Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole
By Karl Marx
One of Econlib’s aims is to put online the most significant works in the history of economic thought, and there can be no doubting the significance of Marx’s influence on both economic theory in the late 19th century and on the creation of Marxist states in the 20th century. From the time of the emergence of modern socialism in the 1840s (especially in France and Germany), free market economists have criticised socialist theory and it is thus useful to place that criticism in its intellectual context, namely beside the main work of one of its leading theorists,
Karl Marx.In 1848, when Europe was wracked by a series of revolutions in which both liberals and socialists participated and which both lost out to the forces of conservative monarchism or Bonapartism,
John Stuart Mill published his
Principles of Political Economy. The chapter on Property shows how important Mill thought it was to confront the socialist challenge to classical liberal economic theory. In hindsight it might appear that Mill was too accommodating to socialist criticism, but I would argue that in fact he offered a reasonable framework for comparing the two systems of thought, which the events of the late 20th century have finally brought to a conclusion which was not possible in his lifetime. Mill states in
Book II Chapter I “Of Property” that a fair comparison of the free market and socialism would compare both the ideal of liberalism with that of socialism, as well as the practice of liberalism versus the practice of socialism. In 1848 the ideals of both were becoming better known (and there were some aspects of the ideal of socialism which Mill found intriguing) but the practice of each was still not conclusive. Mill correctly observed that in 1848 no European society had yet created a society fully based upon private property and free exchange and any future socialist experiment on a state-wide basis was many decades in the future. After the experiments in Marxist central planning with the Bolshevik Revolution in 1917, the Chinese Communists in 1949, and numerous other Marxist states in the post-1945 period, there can be no doubt that the reservations Mill had about the practicality of fully-functioning socialism were completely borne out by historical events. What Mill could never have imagined, the slaughter of tens of millions of people in an effort to make socialism work, has ended for good any argument concerning the Marxist form of socialism.Econlib now offers online two important defences of the socialist ideal, Karl Marx’s three volume work on
Capital and the
collection of essays on Fabian socialism edited by George Bernard Shaw. These can be read in the light of the criticism they provoked among defenders of individual liberty and the free market: Eugen Richter’s anti-Marxist
Pictures of the Socialistic Future, Thomas Mackay’s
2 volume collection of essays rebutting Fabian socialism,
Ludwig von Mises post-1917 critique of
Socialism. One should not forget that
Frederic Bastiat was active during the rise of socialism in France during the 1840s and that many of his essays are aimed at rebutting the socialists of his day. The same is true for Gustave de Molinari and the other authors of the
Dictionnaire d’economie politique (1852). Several key articles on communism and socialism from the
Dictionnaire are translated and reprinted in Lalor’s
Cyclopedia.For further reading on Marx’s
Capital see David L. Prychitko’s essay
“The Nature and Significance of Marx’s
Capital: A Critique of Political Economy“.For further readings on socialism see the following entries in the
Concise Encyclopedia of Economics:
Poor Law Commissioners’ Report of 1834,
edited by Nassau W. Senior, et al.
March 1, 2004
Frederick Engels, ed. Ernest Untermann, trans.
First Pub. Date
Chicago: Charles H. Kerr and Co.
First published in German. Das Kapital, based on the 1st edition.
The text of this edition is in the public domain. Picture of Marx courtesy of The Warren J. Samuels Portrait Collection at Duke University.
- Preface, by Frederick Engels
- Part I, Chapter 1
- Part I, Chapter 2
- Part I, Chapter 3
- Part I, Chapter 4
- Part I, Chapter 5
- Part I, Chapter 6
- Part I, Chapter 7
- Part II, Chapter 8
- Part II, Chapter 9
- Part II, Chapter 10
- Part II, Chapter 11
- Part II, Chapter 12
- Part III, Chapter 13
- Part III, Chapter 14
- Part III, Chapter 15
- Part IV, Chapter 16
- Part IV, Chapter 17
- Part IV, Chapter 18
- Part IV, Chapter 19
- Part IV, Chapter 20
- Part V, Chapter 21
- Part V, Chapter 22
- Part V, Chapter 23
- Part V, Chapter 24
- Part V, Chapter 25
- Part V, Chapter 26
- Part V, Chapter 27
- Part V, Chapter 28
- Part V, Chapter 29
- Part V, Chapter 30
- Part V, Chapter 31
- Part V, Chapter 32
- Part V, Chapter 33
- Part V, Chapter 34
- Part V, Chapter 35
- Part V, Chapter 36
- Part VI, Chapter 37
- Part VI, Chapter 38
- Part VI, Chapter 39
- Part VI, Chapter 40
- Part VI, Chapter 41
- Part VI, Chapter 42
- Part VI, Chapter 43
- Part VI, Chapter 44
- Part VI, Chapter 45
- Part VI, Chapter 46
- Part VI, Chapter 47
- Part VII, Chapter 48
- Part VII, Chapter 49
- Part VII, Chapter 50
- Part VII, Chapter 51
- Part VII, Chapter 52
WE have shown, that the value of commodities, or the price of production regulated by their total value, resolves itself into:
1) One portion of value replacing constant capital, or representing past labor, used up in the form of means of production in the making of the commodity. This, in brief, is the value, or price, which these means of production carried into the process of production of the commodities. We never speak of individual commodities in this case, but of commodity-capital, that is, of that form, in which the product of capital during a certain period of time, say of one year, presents itself, and of which the individual commodity forms one element, which, moreover, so far as its value is concerned, resolves itself into the same analogous constituents.
2) One portion of value representing variable capital,
which measures the income of the laborer and converts itself into wages for him. The laborer has produced these wages in this variable portion of value. This, briefly, is that portion of value, which represents the paid portion of the new labor added to the above constant portion in the production of commodities.
