Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole

Karl Marx
Marx, Karl
Display paragraphs in this book containing:
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
Pub. Date
Das Kapital, based on the 1st edition.

by Frederick Engels


AT last I have the pleasure of making public this third volume of the main work of Marx, the closing part of his economic theories. When I published the second volume, in 1885, I thought that the third would probably offer only technical difficulties, with the exception of a few very important sections. This turned out to be so. But that these exceptional sections, which represent the most valuable parts of the entire work, would give me as much trouble as they did, I could not foresee at that time any more than I anticipated the other obstacles, which retarded the completion of the work to such an extent.


In the first place it was a weakness of my eyes which restricted my time of writing to a minimum for years, and which permits me even now only exceptionally to do any writing by artificial light. There were furthermore other labors which I could not refuse, such as new editions and translations of earlier works of Marx and myself, revisions, prefaces, supplements, which frequently required special study, etc. There was above all the English edition of the first volume of this work, for whose text I am ultimately responsible and which absorbed much of my time. Whoever has followed the colossal growth of international socialist literature during the last ten years, especially the great number of translations of earlier works of Marx and myself, will agree with me in congratulating myself that there is but a limited number of languages in which I am able to assist a translator and which compel me to accede to the request for a revision. This growth of literature, however, was but an evidence of a corresponding growth of the international working class movement itself. And this imposed new obligations on me. From the very first days of our public activity, a good deal of the work of negotiation between the national movements of socialists and working people in the various countries had fallen on the shoulders of Marx and myself. This work increased to the extent that the movement as a whole gained in strength. Up to the time of his death, Marx had borne the brunt of this burden. But after that the ever swelling amount of work had to be done by myself alone. Meanwhile the direct intercourse between the various national labor parties has become the rule, and fortunately it is becoming more and more so. Nevertheless my assistance is still in demand a good deal more than is agreeable to me in view of my theoretical studies. But if a man has been active in the movement for more than fifty years, as I have, he regards the work connected with it as a duty, which must not be shirked, but immediately fulfilled. In our stirring times, as in the 16th century, mere theorizers on public affairs are found only on the side of the reactionaries, and for this reason these gentlemen are not even theoretical scientists, but simply apologists of reaction.


The fact that I live in London implies that my intercourse with the party is limited in winter to correspondence, while in summer time it largely takes place by personal interviews. This fact, and the necessity of following the course of the movement in a steadily growing number of countries and a still more rapidly increasing number of party organs, compelled me to reserve matters which brooked no interruption for the winter months, preferably the first three months of the year. When a man is past seventy, his brain's fibers of association work with a certain disagreeable slowness. He does not overcome interruptions of difficult theoretical problems as easily and quickly as formerly. Thus it came about that the work of one winter, if it was not completed, had to be largely done over the following winter. And this took place particularly in the case of the most difficult section, the fifth.


The reader will observe by the following statements that the work of editing the third was essentially different from that of the second volume. Nothing was available for the third volume but a first draft, and it was very incomplete. The beginnings of the various sections were, as a rule, pretty carefully elaborated, or even polished as to style. But the farther one proceeded, the more sketchy and incomplete was the analysis, the more excursions it contained into side issues whose proper place in the argument was left for later decision, the longer and more complex became the sentences, in which the rising thoughts were deposited as they came. In several places, the handwriting and the treatment of the matter clearly revealed the approach and gradual progress of those attacks of ill health, due to overwork, which at first rendered original work more and more difficult for the author and finally compelled him from time to time to stop work altogether. And no wonder. Between 1863 and 1867, Marx had not only completed the first draft of the two last volumes of Capital and made the first volume ready for the printer, but had also mastered the enormous work connected with the foundation and expansion of the International Workingmen's Association. The result was the appearance of the first symptoms of that ill health which is to blame for the fact that Marx did not himself put the finishing touches to the second and third volumes.


I began my work on these volumes by first dictating the entire manuscript of the original, which was often hard to decipher even for me, into readable copy. This required considerable time to begin with. It was only then that the real work of editing could proceed. I have limited this to the necessary minimum. Wherever it was sufficiently clear, I preserved the character of the first draft as much as possible. I did not even eliminate repetitions of the same thoughts, when they viewed the subject from another standpoint, as was Marx's custom, or at least expressed the same thought in different words. In cases where my alterations or additions are not confined to editing, or where I used the material gathered by Marx for independent conclusions of my own, which, of course, are made as closely as possible in the spirit of Marx, I have enclosed the entire passage in brackets and affixed my initials. My footnotes may not be inclosed in brackets here and there, but wherever my initials are found, I am responsible for the entire note.


It is natural for a first draft, that there should be many passages in the manuscript which indicate points to be elaborated later on, without being followed out in all cases. I have left them, nevertheless, as they are, because they reveal the intentions of the author relative to future elaboration.


