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.
17 of 55

Part III, Chapter XIV.


IF we consider the enormous development of the productive powers of labor, even comparing but the last 30 years with all former periods; if we consider in particular the enormous mass of fixed capital, aside from machinery in the strict meaning of the term, passing into the process of social production. as a whole, then the difficult, which has hitherto troubled the vulgar economists, namely that of finding an explanation for the falling rate of profit, gives way to its opposite, namely to the question; How is it that this fall is not greater and more rapid? There must be some counteracting influences at work, which thwart and annul the effects of this general law, leaving to it merely the character of a tendency. For this reason we have referred to the fall of the average rate of profit as a tendency to fall.


The following are the general counterbalancing causes:

I. Raising the Intensity of Exploitation.


The rate at which labor is exploited, the appropriation of surplus-labor and surplus-value, is raised by a prolongation of the working day and an intensification of labor. These two points have been fully discussed in volume I as incidents to the production of absolute and relative surplus-value. There are many ways of intensifying labor, which imply an increase of the constant capital as compared to the variable, and consequently a fall in the rate of profit, for instance setting a laborer to watch a larger number of machines. In such cases—and in the majority of manipulations serving to produce relative surplus-value—the same causes, which bring about an increase in the rate of surplus-value, may also imply a fall in the mass of surplus-value, looking upon the matter from the point of view of the total quantities of invested capital. But there are other means of intensification, such as increasing the speed of machinery, which although consuming more raw material, and, so far as the fixed capital is concerned, wearing out the machinery so much faster, nevertheless do not affect the relation of its value to the price of labor set in motion by it. It is particularly the prolongation of the working day, this invention of modern industry, which increases the mass of appropriated surplus-labor without essentially altering the proportion of the employed labor-power to the constant capital set in motion by it, and which tends to reduce this capital relatively, if anything. For the rest, we have already demonstrated—what constitutes the real secret of the tendency of the rate of profit to fall—that the manipulations made for the purpose of producing relative surplus-value amount on the whole to this: That on one side as much as possible of a certain quantity of labor is transformed into surplus-value, and that on the other hand as little labor as possible is employed in proportion to the invested capital, so that the same causes, which permit the raising of the intensity of exploitation, forbid the exploitation of the same quantity of labor by the same capital as before. These are the warring tendencies, which, while aiming at a raise in the rate of surplus-value, have at the same time a tendency to bring about a fall in the mass of surplus-value, and therefore of the rate of surplus-value produced by a certain capital. It is furthermore appropriate to mention at this point the extensive introduction of female and child labor, in so far as the whole family must produce a larger quantity of surplus-value for a certain capital than before, even in case the total amount of their wages should increase, which is by no means general.


Whatever tends to promote the production of relative surplus-value by mere improvements in methods, for instance in agriculture, without altering the magnitude of the invested capital, has the same effect. While the constant capital does not increase relatively to the variable in such cases, taking the variable capital as an index of the amount of labor-power employed, the mass of the product does increase in proportion to the labor-power employed. The same takes place, when the productive power of labor (whether its product passes into the consumption of the laborer or into the elements of constant capital) is freed from obstacles of circulation, of arbitrary or other restrictions which become obstacles in course of time, in short, of fetters of all kinds, without touching directly the proportion between the variable and the constant capital.


It might be asked, whether the causes checking the fall of the rate of profit, but always hastening it in the last analysis, include the temporary raise in surplus-value above the average level, which recur now in this, now in that line of production for the benefit of those individual capitalists, who make use of inventions, etc., before they are generally introduced. This question must be answered in the affirmative.


The mass of surplus-value produced by a capital of a certain magnitude is the product of two factors, namely of the rate of surplus-value multiplied by the number of laborers employed at this rate. Hence it depends on the number of laborers, when the rate of surplus-value is given, and on the rate of surplus-value, when the number of laborers is given. In short, it depends on the composite proportion of the absolute magnitudes of the variable capital and the rate of surplus-value. Now we have seen, that on an average the same causes, which raise the rate of relative surplus-value, lower the mass of the employed labor-power. It is evident, however, that there will be a more or less in this according to the definite proportion, in which the opposite movements exert themselves, and that the tendency to reduce the rate of profit will be particularly checked by a raise in the rate of absolute surplus-value due to a prolongation of the working day.


