio of surplus labour to necessary labour, and therefore the rate and the yield of surplus-value, will remain the same.  The rate of profit falls because the production costs of surplus-value have risen, i.e., the capitalist has to spend £100 more on raw material in order to appropriate the same amount of other people’s labour-time as before.  However, if the capitalist is now forced to allocate a part of the money which he formerly spent on wages to buying cotton, e.g., to spend £150 on cotton, of which sum £50 formerly went on wages, then the rate and the amount of profit fall, the amount decreases because less labour is being employed, even though the rate of surplus-value remains the same.  The result would be the same if, owing to a bad harvest, there were not enough cotton available to absorb the same amount of living labour as formerly.  In both cases, the amount and the rate of profit would fall, although the value of labour would remain the same; in other words, the rate of surplus-value or the quantity of unpaid labour which the capitalist receives in relation to the labour for which he pays wages, remains unchanged.

<"tsv3p220">Thus, when the rate of surplus-value, that is, when the value of labour, remains unchanged, a change in the value of constant capital must produce a change in the rate of profit and may be accompanied by a change in the total amount of profit.

On the other hand, as far as the worker is concerned:

If the value of cotton, and therefore the value of the product into which it enters, falls, he still receives the same amount of wages, equal to 10 hours of labour.  But he can now buy the cotton goods which he himself uses more cheaply, and can therefore spend part of the money he previously spent on cotton goods on other things.  It is only in this proportion that the necessities of life available to him increase in quantity, that is, in the proportion in which he saves money on the price of cotton goods.  For apart from this, he now receives no more for a greater quantity of cotton goods than he did previously for a smaller quantity.  Other goods have risen in the same proportion as cotton goods have fallen.  In short, a greater quantity of cotton goods now has no more value than the smaller quantity had previously.  In this case, therefore, the value of wages would remain the same, but it would represent a greater quantity of other commodities (use-values).  Nevertheless, the rate of profit would rise although, given the same circumstances, the rate of surplus-value could not rise.

The opposite is the case when cotton becomes dearer.  If the worker is employed for the same amount of time and still receives a wage equal to 10 hours as he did previously, the value of his labour would remain the same, but its use-value would fall insofar as the worker himself is a consumer of cotton goods.  In this case, the use-value of wages would fail, its value, however, would remain unchanged, although the rate of profit would also fall.  Thus, whereas surplus-value and (real) wages always fall and rise in inverse ratio (with the exception of the case where the worker participates in the [yield of the] absolute lengthening of his working-day; but when this happens, the worker uses up his labour-power all the more quickly), it is possible for the rate of profit to rise or fall in the first case although the value of wages remains the same and their use-value increases, in the second case although the value of wages remains the same, while their use-value falls.

Consequently, a rise in the rate of profit resulting from a fall in the value of constant capital, has no direct connection whatever with any kind of variation in the real value of wages (that is, in the labour-time contained in the wages).

<"tsv3p221">If we assume, as in the above case, that cotton falls in value by 50 per cent, then nothing could be more incorrect than to say either that the production costs of wages have fallen or that, if the worker is paid in cotton goods and receives the same value as he did previously, that is, if he receives a greater amount of cotton goods than he did previously (since although 10 hours, for example, still equals 10sh., I can buy more cotton goods for 10sh. than I could before, because the value of raw cotton has fallen), the rate of profit would remain the same.  The rate of surplus-value remains the same, but the ||337| rate of profit rises.  The production costs of the product fall, because an element of the product—its raw material—now costs less labour-time than previously.  The production costs of wages remain the same as before, since the worker works the same amount of labour-time for himself and the same for the capitalist as he did before.  (The production costs of wages do not depend however on the labour-time which the means of production used by the worker cost, but on the time he works in order to reproduce his wages.  According to Mr. Mill, the production costs of a worker’s wages would be greater if, for example, he worked up copper instead of iron, or flax instead of cotton; and they would be greater if be sowed flax seed rather than cotton seed, or if he worked with an expensive machine rather than with no machine at all, but simply with tools.)  The production costs of profit would fall because the aggregate value, the total amount of the capital advanced in order to produce the surplus-value would fall.  The cost of surplus-value is never greater than the cost of the part of capital spent on wages.  On the other hand, the cost of profit is equal to the total cost of the capital advanced in order to create this surplus-value.  It is therefore determined not only by the value of the portion of capital which is spent on wages and which creates the surplus-value, but also by the value of the elements of capital necessary to bring into action the one part of capital which is exchanged against living labour.  Mr. Mill confuses the production costs of profit with the production costs of surplus-value, that is, he confuses profit and surplus-value.  This analysis shows the importance of the cheapness or dearness of raw materials for the industry which works them up (not to speak of the relative cheapening of machinery*), even <"tsv3p222">assuming that the market price is equal to the value of the commodity, that is, that the market price of the commodity falls in exactly the same ratio as do the raw materials embodied in it.