Now as to details.


For the first part, the main manuscript was serviceable only with considerable restrictions. The entire mathematical calculation of the relation between the rate of surplus-value and the rate of profit (making up the contents of our chapter III) is introduced in the very beginning, while the subject treated in our chapter I is considered later and incidentally. Two attempts of Marx at rewriting were useful in this case, each of them comprizing eight pages in folio. But even these were not consecutively worked out. They furnished the substance of what is now chapter I. Chapter II is taken from the main manuscript. There were quite a number of incomplete mathematical elaborations of chapter III, and in addition thereto an entire and almost complete manuscript, written in the seventies and dealing with the relation of the rate of surplus-value to the rate of profit, in the form of equations. My friend Samuel Moore, who had done the greater portion of the translation of the first volume, undertook to edit this manuscript for me, a work for which he was certainly better fitted than I, since he graduated from Cambridge in mathematics. By the help of his summary, and with an occasional use of the main manuscript, I completed chapter III. Nothing was available for chapter IV but the title. But as the point of issue, the effect of the turn-over on the rate of profit, is of vital importance, I have elaborated it myself. For this reason the whole chapter has been placed between brackets. It was found in the course of this work, that the formula of chapter III for the rate of profit required some modification, in order to be generally applicable. Beginning with chapter V, the main manuscript is the sole basis for the remainder of Part I, although many transpositions and supplements were needed for it.


For the following three parts I could follow the original manuscript throughout, aside from editing the style. A few passages, referring mostly to the influence of the turn-over, had to be brought into agreement with my elaboration of chapter IV; these passages are likewise placed in brackets and marked with my initials.


The main difficulty was presented by Part V, which treated of the most complicated subject in the entire volume. And it was just at this point that Marx had been overtaken by one of those above-mentioned serious attacks of illness. Here, then, we had no finished draft, nor even an outline which might have been perfected, but only a first attempt at an elaboration, which more than once ended in a disarranged mass of notes, comments and extracts. I tried at first to complete this part, as I had the first one, by filling out vacant spaces and fully elaborating passages that were only indicated, so that it would contain at least approximately everything which the author had intended. I tried this at least three times, but failed every time, and the time lost thereby explains most of the retardation. At last I recognized that I should not accomplish my object in this way. I should have had to go through the entire voluminous literature of this field, and the final result would have been something which would not have been Marx's book. I had no other choice than to cut the matter short, to confine myself to as orderly an arrangement as possible, and to add only the most indispensable supplements. And so I succeeded in completing the principal labors for this part in the spring of 1893.


As for the single chapters, chapters XXI to XXIV were, in the main, elaborated by Marx. Chapters XXV and XXVI required a sifting of the references and an interpolation of material found in other places. Chapters XXVII and XXIX could be taken almost completely from the original manuscript, but chapter XXVIII had to be arranged differently in several places. The real difficulty began with chapter XXX. From now on the task before me was not only the arrangement of the references, but also a connecting of the line of reasoning, which was interrupted every moment by intervening clauses, deviations from the main point, etc., and taken up incidentally in quite another place. Thus chapter XXX came into existence by means of transpositions and eliminations utilized in other places. Chapter XXXI, again, was worked out more connectedly. But then followed a long section in the manuscript, entitled "The Confusion," consisting of nothing but extracts from the reports of Parliament on the crises of 1848 and 1857, in which the statements of twenty-three business men, and writers on economics, especially relative to money and capital, gold exports, over-speculation, etc., are collected and accompanied here and there with short and playful comments. In this collection, all the current views of that time concerning the relation of money to capital are practically represented, either by answers or questions, and Marx intended to analyze critically and satirically the confusion revealed by the ideas as to what was money, and what capital, on the money-market. I convinced myself after many experiments that this chapter could not be composed. I have used its material, particularly that criticized by Marx, wherever I found a connection for it.


Next follows in tolerable order the material which I have placed in chapter XXXII. But this is immediately followed by a new batch of extracts from reports of Parliament on every conceivable subject germane to this part, intermingled with comments of the author. Toward the end these comments are mainly directed toward the movement of money metals and the quotations of bills of exchange, and they close with miscellaneous remarks. On the other hand, chapter XXXV, entitled "Precapitalist Conditions," was fully elaborated.


Of all this material, beginning with the "Confusion," and using as much of it as had not been previously placed otherwise, I made up chapters XXXIII to XXXV. Of course this could not be done without considerable interpolations on my part in order to complete the connections. Unless these interpolations are of a merely formal nature, they are expressly marked as belonging to me. In this way I have succeeded in placing all the relevant statements of the author in the text of this work. Nothing has been left out but a small portion of the extracts, which either repeated statements already made previously, or touched on points which the original manuscript did not treat in detail.