We saw in the case of the rate of profit, that a fall in the rate was generally accompanied by an increase in the mass of profit, on account of the increasing mass of the total capital employed. From the point of view of the total variable capital of society, the surplus-value produced by it is equal to the profit produced by it. Both the absolute mass and the absolute rate of surplus-value have thus increased. The one has increased, because the quantity of labor-power employed by society has grown, the other, because the intensity of exploitation of this labor-power has increased. But in the case of a capital of a given magnitude, for instance 100, the rate of surplus-value may increase, while the mass may decrease on an average; for the rate is determined by the proportion, in which the variable capital produces value, while its mass is determined by the proportional part which the variable capital constitutes in the total capital.


The rise in the rate of surplus-value is a factor, which determines also the mass of surplus-value and thereby the rate of profit, for it takes place especially under conditions, in which, as we have seen, the constant capital is either not increased at all relatively to the variable capital, or not increased in proportion. This factor does not suspend the general law. But it causes that law to become more of a tendency, that is, a law whose absolute enforcement is checked, retarded, weakened, by counteracting influences. Since the same causes, which raise the rate of surplus-value (even a prolongation of the working time is a result of large scale industry), also tend to decrease the labor-power employed by a certain capital, it follows that these same causes also tend to reduce the rate of profit and to check the speed of this fall. If one laborer is compelled to perform as much labor as would be rationally performed by two, and if this is done under circumstances, in which this one laborer can replace three, then this one will produce as much surplus-labor as was formerly produced by two, and to that extent the rate of surplus-value will have risen. But this one will not produce as much as formerly three, and to that extent the mass of surplus-value will have decreased. But this reduction in mass will be compensated, or limited, by the rise in the rate of surplus-value. If the entire population is employed at a higher rate of surplus-value, the mass of surplus-value will increase, although the population may remain the same. It will increase still more, if the population increases at the same time. And although this goes hand in hand with a relative reduction of the number of laborers employed in proportion to the magnitude of the total capital, yet this reduction is checked or moderated by the rise in the rate of surplus-value.


Before leaving this point, we wish to emphasize once more that, with a capital of a certain magnitude, the rate of surplus-value may rise, while its mass is decreasing, and vice versa. The mass of surplus-value is equal to the rate multiplied by the number of laborers; however, this rate is never calculated on the total, but only on the variable capital, actually only for a day at a time. On the other hand, with a given magnitude of a certain capital, the rate of profit can never fall or rise, without a simultaneous fall or rise in the mass of surplus-value.

II. Depression of Wages Below their Value.


This is mentioned only empirically at this place, since it, like many other things, which might be enumerated here, has nothing to do with the general analysis of capital, but belongs in a presentation of competition, which is not given in this work. However, it is one of the most important causes checking the tendency of the rate of profit to fall.

III. Cheapening of the Elements of Constant Capital.


Everything that has been said in the first part of this volume about the causes, which raise the rate of profit while the rate of surplus-value remains the same, or independently of the rate of surplus-value, belongs here. This applies particularly to the fact that, from the point of view of the total capital, the value of the constant capital does not increase in the same proportion as its material volume. For instance, the quantity of cotton, which a single European spinning operator works up in a modern factory, has grown in a colossal degree compared to the quantity formerly worked up by a European operator with a spinning wheel. But the value of the worked-up cotton has not grown in proportion to its mass. The same holds good of machinery and other fixed capital. In short, the same development, which increases the mass of the constant capital relatively over that of the variable, reduces the value of its elements as a result of the increased productivity of labor. In this way the value of the constant capital although continually increasing, is prevented from increasing at the same rate as its material volume, that is, the material volume of the means of production set in motion by the same amount of labor-power. In exceptional cases the mass of the elements of constant capital may even increase, while its value remains the same or even falls.


The foregoing bears upon the depreciation of existing capital (that is, of its material elements) which comes with the development of industry. This is another one of the causes which by their constant effects tend to check the fall of the rate of profit, although it may under certain circumstances reduce the mass of profit by reducing the mass of capital yielding a profit. This shows once more that the same causes, which bring about a tendency of the rate of profit to fall, also check the realisation of this tendency.