Colonel Torrens is therefore correct when he says with regard to England:

In relation “… to a country in the condition of England, the importance of a foreign market must be measured not by the quantity of finished goods which it receives, but by the quantity of the elements of reproduction which it returns” (R. Torrens, A Letter to [the Right Honourable] Sir Robert Feet […] on the Condition of England etc., second ed., London, 1843, p. 275).

<The way Torrens seeks to prove this, however, is bad.  The usual talk about supply and demand.  According to him it would appear that if, for example, English capital which manufactures cotton goods grows more rapidly than capital which grows cotton, in the United States for instance, then the price of cotton rises and then, he says:

“… the value of cotton fabrics will decline in relation to the elementary cost of their production” [op. cit., p. 240].

That is to say, while the price of the raw material is rising due to the growing demand from England, the price of cotton fabrics, raised by the rising price of the raw material, will fall; we can indeed observe at the present time (spring 1862), for instance, that cotton twist is scarcely more expensive than raw cotton and woven cotton hardly any dearer than yarn.  Torrens, however, assumes that there is an adequate supply of cotton, though at a rather high price, available for consumption by English industry.  The price of cotton rises above its value.  Consequently, if cotton fabrics are sold at their value, this is only possible provided the cotton-grower secures more surplus-value from the total product than is his due, by actually taking part of the surplus-value due to the cotton manufacturer.  The latter cannot replace this portion by raising the price, because demand would fall if prices rose.  On the contrary, his profit may decline even more as a consequence of falling demand than it does as a consequence of the cotton-grower’s surcharge.

The demand for raw materials—raw cotton, for example—is regulated annually not only by the effective demand existing at a given moment, but by the average demand throughout the year, that is, not only by the demand from the mills that are working at the time, but by this demand increased by the number of mills which, experience shows, will start operating <"tsv3p223">during the course of the coming year, that is, by the relative increase in the number of mills taking place during the year, or by the surplus demand ||338| corresponding to this relative increase.

Conversely, if the price of cotton, etc., should fall, e.g., as a result of an especially good harvest, then in most cases the price falls below its value, again through the law of demand and supply.  The rate of profit—and possibly, as we saw above, the total amount of profit—increases, consequently, not only in the proportion in which it would have increased had the cotton which has become cheaper been sold at its value; but it increases because the finished article has not become cheaper in the total proportion in which the cotton-grower sold his raw cotton below its value, that is, because the manufacturer has pocketed part of the surplus-value due to the cotton-grower.  This does not diminish the demand for his product, since its price falls in any case due to the decrease in the value of cotton.  However, its price does not fall as much as the price of raw cot-ton falls below its own value.

In addition, demand increases at such times because the workers are fully employed and receive full wages, so that they themselves act as consumers on a significant scale, consumers of their own product.  In cases in which the price of the raw material declines, not as a result of a permanent or continuous fall in its average production costs but because of either an especially good or an especially bad year (weather conditions), the workers’ wages do not fall, the demand for labour, however, grows.  The effect produced by this demand is not merely proportionate to its growth.  On the contrary, when the product suddenly becomes dearer, on the one hand many workers are dismissed,  and on the other hand the manufacturer seeks to recoup his loss by reducing wages below their normal level.  Thus the normal demand on the part of the workers declines, intensifying the now general decline in demand, and worsening the effect this has on the market price of the product.>

It was mainly his (Ricardian) conception of the division of the product between worker and capitalist which led Mill to the idea that changes in the value of constant capital alter the value of labour or the production costs of labour; for example, that a fall in the value of the constant capital advanced results in a decline in the value of labour, in its production costs, and therefore also in wages.  The value of yarn falls as a result of a <"tsv3p224">decrease in the value of the raw material—raw cotton, for example.  Its costs of production decline: the amount of labour-time embodied in it is reduced.  If, for example, a pound of cotton twist were the product of one man working a twelve-hour day, and if the value of the cotton contained in this twist fell, then the value of the pound of twist would fall in the precise degree that the cotton required for spinning fell.  For example, [the price of] one pound of No. 40 Mule yarn 2nd quality was 1s. on May 22nd, 1861.  It was 11d. on May 22nd, 1858 (11 6/8d. in actual fact, since its price did not fall to the same extent as that of raw cotton).  But in the first case a pound of fair raw cotton cost 8d. (8 1/8d. in actual fact) and 7d. (7 3/8d. in actual fact) in the second.  In these cases, the value of the yarn fell in exactly the same degree as the value of cotton, its raw material.  Consequently, says Mill, the amount of labour remains the same as it was previously; if it was 12 hours, the product is the result of the same 12 hours of labour.  But there was 1d. less worth of the pre-existing labour in the second case than in the first.  The labour [-time] is the same, but the production costs of labour have been reduced (by 1d.).  Now although one pound of cotton twist as twist, as a use-value, remains the product of 12 hours labour as it was previously, the value of the pound of twist is neither now, nor was it previously, the product of 12 hours work by the spinner.  The value of the raw cotton, which in the first case amounted to two-thirds of 1s., i.e., 8d., was not the product of the spinner; in the second case, two-thirds of 11d., that is, 7d., was not his product.  In the first case the remaining 4d, is the product of 12 working hours, and just the same amount—4d.—is the product in the second.  In both cases, his labour adds only a third to the value of the twist.  Thus, in the first case, only 1/3 lb. of twist out of 1 lb. of yarn was the product of the spinner (disregarding machinery) and it was the same in the second case.  The worker and the capitalist have only 4d. to divide between them, the same as previously, that is, 1/3 lb. of twist.  If the worker buys cotton twist with the 4d., he will receive a greater quantity of it in the second case than in the first, now however a bigger quantity of twist is worth the same as a smaller quantity of twist was previously.  But the division of the 4d. between worker and capitalist remains the same.  If the time worked by the worker to reproduce or produce his wages is 10 hours, his surplus labour amounts to 2 hours, as it did previously.  He receives 5/6 of 4d, or of 1/3 lb. of cotton <"tsv3p225">twist—as he did previously—and the capitalist receives 1/6.  Therefore no change ||339| has taken place in respect of the division of the product, of the cotton twist.  None the less, the rate of profit has risen, because the value of the raw material has fallen and, consequently, the ratio of surplus-value to the total capital advanced, that is, to the production costs of the capitalist, has increased.