3) Surplus-Value, which is that portion of the value of the produced commodities, in which the unpaid, or surplus labor is incorporated. This last portion of the value in its turn assumes the independent forms, which are at the same time forms of revenue, namely the forms of profit on capital (interest on capital as such and profit of enterprise on capital in productive work) and ground-rent, which is claimed by the owner of the land participating in the process of production. The parts mentioned under 2) and 3), that is, that portion of value, which always assumes the revenue forms of wages (but only after having first gone through the form of variable capital), profit and rent, is distinguished from the constant portion mentioned under 1) by the fact that in it that entire portion of value is dissolved, in which the additional labor added to that constant part, to the means of production of the commodities, is materialized. Now, if we leave aside the constant portion, then it is correct to say that the value of a commodity, to the extent that it represents newly added labor, continually resolves itself into three parts, which form three forms of revenue, namely wages, profit and rent,
*151 in which the respective
magnitudes of value, that is the aliquot portions, which they constitute in the total value, are determined by various peculiar laws, which we have analysed previously. But on the other hand, it would be a mistake to say that the value of wages, the rate of profit, and the rate of rent form independent constituent elements of value, whose composition gives rise to the value of commodities, leaving aside the constant part; in other words, it would be a mistake to say that they are constituent elements of the value of commodities, or of the price of production.
The difference is easily seen.
Take it that the value of the product of a capital of 500 is equal to 400 c + 100 v + 150 s = 650; let the 150 s be divided into 75 profit + 75 rent. We will also assume, in order to forestall useless difficulties, that this is a capital of average composition, so that its price of production and its value coincide; this coincidence always takes place, whenever the product of such an individual capital may be considered as the product of some portion of the total capital corresponding to the same magnitude.
Here the wages, measured by the variable capital, form 20% of the advanced capital; the surplus-value, calculated on the total capital, forms 30%, namely 15% profit and 15% rent. The entire portion of value of the commodity representing the newly added labor is equal to 100 v + 150 s = 250. Its magnitude does not depend upon its division into wages, profit and rent. We see by the proportion of these parts to each other that a labor-power, which is paid with 100 in money, say 100 pounds sterling, has supplied a quantity of labor represented by money to the amount of 250 pounds sterling. We see from this that the laborer performed one and a half times as much surplus labor as he did labor for himself. If the working day contained 10 hours, then he worked 4 hours for himself and 6
hours for the capitalist. Therefore the labor of the laborers paid with 100 pounds sterling is expressed in money to the amount of 250 pounds sterling. Outside of this value of 250 pounds sterling there is nothing to divide between laborer and capitalist, between capitalist and landlord. It is the total value newly added to the value of 400, which is the value of the means of production. The value of 250 thus produced and determined by the quantity of labor materialized by it in the commodities forms the limit of the dividend, which the laborer, the capitalist and the landlord will be able to draw out of this value in the shape of the revenues, wages, profit and rent.
Take it that a capital of the same organic composition, that is, of the same proportion between the employed living labor-power and the constant capital set in motion by it, should be compelled to pay 150 pounds sterling instead of 100 pounds sterling for the same labor-power which sets in motion the constant capital of 400. And let us further assume that profit and rent should share the surplus-value in a different proportion. As we have assumed that the variable capital of 150 pounds sterling sets the same quantity of labor in motion as the variable capital of 100 did, the newly added value would be 250 as before, and the total value of the product would be 650, also as before. But the formula would then read: 400 c + 150 v + 100 s, and these 100 s would be divided, say, into 45 profit and 55 rent. The proportion, in which the newly produced total value would now be divided among wages, profit and rent, would now be very different. The magnitude of the advanced total capital would also be very different, although it would set only the same total quantity of labor in motion. The wages would amount to 27 8/11%, the profit to 8 2/11%, and the rent to 10% of the advanced capital. The total surplus-value would, therefore, amount to a little over 18%.
In consequence of the raise in wages the unpaid portion of the total labor would be changed and with it the surplus-value. If the working day contained 10 hours, the laborer would work 6 hours for himself and 4 hours for the capitalist.
The proportion of profit and rent would also be changed, the reduced surplus-value would be divided in a different proportion between the capitalist and the landlord. Finally, since the value of the constant capital would have remained the same, while the value of the advanced variable capital would have risen, the reduced surplus-value would express itself in a still more reduced rate of gross profit, by which we mean here the proportion between the total surplus-value and the advanced total capital.
The change in the value of wages, in the rate of profit, and in the rate of rent, whatever might be the effect of the laws regulating the proportion of these parts, could move only within the limits set by the newly produced value of commodities amounting to 250. An exception could take place only, if rent should rest upon a monopoly price. This would not alter the law itself, but merely complicate its analysis. For if we consider only the product itself in this case, then merely the division of the surplus-value would be different. But if we consider its relative value as compared to other commodities, then we should find no other difference but that a portion of the surplus-value had been transferred from them to this particular commodity.
Let us sum up:
In the first place, the surplus-value falls by one-third from its former figure, it falls from 150 to 100. The rate of profit falls by a little more than one-third, from 30% to 18%, because the reduced surplus-value must be calculated on an increased advance of total capital. But it does not fall in the same proportion as the rate of surplus-value. This last falls from 150/100 to 100/150, that is, from 150% to 66 2/3%, whereas the rate of profit falls only from 150/500 to 100/550 or from 30% to 18 2/11%. The rate of profit, then, falls proportionately more than the mass of surplus-value, but less than the rate of surplus-value. We find, furthermore, that the values as well as the masses of products remain the same, so long as the same quantity of
labor is employed, although the advanced capital has increased by the augmentation of its variable portion. This increase of the advanced capital would indeed make itself felt for a capitalist who would start out in business. But looking upon reproduction as a whole, the augmentation of the variable capital means merely that a larger portion of the new value added by newly performed labor is converted into wages, and thus at first into variable capital instead of into surplus-value and surplus products. The value of the product thus remains the same, because it is bounded on the one hand by the value of the constant capital, 400, and on the other hand by the figure 250, in which the newly added labor is represented. Both of these values remain unaltered. The product would represent the same amount of use-value in the same quantity of exchange-value, to the extent that it would return into the constant capital, so that the same mass of elements of constant capital would retain the same value. The matter would be different, if the wages should rise, not because the laborer would receive a larger share of his own labor, but if he should receive a larger portion of his own labor, because the productivity of labor would have decreased. In this case, the total value, in which this same labor, paid and unpaid, would be incorporated, would remain the same. But the mass of products, in which this quantity of labor would be incorporated, would be the same, so that the price of each aliquot portion of this product would rise, because each portion would contain more labor. The increased wages of 150 would not represent any more labor than the wages of 100 did before; the reduced surplus-value of 100 would represent merely two-thirds of the product which it did previously, only 66 2/3% of the mass of use-values, which were formerly represented by 100. In this case the constant capital would also become dearer to the extent that this product would go back into it. But this would not be the result of the increase in wages. This increase in wages would rather be a result of the increase in the price of commodities and a result of the diminished productivity of the same quantity of labor. Here the impression is given that the raise in wages made the product
dearer; however, this raise is not the cause, but rather a result of a change in the value of the commodities, due to the decreased productivity of labor.
