Capital and Profit

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MECW, Volume 33, p. 69-76

1) Surplus Value and Profit[edit source]

[XVI-973] Considered in its totality (wholeness) (or considered completely) (or in its completeness) the movement of capital is a unity of the process of production and the process of circulation.

The surplus value produced within a given period of circulation (let us take e.g. a year as the measure; see above, Chapter II[54]), when measured against the total capital which has been advanced, is called — profit. (Under profit is included not only interest — known to be a mere portion of the total profit — but also the rent of land, which is nothing but a part of the capital employed in agriculture. The particular way capital is specified by this particular form of investment belongs to the consideration of landed property.[55] Here we shall merely indicate that profit is not to be understood exclusively as what is called industrial or commercial profit.)

Considered with respect to its material, profit is absolutely nothing but surplus value itself. Considered with respect to its absolute magnitude, it therefore does not differ from the surplus value produced by capital over a particular turnover time. It is surplus value itself, but calculated differently. By its nature, surplus value is related to that part of the advanced capital through exchange with which it arises, and it is therefore calculated in relation to that part. Circulation time, in so far as it differs from production time, only comes into consideration here as a barrier to the creation of surplus value. But as profit, surplus value is related to, and therefore measured by, not a part of the capital advanced, but the whole amount of the capital advanced, without regard to the entirely different positions these different components occupy in the creation of surplus value and the production of the value of the commodity in general.

So: Assume there is a capital equal to 600 thalers. The constant part of the capital consists of 5/6 of it, namely raw material and machinery; the variable part, laid out in wages, consists of the remaining 1/6. If the surplus value produced in a year amounts to 60 thalers — hence the value of the whole product in a year is 660 thalers — this surplus value of 60 thalers is called profit, as long as it is not considered with regard to the 100 thalers which are exchanged for 160 in the capitalist production process, not with regard to the sixth of the capital from which it arises, but with regard to the 6 /6 of which the capital advanced consists, i.e. with regard to the total capital advanced of 600 thalers. Although the 60 thalers continue to have the same magnitude of value, 60 on 100 makes 60 per cent while 60 on 600 only makes 10%. Surplus value therefore receives in profit — which always expresses a relation, a proportion — a new expression, numerically different from its original shape. The same magnitude naturally alters its numerical expression, once it is calculated, instead of in its organic relation to part of a whole, in a relation to the whole of the whole.

[XVI-974] The difference is not only numerical but also conceptual, essential. It is not only a matter of a different valuation, measurement or calculation. There is more to it. This difference in calculation, measurement, valuation is a necessity for capital, it expresses a new characteristic relation of capital, the creation of a new form, which is just as essential as the difference between the form of exchange value and that of money, perhaps.

As we have seen, the relation between surplus value and the variable part of capital is an organic one. In fact it expresses the secret of the formation and growth, of the existence of capital as capital. This organic relation is extinguished in the relation between profit and capital. Surplus value obtains a form in which the secret of its origin is no longer hinted at with the slightest trace. Since all parts of capital equally appear as the basis of the newly created value, the capital-relation becomes a complete mystification. In surplus value as such, the relation of capital to the labour which capital appropriates is constantly expressed. In the relation of capital to profit, capital is related not to labour but to itself. It is on the one hand a merely quantitative relation of an amount of value or an amount of money to itself. If I say for example that a capital of 100 thalers brings in a profit of 10 thalers a year, I am merely comparing thalers with thalers. On the first occasion the principal, the capital, the main amount, appears as given, on the other occasion these 100 thalers become the main amount, the principal, the capital, precisely because they bring in an extra amount, and the main amount appears as the underlying cause, of which this extra amount is the effect. This is its natural fruit. (See Aristotle on usury[57], and also the one passage in Sismondi 58 where he says that wealth like labour bears fruit annually. When he adds to this “like labour and through labour” he is already going too far.)

The difference between capital and its particular forms is therefore extinguished in this form, and this is therefore also true of capital’s functions in which it appears even before capitalist production itself. Capital thereby becomes a thing, which existed just as much in antiquity as it exists today.