If, for the sake of simplification, we abstract from the machines, etc., then the two cases stand as follows:

Price of 1 lb. of twist Constant capital Labour added Wages Total expenditure surplus-value Rate of profit
1st case 12d. 8d. 4d. 131/3 farthings 11d. 4/3 farthings 22/3 farthings 515/17 per cent
2nd case 11d. 7d. 4d. 131/3 farthings 10d. 4/3 farthings 22/3 farthings 614/31 per cent

Thus the rate of profit has risen although the value of labour has remained the same and the use-value of the labour as expressed in cotton twist has risen.  The rate of profit has risen without any kind of variation in the labour-time which the worker appropriates for himself, solely because the value of the cotton, and consequently the total value of the production costs of the capitalist, has fallen.  2 2/3 farthings on 11d. 4/3 farthings expenditure is naturally less than 2 2/3 farthings on 10d. 4/3 farthings expenditure.

***

In the light of what has been said above, the fallaciousness of the following passages with which Mill concludes his illustration becomes clear,

“If the cost of production of wages had remained the same as before, profits could not have risen.  Each labourer received one quarter of corn; but one quarter of corn at that time was the result of the same cost of production as 1 1/5 quarter now.  In order, therefore, that each labourer should receive the same cost of production, each must […] receive one quarter of corn, plus one-fifth” ([John Stuart Mill, Essays on some unsettled Questions of Political Economy, London, 1844,] p. 103).

“Assuming, therefore, that the labourer is paid in the very article he produces, it is evident that, when any saving of expense takes place in the production of that article, if the labourer still receives the same cost of production as before, he must receive an increased quantity, in the very same ratio in which the productive power of capital has been increased.  But, if <"tsv3p226">so, the outlay of the capitalist will bear exactly the same proportion to the return as it did before; and profits will not rise.” (This is wrong.)  “The variations, therefore, in the rate of profits, and those in the cost of production of wages, go hand in hand, and are inseparable.  Mr. Ricardo’s principle […] is strictly true, if by low wages be meant not merely wages which are the produce of a smaller quantity of labour, but wages which are produced at less cost, reckoning labour and previous profits together” (loc. cit., p.104).

Thus according to Mill’s illustration, Ricardo’s view is strictly true if low wages (or the production costs of wages in general) are taken to mean not only the opposite of what he said they mean, but if they are taken to mean absolute nonsense, namely, that the production costs of wages are taken to mean not that portion of the working-day which the worker works to replace his wages, but also the production costs of the raw material he works up and the machinery he uses, that is, labour-time which he has not expended at all—neither for himself nor for the capitalist.

***

Fifthly.  Now comes the real question: How far can a change in the value of constant capital affect the surplus-value?

If we say that the value of the average daily wage is equal to 10 hours or, what amounts to the same thing, that from the working-day of, let us say, 12 hours which the worker labours, 10 hours are required in order to produce and replace his wages, and that only the time he works over and above this is unpaid labour-time in which he produces values which the capitalist ||340| receives without having paid for them; this means nothing more than that 10 hours of labour are embodied in the total quantity of means of subsistence which the worker consumes.  These 10 hours of labour are expressed in a certain sum of money with which he buys the food.