IV. Relative Overpopulation.


The production of a relative surplus-population is inseparable from the development of the productivity of labor expressed by a fall in the rate of profit, and the two go hand in hand. The relative overpopulation becomes so much more apparent in a certain country, the more the capitalist mode of production is developed in it. This, again, is on the one hand a reason, which explains why the imperfect subordination of labor to capital continues in many lines of production, and continues longer than seems at first glance compatible with the general stage of development. This is due to the cheapness and mass of the disposable or unemployed wage laborers, and to the greater resistance, which some lines of production, by their nature, oppose to a transformation of manufacture into machine production. On the other hand, new lines of production are opened up, especially for the production of luxuries, and these lines take for their basis this relative overpopulation set free in other lines of production by the increase of their constant capital. These new lines start out with living labor as their predominating element, and go by degrees through the same evolution as the other lines of production. In either case the variable capital constitutes a considerable proportion of the total capital and wages are below the average, so that both the rate and mass of surplus-value are exceptionally high. Since the average rate of profit is formed by leveling the rates of profit in the individual lines of production, the same cause, which brings about a falling tendency of the rate of profit, once more produces a counterbalance to this tendency and paralyses its effects more or less.

V. Foreign Trade.


To the extent that foreign trade cheapens partly the elements of constant capital, partly the necessities of life for which the variable capital is exchanged, it tends to raise the rate of profit by raising the rate of surplus-value and lowering the value of the constant capital. It exerts itself generally in this direction by permitting an expansion of the scale of production. But by this means it hastens on one hand the process of accumulation, on the other the reduction of the variable as compared to the constant capital, and thus a fall in the rate of profit. In the same way the expansion of foreign trade, which is the basis of the capitalist mode of production in its stages of infancy, has become its own product in the further progress of capitalist development through its innate necessities, through its need of an ever expanding market. Here we see once more the dual nature of these effects. (Ricardo entirely overlooked this side of foreign trade.)


Another question, which by its special nature is really beyond the scope of our analysis, is the following: Is the average rate of profit raised by the higher rate of profit, which capital invested in foreign, and particularly in colonial trade, realises?


Capitals invested in foreign trade are in a position to yield a higher rate of profit, because, in the first place, they come in competition with commodities produced in other countries with lesser facilities of production, so that an advanced country is enabled to sell its goods above their value even when it sells them cheaper than the competing countries. To the extent that the labor of the advanced countries is here exploited as a labor of a higher specific weight, the rate of profit rises, because labor which has not been paid as being of a higher quality is sold as much. The same condition may obtain in the relations with a certain country, into which commodities are exported and from which commodities are imported. This country may offer more materialised labor in goods than it receives, and yet it may receive in return commodities cheaper than it could produce them. In the same way a manufacturer, who exploits a new invention before it has become general, undersells his competitors and yet sells his commodities above their individual values, that is to say, he exploits the specifically higher productive power of the labor employed by him as surplus-value. By this means he secures a surplus-profit. On the other hand, capitals invested in colonies, etc., may yield a higher rate of profit for the simple reason that the rate of profit is higher there on account of the backward development, and for the added reason, that slaves, coolies, etc., permit a better exploitation of labor. We see no reason, why these higher rates of profit realised by capitals invested in certain lines and sent home by them should not enter as elements into the average rate of profit and tend to keep it up to that extent.*36 We see so much less reason for the contrary opinion, when it is assumed that such favored lines of investment are subject to the laws of free competition. What Ricardo has in mind as objections, is mainly this: With the higher prices realised in foreign trade, commodities are bought abroad and sent home. These commodities are sold on the home market, and this can constitute at best but a temporary advantage of the favored spheres of production over others. This aspect of the matter is changed, when we no longer look upon it from the point of view of money. The favored country recovers more labor in exchange for less labor, although this difference, this surplus, is pocketed by a certain class, as it is in any exchange between labor and capital. So far as the rate of profit is higher, because it is generally higher in the colonial country, it may go hand in hand with a low level of prices, if the natural conditions are favorable. It is true that a compensation takes place, but it is not a compensation on the old level, as Ricardo thinks.


