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

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

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

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

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

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

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

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

He says, then:

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

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

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

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

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

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

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

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

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

Although it is false, it is nevertheless true.

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

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

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

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

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

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

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

According to the first assumption we have:

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

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

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

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

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

But what does Mill say?

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

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

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

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

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

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

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

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

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

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

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

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

Let us see how he proceeds.

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

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

But how does Mill tackle the problem?

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

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

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

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

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

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

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

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

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

We would thus arrive at the following calculation:

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

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

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

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

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

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

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

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

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

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

Mr. Mill continues:

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

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

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

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

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

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

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

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

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

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

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

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

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

***

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

First, it has emerged that:

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

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

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

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

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

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

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

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

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

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

Hence this assumption too is absurd.

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

||333|

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

***

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

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

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

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

***

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

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

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

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

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

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

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

***

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

***

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

***

So much for this digression.

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

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

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

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

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

***

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

[8.  Conclusion]

This whole account of the Ricardian school shows that it declines at two points.

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

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

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

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

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

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

[a] See this volume, pp. 30-32.—Ed.

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

[c] See this volume, p. 58.—Ed.

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

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

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

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

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

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

[j] See this volume, pp. 99-100.—Ed.

[k] The manuscript has “state”.—Ed.

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

[m] The manuscript has “his”.—Ed.

[n]  See this volume, p. 111.—Ed.

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

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

[q] Under the aspect of space.—Ed.

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

[s] See this volume, pp. 110-11.—Ed.

[t] See this volume, p. 34.—Ed.

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

[v] See this volume, p. 143.—Ed.

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

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

[y] See this volume, p. 129.—Ed.

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

[aa] See this volume, pp. 85-88.—Ed.

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

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

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

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

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

[gg] The manuscript has “a”.—Ed.

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

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

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

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

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

[mm] The manuscript has “So a”.—Ed.

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

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

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

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

[rr] The manuscript has “For a”.—Ed.

[ss] The manuscript has “plus”.—Ed.

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

[uu] It is proved.—Ed.

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

[ww] The manuscript has “For a”.—Ed.

[xx] The manuscript has “plus”.—Ed.

[yy] See this volume, pp.218-25.—Ed.

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

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