The value of commodities however is determined by the labour-time embodied in them, irrespective of whether this labour-time is embodied in the raw material, the machinery used up, or the labour newly added by the worker to the raw material by means of the machinery.  Thus, if there were to be a constant (not temporary) change in the value of the raw material or of the machinery which enter into this commodity—a change brought about by a change in the productivity of labour which produces this raw material and this machinery, in short, the constant capital embodied in this commodity—and if, as a result, more or <"tsv3p227">less labour-time were required in order to produce this part of the commodity, the commodity itself would consequently be dearer or cheaper (provided both the productivity of the labour which transforms the raw material into the commodity and the length of the working-day remained unchanged).  This would lead either to a rise or to a fall in the production costs, i.e., the value, of labour-power; in other words, if previously out of the 12 hours the worker worked 10 hours for himself, he must now work 11 hours, or, in the opposite case, only 9 hours for himself.  In the first case, his labour for the capitalist, i.e., the surplus-value, would have declined by half, from two hours to one; in the second case it would have risen by half, from two hours to three.  In this latter case, the rate of profit and the total profit of the capitalist would rise, the former because the value of constant capital would have fallen, and both because the rate of surplus-value (and its amount in absolute figures) would have increased.

This is the only way in which a change in the value of constant capital can affect the value of labour, the production cost of wages, or the division of the working-day between capitalist and worker, hence also the surplus-value.

However, this simply means that for the capitalist who, for example, spins cotton, the necessary labour-time of his own workers is determined not only by the productivity of labour in the spinning industry, but likewise by the productivity of labour in the production of cotton, of machinery, etc., just as it is also determined by the productivity in all branches of industry whose products—although they do not enter as constant capital, that is, either as raw material or as machinery, etc., into his product (a product which, it is assumed, enters into the consumption of the worker), into the yarn—constitute a part of the circulating capital which is expended in wages, that is, by the productivity in the industries producing food, etc.  What appears as the product in one industry appears as raw material or instrument of labour in another; the constant capital of one industry thus consists of the products of another industry; in the latter it does not constitute constant capital, but is the result of the production process within this branch.  To the individual capitalist it makes a great deal of difference whether the increased productivity of labour (and therefore also the fall in the value of labour-power) takes place within his own branch of industry or amongst those which supply his industry with constant <"tsv3p228">capital.  For the capitalist class, for capital as a whole, it is all the same.

Thus this case <in which a fall (or a rise) in the value of constant capital is not due to the fact that the industry employing this constant capital produces on a large scale, but to the fact that the production costs of constant capital itself have changed> concurs with the laws elaborated for surplus-value.

When in general we speak about profit or rate of profit, then surplus-value is supposed to be given.  The influences therefore which determine surplus-value have all operated.  This is the presupposition.

***

Sixthly.  In addition, one could have set forth how the ratio of constant capital to variable capital and hence the rate of profit is altered by a particular form of surplus-value.  Namely, by the lengthening of the working-day beyond its normal limits.  ||341| This results in the diminution of the relative value of the constant capital or of the proportionate part of value which it constitutes in the total value of the product.  But we will leave this till Chapter III where the greater part of what has been dealt with here really belongs.

***

Mr. Mill, basing himself on his brilliant illustration, advances the general (Ricardian) proposition:

“The only expression of the law of profits … is, that they depend on the cost of production of wages” (loc. cit., pp. 104-05).

On the contrary, one should say: The rate of profit (and this is what Mr. Mill is talking about) depends exclusively on the cost of production of wages only in one single case.  And this is when the rate of surplus-value and the rate of profit are identical.  But this can only occur if the whole of the capital advanced is laid out directly in wages, so that no constant capital, be it raw material, machinery, factory buildings, etc., enters into the product, or that the raw material, etc., insofar as it does enter, is not the product of labour and costs nothing—a case which is virtually impossible in capitalist production.  Only in this case are the variations in the rate of profit identical with the variations in the rate of surplus-value, or, what amounts to the same thing, with the variations in the production costs of wages.

<"tsv3p229">In general however (and this also includes the exceptional case mentioned above) the rate of profit is equal to the ratio of surplus-value to the total value of the capital advanced.

If we call the surplus-value S, and the value of the capital advanced C, then profit works out at S: C or S/C.  This ratio is determined not only by the size of S <and all the factors which determine the production cost of wages enter into the determination of S> but also by the size of C.  But C, the total value of the capital advanced, consists of the constant capital, c, and the variable capital, v (laid out in wages).  The rate of profit is therefore S : (v+c)=S: C.  But S itself, the surplus-value, is determined not only by its own rate, i.e., by the ratio of surplus labour to necessary labour, in other words, by the division of the working-day between capital and labour, that is, its division into paid and unpaid labour-time.  The quantity of surplus-value, i.e., the total amount of surplus-value, is likewise determined by the number of working-days which capital exploits simultaneously.  And, for a particular capital, the amount of labour-time employed at a definite rate of unpaid labour depends on the time in which the product remains in the actual production process without labour being applied or without the same amount of labour as was required formerly (for example, wine before it has matured, corn once it has been sown, skins and other materials which are subjected to chemical treatment for a certain period, etc.), as well as on the length of time involved in the circulation of the commodity, the length of time required for the metamorphosis of the commodity, that is, the interval between its completion as a product and its reproduction as a commodity.  How many days can be worked simultaneously (if the value of wages, and therefore the rate of surplus-value, is given) depends in general on the amount of capital expended on wages.  But on the whole, the factors mentioned above modify the total amount of living  labour-time which a capital of a given size can employ during a definite period—during a year, for example.  These circumstances determine the absolute amount of labour-time which a given capital can employ.  This does not, however, alter the fact that surplus-value is determined exclusively by its own rate multiplied by the number of days worked simultaneously.  These circumstances only determine the operation of the last factor, the amount of labour-time employed.