The part dealing with ground-rent was much more fully elaborated, although not properly arranged. This is apparent from the fact that Marx found it necessary to recapitulate the plan of the entire part in chapter XLIII, which was the last portion of the section on rent in the manuscript. This was so much more welcome to the editor, as the manuscript began with chapter XXXVII, which was followed by chapters XLV to XLVII, whereupon chapters XXXVIII to XLIV came next in order. The greatest amount of labor was involved in getting up the tables for the differential rent, II and in the discovery that the third case of this class of rent, which belonged in chapter XLIII, had not been analyzed there.


Marx had made entirely new and special studies for this part on ground rent, in the seventies. He had studied for years the originals of the statistical reports and other publications on real estate, which had become inevitable after the "reform" of 1861 in Russia. He had made extracts from these originals, which had been placed at his disposal to the fullest extent by his Russian friends, and he had intended to use these notes for a new elaboration of this part. Owing to the variety of forms represented by the real estate and the exploitation of the agricultural producers of Russia, this country was to play the same role in the part on ground rent that England did in volume I in the case of industrial wage-labor. Unfortunately he was prevented from carrying out this plan.


The seventh part, finally, was fully written out, but only as a first draft, whose endlessly involved periods had to be dissected, before they could be presented to the printer. Of the last chapter, only the beginning existed. In it the three great classes of developed capitalist society, land owners, capitalists and wage laborers, corresponding to the three great forms of revenue, and the class-struggle necessarily arising with their existence, were to be presented as the actual outcome of the capitalist period. It was a habit of Marx to reserve such concluding summaries for the final revision, so that the latest historical developments furnished him with never failing regularity with the proofs of the correctness of his theoretical analyses.


The quotations and extracts corroborating his statements are considerably less numerous than in the first volume, as they already were in the second. Wherever the manuscript referred to statements of earlier economists, only the name was given as a rule, and the quotations were to be added later. Of course, I had to leave this as it was. Of reports of parliament only four have been used, but these were abundantly exploited. They are the following:


1) Reports from Committees (of the Lower House), Volume VIII, Commercial Distress, Volume II, Part I, 1847-48. Minutes of Evidence. Quoted as "Commercial Distress, 1847-48."


2) Secret Committee of the House of Lords on Commercial Distress, 1847. Report printed 1848. Evidence printed 1857 (because it was considered too hazardous in 1848).—Quoted as "Commercial Distress, 1848-57."


3) & 4) Report, Bank Acts, 1857.—The same, 1858.—Reports of the Committee of the Lower House on the Effect of the Bank Acts of 1844 and 1845. With evidence.—Quoted as "Bank Acts," or "Bank Committee," 1857 or 1858.


I hope to start on the fourth volume, the history of theories of surplus-value, as soon as conditions will permit me.


In the preface to the second volume of Capital I had to square accounts with those gentlemen, who were making much ado over the alleged fact that they had discovered in the person of Rodbertus the "Secret source and a superior predecessor to Marx." I offered them an opportunity to show what the economics of Rodbertus could accomplish. I asked them to demonstrate the way "in which an equal average rate of profit can and must come about, not only without a violation of the law of value, but by means of it." These same gentlemen, who were then celebrating the brave Rodbertus as an economist star of the first magnitude, either for subjective or objective reasons which were as a rule anything but scientific, have without exception failed to answer the problem. However, other people have thought it worth their while to occupy themselves with this problem.


In his critique of the second volume (Conrad's Jahrbücher, XI, 1885, pages 452-65), Professor Lexis takes up this question, although he does not pretend to give a direct solution of it. He says: "The solution of that contradiction" (namely the contradiction between the law of value of Ricardo-Marx and an equal average rate of profit) "is impossible, if the various classes of commodities are considered individually, if their value is to be equal to their exchange-value, and this again equal or proportional to their price." According to him this solution is possible only, if "the determination of value for the individual commodities according to labor is relinquished, the production of commodities viewed as a whole, and their distribution among the aggregate classes of capitalists and laborers regarded from the same point of view....The laboring class receives but a certain portion of the total product,...the other portion falls to the share of the capitalists and represents the surplus-product, as understood by Marx, and accordingly...the surplus-value. The members of the capitalist class divide this entire surplus-value among themselves, not in proportion to the number of laborers employed by them, but in proportion to the amount of capital invested by each one. The land is thereby regarded as belonging in the class of capital-value." The Marxian ideal values determined by the units of labor incorporated in the commodities do not correspond to the prices, but may be "regarded as points of departure of a movement, which leads to the actual prices. These are conditioned on the fact that capitals of equal magnitude demand equal profits." In consequence some capitalists will secure higher prices for their commodities than the ideal values, and others will secure less. "But since the losses or gains of surplus-value mutually balance one another in the capitalist class, the total amount of the surplus-value is the same as though all prices were proportional to the ideal values."