On the other hand, so long as all other circumstances remain the same, so long as the same quantity of employed labor is represented by 250, and the value of the means of production handled by it should then rise or fall, then the value of the same quantity of products would rise or fall by the same magnitude. 450 c + 100 v + 150 s make the value of the product equal to 700. But 350 c + 100 v + 150 s would make the value of the same quantity of products only equal to 600, as against a former 650. Hence, if the advanced capital should increase or decrease, while it sets the same quantity of labor in motion, the value of its product would rise or fall, other circumstances remaining the same, if the increase or decrease of the advanced capital is due to a change in the value of the constant portion of capital. On the other hand, the value of the product remains unchanged, if the increase or decrease of the advanced capital is caused by a change in the value of the variable portion of capital, provided that the productivity of labor remains the same. In the case of the constant capital, the increase or decrease of its value is not balanced by any opposite movement. But in the case of the variable capital, so long as the productivity of labor remains the same, an increase or decrease of its value is balanced by the opposite movement on the part of the surplus-value, so that the value of the variable capital plus the surplus-value, that is, the new value added by new labor to the means of production and newly incorporated in the product, remains the same.
But if the increase or decrease of the value of the variable capital is due to a rise or fall in the price of commodities, that is, to an increase or decrease of the productivity of the labor employed by this investment of capital, then the value of the product is affected. Only, the rise or fall of wages in this case is not a cause, but an effect.
On the other hand, if the constant capital in the above illustration should remain at 400 c, and if the change from
100 v + 150 s to 150 v + 100 s, that is, an increase of the variable capital, should be due to a decrease in the productivity of labor, not in this same particular line of industry, say in cotton spinning, but perhaps in agriculture, so that it would be a result of a rise in the price of foodstuffs, then the value of the product would remain unchanged. The value of 650 would still be represented by the same quantity of cotton yarn.
The foregoing leads furthermore to the following conclusions: If a decrease in the expenditure of constant capital is due to economies, etc., in such lines of production as supply agriculture with their products, then this, like a direct improvement in the productivity of the employed labor itself, may lead to a reduction of wages, because it would lead to a cheapening of the subsistence of the laborer, and this would imply an increase of the surplus-value; so that the rate of profit in this case would grow for two reasons, namely on the one hand, because the value of the constant capital would decrease, and on the other hand, because the surplusvalue would increase. In our analysis of the conversion of surplus-value into profit we assumed that the wages would not fall, but remain constant, because there we had to investigate the fluctuations of the rate of profit, independent of the changes in the rate of surplus-value. Moreover, the laws which we developed in that case are general ones, and apply also to investments of capital, the products of which do not pass over into the consumption of the laborer, and in that case changes in the value of the product are without influence upon the wages.
We know, then, that the separation and distribution of the new value added by new labor annually to the means of production, or to the constant part of capital, among the various forms of revenue, namely wages, profit and rent, do not alter the limits of this value itself, do not alter the sum of value to be so distributed; neither can a change in the proportions of these different parts alter their sum, which
makes up this given magnitude of value. A given figure of 100 always remains the same, whether it is divided into 50 + 50, or into 20 + 70 + 10, or into 40 + 30 + 30. That portion of the value of the product, which is divided into these revenues, is determined, like the constant portion of the value of capital, by the value of commodities, that is, by the quantity of the labor incorporated in them from case to case. In the first place, then, the quantity of value of the commodities to be distributed among wages, profit and rent is given; in other words, the absolute limit of the sum of the portions of value of these commodities. In the second place, as concerns the individual categories themselves, their average and regulating limits are likewise given. The wages form the basis in this limitation. The wages are regulated on the one side by a natural law; their minimum is determined by the physical minimum required by the laborer for the conservation of his labor-power and for its reproduction; this means a minimum quantity of commodities. The value of these commodities is determined by the labor time required for their reproduction; it is determined by that portion of the new labor added to the means of production, or by that portion of each working day, which the laborer must have for the production and reproduction of an equivalent for the value of these necessary means of subsistence. For instance, if his average daily food requirements have the value of six hours of average labor, then he must work on an average six hours per day for himself. The actual value of his laborpower differs from this physical minimum; it differs according to climate and condition of social development; it depends not merely upon the physical, but also upon the historically developed social needs, which become second nature. But in every country and at any given period this regulating average wage is a given magnitude. The value of all other revenues thus has its limit. It is always equal to the value, in which the total working day (which coincides in the present case with the average working day, since it comprises the total quantity of labor set in motion by the total social capital) is incorporated, minus that portion of this working day,
which is incorporated in wages. Its limit is therefore determined by the limit of that value, in which the unpaid labor is expressed, that is, by the quantity of this unpaid labor. While that portion of the working day, which is required by the laborer for the reproduction of the value of his wages, finds its ultimate limit in the physical minimum of wages, the other portion of the working day, in which surplus labor is incorporated, and with it that portion of value which stands for surplus-value, finds its limit in the physical maximum of the working day, that is, in the total quantity of daily labor time, during which the laborer can be active altogether and still preserve and reproduce his labor-power. As we are here concerned in the distribution of that value, which represents the total labor newly added per year, the working day may here be regarded as a constant magnitude, and is taken for granted as such, no matter how much or how little it may differ from its physical maximum. The absolute limit of that portion of value, which forms surplus-value, and which resolves itself into profit and ground-rent, is thus given. It is determined by the excess of the unpaid portion of the working day over its paid portion, which means by that portion of the value of the total product, in which this surplus labor is realized. If we call the surplus-value thus limited and calculated on the advanced total capital the profit, as I have done, then this profit, so far as its absolute magnitude is concerned, is equal to the surplus-value and, therefore, determined in its boundaries by the same laws as it. On the other hand, the level of the rate of profit is likewise a magnitude inclosed within certain limits by the value of commodities. This rate is the proportion of the total surplus-value to the total social capital advanced in production. If this capital is equal to 500 (say millions) and the surplus-value equal to 100, then 20% form the absolute limit of the rate of profit. The distribution of the social profit at this rate among the various capitals invested in the different spheres of production creates prices of production, which swerve from the values of commodities, and these prices of production are the real regulating average market