<"tsv3p230">The rate of surplus-value is equal to the ratio of surplus labour in one working-day, that is, it is equal to the surplus-value yielded by a single working-day.  For example, if the working-day is 12 hours and the surplus labour 2 hours, then these 2 hours constitute 1/6 of the total labour-time of 12 hours; but we must calculate them on the necessary labour (or on the wages paid for it, they represent the same quantity of labour-time in materialised form); [therefore it is] 1/5 (1/5 of 10 hours=2 hours) (1/5=20 per cent).  In this case the amount of surplus-value (yielded in a single day) is determined entirely by the rate.  If the capitalist operates on the scale of 100 such ||342| days, then the surplus-value (its total amount) will be 200 labour hours.  The rate has remained the same—200 hours for 1,000 hours of necessary labour will give 1/5, or 20 per cent.  If the rate of surplus-value is given, its amount depends entirely on the number of workers employed, that is, on the total amount of capital expended on wages, variable capital.  If the number of workers employed is given, that is, the amount of capital laid out in wages, the variable capital, then the amount of surplus-value depends entirely on its rate, that is, on the ratio of surplus labour to necessary labour, on the production costs of wages, on the division of the working-day between capitalist and worker.  If 100 workers (working 12 hours a day) provide me with 200 labour hours, then the total amount of surplus-value will be 200, the rate 1/5 of a [paid] working-day, or 2 hours.  And the surplus-value comes to 2 hours multiplied by 100 [=200].  If 50 workers provide me with 200 labour hours, then the total amount of the surplus-value is 200 hours; the rate is 2/5 of a (paid) working-day, that is, 4 hours.  And the surplus-value amounts to 4 hours multiplied by 50 =200.  Since the total amount of surplus-value is equal to the product of its rate and the number of working-days, it can remain the same although the factors change in an inverse ratio.

The rate of surplus-value is always expressed in the ratio of surplus-value to variable capital.  For variable capital is equal to the total amount of the paid labour-time; surplus-value is equal to the total amount of unpaid labour-time.  Thus the ratio of surplus-value to variable capital always expresses the ratio of the unpaid part of the working-day to the paid part.  For example, in the case mentioned previously, let the wage for 10 hours be 1 thaler, where 1 thaler represents a quantity of silver which contains 10 hours of labour.  100 working-days are consequently paid for with 100 thaler.  Now if the surplus-value amounts <"tsv3p231">to 20 thaler, the rate is 20/100, or 1/5, or 20 per cent.  Or what amounts to the same thing, the capitalist receives 2 hours for every 10 working hours (equal to 1 thaler); for 100x10 working hours, that is, 1,000 hours, he receives 200 hours or 20 thaler.

Thus, although the rate of surplus-value is determined exclusively by the ratio of surplus labour-time to necessary time, in other words, by the corresponding part of the working-day which the worker requires to produce his wages, that is, by the production cost of wages, the amount of surplus-value is moreover determined by the number of working-days, by the total quantity of labour-time which is employed at this definite rate of surplus-value, that is, by the total amount of capital expended on wages (if the rate of surplus-value is given).  But since profit is the ratio, not of the rate of surplus-value, but of the total amount of surplus-value to the total value of the capital advanced, then clearly its rate is determined not only by the rate, but also by the total amount of surplus-value, an amount which depends on the compound ratio of the rate and the number of workingdays, on the amount of capital expended on wages and the production costs of wages.

If the rate of surplus-value is given, then its amount depends exclusively on the amount of capital advanced (laid out in wages).  Now the average wage is the same, in other words, it is assumed that workers in all branches of industry receive a wage of 10 hours, for example.  (In those branches of industry where wages are higher than the average, this, from our point of view and for the matter under consideration, would amount to the capitalist employing a greater number of unskilled workers.)  Thus, if it is assumed that the surplus labour is equal, and this means that the entire normal working-day is equal (the inequalities cancel one another out in part since one hour of skilled labour, for example, is equal to two hours of unskilled labour), ||343| then the amount of the surplus-value depends entirely on the amount of capital expended [on wages].  It can therefore be said that the amounts of surplus-value are proportional to the amounts of capital laid out (in wages).  This does not, however, apply to profit, since profit [expresses] the ratio of surplus-value to the total value of the capital expended, and the portion which capitals of equal size lay out in wages, or the ratio of variable capital to the total capital, can be and is very different.  The amount of profit—as regards the different capitals—here depends on the ratio between the variable capital and the total capital, that is, <"tsv3p232">on v/c+v.  Thus, if the rate of surplus-value is given, and it is always expressed by s/v, by the ratio of surplus-value to variable capital, then the rate of profit is determined entirely by the ratio of variable capital to the total capital.