It is evident that the problem has not been solved by any means through these statements, but it has been at least correctly formulated, although in a somewhat loose and shallow manner. And this is, indeed, more than we had a right to expect from a man who prides himself somewhat on being a "vulgar economist." It is even surprising when compared with the handiwork of some other vulgar economists, which we shall discuss later. The vulgar economy of Lexis is of a rather peculiar nature. He says that the gains of the capitalist may be derived in the way indicated by Marx, but there are no reasons that would compel us to accept this view. On the contrary, vulgar economy is said to have a simpler explanation, namely the following: "The capitalist sellers, such as the producer of raw materials, the manufacturer, the wholesale dealer, the retail dealer, all make a profit on their transactions, each selling his product at a higher price than the purchase price, each adding a certain percentage to the price paid by him. The laborer alone is unable to raise the price of his commodity, he is compelled, by his oppressed condition, to sell his labor to the capitalist at a price corresponding to its cost of production, that is to say, for the means of his subsistence....Therefore the capitalist additions to the prices strike the laborer with full force and result in the transfer of a part of the value of the total product to the capitalist class."


Now it does not require much thought to show that this explanation of vulgar economy for the profits of capital amounts to the same thing as the Marxian theory of surplus-value. For Lexis thus admits that the laborers are in just that forced condition of oppression which Marx has described; that they are just as much exploited here as they are according to Marx, because every idler can sell commodities above their value, while the laborer alone cannot do so; and that it is just as easy to build up a plausible vulgar socialism on this theory, as it was to build up another kind of socialism in England on the foundation of Jevons' and Menger's theory of use-value and marginal profit. I strongly suspect that Mr. George Bernard Shaw, were he familiar with this theory of profit, would eagerly extend both hands for it, discard Jevons and Karl Menger, and build on this rock the Fabian church of the future.


In reality, this theory is merely a transcript of the Marxian. What is the fund out of which all these additions to the prices are paid? The "total product" of the working class. And it is due to the fact that the commodity "labor," or, as Marx has it, "labor-power," must be sold below its price. For if it is a common quality of all commodities to be sold at a price above their cost of production, with the sole exception of labor, then labor is sold below the price which is the rule in this world of vulgar economy. The extra profit thus accruing to the capitalist, or to the capitalist class, then arises in the last analysis from the fact that the laborer, after he has made up for the price of his labor-power by reproducing it, must produce a surplus-product for which he is not paid, in other words, he produces surplus-value representing unpaid labor. Lexis is very careful in the choice of his terms. He does not say anywhere outright that this is his own conception. But if it is, then it is evident that he is not one of those vulgar economists, every one of whom is, as he says himself, "a hopeless idiot in the eyes of Marx," but that he is a Marxian disguised as a vulgar economist. Whether this disguise is consciously or unconsciously adopted, is a psychological question which does not interest us at this point. The man who can find this out may also be able to discover how it is that some time ago a man of Lexis' intellectual endowments could defend such nonsense as bimetallism.


The first one who really attempted to answer this question was Dr. Conrad Schmidt in his pamphlet entitled, The Average Rate of Profit, Based on Marx's Theory of Value, Stuttgart, Dietz, 1889. Schmidt seeks to reconcile the details of the formation of commodity prices with the theory of value and with an average rate of profit. The industrial capitalist receives in his product, first, an equivalent for the capital advanced by him, and second, a surplus-product for which he has not paid anything. But in order to earn his surplus-product, he must advance capital for its production. He must employ a certain quantity of materialized labor for the purpose of appropriating this surplus-product. For the capitalist, the capital advanced by him represents the quantity of materialized labor which is socially necessary for the production of his surplus-product. This applies to every industrial capitalist. Now, since commodities, according to the theory of value, are exchanged for one another in proportion to the social labor required for their production, and since the labor necessary for the manufacture of the capitalist's surplus-product is accumulated in the capital of the capitalist, it follows that surplus-products are exchanged in proportion to the capitals required for their production, and not in proportion to the labor actually incorporated in them. Hence the share of each unit of capital is equal to the sum of all produced surplus-values divided by the sum of the capitals employed in production. Accordingly, equal capitals yield equal profits in equal times, and this is accomplished by adding the cost price of the surplus-product figured on the basis of the average profit to the cost price of the paid product and selling both the paid and unpaid product at this increased price. Thus the average rate of profit arises in spite of the fact that, according to Schmidt, the average prices of commodities are determined by the law of value.