prices. But this deviation of prices of production from values abolishes neither the determination of prices by values nor the lawful limits of profit. Instead of the value of a commodity being equal to the capital consumed in it plus the surplus-value contained in it, its price of production is then equal to the capital, k, consumed in it plus the surplus-value falling to its share as a result of the average rate of profit, for instance 20% of the capital advanced in its production, counting both the consumed and the merely employed capital. But this addition of 20% is itself determined by the surplus-value created by the total social capital, and by its proportion to the value of this capital; and for this reason it is 20% and not 10% or 100%. The transformation of the values into prices of production, then, does not abolish the limits of profit, but merely alters its distribution among the various particular capitals, which make up the total social capital, distributes it uniformly among them in the proportion in which they form parts of the value of this total capital. The market prices fall below or rise above these regulating prices of production, but these fluctuations balance each other. If one studies price lists during a certain long period, and if one subtracts the cases, in which the real value of commodities is altered by a change in the productivity of labor, and likewise the cases, in which the process of production has been previously disturbed by natural or social accidents, one will be surprised, in the first place, by the relatively narrow limits of the fluctuations, and, in the second place, by the regularity of their mutual compensation. The same domination of the regulating averages will be found here, which Quételet pointed out in the case of social phenomena. If the equalization of the values of commodities into prices of production does not meet any obstacles, then the rent resolves itself into differential rent, that is, it is limited to the equalization of the surplus-profits, which would be given to some of the capitalists by the regulating prices of production, but which are then appropriated by the landlords. Here, then, the rent has its definite limit of value in the fluctuations of the individual rates of profit,
which are caused by the regulation of the prices of production through the general rate of profit. If private ownership of land places obstacles in the way of the equalization of the values of commodities into prices of production, and appropriates absolute rent, then this absolute rent is limited by the excess of the value of the products of the soil over their prices of production, that is, by the excess of the surplus-value in them over the rate of profit assigned to the capitals by the average rate of profit. This difference then forms the limit of the rent, which is always but a certain portion of surplus-value produced and existing in the commodities.
Finally, if the equalization of the surplus-value into average profit meets with obstacles in the various spheres of production in the shape of artificial or natural monopolies, particularly of monopoly in land, so that a monopoly price would be possible, which would rise above the price of production and above the value of the commodities affected by such a monopoly, still the limits imposed by the value of commodities would not be abolished thereby. The monopoly price of certain commodities would merely transfer a portion of the profit of the other producers of commodities to the commodities with a monopoly price. A local disturbance in the distribution of the surplus-value among the various spheres of production would take place indirectly, but they would leave the boundaries of the surplus-value itself unaltered. If a commodity with a monopoly price should enter into the necessary consumption of the laborer, it would increase the wages and thereby reduce the surplus-value, if the laborer would receive the value of his labor-power, the same as before. But such a commodity might also depress wages below the value of labor-power, of course only to the extent that wages would be higher than the physical minimum of subsistence. In this case the monopoly price would be paid by a deduction from the real wages (that is, from the quantity of use-values received by the laborer for the same quantity of labor) and from the profit of the other capitalists. The limits, within which the monopoly price would
affect the normal regulation of the prices of commodities, would be accurately fixed and could be closely calculated.
Just as the division of the newly added value of commodities into necessary and surplus labor, wages and surplus-value, and its general division between revenues, finds its given and regulating limits, so the division of the surplus-value itself into profit and ground-rent finds its limit in the laws regulating the equalization of the rate of profit. In the division into interest and profits of enterprise the average profit itself forms the limit for both of them. It furnishes the given magnitude of value, which they may divide among themselves and which is the only one that they can so divide. The definite proportion of this division is here accidental, that is, it is determined exclusively by conditions of competition. Whereas in other cases the balancing of supply and demand implies the cessation of the deviation of market prices from their regulating average prices, that is, the cessation of the influence of competition, it is here the only determinant. But why? Because the same factor in production, the capital, has to divide its share of the surplus-value between two owners of the same factor in production. But the fact that no definite, lawful, limit for the division of the average profit is found, does not do away with its limit as a part of the value of commodities, any more than the fact that two partners in a certain business, being under the influence of different circumstances, divide their profit unequally, affects the limits of this profit in any way.
Hence, although that portion of the value of commodities, in which the value of the new labor added to the means of production is incorporated, is divided into different parts, which assume independent forms as revenues, this is no reason why wages, profit and ground-rent should be considered as constituting elements, whose addition, or sum, would be the source of the regulating price of commodities (natural price, prix nécessaire); it is no reason to think that not the value of commodities, after the subtraction of the constant portion of value, is the original unit separated into these three parts, but rather the price of each one of these three
parts is independently determined, and that the price of commodities is then formed by an addition of these three independent magnitudes. In reality the value of commodities is the magnitude which exists first, and it comprises the sum of the total values of wages, profit and rent, whatever may be their relative magnitudes. In the wrong conception, wages, profit and rent are three independent magnitudes of value, whose total magnitude is supposed to produce the magnitude of the value of a commodity, to limit and to determine it.
In the first place it is evident that, if wages, profit and rent constitute the price of commodities, this would apply as much to the constant portion of the value of commodities as to the other portion, in which variable capital and surplus-value are incorporated. This constant portion may here be left entirely out of consideration, since the value of the commodities of which it is made up would likewise resolve itself into wages, profit and rent. We have already shown that this conception denies the existence of such a constant portion of value.
It is furthermore evident that all meaning of value is here eliminated. Only the conception of price remains, in the sense that a certain amount of money is paid to the owners of labor-power, capital and land. But what is money? Money is not a thing, but a definite form of value, hence it is again conditioned upon value. Let us say, then, that a definite amount of gold or silver is paid for those elements of production, or that they are equalled in our minds to this amount. But gold and silver (and the enlightened economist is proud of this understanding) are themselves commodities, like all others. The price of gold and silver is therefore likewise determined by wages, profit and rent. Hence we cannot determine what wages, profit and rent are, by making them equal to a certain amount of gold or silver, for the value of this gold and silver, by which they are supposed to be estimated as equivalents, is precisely supposed to be determined by them, independently of gold and silver, that is, independently of the value of any commodity, for
this value is supposed to be the product of those three. To say that the value of wages, profit and rent consist in their being equivalent to a certain quantity of gold and silver, would merely be the same as saying that they are equal to a certain quantity of wages, profit and rent.