“The capitalist expects an equal profit upon all the parts of the capital” (Malthus).a

On the one hand this contains the correct point that profit is a form of surplus value, if the latter is related equally to all parts of the capital and therefore measured equally against the total amount of capital. But there is also the point that the capitalist knows nothing of the essence of capital, and surplus value exists in his consciousness only in the form of profit, a converted form of surplus value, which is completely abstracted from the relations under which it originates and by which it is conditioned. During the direct process of production, the nature of surplus value does, it is true, continuously enter the capitalist’s consciousness, as indeed we have seen in considering surplus value, the greed for alien labour time, etc.[59] But this is only a transitory moment. In fact the capitalist himself regards capital as a self-acting automaton, which has the quality of increasing itself and bringing in a gain, not as a relation, but in its material existence. The social relations under which value takes on this quality, and the things in which it exists as its body (use value), appear as eternal natural relations, or rather, it is grasped at most that certain (artificial) conditions hinder this natural development and cannot allow it to unfold completely.

The notion of capital as a self-acting automaton of this kind lies at the basis of e.g. Price’s calculation of interest and compound interest, which completely turned the head even of William Pitt.[60]

(See Luther on the growth of interest.[61]) Hence also the kind of idiotic proclamations one finds on the part of the political economists. E.g. there must be profit, otherwise the capitalist would put his capital out at interest. He would have no reason to throw it into production instead of putting it out at interest [XVI-975] (thus capital would allegedly bring in interest even if no capital were thrown into production). Thus Turgot already says: If it brought in no profit, everyone would buy land with his capital. (See Turgot[62]. Thus here a particular mode of employment of capital is regarded as being of itself profitable.)

Surplus value, however, necessarily assumes the form of profit in the bourgeois mind — and this is not just a way of looking at things. The relation of surplus value as a relation of profit dominates bourgeois production, determines the distribution of the capitals in the different branches of production, is so to speak the triangulation point for free competition (the competition of capitals amongst each other, i.e. the real movement of capitals in which alone the laws of capital are realised. These laws are in fact nothing but the general relations of this movement, its result on the one hand, its tendency on the other.)

The relations under which a quantity of value, money, commodities, the particular use values in which value re-enters production, becomes capital, i.e. the owner of this quantity of value becomes a capitalist, are, under capitalist production, within bourgeois society, so enmeshed with the existence of capitalists that for example Wakefield had to go to the Colonies to discover that these relations are not self-evident, and that without them value does not become capital and the owner of value does not become a capitalist. So self-evident, and so altogether incomprehensible, that this discovery of Wakefield’s could in fact mark a kind of epoch in modern political economy.[63]