This is a very ingenious construction. It is made entirely after the Hegelian model, but it has this in common with the majority of the Hegelian constructions that it is not correct. It makes no difference whether the surplus-product or the paid product is considered. If the theory of value is to be applied directly to the average profit both of these products must be sold in proportion to the socially necessary labor incorporated in them. The theory of value is aimed at the very outset against the idea, derived from the capitalist mode of thought, that the accumulated labor of the past, which is embodied in capital, could be anything else but a certain quantity of finished values, namely also a creator of values greater than itself, seeing that it is an element in production and in the formation of profit. The theory of value demonstrates that living labor alone has this faculty of creating surplus-values. It is well known that the capitalists expect to reap profits in proportion to the magnitude of their capitals, looking upon their advances of capital as a sort of cost price of their profits. But if Schmidt utilizes this conception for the purpose of harmonizing by means of it the prices calculated according to the average rate of profit and those based on the theory of value, he thereby repudiates this theory of value, for he embodies in it as one of its factors a conception which is wholly at variance with it.


Either accumulated labor creates values the same as living labor, and in that case the law of value does not apply.


Or, it is not a creator of values, and in that case Schmidt's demonstration is irreconcilable with the law of value.


Schmidt was misled into straying into this bypath when being quite close to the solution, because he believed that he would have to find as mathematical a formula as possible, by which the agreement of the average price of every individual commodity with the law of value could be demonstrated. But while he has followed a wrong path in this instance, close to the real goal, he shows by the rest of his booklet that he has very understandingly drawn other conclusions from the first two volumes of Capital. His is the honor of having found by independent effort the correct answer given by Marx in the third part of the third volume of his work for the hitherto inexplicable sinking tendency of the rate of profit; and of having furthermore correctly shown the genesis of commercial profit out of industrial surplus-value, and of having made a series of statements concerning interest and ground rent, by which he has anticipated things developed by Marx in the fourth and fifth part of the third volume of his work.


In a subsequent article (Neue Zeit, 1892-93, Nos. 4 and 5), Schmidt tries another way to solve the problem. It amounts to the statement that competition brings about an average rate of profit by causing the emigration of capital from lines of production with profit below the average to lines with profit above the average. There is nothing new in the statement that competition is the great equalizer of profits. But Schmidt tries to prove that this leveling of profits is identical with a reduction of the selling price of commodities produced in excess to a measure in keeping with a price which society can pay for it according to the law of value. The analyses of Marx in this work show sufficiently why this way could not lead to any solution.


After Schmidt, it was P. Fireman who attempted a solution of the problem (Conrad's Jahrbücher, dritte Folge, III, page 793). I shall not discuss his remarks on some of the other aspects of the Marxian analyses. He starts out from the mistaken assumption that Marx wishes to define where he is only analyzing, or that one may look in Marx's work at all for fixed and universally applicable definitions. It is a matter of course that when things and their mutual interrelations are conceived, not as fixed, but as changing, that their mental images, the ideas concerning them, are likewise subject to change and transformation; that they cannot be sealed up in rigid definitions, but must be developed in the historical or logical process of their formation. From this it will be understood why Marx starts out in the beginning of his first volume, where he makes the simple production of commodities his historical premise and then proceeds from this basis to capital, from a simple commodity instead of its ideologically and historically secondary form, a capitalistically modified commodity. Fireman cannot understand that at all. I prefer to pass over these and other side-issues and proceed at once to the gist of the matter. While the author is taught by the theory that surplus-value is proportional to the labor-powers employed, provided a certain rate of surplus-value is given, he learns from experience that profit is proportional to the magnitude of the total capital employed, provided a certain average rate of profit is given. Fireman explains this by saying that profit is merely a conventional phenomenon (which means, in his language, that it belongs to a definite social formation with which it stands and falls). Its existence is simply dependent on capital. If this is strong enough to secure a profit for itself, it is also compelled by competition to bring about the same rate of profit for all capitals. In other words, capitalist production is impracticable without an equal rate of profit. Assuming this to be the mode of production, the quantity of profit for the individual capitalist can depend only on the magnitude of his capital, if the rate of profit is given. On the other hand, profit consists of surplus-value, of unpaid labor. And how is the transformation of surplus-value, determined in quantity by the degree of labor exploitation, into profit, determined in quantity by the magnitude of the employed capital, accomplished? "Simply by selling commodities above their value in all lines of production in which the ratio between...constant and variable capital is greatest, and this implies on the other hand that the commodities are sold below their value in all lines of production in which the ratio between constant and variable capital is smallest, so that commodities are sold at their true value only in lines of production in which the ratio of c:v represents a definite medium magnitude....Is this discrepancy between the prices and values of commodities a refutation of the principle of value? By no means. For since the prices of some commodities rise above value to the same extent that the prices of others fall below it, the total sum of prices remains equal to the total sum of values...the incongruity disappears in the last instance." This incongruity is a "disturbance"; and "in the exact sciences it is not the custom to regard a calculable disturbance as a refutation of a certain law."