The rate of profit is thus determined, firstly, by the rate of surplus-value, that is, by the ratio of unpaid labour to paid labour; and it changes, rises or falls (insofar as this action is not rendered ineffectual by movements of the other determining factors), with changes in the rate of surplus-value.  This, however, rises or falls in direct proportion to the productivity of labour and in inverse proportion to the value of labour, that is, to the production costs of wages or the quantity of necessary labour.

Secondly, however, the rate of profit is determined by the ratio of variable capital to the total capital, by v/c+v.  The total amount of surplus-value, where its rate is given, depends of course only on the size of the variable capital, which, on the assumption made, is determined by, or simply expresses, the number of working-days worked simultaneously, that is, the total amount of labour-time employed.  But the rate of profit depends on the ratio of this absolute magnitude of surplus-value, which is determined by the variable capital, to the total capital, that is, on the ratio between variable capital and total capital, on v/c+v.  Since S, surplus-value, has been assumed as given in calculating the rate of profit, and therefore v is likewise assumed as given, any variations occurring in can be due only to variations in c, that is, in constant capital.  For if v is given, the sum c+v, equal to C, can only change if c changes and the ratio v/c+v or v/C changes with changes in the sum.

If v=100, c=400, then v+c=500 and v/v+c  = 100/500= 1/5 = 20 per cent.  Therefore, if the rate of surplus-value came to 5/10 or 1/2, [the amount of surplus-value] would be 50.  But since the variable capital is only equal to 1/5 the total capital, the profit is therefore a half of a fifth, that is, one-tenth [of the total capital] and, in fact, 1/10 of 500, which is 50, that is, 10 per cent.  The ratio v/c+v changes with every change in c, but naturally not by the same numerical quantity.  If we assume that v and c amount <"tsv3p233">originally to 10 each, that is to say, that the total capital consists of half variable and half constant capital, then v/v+c  = 10/10+10 =10/20=1/2.  If the rate of surplus-value is 1/2 of v, then it is equal to 1/4 of C.  In other words, if the surplus-value is 50 per cent, then in this case, where the variable capital is C/2, the rate of profit comes to 25 per cent.  If we now assume that the constant capital is doubled, i.e., it increases from 10 to 20 then v/c+v = 10/20+10 = 10/30 = 1/3.  (The rate of surplus-value, 1/2 of 10, would now be 1/2 of 1/3 of C, that is, 1/6 of 30, that is, 5.  Thus 1/2 of 10=5, 5calculated on 10 is 50 per cent, 5 calculated on 30 is 16 2/3 per cent.  On the other hand, 5 calculated on 20 was 1/4, that is 25 per cent.)  The constant capital has doubled, that is, it has increased from 10 to 20.  But the sum c+v has only increased by half namely, from 20 to 30.  The constant capital has increased by 100 per cent, the sum c+v only by 50 per cent.  The ratio v/c+v  originally 10/20, has fallen to 10/30, that is, from a half to a third, that is, from 3/6 to 2/6.  Thus it has fallen by only 1/6, where- as the constant capital has been doubled.  How the growth or decline in the constant capital affects the ratio v/c+v depends evidently on the proportion in which c and v originally constitutee parts of the whole capital C (consisting of c+v).

||344| The constant capital (that is, its value) can firstly rise(or fall) although the amounts of raw material, machinery, etc., employed, remain the same.  In this case therefore, the variations in constant capital are not determined by the conditions of production prevailing in the industrial process into which it enters as constant capital, but are independent of them.  Whatever the causes bringing about the change in value may be, they always influence the rate of profit.  In this case, the same amount of raw material, machinery, etc., has more or less value than it did previously, because more or less labour-time was required to produce them.  The variations, then, are determined by the conditions production of the processes from which the component parts of constant capital emerge as products.  We have already[yy] examined how this affects the rate of profit.

<"tsv3p234">As far as the rate of profit is concerned, whether in a particular industry constant capital, raw material, for example, rises or falls in value because its own production has become dearer, etc., amounts to the same thing as if in some branch of industry (or even in the same branch) more expensive raw material were used for the production of one type of commodity than for that of another type, while the outlay on wages remained unchanged.

When there is equal expenditure on wage-labour, but the raw material worked up by one kind of capital (corn, for example) is dearer than the raw material worked up by another (oats, for example) (or, for that matter, silver and copper, etc., or wool and cotton, etc.), the rate of profit for the two capitals must be in inverse proportion to the dearness of the raw material.  Thus, if on the average the same profit is made in both branches of industry, then this is only possible because the surplus-value is shared between the capitalists, not in accordance with the ratio of surplus-value which each capitalist produces in his own particular sphere of production but in relation to the size of the capital they employ.  This can happen in two ways.  A, who works up the cheaper material, sells his commodity at its real value; he thereby also pockets the surplus-value he himself has produced.  The price of his commodity is equal to its value.  B, who works up dearer material, sells his commodity above its value and charges as much in his price [in order that his commodity should yield a corresponding profit] as if he had been working up a cheaper material.  If A and B exchange their products, then it is the same for A as if he had included a smaller amount of surplus-value in the price of his commodity than it actually contains.  Or as if both A and B had from the very beginning charged a rate of profit commensurate with the size of the capital invested, that is, had divided the joint surplus-value between them on the basis of the amount of the capital they had invested.  And this is what the term general rate of profit denotes.