However, this same foreign trade develops the capitalist mode of production in the home country. And this implies the relative decrease of the variable as compared to the constant capital, while it produces, on the other hand, an overproduction for the foreign market, so that it has once more the opposite effect in its further course.


And so we have seen in a general way, that the same causes, which produce a falling tendency in the rate of profit, also call forth counter-effects, which check and partly paralyse this fall. This law is not suspended, but its effect is weakened. Otherwise it would not be the fall of the average rate of profit, which would be unintelligible, but rather the relative slowness of this fall. The law therefore shows itself only as a tendency, whose effects become clearly marked only under certain conditions and in the course of long periods.


Before passing on to something new, we will, for the sake of preventing misunderstanding, repeat two statements, which we have substantiated at different times.


1) The same process, which brings about a cheapening of commodities in the course of development of the capitalist mode of production, also causes a change in the organic composition of the social capital invested in the production of commodities, and thereby lowers the rate of profit. We must be careful, then, not to confound the reduction in the relative cost of an individual commodity, including that portion of its cost which represents wear and tear of machinery, with the relative rise in the value of the constant as compared to the variable capital, although vice versa every reduction in the relative cost of the constant capital, whose material elements retain the same volume or increase in volume, tends to raise the rate of profit, in other words, tends to reduce the value of the constant capital to that extent as compared with the shrinking proportions of the employed variable capital.


2) The fact that the additional living labor contained in the individual commodities, which together make up the product of capital, stands in a decreasing proportion to the materials and instruments of labor consumed by them; the fact, that an ever decreasing quantity of additional living labor is materialised in them, because their production requires less labor to the extent that the productive power of society is developed,—this fact does not touch the proportion, according to which the living labor contained in the commodities is divided into paid and unpaid labor. On the other hand, although the total quantity of additional living labor contained in them decreases, the unpaid portion increases over the paid portion, either by an absolute, or by a proportional reduction of the paid portion; for the same mode of production, which reduces the total quantity of the additional living labor in the commodities, is accompanied by a rise of the absolute and relative surplus-value. The falling tendency of the rate of profit is accompanied by a rising tendency of the rate of surplus-value, that is, in the rate of exploitation. Nothing is more absurd, for this reason, than to explain a fall in the rate of profit by a rise in the rate of wages, although there may be exceptional cases where this may apply. Statistics do not become available for actual analyses of the rates of wages in different epochs and countries, until the conditions, which shape the rate of profit, are thoroughly understood. The rate of profit does not fall, because labor becomes less productive, but because it becomes more productive. Both phenomena, the rise in the rate of surplus-value and the fall in the rate of profit, are but specific forms through which the productivity of labor seeks a capitalistic expression,

VI. The Increase of Stock Capital.


The foregoing five points may be supplemented by the following, which, however, cannot be more fully detailed for the present. A portion of capital serves only as interest-bearing capital, and is so calculated, to the extent that capitalist production makes progress and hastens accumulation. This term interest-bearing capital is not applied here to capital loaned by a capitalist who is satisfied with interest on it, while the industrial capitalist borrowing it pockets the investor's profit. This has no bearing upon the level of the average rate of profit, for this rate is concerned only with profit as composed of interest + profit of all sorts + ground rent, and the proportional division into these particular categories is immaterial for it. We speak here of interest-bearing capital in the sense that these capitals, although invested in large productive enterprises, yield only large or small amounts of interest, so-called dividends, after all costs have been paid. This is typical of railroads, for instance. These dividends do not help to level the average rate of profit, because they represent a lower than the average rate of profit. If they did help in this, then the average rate of profit would fall much lower. Theoretically such capitals may be included in the calculation, and in that case the result will be a lower rate of profit than that which actually seems to exist and determine the actions of the capitalists, since the constant capital is the largest as compared to the variable capital precisely in these enterprises.

Notes for this chapter

Adam Smith was right in this respect, contrary to Ricardo, who said: "They contend the equality of profits will be brought about by the general rise of profits; and I am of opinion that the profits of the favoured trade will speedily submit to the general level. (Works, MacCulloch ed., p. 73.)

Part III, Chapter XV.

End of Notes

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