On comparing the relevant passages of chapter IX with these statements, it will be seen that Fireman has indeed placed his finger on the salient point. But the undeservedly cool reception given to his able article proves that Fireman still needed many interconnecting links, even after this discovery of his, before he would have been enabled to work out a full and comprehensible solution. Although many were interested in this problem, they were all afraid of burning their fingers with it. And this is due not only to the incomplete form in which Fireman left his discovery, but also to the undeniable faultiness of his conception of the Marxian analyses and his critique of them based on his misconception.


Whenever there is an opportunity to make himself ridiculous by attempting a difficult feat, professor Julius Wolf of Zürich never fails to exhibit himself. He tells us (Conrad's Jahrbücher, neue Folge, II, pages 352 and following) that the entire problem is solved by the relative surplus-value. The production of relative surplus-value rests on the increase of the constant capital as compared to the variable capital. "A plus in constant capital has for its premise a plus in the productive power of the laborers. Since this plus in productive power (by way of cheapening the necessities of life) produces a plus in surplus-value, the direct relation between an increase of surplus-value and an increasing share of the constant capital in the total capital is revealed. A plus in constant capital indicates a plus in the productive power of labor. Therefore, if the variable capital remains the same and the constant capital increases, surplus-value must also increase, and we are in agreement with Marx. This was the problem which we were to solve."


Now Marx says the direct opposite in a hundred passages of the first volume. Furthermore, the assertion that, according to Marx, relative surplus-value increases in proportion as the constant capital is augmented while the variable capital decreases, is so astounding that it defies all parliamentarian language. And finally Mr. Julius Wolf demonstrates in every line that he has neither relatively nor absolutely the least understanding of relative or absolute surplus-value. Truly he says that "at first glance one seems to be in a nest of incongruities," which, by the way, is the only true statement in his whole article. But what does that matter? Mr. Julius Wolf is so proud of his brilliant discovery that he cannot refrain from bestowing posthumous praise on Marx for it and advertising his own fathomless nonsense as a "renewed proof of the acuteness and farsightedness with which Marx has drawn up his critical system of capitalist economy."


But that is not the worst. Mr. Wolf says: "Ricardo likewise claimed that an equal investment of capital yielded equal surplus-values (profit), and that the same expenditure of labor created the same amount of surplus-value. And the question was: How does the one agree with the other? But Marx did not acknowledge this form of the problem. He has doubtless shown (in the third volume), that the second statement is not necessarily a consequence of the law of value, or that it even contradicts his law of value and must, therefore, directly repudiated." And thereupon Wolf seeks to find out whether Marx or I made a mistake. Of course, it does not occur to him that he is the one who is wandering in darkness.


It would be an insult to my readers, and a total disregard for the humor of the situation, were I to lose one word about this gem of a passage. I merely wish to add this: With the same boldness, which enabled him to foretell even then what Marx "has doubtless shown" in the third volume, he avails himself of this opportunity to report an alleged gossip among the professors to the effect that Konrad Schmidt's above-named work was "directly inspired by Engels." Mr. Julius Wolf! In the world in which you live it may be customary for a man to challenge others publicly for the solution of some problem and to acquaint his private friends clandestinely with this solution. That you are capable of such a thing is not hard to believe. But that a man need not stoop to such mean tricks in the world in which I live, is shown by the present preface.


Marx had hardly died, when Mr. Achille Loria hastily published an article about him in the Nuova Antologia (April, 1883). He starts out with a biography of Marx full of misinformation, and follows it up with a critique of Marx's public, political and literary activity. He misrepresents the materialist conception of history of Marx and twists it with an assurance which indicates a great purpose. And this purpose was later accomplished. In 1886, the same Mr. Loria published a book entitled La teoria economica delta costituzione politica (The Economic Foundations of Society), in which he announced to his admiring contemporaries that the materialist conception of history, so completely and purposely misrepresented by him in 1883, was his own discovery. True, the Marxian theory is reduced to a rather Philistine level in this book. And the historical illustrations and proofs abound in mistakes which would not be pardoned in a high school boy. But what does that matter? He thinks he has established his claim that the discovery that always and everywhere the political conditions and events are explained by corresponding economic conditions was not made by Marx in 1845, but by Mr. Loria in 1886. At least this is what he has tried to make his countrymen believe, and also some Frenchmen, for his book has been translated into French. And now he can pose in Italy as the author of a new and epoch-making theory of history, until the Italian socialists will find time to strip the illustre Loria of his stolen peacock feathers.