Take wages first. For it is necessary to make labor the point of departure, even in this view of the matter. How, then, is the regulating price of wages determined, the price around which its market prices oscillate?
Let us reply that it is determined by the demand and supply of labor-power. But what sort of a demand is this? It is a demand made by capital. The demand for labor is therefore at the same time a supply of capital. In order to speak of a supply of capital, we should know above all what capital is. What is capital made of? If we select its simplest forms, it consists of money and commodities. But money is merely a form of commodities. Capital, then, consists of commodities. But the value of commodities, according to our assumption, is first determined by the price of the labor producing them, by wages. The existence of wages is here a prerequisite and is considered as a constituting element of the price of commodities. Now this price is to be determined by the proportion of the supplied labor to capital. The price of the capital itself is equal to the price of the commodities of which it is composed. The demand of capital for labor is equal to the supply of capital. And the supply of capital is equal to the supply of a quantity of commodities of a given price, and this price is regulated in the first place by the price of labor, and the price of labor in its turn is equal to that portion of the price of commodities, which makes up the variable capital, which is transferred to the laborer in exchange for his labor; and the price of the commodities, of which this variable capital is composed, is in its turn primarily determined by the price of labor; for it is determined by the prices of wages, profit and rent. In order to determine wages, we cannot, therefore, assume the previous existence of capital, for the value of the capital is itself determined in part by wages.
Besides, the dragging of competition into this problem does not help any. Competition makes the market prices of labor rise and fall. But suppose that the demand and supply of labor are balanced. What determines wages in that case? Competition. But we have just assumed that competition ceases to act as a determinant, that it abolishes its effects by the equilibrium of its two opposing forces. We are precisely trying to find the natural price of wages, that is, the price of labor not regulated by competition, but which, on the contrary, regulates it.
Nothing remains but to determine the necessary price of labor by the necessary subsistence of the laborer. But these articles of food are commodities, which have a price. The price of labor is therefore determined by the price of the necessary means of existence, and the price of the means of existence, like that of all other commodities, is determined primarily by the price of labor. Therefore the price of labor determined by the price of the means of existence is determined by the price of labor. The price of labor is determined by itself. In other words, we do not know by what the price of labor is determined. Labor in this case has any price at all, because it is considered as a commodity. In order, therefore, to speak of the price of labor, we must know what price itself means. But what price itself is, we do not learn in this way at all.
But let us assume, that the necessary price of labor had been determined in this agreeable manner. Then how is the average profit determined, the profit of every capital in normal conditions, which forms the second element of the price of commodities? The average profit must be determined by an average rate of profit; how is this rate determined? By the competition between the capitalists? But this competition itself is conditioned upon the existence of profit. It presupposes the existence of different rates of profit, and thus of different profits, either in the same, or in different spheres of production. Competition can influence the rate of profit only to the extent that it affects the prices of commodities. Competition can merely make the producers within the same
sphere of production sell their commodities at the same prices, and make them sell their commodities in different spheres of production at prices which will give them the same profit, will give them the same proportional addition to the price of commodities, which has already been partially determined by wages. Hence competition cannot balance anything but inequalities in the rate of profit. In order to balance unequal rates of profit, the profit as an element in the price of commodities must already exist. Competition does not create it. It lowers or raises its level, but it does not create this level, which appears whenever the balance has been struck. And when we speak of a necessary rate of profit, we wish precisely to know the rate of profit which is independent of the movements of competition, and which rather regulates these movements. The average rate of profit appears, when the forces of the competing capitalists balance each other. Competition may bring about this balance, but cannot create the rate of profit which appears whenever this balance is found. As soon as the equilibrium is reached, why is the rate of profit 10, or 20, or 100%? On account of competition? No, on the contrary, competition has done away with the causes, which produced deviations from the rate of 10, or 20, or 100%. It has brought about a price of commodities, by which every capital yields the same profit in proportion to its magnitude. The magnitude of this profit itself is independent of it. It merely reduces all deviations to this magnitude. One man competes with another, and competition compels him to sell his commodities at the same price as the other. But why is this price 10 or 20 or 100%?
Nothing remains under these circumstances but to declare that the rate of profit, and with it the profit itself arises in some unaccountable manner by a certain addition to the price of commodities, which to that extent was determined by the wages. The only thing which competition tells us is that this rate of profit must have a certain figure. But we knew that before, when we spoke of an average rate of profit and of a “necessary price” of profit.
It is quite unnecessary to thrash this absurd process over in the case of ground-rent. It is evident, even so, that it, logically pursued, makes profit and rent appear as additions made by unaccountable laws to the price of commodities, which is primarily determined by wages. In short, competition has to shoulder the duty of explaining all inexplicable ideas of the economists, whereas the economists should rather explain competition.
Now, if we leave aside the illusion of a profit and rent created by the circulation, that is of parts of price arising through sale—for circulation can never give what it did not first receive—the matter simply amounts to this:
Let the price of a commodity determined by wages be 100; let the rate of profit be 10% of the wages, and the rent 15% of the wages. Then the price of the commodity determined by wages, profit and rent is 125. These added 25 cannot come from the sale of this commodity. For all sellers sell to each other at 125 what has actually cost only 100 in wages, and the result is the same as though they had all sold at 100. The operation must rather be studied independently of the process of circulation.
If the three revenues share the commodity itself, which now costs 125—and it does not alter the matter, if the capitalist should first sell at 125, then pay 100 to the laborer, 10 to himself, and 15 to the landlord—then the laborer receives 4/5, equal to 100, of the value and of the product. The capitalist receives 2/25 of the value and of the product, and the landlord 3/25. When the capitalist sells at 125, instead of at 100, he merely gives to the laborer 4/5 of the product, in which his labor is incorporated. This would be the same, if he had given 80 to the laborer and kept back 20, of which he would share 8 and the landlord 12. In this case he would have sold the commodity at its value, since in fact the additions to the price of the commodity are made independently of the value of the commodity, which is assumed to be determined here by the value of labor-power. This amounts in a roundabout way to saying that in this conception the term wages, here 100, is equal
to the value of the product, that is, equal to that sum of money, in which the same definite quantity of labor is represented; but that this value again differs from the real wages and therefore leaves a surplus. Only, in the present case, this is obtained nominally by an addition to the price. Hence, if the wages were 110 instead of 100, the profit would have to be 11 and the ground-rent 16½, so that the price of the commodity would be 137½. This would leave the proportion unaltered. But as the division would always be obtained by a nominal addition of definite percentages to the wages, the price would rise and fall with the wages. The wages are here first assumed as equal to the value of the commodity, and then again separated from it. In fact, however, the matter amounts in a roundabout and meaningless way to this, that the value of the commodity is determined by the quantity of labor contained in it, whereas the value of wages is determined by the price of the necessities of life, and the surplus of value above the wages forms profit and rent.