Naturally this equalisation does not take place when the constant element in a particular capital such as raw materials, for example, falls or rises temporarily under the influence of the seasons, etc.  Although the extraordinary profits made by the cotton-spinners, for example, in years of especially good cotton crops, undoubtedly lead to an influx of new capital into this branch of industry and give rise to the building of a large number of new factories and of textile machinery.  If a bad year for <"tsv3p235">cotton ensues, then the loss [because of the sudden rise in the price of cotton] will be all the greater.

Secondly, the production costs of machinery, raw materials, in short of constant capital, remain the same, but larger amounts of them may be required; their value therefore grows in proportion to the growing amount used as a result of the changed conditions of production in the processes in which those elements enter as means of production.  In this case, as in the previous example, the increase in the value of constant capital results of course in a fall in the rate of profit.  On the other hand however, these variations in the conditions of production themselves indicate that labour has become more productive and thus that the rate of surplus-value has risen.  For more raw material is now being consumed by the same amount of living labour only because it can now work up the same amount in less time, and more machinery is now being used only because the cost of machinery is smaller than the cost of the labour it replaces.  Thus it is a question here of making up to a certain extent the fall in the rate of profit by increasing the rate of surplus-value and therefore also the total amount of surplus-value.

Finally, the two factors responsible for the change in value can operate together in very different combinations.  For example, ||345| the average value of raw cotton has fallen, but simultaneously the value of the amount of cotton which can be worked up in a certain time, has increased even more.  [Or] the value of cotton has risen, and so has the value of the total amount of it which can be worked up in a given time.  Machinery with increased productive capacity has become dearer in absolute terms, but has become cheapen in relation to its efficiency, and so forth.

It has been assumed hitherto that the variable capital remains unchanged.  Variable capital, however, can also decline not only relatively but absolutely, as for example in agriculture; that is, it can decline not only relative to the size of the constant capital.  Alternatively, variable capital can increase absolutely.  In this case, however, it is the same as if it remained unchanged, insofar as the constant capital grows in a greater or in the same ratio the reasons mentioned above.

If the constant capital remains unchanged, then any rise or fall of it in relation to the variable capital is accounted for only by a relative rise or fall of the constant capital due to an absolute fall or rise of the amount of variable capital.

<"tsv3p236">If the variable capital remains unchanged, then every rise or fall in the constant capital can be explained only by its own absolute rise or fall.

If variations take place in both variable and constant capital simultaneously, then after deducting the variations which are identical in both, the result is the same as if one had remained unchanged while the other had risen or fallen.

Once the rate of profit is given, the amount of profit depends on the size of the capital employed.  A large capital with a low rate of profit yields a larger profit than a small capital with a high rate of profit.

***

So much for this digression.

Apart from this, only the two following passages from John Stuart Mill require comment:

Capital, strictly speaking, has no productive power.  The only productive power is that of labour; assisted, no doubt, by tools, and acting upon raw materials”[zz] (op. cit., p. 90).

Strictly speaking, he here confuses capital with the material elements of which it is constituted.  However, the passage is valuable for those who do the same thing and who nevertheless assert that capital has productive power.  Of course, here too the matter is only stated correctly insofar as the production of value is considered.  After all, nature also produces insofar as it is only a question of use-values.

“… productive power of capital […] can only mean[aaa] the quantity of real productive power which the capitalist, by means of his capital, can command” (loc. cit., p. 91).

Here capital is conceived correctly as a production relation.  |VIII-345||

***

<"vol32-p373"> 

||XIV-851| In a previous notebook I have traced in detail how Mill violently attempts to derive Ricardo’s law of the rate of profit (in inverse proportion to wages) directly from the law of value without distinguishing between surplus-value and profit.

[8.  Conclusion]

<"tsv3p237">This whole account of the Ricardian school shows that it declines at two points.

1) Exchange between capital and labour corresponding to the law of value.

2) Elaboration of the general rate of profit.  Identification of surplus-value and profit.  Failure to understand the relation between values and cost-prices.


* ||XV-887| <The following has to be added with regard to Bailey’s insipidity.

When he says that A is distant from B, he does not thereby compare them with one another, equalise them, but separates them in space.  They do not occupy the same space.  Nevertheless he still declares that both are spatial things and are differentiated in virtue of being things which belong in space.  He therefore makes them equal in advance, gives them the same unity.  However, here it is a question of equation.