But this is only an insignificant sample of Mr. Loria's style of doing things. He assures us that all of Marx's theories rest on conscious sophistry (un consaputo sofisma); that Marx was not above using false logic, even though he knew it to be so (sapendolitali), etc. And after thus biasing his readers by a whole series of such contemptible insinuations, in order that they may regard Marx as just such an unprincipled upstart as Loria, accomplishing his effects by the same shameless and foul means as this professor from Padua, he has a very important secret for the readers, and incidentally he touches upon the rate of profit.


Mr. Loria says: According to Marx, the amount of surplus-value (which Mr. Loria here mistakes for profit) produced in an industrial establishment under capitalism depends on the variable capital employed in it, since the constant capital does not yield any profit. But this is contrary to fact. For in practice the profit is not measured by the variable, but by the total capital. And Marx himself recognizes this (Vol. I, chapter XI) and admits that the facts seem to contradict his theory. But how does he get over this contradiction? He refers his readers to a subsequent volume which has not yet been published. Loria had previously told his readers with reference to this unpublished volume, that he did not believe that Marx had ever thought for a moment of writing it. And now he exclaims triumphantly: "Not without good reason did I contend that this second volume, which Marx always flings into the teeth of his adversaries without ever publishing it, might very well be a shrewd expedient, to which Marx always resorted whenever scientific arguments failed him (un ingegnoso spediente ideato dal Marx a sostituzione degli argomenti scientifici). And whoever is not convinced after this that Marx stood on the same level of scientific swindle with the illustre Loria, is past all redemption.


We have at least learned this much: According to Mr. Loria, the Marxian theory of surplus-value is absolutely irreconcilable with the fact of a general and equal rate of profit. But at last the second volume of Capital appeared. It contained my public challenge referring to this point. If Mr. Loria had been one of us diffident Germans, he would have felt a certain embarrassment. But he is a bold southerner, he comes from a hot climate and can claim that a cool nerve is a natural requirement for him. The question concerning the rate of profit has been publicly put. Mr. Loria has publicly declared that it is insoluble. And for this very reason he is now going to outshine himself by publicly solving it.


This miracle is accomplished in Conrad's Jahrbücher, N. F., vol. XX, pages 272 and following, in an article dealing with Konrad Schmidt's above-cited pamphlet. After Loria has learned from Schmidt how the commercial profit is made, he sees everything clearly. "Since a determination of value by means of labor-time gives an advantage to those capitalists who invest a greater portion of their capital in wages, the unproductive" (he means commercial) "capital can extort from these privileged capitalists a higher interest" (he means profit) "and thus bring about an equalization between the individual industrial capitalists....For instance, if each of the industrial capitalists A, B, C, use 100 working days and 0, 100, and 200 constant capital respectively in production, and if the wages for 100 working days amount to 50 working days, then every capitalist receives a surplus-value of 50 working days, and the rate of profit is 100% for the first 33.3% for the second, and 20% for the third capitalist. But if a fourth capitalist D accumulates an unproductive capital of 300, which extorts an interest" (profit) "equal in value to 40 working days from A, and an interest of 20 working days from B, then the rate of profit of the capitalists A and B will sink to 20% the same as that of C, and D with his capital of 300 will receive a profit of 60, or a rate of profit of 20%, the same as the other capitalists."


With such astonishing dexterity l'illustre Loria solves sleight of hand fashion the same question which he had declared insoluble ten years previously. Unfortunately he did not betray to us the secret of the way in which the owners of the "unproductive capital" obtain the power to extort from those industrials their extra-profit exceeding the average rate of profit and to keep it in their own pockets in the same way in which the land owner pockets the surplus-profit of the capitalist farmer as ground rent. For according to this the commercial capitalists would be levying upon the industrials a tribute analogous to ground rent and thereby bring about an equalization of the rate of profit. Now, the commercial capital is indeed a very essential factor in the equalization of the rate of profit, as nearly everybody knows. But only a literary adventurer, who in the bottom of his heart cares naught for political economy, can venture the assertion that commercial capital has the magic power to absorb all profits above the average rate of profit, even before this average rate has become established, and to convert it into ground-rent for itself without even requiring any real estate for this purpose. Nor is the assertion less astonishing that commercial capital has the gift of discovering those industrials, whose surplus-value just covers the average rate of profit, and that it considers it an honor to mitigate the fate of those luckless victims of the Marxian law of value by selling its products to them free of charge, without asking as much as a commission for it. What a mountebank a man must be in order to imagine that Marx had to have recourse to such miserable tricks!