The actual production process of capital is constantly bound up with its circulation process. Both are moments of the production process itself, as the production process for its part in turn appears as a moment of the circulation process. The two constantly overlap, interpenetrate, and thereby constantly falsify each other’s characteristic distinguishing marks. But in the process of circulation surplus value on the one hand assumes new determinations, on the other hand capital passes through transformations, and finally it so to speak steps out of its organic life into foreign conditions of life, into relations in which not capital and labour but on the one hand capital and capital confront each other, and on the other hand the individuals as well again confront each other in the relations of simple circulation, as commodity owners, buyers and sellers — circulation time and labour time thus cut across each other as this path is followed, and thus appear to determine surplus value equally. Now the original form in which capital and wage labour confront each other disappears as it were, and relations enter the picture which are apparently independent of this, surplus value itself no longer appears as a product of the appropriation of labour time, but as the excess of the selling price of commodities over their value, and as well, above all, as money. The result is the complete extinction of the memory of the original nature of surplus value, or alternatively this original nature never enters clearly into consciousness at all, but appears at most as an equally valid moment alongside the moments which arise out of circulation independently of capital’s original nature, hence as a moment of the movement which belongs to capital independently of its relation to labour. Indeed, these phenomena of circulation are themselves directly adduced by other political economists (such as Ramsay, Malthus, Senior, Torrens, etc. [64]) as proofs that capital in its material shape — regardless of the social relation of production which makes it capital — is an independent source of surplus value alongside labour and independently of labour. But it lay in the nature of this relation, as we already saw in considering the process of production of capital, that the socially productive forces of labour appear as productive forces transposed into capital, that the autonomisation and personification of past labour and of the value which exists in practice in the shape of the capitalist, the rule of past labour over living labour, which constitutes the essence of capital, the transformation as against this of the worker into mere objective labour capacity, a commodity, the fruitfulness of capital, in so far as it exists objectively, does not appear as a consequence of the social relation of production, the latter appearing rather inversely as a consequence of the material relation between those objects and labour as particular moments [XVI-976] of the process of production. In the capital-relation — to the extent that it is still considered independently of its circulation process — what is essentially characteristic is the mystification, the upside-down world, the inversion of the subjective and the objective, as it already appears in money. Corresponding to the inverted relation, there necessarily arises, already in the actual production process itself, an inverted conception, a transposed consciousness, which is completed by the transformations and modifications of the actual process of circulation. However, the capitalist as capitalist is nothing but this movement of capital itself. What he is in reality, he is also in consciousness. Since the positive, dominant side of the relation is expressed in him, he only feels at home precisely in these contradictions; they do not disturb him, whereas the wage labourer, who is trapped in the same inverted notion, only from the other extreme, is driven in practice, as the oppressed side, to resistance against the whole relation, hence also against the notions, concepts and modes of thinking corresponding to it.

It must be added that in the real process of circulation not only do those transformations we have considered take place (and impel even the better political economists to adopt the capitalists’ conceptions, if in a somewhat more doctrinaire form) but they coincide with real competition, buying and selling above and below value, hence profit does not appear to the capitalists as surplus value, as it is in fact for every one of them,’ not as dependent on the degree of exploitation of labour, but as the result of one person’s taking advantage of another, a notion which not only the older, but even the more recent political economists have sanctioned. (E.g. Torrens[65]. See also Senior on money, etc., and wages.[66])

In fact the only thing which interests capital in practice, and regulates the real movement of capital, competition, is profit, and not surplus value, i.e. the ratio of the surplus value to the total amount of capital advanced, and not the ratio of the surplus value to the capital laid out in the purchase of labour capacity. This leads us (and is the actual transition) to the consideration of costs of production and their relation to the process of the sale of the product.

There are still a few remarks to make before we pass on to this.

Firstly: From the standpoint of the society in which capitalist production prevails, capital appears as a selfactor — value as possessing in itself the quality of self-increase in consequence of qualitates occultae a of some kind; how much this is the case appears strikingly in interest-bearing money capital, money capital loaned out at interest. An amount of value is sold here as in itself capital; i.e. capital itself appears as a commodity. A certain quantity of values, or a bill on values, is sold as a self-preserving and self-increasing amount. The situation is not altered by the fact that this amount is not money itself but the commodity into which it can be converted. For as self-preserving and self-increasing value commodities are viewed and sold merely qua exchange value, i.e. qua money. This quality of being capital is sold as an immanent quality of the amount of value. It therefore returns to its owner with a profit.

Secondly: It needs no discussion here that if a commodity is sold above or below its value, there takes place merely a change in the distribution of surplus value between different capitalists, between the buyer and the seller. This difference in distribution, or alteration in the proportions in which different people share in the surplus value, does not change anything, either in its magnitude or in its nature.

