The People's Marx, Abridged Popular Edition of the the Three Volumes of Capital, Borchardt 1921

Chapter 7


How Uniform Profit is obtained

(Extracted from vol. III, part. 1, ch. 9, German ed.)

Let us now return to the question as to the influence exerted by the difference between fixed and circulating capital on the rate of profit. In our schedule (p. 29) we assumed that the whole of the constant capital reappears immediately in the value of the product (i. e. that it is entirely circulating capital). This may occasionally be the case, but it. is not the rule. We must therefore take into consideration the fact that, in general, only "a part of the constant capital is consumed, whereas the rest remains. According as to whether this remaining part is large or small, the surplus-value actually produced by several capitals of equal size will other conditions being identical - naturally vary. Let us take the following figures always on the assumption that the surplus-value amounts to 100%, i. e. that labour power, over and above its own value, produces exactly as much surplus-value:

Capital

Surplus-Value

Rate of Profit (%)

Consumed constant Capital

Value of Commo-dities

Cost-price

I. 80c + 20v

20

20

50

90

70

II. 70c +30v

30

30

51

111

81

III. 60c + 40v

40

40

51

131

91

IV. 85c + 15v

15

15

40

70

55

V. 95c + 5 v

5

5

10

20

15

390c + 110 v

110

110

Total

78c + 22v

22

22

Average

If we regard the capitals I -V once more as a single total capital, we shall find that in this case also the composition of the five capitals is 500 = 390 c + 110 v; that the average composition 78c + 22v, thus remains the same; consequently that the average surplus-value 22 % likewise remains unchanged. If this surplus-value were uniformly distributed among capitals I - V, the following would be the prices of the commodities:

Capital

Surplus-Value

Value of commodities

Cost-price of commodities

Price of commodities

Rate of profit %

Difference between price and value

I. 80c + 20v

20

90

70

92

22

+ 2

II. 70c +30v

30

111

81

103

22

- 8

III. 60c + 40v

40

131

91

113

22

- 18

IV. 85c + 15v

15

70

55

77

22

+ 7

V. 95c + 5 v

5

20

15

37

22

+ 17

Taken all together the commodities will be sold:

+ 2

and

- 8

+ 7

- 18

+ 17

26 above

26 below their value

Thus the differences of price are mutually compensated by means of a uniform distribution of the surplus-value, or by the addition of the average profit of 22 % on the capital advanced to the various cost-prices of the commodities I - V. In the same proportion in which part of the commodities is sold above its value, another part is sold below the latter. And their sale at such prices alone renders it possible that the rate of profit for all the categories I - V is a uniform one (22 %), regardless of the heterogeneous organic com- position of capitals I - V. The prices which are obtained in this way are the prices of production. [1] Consequently the price of production of the commodity = its cost-price + the average profit.

When selling their commodities, the capitalists in the different branches thus withdraw exactly those capital values which have been consumed in the process of production. Not so in the case of the surplus-value or profit. Of this, the individual capitalist does not obtain the amount realised in the course of the production of his commodities, but as much of the total surplus-value of the entire class of capitalists as is apportioned to his own capital according to the prevailing average rate of profit. Every capital advanced, whatever be its composition, obtains per centum each year the profit reaped per centum that year by the totality of capital. The various capitalists resemble, in so far as profit is concerned, mere shareholders of a joint-stock company in which the profit-sharing is uniformly distributed per centum; such profit-sharing varies, in the case of the individual capitalists, merely according to the size of the capital invested by each one in the whole undertaking - i. e. according to the number of his shares. In this way, if we consider all the branches of production in their totality, the total price of production of all commodities is, in Society itself, equal to their total value.