But Mr. Loria does not shine in his full glory, until we compare him with his northern competitors, for instance with Mr. Julius Wolf, who was not born yesterday, either. What a small coyote Mr. Wolf seems to be, even in his big volume on Socialism and the Capitalist Order of Society, compared to that Italian! How clumsily, I am almost tempted to say modestly, does he stand forth beside the noble check of the maestro who pretends as a matter of course that Marx is just such a sophist, poor logician, liar and mountebank as Mr. Loria himself, that Marx bamboozles the public with a promise of completing his theory in some future volume which he neither will nor can write, as he very well knows, whenever he gets into a tight place! Unlimited nerve coupled to the smoothness of an eel when slipping through impossible situations, a heroic imperviousness to kicks received by him, a hasty appropriation of the accomplishments of others, an importunate charlatanry of advertising, an organization of fame by the help of a clique of friends—who can equal him in all these?


Italy is the land of classic lore. Since the great time when the morning glow of the modern world rose over it, it produced magnificent characters of unequalled classic perfection, from Dante to Garibaldi. But the time of its degradation under the rule of strangers also bequeathed classic character-masks to it, among them two especially sharply chiseled types, that of Sganarelli and Dulcamara. The classic unity of both is embodied in our illustre Loria.


In conclusion I must take my readers across the Atlantic. Dr. (med.) George C. Stiebeling, of New York, also found a solution of the problem, and a very simple one at that. It was so simple that no one on either side of the ocean cared to take him seriously. This aroused his ire, and he complained about this outrage in an endless number of pamphlets and newspaper articles, on both sides of the great water. He was told in the Neue Zeit that his solution was based entirely on an error in his calculation. But this did not disturb him in the least. Marx had also made many errors of calculation, and yet he was right. Let us, then, take a closer look at Dr. Stiebeling's solution.


"Take two factories working with equal capitals for an equal length of time, but with different proportions of their constant and variable capitals. The total capital (c + v) will be regarded as equal to y, and the difference in the proportion of the constant to the variable capital equal to x. In the first factory, y is equal to c + v, in the second y is equal to (c - x) + (v + x). The rate of surplus-value is therefore in the first factory equal to m/v, and in the second factory equal to m/v-x. I designate as profit (p) the total surplus-value (m), by which the total capital y, or c + v, is augmented in the given time, in other words, p is equal to m. Hence the rate of profit in the first factory is equal to p/y, or m/c+v, and in the second factory likewise equal to p/y, or m/(c-x)-(v+x), that is to say, it is also equal to m/c+v. The...problem solves itself in such a way that, on the basis of the law of value, equal capitals employing unequal quantities of living labor in equal lengths of time, a change in the rate of surplus-value brings about the equalization of an average rate of profit." (G. C. Stiebeling, The Law of Value and the Rate of Profit, New York, John Heinrich.)


In spite of the beautiful clearness of the above calculation, we cannot refrain from asking Dr. Stiebeling this question: How does he know that the sum of surplus-values produced by the first factory is exactly equal to the sum of surplus-values produced in the second factory? He states explicitly that c, v, y and x, that is to say, all the other factors in the calculation, are equal in both factories, but not a word about m. It follows by no means that these two quantities of surplus-value are equal simply because he designates them both by m. On the contrary, this is precisely what must be proved, especially since Dr. Stiebeling also identifies the profit p without further ceremony with the surplus-value m. Now, only two possibilities present themselves. Either the m's are equal, both factories produce equal quantities of surplus-value, and therefore, since both capitals are equal, also equal quantities of profit. If so, then Dr. Stiebeling has taken for granted at the outset what he was called upon to prove. Or, one factory produces more surplus-value than the other, and in that case his entire calculation falls to the ground.


Mr. Stiebeling spared neither pains nor money in building upon this erroneous calculation of his mountains of other calculations and exhibiting them to the public. I can assure him, for his own peace of mind, that nearly all of his calculations are equally wrong, and whenever they are not, they prove something entirely different from what he set out to prove. He proves, for instance, by a comparison of the U. S. census figures for 1870 and 1880 that the rate of profit has actually fallen, but explains this fact wrongly, assuming that he has to correct Marx for working his theory with a never changing, stable, rate of profit. But the third part of the third volume of Capital shows that this "stable rate of profit" in Marxian economics is purely a figment of Dr. Stiebeling's brain, and that the falling rate of profit is due to causes which are just the reverse of those indicated by Dr. Stiebeling. No doubt Dr. Stiebeling has the best intentions, but a man who undertakes to discuss scientific questions should learn above all to read the works of the author, whom he wishes to study, just as they have been written, and especially not to find anything in them which they do not contain.


The outcome of the entire investigation, also in this question, shows once more that the Marxian school is the only one which has accomplished something in this line. When Fireman and Konrad Schmidt read this third volume, they will have good reasons for being well satisfied with the work done by each of them.

London, October 4, 1894.

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