Thirdly: The relation of competition, in so far as we have considered it here as an illustration (not as belonging to the development itself [67]) , entails that the surplus value the individual capitalist makes is not really the decisive factor. [XVI-977] For an average profit is formed; i.e. a general measure, and laws, according to which the capitalists calculate among themselves the total value of their class. (See Jones as well on this.) The real price of the commodity — disregarding fluctuations in the market price — is thereby considerably modified, and it differs from the value of the commodity. No individual capitalist can therefore say, nor does any one of them know, to what extent the surplus value he has produced himself enters, or does not enter, into the profit he makes, to what extent a part of the surplus value produced by the class of capitalists enters into the price of his commodity. It is best to bring this point in when considering the costs of production, just as it is best to bring in there the inverted manner in which the laws of capital are represented in competition. The perception, as it arises out of competition, the relation that dominates the capitalist (for it is in fact the laws of capital themselves which in competition appear to him as external compulsion applied by his capital to other capitals and to his capital by other capitals), alienates him completely from the perception of the inner essence of the relations within which he moves, and of which he is merely the interested agent or functionary.

Fourthly: The confusion or lack of distinction between surplus value and profit is the source of the greatest blunders in political economy, even where it is merely a matter of giving a correct presentation. The significant political economists, such as e.g. Ricardo, naturally do not confuse the two completely, although they never consciously grasp the difference. But for that reason the real law appears with them, on the one hand, as an abstraction from the real movement, which therefore also contradicts it everywhere in detail. On the other hand, they are bound to want to use the nature of value or surplus value to explain phenomena which only arise from surplus value in the form of profit. Hence incorrect laws. Ricardo abstracts from competition where he develops the general nature of capital. On the other hand, lie already brings in fixed capital, etc., as determining moments right at the beginning, in the determination of value, and thereby abolishes his so-called law or reduces it to a mere shadow, as Malthus correctly shows.[68] On the other hand, with his followers, like Mill and McCulloch,[69] we see the insane attempt e.g. to convert circulation time into labour time, and finally to describe as labour not only the functions of beasts, but of inanimate things, all their natural motions. Say too in this connection.[70] However this criticism belongs to the concluding section of this chapter.

2) Profit always expresses Surplus Value too Small[edit source]

It follows from the characteristic distinction of form between surplus value and profit that profit always expresses a smaller proportion than that of real surplus value, hence the rate of profit always represents the ratio in which capital appropriates alien labour as much smaller than it really is. This (tautological) law, once understood, does away with all incorrect statistics, and it has bigger merits. It is essential for the comprehension of phenomena which would otherwise remain incomprehensible and limp along beside the theory as indigestible fragments of reality.

It goes without saying that the magnitude a expresses a smaller ratio if it is measured against b+c+a than if it is measured against c+a, or that a magnitude expresses a larger or smaller part of a third magnitude according to whether that latter magnitude is itself larger or smaller. The total capital is therefore always larger than the part of it which is exchanged for wages.

3) The Ratio is Altered Numerically and in Form[edit source]

[XVI-978] Profit is therefore a different relation firstly in its form; and secondly it is numerically different. It is a converted form of surplus value, in which there is a change firstly in the latter’s numerical relation, secondly in its conceptual determination.

4) The Same Surplus Value may be expressed in very different Rates of Profit; the Same Rate of Profit may express very Different Surplus Values[edit source]

Thus, if the surplus value is converted into profit, i.e., considered numerically, if the surplus value is calculated in proportion to the total amount of capital advanced, the following propositions a re a further consequence of this different presentation:

An equal profit may express different rates of surplus value. Take for example a profit of 10%. If the capital is 600, with constant capital 500 and variable 100, 60 thalers of surplus value amount to 60%, at the same time 10%, on a capital of 600. If the capital of 600 consists of 400 thalers of constant capital and 200 thalers of variable, 60 on 200 thalers amounts to a surplus value of 30%. The profit continues to be 10%. Finally, if the capital of 600 consists of 550 constant and 50 thalers of variable capital, 60 on 50 would amount to 120% surplus value (50:60=100:120) but profit would continue to be 10%.