If I say that the area of the triangle A is equal to that of the parallelogram B, this means not only that the area of the triangle is expressed in the parallelogram and that of the parallelogram in the triangle, but it means that if the height of the triangle is equal to h and the base equal to b, then A=h×b/2, a property which belongs to it itself just as it is a property of the parallelogram that it is likewise equal to h×b/2.  As areas, the triangle and the parallelogram are here declared to be equal, to be equivalents, although as a triangle and a parallelogram they are different.  In order to equate these different things with one another, each must represent the same common element regardless of the other.  If geometry, like the political economy of Mr. Bailey, contented itself with saying that the equality of the triangle and of the parallelogram means that the triangle is expressed in the parallelogram, and the parallelogram in the triangle, it would be of little value.> |XV-887||

* By relative cheapening of machinery, I mean that the absolute value of the amount of machinery employed increases, but that it does not increase in the same proportion as the mass and efficiency of the machinery.


[a] See this volume, pp. 30-32.—Ed.

[b] See this volume, pp. 14 and 29-31.—Ed.

[c] See this volume, p. 58.—Ed.

[d] In the manuscript, “proportion”.—Ed.

[e] The manuscript has “time can do nothing”.—Ed.

[f] The manuscript has “add to value” instead of “create value”.—Ed.

[g] In the manuscript, “Mr. Mill”.—Ed.

[h] This and the other passages taken by Marx from Parisot’s translation of Mill’s work are quoted in this volume from James Mill, Elements of Political Economy, London, 1824.  These quotations are marked “Parisot” and the French text Marx used can be found in the Appendix of this volume.—Ed.

[i] This passage taken by Marx from Prévost’s translation of McCulloch’s book A Discourse on the Rise, Progress, Peculiar Objects, and Importance of Political Economy, is quoted here from the English original, p. 71.—Ed.

[j] See this volume, pp. 99-100.—Ed.

[k] The manuscript has “state”.—Ed.

[l] Marx wrote most of this and of the two following paragraphs in English.—Ed.

[m] The manuscript has “his”.—Ed.

[n]  See this volume, p. 111.—Ed.

[o]  Marx wrote this paragraph and the one following the passage quoted almost entirely in English.—Ed.

[p]  Marx wrote this paragraph in English—Ed.

[q] Under the aspect of space.—Ed.

[r]  Marx here sums up Bailey’s argument in his own words.—Ed.

[s] See this volume, pp. 110-11.—Ed.

[t] See this volume, p. 34.—Ed.

[u] Marx wrote most of this paragraph and the one following the quotation in English.—Ed.

[v] See this volume, p. 143.—Ed.

[w] See this volume, pp. 150 and 153-54.—Ed.

[x] In the manuscript, this reads: “there is for it no function to perform”.—Ed.

[y] See this volume, p. 129.—Ed.

[z]  Marx here summarises the ideas developed by Bailey in Chapter X of his book.—Ed.

[aa] See this volume, pp. 85-88.—Ed.

[bb]  Instead of this part of the sentence Marx wrote in the manuscript: “The three types of commodities cannot be entirely distinguished from one another.”—Ed.

[cc] The beginning of this paragraph up to “for resemblances” is Marx’s summary of Malthus’s views on McCulloch.  The rest is a direct quotation.—Ed.

[dd] Instead of “real and exchangeable”, the manuscript has “real and relative or exchangeable value”.—Ed.

[ee] Marx mentions p. 211 and p. 225.—Ed.

[ff] Instead of “required for the production of any commodity”, the manuscript has “expended in its appropriation or production”.—Ed.

[gg] The manuscript has “a”.—Ed.

[hh] This passage from McCulloch which Marx quotes from Prévost’s translation is quoted here from The Edinburgh Review, Vol. XL, March-July 1824.—Ed.

[ii] The manuscript has “stationary” instead of “constant”.—Ed.

[jj] The manuscript has “to the wages”.—Ed.

[kk] In this sentence, which is written in German, Marx summarises the ideas set forth by McCulloch on pp. 373-74.—Ed.

[ll] The manuscript has “But the”.—Ed.

[mm] The manuscript has “So a”.—Ed.

[nn] Instead of “constitutes the […] profits”, the manuscript has “constitutes the profit or surplus which Ricardo cannot explain on the basis of his theory”.—Ed.

[oo] Marx here is summarising a paragraph printed on p, 18 of Stirling’s book.—Ed.

[pp] This sentence and the one preceding it are a summary by Marx of Mill’s arguments on this page.—Ed.

[qq] This and the following sentence are a compression by Marx of Mill’s ideas, which are spread over several paragraphs in his book.—Ed.

[rr] The manuscript has “For a”.—Ed.

[ss] The manuscript has “plus”.—Ed.

[tt] The manuscript has “is therefore strictly true”.—Ed.

[uu] It is proved.—Ed.

[vv] The manuscript has “fixed capital”.—Ed.

[ww] The manuscript has “For a”.—Ed.

[xx] The manuscript has “plus”.—Ed.

[yy] See this volume, pp.218-25.—Ed.

[zz] The manuscript has “machinery”.—Ed.

[aaa] The manuscript has “is nothing but” instead of “can only mean”.—Ed.