The separation of the value of commodities, after the subtraction of the value of the means of production consumed in their creation, this separation of this given quantity of value determined by the quantity of labor incorporated in the produced commodities into three parts, namely into wages, profit and rent, which assume the shape of independent and mutually unrelated revenues, this same separation appears on the surface of capitalist production, and consequently in the minds of the agents bounded by it, in an inverted form.
Let the total value of a certain commodity be 300, of which 200 may be the value of the means of production, or elements of constant capital, consumed in its production. This leaves 100 as the amount of the new value added to this commodity in its process of production. This new value of 100 is all that is available for division among these three forms of revenue. Let us place the figure for wages at x, for profit at y, for ground-rent at z, then the sum of x + y + z will always be 100 in our present case. In the conception of the industrials, merchants and bankers, as in that of the
vulgar economists, matters are supposed to pass in an entirely different way. According to them it is not the value of the commodity, which equals 100 after subtracting the value of the means of production consumed in it, nor is it this 100 which is divided into x, y and z. According to them it is rather the price of the commodity, which is composed of wages, profit and rent, whose figures of value are determined independently of the value of this commodity and independently of each other, so that x, y and z exist independently, each by itself and is so determined, while the sum of these magnitudes, which may be larger or smaller than 100, makes up the value of the commodity by adding these three different values together. This case of mistaken identity is necessary:
1) Because the component parts of value in the commodities face each other as independent revenues, which are referred back as such to three very dissimilar agencies in production, namely to labor, capital and land, and which then seem to arise out of these. The ownership of labor-power, of capital, of land, is the cause, which assigns these different parts of the value of commodities to these respective owners, and transforms these parts into revenue for them. But the value does not arise from a transformation of its parts into revenue, it must rather exist before it can be converted into revenue, before it can assume this form. The appearance of the reverse must fortify itself so much the more, as the determination of the relative magnitude of these three parts follows different laws, whose connection with and limitation by the value of commodities themselves does not show itself on the surface by any means.
2) We have seen that a general rise or fall of wages, by causing a movement in the opposite direction on the part of the average rate of profit, so long as other circumstances remain the same, changes the prices of production of the different commodities, raises some and lowers others, according to the average composition of the capital in the respective spheres of production. There is no doubt that at least in some spheres of production the experience is made, that the
average price of a commodity rises, because wages have risen, and falls, because wages have fallen. What is not “experienced” is the secret regulation of this change by the value of commodities, which is independent of wages. But if the rise of wages is local, if it takes place only in particular spheres of production in consequence of peculiar circumstances, then a corresponding nominal raise of prices may occur in the case of these commodities. The rise of the relative value of one kind of commodities as against others, which have been produced with an unchanged scale of wages, is then merely a reaction against the local disturbance of a uniform distribution of surplus-value among the various spheres of production, a means of leveling particular rates of profit into an average rate. The “experience,” which is met in that case, is once more the determination of the price by the wages. In both these cases, the same experience shows that the wages determine the prices of commodities. What is not “experienced,” is the hidden cause of this interrelation. Furthermore: The average price of labor, that is, the value of labor-power, is determined by the price of production of the necessary articles of subsistence. If the price of these falls, so does that of those. What is once more experienced here, is the existence of a connection between wages and the price of commodities. But the cause may seem to be an effect, and the effect a cause, as is also the case in the movements of market prices, where a rise of wages above its average corresponds to the rise of the market prices above the prices of production during periods of prosperity, and subsequent fall of wages below their average corresponds to a fall of market prices below the prices of production. Owing to the dependence of prices of production upon the values of commodities, the primary experience, aside from the oscillating movements of the market prices, should always be that the rate of profit falls whenever wages rise, and vice versa. But we have seen that the rate of profit may be determined by the movements of the value of constant capital, independently of the movements of wages; so that wages and the rate of profit, instead of moving in opposite
directions, move in the same direction, and may rise or fall together. If the rate of surplus-value were directly identical with the rate of profit, then this could not happen. Even if wages should rise as a result of a rise in the prices of foodstuffs, the rate of profit may remain the same, or may even rise, owing to a greater intensity of labor or a prolongation of the working day. All these experiences corroborate the illusion created by the apparently independent and reversed form of the parts of value, as though either the wages alone, or wages and profit together determined the value of commodities. As soon as this seems to be the case with reference to wages, so that the price of labor and the value created by labor seem to coincide, the same applies as a matter of course to profit and rent. Their prices, that is, their expression in money, must then seem to be regulated independently of labor and of the value produced by it.
3) Let us assume that the values of commodities, or the apparently independent prices of production, coincide seemingly directly and continually with the market prices of commodities, instead of merely enforcing themselves as the regulating average prices by the continual balancing of the fluctuations of market prices. Let us assume, furthermore, that reproduction always takes place under the same unaltered conditions, so that the productivity of labor remains constant in all elements of capital. Finally, let us assume that that portion of the value of the produced commodities, which is formed in every sphere of production by the addition of a new quantity of labor, or by the addition of a newly produced value to the value of the means of production, is always divided according to the same unaltered proportion into wages, profit and rent, so that the actually paid wages, the actually realized profit, and the actual rent always directly coincides with the value of labor-power, with that portion of the total surplus-value which falls to the share of every active part of total capital by means of the average rate of profit, and with the limits, in which ground-rent is normally held upon this basis. In one word, let us assume that the division of the produced social values and the regulation of
the prices of production takes place on a capitalist basis, but that competition is abolished.