5) Relation of Surplus Value and Profit = Relation of Variable Capital to Total Capital[6][edit source]

Since profit is nothing but the ratio of the surplus value to the total amount of capital advanced, the rate of profit, or its proportional magnitude, evidently depends on two circumstances, firstly the total amount of capital advanced, and secondly the ratio of the variable part of the capital advanced to its constant part. This is when the surplus value is presupposed as given. Otherwise, it depends on 1) the ratio of the surplus value to the variable part of the capital; secondly the ratio of the variable part to the total quantity of capital, or also, and this is the same thing, its ratio to the constant part of the capital. E.g. 50 is 1/2 of 100, but it is, at the same time, 1/(2 x 6) = 1/12 of 600. If 50 = S (surplus value), 100= V, the variable capital, then 50/l00 is the rate of surplus value, which = 1/2 or 50% = s/v. If the total capital is 600=C(500) + V, then 50/600 = 1/12 = 8 1/3% is the profit, which = S/(V+C). (S/V):(S/(V+C) = (V+C):V. or also S/(v+c) (the rate of profit): S/V (is related to the rate of surplus value)= V (as the variable capital): V+ C (is related to the total capital). Thus S/(v+c): S/V = V:(V+C).

Profit is related to surplus value as variable [should read: total] capital is related to total [should read: variable] capital (we do not need the categories of fixed and circulating capital here, because variable capital is circulating capital, but a part of constant capital is also circulating capital, so this antithesis does not belong here) and this evidently depends on the proportion in which constant and variable capital form components of the total capital [C], since V=C-c and c = C-v. If C were = 0, variable capital would have reached its maximum; i.e. the whole amount of the capital advanced would be variable capital, i.e. capital laid out directly in wages. In this case profit would be = s/(c+v) = s/v , i.e. [XVI-979] it would be equal to the surplus value. This would be the expression of its maximum. It declines in the same measure as c grows, and therefore as the total amount of capital advanced, c+v, or C, diverges from the variable capital v. If one considers the expression s/(v+c) , one sees that its magnitude evidently stands in a direct ratio to the absolute magnitude of s, which is however conditioned by the ratio it stands in an inverse ratio to the magnitude of v+ c, i.e. the total amount of capital advanced. With Cherbuliez (see Notebook[72]) the determination of profit would be correct, if he did not confuse product and value of the product, use value and exchange value of the commodity.

6) Costs of Production [73][edit source]

a) We have seen [74] that the general form of capital is M — C — C — M’. In other words, money, an amount of value, is thrown into circulation in order to extract from it a larger amount. The process which produces this larger amount of value is capitalist production; the process which realises it is the circulation process of capital.