This assertion would appear to be contradicted by the fact that the commodities which serve one capitalist as means of production - i. e. machines, raw materials, etc. - have, as a rule, been purchased from another capitalist and include therefore the latter's profit in their price, or, in other words, that the profit of one branch of industry is included in the cost-price of another branch. But if we add, on the one side, all the cost-prices of the whole country together; and, on the other side, all the profits, we shall find the calculation to be exact. For instance, linen is required for the manufacture of linen coats, and linen, in turn, requires flax. A number of capitalists apply themselves therefore to the production of flax, and invest therein a capital of, let us say, 100 (e.g. £ 100 000). If the rate of profit be 10 %, the linen manufacturers must purchase this flax for 110, and then sell it to the tailors for 121. The total capital utilised in these three branches thus amounts to the following sum:

in the production of flax

100

in the production of linen

110

in the production of coats

121

331

This sum must yield a profit of 33,1, which is realised by selling the coats in the final instance for 133,1. [2] But of this profit the coat manufacturers obtain only the sum of 12,1. When purchasing the linen they must pay over the surplus amount of 21 to its producers; these, in their turn, retain only 11, and hand on the remaining 10 to the producers of flax. Thus each of the capitals interested receives that share of profit due to it in proportion to its size.

As soon as a general rate of profit has been established, with the result that the average profit in all branches adapts itself to the size of the invested capital, it is only by accident that the surplus-value really produced in any given branch corresponds to the profit contained in the selling-price of the commodity. As a general rule, profit and surplus-value are really two different magnitudes. The question as to how much surplus-value is produced in a given branch is of direct interest only in so far as the total average profit of all capitals is concerned. This question affects but indirectly individual branches of production and individual capitalists; an increased surplus-value in a particular branch causes an increase of the total available surplus-value, and, in consequence, an increased average profit. But this process goes on, so to speak, behind the back of the individual capitalist; he neither sees nor understands it, nor, indeed, does it interest him. The difference between profit and surplus-value in the various branches of production completely conceals the origin and the real nature of profit not only from the capitalist, who has an interest in deceiving himself, but also from the labourer. The mere fact that, as far as practical experience is concerned, profit and cost-price are opposed to each other, tends to confuse the capitalist as to the real meaning of value; for he has not in view the total amount of labour necessary for the production of the commodity, but only that part of it which he has paid in the shape of dead or live means of production; and thus does profit appear to him as something distinct from the inner value of the commodity. The capitalist is confirmed and hardened in this mistaken idea, seeing that, as a matter of fact, the profit which is added to the cost-price in the case of the individual branches of production, which the capitalist naturally enough alone has in view is not determined by the formation of the value going on within itself, but is quite extraneously established against it. As far as practical experience is concerned, each part of the capital yields a uniform profit. Whatever may be the composition of capital whether 1/4 dead and 3/4 live, or 3/4 dead and 1/4 live labour be set in motion by it, whether it absorbs in the one case three times as much surplus-labour and produces three times as much surplus-value as in the other it yields in either case the same profit, equal exploitation of labour being assumed, and abstraction being made of individual differences disappear anyhow, seeing that each time we have only the average composition of the whole branch before us. The individual capitalist, whose horizon is limited, rightly believes that his profit does not derive exclusively from the labour employed by him personally or in his branch of industry. This is quite right in so far as his average profit is concerned. But he is wholly ignorant as to how far this profit is adjusted by the total exploitation of labour by the total capital, i. e. by all his capitalist comrades; and he is all the more ignorant of this, seeing that the bourgeois theorists themselves, the professors of political economy, have up to now not revealed it. Economy of labour - not only of the labour necessary to produce a given commodity, but also of the number of labourers employed - and increased utilisation of dead labour (i. e. constant capital), appear as economically justifiable operations. How could therefore live labour be the only source of profit, seeing that the reduction of the quantity of labour necessary for production appears under certain circumstances as the primary source of the increase of profit at any rate for the individual capitalist?

[1] We call thus the prices obtained by the addition of the average profit to the cost-price paid by the capitalist.

[2] In reality the price of the coats must of course be much higher. We are only considering that part of the capital required for the purchase of the linen.

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