Under these assumptions, then, under which the value of commodities would be constant and would appear so, under which that part of the value of commodities which resolves itself into revenues would remain a constant magnitude and would always present itself as such, and under which, finally, this given and constant part of value would always be divided according to constant proportions into wages, profit and rent, even under these assumptions would the real movement necessarily appear in an inverted form: not as a division of a previously given quantity of value into three parts, which assume mutually independent forms of revenue, but on the contrary, as the formation of this quantity of value by the sum of the independent and selfdetermined elements of wages, profit and rent, of which it is composed. This illusion would necessarily arise, because in the actual movement of the individual capitals and of the commodities produced by them not the value of the commodities would seem to precede their division, but vice versa, the parts into which it is divided would seem to exist before the value of the commodities. In the first place we have seen that to every capitalist the cost price of his commodities appears as a given magnitude and continually presents itself as such in the actual price of production. But the cost price is equal to the value of the constant capital, the advanced means of production, plus the value of labor-power, which, however, presents itself to the agent in production in the irrational shape of a price of labor, so that the wages appear at the same time as a revenue for the laborer. The average price of labor is a given magnitude, because the value of labor-power, like that of any other commodity, is determined by the labor time required for its reproduction. But as concerns that portion of the value of commodities, which resolves itself into wages, it does not arise from the fact that it assumes this form of wages, nor from the fact that the capitalist advances to the laborer his share of his own product in the shape of wages, but from the fact that the laborer produces an equivalent
for his wages, that is, that a portion of his daily or annual labor produces the value contained in the price of his labor-power. But the wages are stipulated by contract, before the value equivalent to them has been produced. As an element of price, whose magnitude is given before the commodity and its value have been produced, as a constituent part of the cost price, wages do not appear as a part which detaches itself in an independent form from the total value of the commodity, but rather as a given magnitude, which predetermines this value, a creator of price or value. A role similar to that of wages in the cost price of commodities is played by the average profit in their price of production, for the price of production is equal to the cost price plus the average profit on the advanced capital. This average profit figures practically, in the conception and in the calculation of the capitalist himself, as a regulating element, not merely to the extent that it determines the transfer of the capitals from one sphere of investment into another, but also in all sales and contracts, which embrace a process of reproduction extending over long epochs. But whenever it figures in this way, it is a previously existing magnitude, which is in fact independent of the value and surplus-value produced in any particular sphere of production, and still more independent of the value and surplus-value produced by any individual investment of capital in any sphere of production. It does not present itself as a result of a division of value, but rather as a magnitude independent of the value of the produced commodities, as existing from the start and determining the average price of the commodities, that is, as a creator of value. Indeed, the surplus-value, owing to its separation into various and mutually unrelated parts, appears in a still more concrete form as a prerequisite for the creation of the value of commodities. A part of the average profit, in the form of interest, faces the capitalist independently as an element preceding the production of commodities and of their value. Although the fluctuations of the amount of interest are considerable, yet at any specific moment it is a given magnitude for every capitalist, and it enters into the cost price of
the commodities produced by any individual capitalist. So does also the ground-rent in the form of lease money fixed by contract in the case of the agricultural capitalist, and in the form of rent for business rooms in the case of other business men. These parts, into which surplus-value is divided, being given as elements of cost price for the individual capitalist, appear for this reason inversely as creators of surplus-value; they appear as creators of a portion of the price of commodities, just as wages appear as the creator of the other portion. The secret of the continual reappearance of these divided parts of commodity value in the role of prerequisites for the formation of value itself is simply this, that the capitalist mode of production, like any other, does not merely always reproduce the material product, but also the economic conditions, the definite economic forms of its creation. Its result, therefore, appears as continually as its prerequisites, as its prerequisites appear in the role of its results. And it is this continual reproduction of the same conditions, which the individual capital anticipates in a matter of fact way as an indubitable fact. So long as the capitalist mode of production persists as such, a portion of the newly added labor resolves itself continually into wages, another into profit (interest and profit of enterprise), and a third into rent. In the contracts between the owners of the various agencies of production this is always assumed, and this assumption is correct, no matter how much the relative proportions may fluctuate in individual cases. The definite shape, in which the parts of value face each other, is assumed as pre-existing, because it is continually reproduced, and it is continually reproduced, because it is continually taken for granted.
It is true, that both experience and the appearance of things demonstrate the fact that the market prices, whose influence seems to the capitalist to be indeed the whole thing in the determination of values, are by no means dependent upon these anticipations, so far as their amount is concerned. They are not governed by any contracts demanding a high or a low rent and interest. But the market prices are constant
only in their changes, and their average for a certain long period results in the respective averages of wages, profit and rent as magnitudes dominating the constant ones, such as the market prices, in the last analysis.
On the other hand, it seems like a simple reflection, that if wages, profit and rent are creators of value for the reason that they seem to precede the production of value, and that they are taken for granted by the individual capitalist in his cost price and price of production, then the constant portion of value, whose value enters as a given quantity into the production of every commodity, is also a creator of value. But the constant portion of value is nothing but a quantity of commodities and, therefore, of values of commodities. Thus we should arrive at the absurd tautology that the value of commodities is the creator and cause of the value of commodities.
If the capitalist were interested in reflecting about this—and his reflections as a capitalist are dictated exclusively by his interests and his interested motives—his experience would show him, that the product, which he himself produces, passes over into other spheres of production as a constant part of capital, and that products of these other spheres of production pass over into his own product as constant parts of capital. Owing to the fact that the additional value of his own new production, from his point of view, seems to be formed by means of wages, profit and rent, the same appearance holds good also in the case of the constant portion consisting of products of other capitalists. And so the price of the constant portion of capital, and with it the total value of the commodities, reduces itself in the last resort, although in a somewhat unaccountable manner, to a sum of values resulting from the addition of the independent creators of value, wages, profit and rent, which are regulated by different laws and come from different sources.
4) Whether the commodities are sold, or not sold, at their values, whether their value is determined in one way or another, is quite immaterial for the individual capitalist. This determination of values is from the very outset a process
passing behind his back and controlled by conditions independent of himself, because it is not the values, but the divergent prices of production, which form the regulating average prices in every sphere of production. The determination of values as such, interests and influences the individual capitalist and the capital in each sphere of production only to the extent that the reduced or increased quantity of labor required in accordance with the rise or fall of the productive power of labor, enables him in one case to make an extra profit, and compels him in another to raise the price of his commodities, because an additional amount of wages, an additional amount of constant capital, and consequently some more interest, fall upon each individual part of the product, or upon the individual commodities. This determination of values interests him only to the extent that it raises or lowers the cost of production of commodities for himself, in other words, only to the extent that it places him in an exceptional position.
