[Chapter XX]  Disintegration of the Ricardian School

1.  [Robert Torrens]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“In that early period of society”

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

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

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

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

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

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

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

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

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

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

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

James Mill is right as against this fellow when he says:

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

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

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

Now there are two [possibilities]:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[c) Torrens and the Conception of Production Costs]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[a) Confusion of surplus-value with Profit]

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

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

Mill’s passage concerning “time” reads:

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

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

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

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

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

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

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

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

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

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

Wages:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But even more.

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

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

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

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

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

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

***

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

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

***

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

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

***

In addition to the above.

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

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

In another passage he says:

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

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

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

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

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

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

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

***

A passage from Mill must be noted:

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

[d)] Demand, supply, Over-Production

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

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

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

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

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

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

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

Yet another passage from Mill:

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

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

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

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

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

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

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

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

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

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

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

***

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

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

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

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

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

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

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

But the following remark about rent is noteworthy:

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

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

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

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

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

***

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

***

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

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

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

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

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

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

He says first:

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

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

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

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

[Secondly,] Prévost tries a different approach.

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

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

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

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

3.  Polemical Writings

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

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

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

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

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

The real sense of this work lies in the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[Ricardo says in the Principles:]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This is indeed the secret basis of glut.

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

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

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

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

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

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

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

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

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

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

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

Against Say.  (Notebook XII, p. 12.)

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

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

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

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

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

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

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

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

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

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

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

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