The capitalist does not produce the commodity for its own sake, not for the sake of its use value or for consumption. The product capital is in reality concerned with is not the material product but the gain, the excess of the product’s value over the value of the capital advanced, which enters into the production of the commodity. If he converts £1,000 into machinery, cotton and wages, this is not for the sake of the twist he produces but because the machinery, cotton and wages now represent £1,200, after their conversion into twist, instead of £1,000 as originally. The hoarder as such changes a commodity of a definite value, e.g. £1,000 of twist, from the form of a commodity into that of money, in order to withdraw the latter from circulation and to possess the exchange value of his commodity in the independent form of money, the form in which it is independent of the commodity itself. The capitalist does not share the hoarder’s superstitions. The forms in which exchange value appears, commodity or money, are indifferent to him, they are impermanent forms, because all real wealth is for him in fact merely exchange value in its different embodiments. He first converts money into a commodity — a commodity of a higher exchange value than the money advanced, because within the capitalist process of production more labour time is materialised in the commodity than was originally contained in its factors of production, and indeed it is realised through the unpaid appropriation of alien labour time — and in the circulation process he converts this commodity back into money, but now into a larger amount of money than the amount from which the process took its departure. A part of this excess over its original magnitude serves him as income, which he consumes, and a part is converted back into capital in order to begin the same cycle afresh. Whether he converts it into variable or constant, fixed or circulating capital, the capitalist must, on the one hand, uniformly withdraw every part of the capital from his private consumption and consume it industrially, and, on the other hand, expose it to the chances and risks of circulation, once it has assumed the form of the product. The capitalist uniformly advances the total capital — without regard to the qualitative differences within it in the production of surplus value — in order not only to reproduce the capital advanced but to produce an excess of value over and above the capital. He can only exploit labour, i.e. convert the value of the variable capital he advances into a higher value, through the exchange with living labour, by advancing at the same time the conditions for the realisation, the conditions of production of this labour — raw material and machinery — converting a sum of value he possesses into this form of the conditions of production, just as he is only a capitalist at all, can only undertake the process of exploitation of labour at all, because he, as proprietor of the conditions of production, confronts the worker, as the mere possessor of labour capacity. It is quite indifferent to him whether it is considered that he advances constant capital to make a profit on the variable capital, or advances variable capital [XVI-980] to make a profit out of the constant capital; whether he lays out money in wages to give a higher value to the machinery and raw material, or advances money in machinery and raw material to be able to exploit labour. Although the profit he makes, the surplus value of the commodity he realises in the process of circulation, consists only of the excess of unpaid labour appropriated by him over the labour he has paid — his commodity only has a surplus value because a portion of unpaid labour time is now contained in it, and he sells this although he has not paid for it — the size of his profit by no means depends on the surplus value alone, but rather on the ratio of the surplus value to the total amount of capital advanced. If the capital advanced was 1,000, and if the value of the commodity into which it is converted is 1,200, the profit is only 200 compared with 1,000; 200:1,000=20%. The part of the capital that was laid out in machinery and material of labour is just as much advanced by the capitalist as is the part laid out in wages, and although the latter part alone creates surplus value, it only creates it on condition that the other parts, i.e. the conditions of production for the labour, are advanced, and all these elements enter uniformly into the product. Since the capitalist can only exploit labour by advancing constant capital, since he can only valorise constant by advancing variable capital, all these things are lumped together in his notion of the matter, and all the more so because his real profit is determined by the ratio of surplus value not to variable capital but to the total capital, hence is not determined at all by surplus value, but rather by the profit, which, as we have just seen, may remain the same and yet express different rates of surplus value.

We now return, therefore, to the point of departure from which we proceeded in considering the general form of capital. Profit represents the excess of exchange value, produced in the process of production and realised in the process of circulation, over the amount of money or exchange value originally converted into capital by the capitalist. Firstly, the real rate at which the capitalist profits, hence capital grows and accumulates, depends on this relation. Secondly, therefore, the competition between capitals is also dependent on this. Thirdly, this leads to the disappearance of any recollection of the real origin of this profit and the qualitative distinction between the various elements, or the entry of these elements into the capitalist process of production.

Profit therefore = the excess of value of the product or rather the amount of money realised in circulation for the product (hence in the capitalist process, this excess during a particular turnover time) above the value of the capital which entered the formation of the product. The whole of the capital accordingly appears as means of production for this profit, and since these means of production are values which are here given over in part to the industrial process of production, in part to circulation, in order to create this excess of value or profit, the whole amount of the capital advanced appears as costs of production of the commodity, in fact costs of production of the gain or profit which is made by means of the commodity.

Cost of production means everything, all the components of the product the capitalist has paid for. If he sells the commodity at £1,200, and surplus value on this amounts to 200, he has paid £1,000, he has bought it, and converted it from the form of money, of exchange value, in which he originally possessed it, into the form of the commodity; i.e., from the standpoint of exchange value, into a lower form. If he were not to sell the commodity, which he has not produced for its use value, the £1,000 advanced would be lost. They are in any case costs, and must be replaced by the sale, so that the capital can be available again and again in its original state, so that it may simply be preserved. [XVI-981] The £1,000, or rather the advance of the £1,000, for they are intended to be replaced, are the price — hence the costs — which the capitalist pays in order to buy the £1,200.

It therefore follows that the production costs of the commodity from the standpoint of the individual capitalist, and its real production costs, are two different things.

The production costs contained in the commodity itself are equal to the labour time it costs to produce it. Or its production costs are equal to its value. The labour materialised in it includes the labour used to produce the raw material which has entered into it, as well as the labour used to produce the fixed capital employed in producing it, and, finally, the labour, the necessary and surplus labour, paid and unpaid labour, employed to produce it.