On the other hand, wages, interest and rent appear to him as regulating boundaries, not only of the price at which he can realize the profit of enterprise, that is, the profit falling to his share in his capacity as a producing capitalist, but also of the price at which he must be able to sell his commodities, if he is to keep his reproduction going at all. It is quite immaterial for him, whether he realises the value and surplus-value in his commodities by their sale, provided only that he gets the customary profit or enterprise or more than that, so long as he pockets this surplus over and above the individual cost price determined for him by wages, interest and rent. Aside from the constant portion of capital, wages, interest and rent appear to him, therefore, as the limiting, creating, determining elements of the price of commodities. For instance, if he can succeed in depressing wages below their normal level, below the value of labor-power, if he can obtain capital at a lower rate of interest, if he can pay less than the normal amount for rent, then he does not care, whether he sells his product below its value, or even below its price of production, so that he gives away without any
equivalent a portion of the surplus-value contained in the commodities. This applies even to the constant portion of capital. For instance, if an industrial capitalist can buy his raw material below its price of production, then this protects him against loss, even if he sells it in his own finished product under its price of production. His profit of enterprise may remain the same, or may even increase, so long as the excess of the price of commodities over its elements remains the same or increases. But aside from the value of the means of production, which enter into his own production with a given price, it is precisely wages, interest and rent which enter into this production as limiting and regulating amounts of price. Consequently they appear to him as elements determining the price of commodities. The profit of enterprise, from his point of view, seems determined either by the excess of the market prices, dependent upon accidental conditions of competition, over the immanent value of commodities determined by those elements of price. Or, to the extent that this profit itself exerts a determining influence upon market prices, it seems itself dependent upon the competition between buyers and sellers.
In the competition, both of the individual capitalists among themselves and in the competition on the world market, it is the given and presupposed magnitudes of wages, interest and rent which enter into the calculation as constant and regulating magnitudes. They are constant, not in the sense of being unalterable magnitudes, but in the sense that they are given in any individual case and that they form the constant boundary for the continually fluctuating market prices. For instance, in the competition on the world market the question is exclusively as to whether the commodities can be sold at, or below, the existing world market prices with a profit, as to whether, with the existing wages, interest and rent a corresponding profit of enterprise can be realized. If the wages and the price of land are low in a certain country, while the interest on capital is high, because the capitalist mode of production has not been developed in it, whereas in some other country the wage and the price of
land are nominally high, while the interest on capital is low, then the capitalist employs in the one country more labor and land, in the other relatively more capital. These factors enter as determining elements into the calculation by which the degree of possible competition between these two countries is estimated. Here, then, experience shows theoretically, and the interested calculation of the capitalist shows practically, that the prices of commodities are determined by wages, interest and rent, by the price of labor, of capital and of land, and that these elements of price are indeed the regulating factors of price.
Of course, this always leaves an element which is not assumed as pre-existing, but which rather results from the market price of commodities, namely the surplus above the cost price formed by the addition of these elements, namely of wages, interest and rent. This fourth element seems to be determined in every individual case by competition, and in the long average of cases by the average profit, which in its turn is regulated by this same competition, only at longer intervals.
5) On the basis of capitalist competition it becomes so much a matter of course to separate the value, in which the newly added labor is represented, into the forms of revenue known as wages, profit and ground-rent, that this method is applied (not to mention past stages of history, of which we gave illustrations under the head of ground-rent) even in cases, in which the conditions required for those forms of revenue are missing. In other words, everything is counted under these heads by analogy.
If an independent laborer—for instance, a small farmer, in whose case all three forms of revenue may be used—works for himself and sells his own product, he is, in the first place, considered as his own employer (capitalist), who employs himself as a laborer, and as his own landlord, who employs himself as his own tenant. To himself as a wage worker he pays his wages, to himself as a capitalist he turns over his profit, and to himself as a landlord he pays his rent. Assuming the capitalist mode of production and the conditions
corresponding to it to be the general basis of society, this conception is correct, in so far as he does not owe it to his labor, but to his ownership of means of production—which have here assumed the general form of capital—that he is able to appropriate his own surplus labor. And furthermore, to the extent that he creates his own product in the shape of commodities, and thus depends upon its price (and even if he does not depend upon it, this price can be estimated), the quantity of surplus labor, which he can realize, does not depend upon its own size, but upon the general rate of profit; and in like manner any surplus above the amount of surplus-value allowed by the general rate of profit is not determined by the quantity of labor performed by himself, but can be appropriated by him only because he is the owner of the land. Because a form of production not corresponding to the capitalist mode of production may thus be brought in line with its forms of revenue—and to a certain extent not incorrectly—the illusion is strengthened so much the more that the capitalist conditions are the natural conditions of any mode of production.
On the other hand, if we reduce the wages to their general basis, namely to that portion of the product of the producer’s own labor which passes over into the individual consumption of the laborer; if we relieve this portion of its capitalist limitations and extend it to that volume of consumption, which is permitted, on the one hand, by the existing productivity of society (that is the social productivity of his own individual labor in its capacity as a truly social one), and on the other hand, required by the full development of his individuality; if we reduce the surplus labor and the surplus product to that measure, which is required under the existing conditions of social production, on the one hand for the formation of an insurance and reserve fund, and on the other hand for the continuous expansion of reproduction to an extent dictated by social needs; finally, if we include in number one, necessary labor, and number two, surplus labor, that quantity of labor, which must always be performed by the ablebodied for the incapacitated or immature members of
society, in other words, if we deprive both wages and surplus-value, both necessary and surplus labor, of their specifically capitalist character, then we have not these forms, but merely their foundations, which are common to all social modes of production.
Moreover, this manner of generalizing was also used in previous modes of production, for instance, in the feudal one. Conditions of production, which did not correspond to it at all, which stood entirely outside of it, were counted in as feudal relations. This was done, for instance, in England, in the case of tenures in common socage (as distinguished from tenures on knight’s service), which comprised merely monetary obligations and were feudal in name only.
Principles, Chapter III, p. 77.)
Part VII, Chapter LI.