From the standpoint of the capitalist, the costs of production consist only of the money he has advanced — or only of the part of the production costs of the commodity which he has paid. The capitalist has not paid for the surplus labour contained in the commodity. Indeed, it is precisely the fact of not paying for this which constitutes his profit. This surplus labour costs the capitalist nothing, although it naturally costs the worker labour just as much as does his paid labour, and enters into the commodity as an element constitutive of value just as much as the paid labour.

It follows, therefore, that surplus value, hence also profit, in so far as it is only another form of surplus value, does not enter into the production costs of the capitalist who sells the commodity, even though it does enter into the production costs of the commodity. His profit arises precisely from the fact that he has something to sell which he has not paid for. For him the profit consists in the excess of the value (the price) of the commodity over its production costs, which means in other words nothing but the excess of the total amount of labour time contained in the commodity over the labour time paid for by the capitalist which is contained therein.

This solves the controversy over whether profit enters into the costs of production or not. (See in Say, Jones, and particularly Torrens, etc.; these matters will be examined in more detail later on. [75])

b) In a deeper sense, it is a question (see the absurd Say, Storch, etc. [76]) of whether profit enters into the costs of production, i.e. is indispensable to capitalist production. It boils down to the fact that surplus value, hence also profit, is not merely a form of income but a relation of production for capital (for accumulation, etc.); the absurdity of the abstract distinction between a relation of production and a relation of distribution is in general demonstrated here. The question can only be brought up at all through an absolute failure to comprehend the nature of capital, hence also of capitalist production. In the shape of interest, profit already enters as an element into the costs of production.

c) It follows from the law that the production costs of capital are smaller than the value of the commodities produced by it (and profit is constituted precisely by the excess of the value of the commodity over the value of the production costs contained in it, or the excess of the labour contained in it over the paid labour contained in it), that commodities can be sold below their value at a profit. As long as some excess over the production costs is realised, a profit is always realised. The commodity will be sold at a profit as long as it is sold above the value of its production costs, although this does not mean that the buyer has to pay the whole of the difference between the value of the production costs and the value of the commodity. Assume that a pound of twist has a value of Is., of which 4/5 are costs of production. 1/5 is unpaid labour, hence the element that constitutes the surplus value. If the 1 lb. of twist is sold at only Is., it is sold at its value, and the profit realised in it amounts to 1/5 s.= 12/5p. = 2 2/5d. If the 1 lb. were to be sold at 4/5 s., or (4x12)/5 d. = 48/5 d. = 9 3/5d., it would be sold at 1/5 below its value, and no profit at all would be realised. But if it is sold above 93 /5d., say perhaps at 10d., [XVI-982] it is sold at a profit of 2/5d., although this is still 2d. or 20/10 d. below its value. The profit is there as soon as it is sold above its production costs; even if it is sold below its value. If it is sold at its value, the whole of the surplus value is realised for the capitalist, i.e. the whole excess of the unpaid labour contained in the commodity over the paid labour contained therein. Therefore delimited here is the whole of the room available for the rise and fall of profit. This room is determined by the surplus value, i.e. by [the correlation of] the value of the commodity and the value of its production costs, by difference between the value of the commodity and the value of its production costs, between the total amount of labour contained in it and the paid labour contained in it.

If the capitalist sells the commodity at a profit, but below its value, a part of the surplus value is appropriated by the buyer instead of the seller. This different division of the surplus value among different persons would naturally change nothing in its nature, just as it is a matter of complete indifference to the worker (unless he happens himself to be the buyer of the commodity) whether his unpaid surplus labour is appropriated by the capitalist who exploits him directly or by the class of capitalists, etc.

This law, that the capitalist can sell the commodity at a profit, although below its value, is very important for the explanation of certain phenomena of competition.

In particular, one of the main phenomena, which we shall come back to later in more detail, would be entirely inexplicable without this: namely, a general rate of profit, or the way in which the capitals work out amongst themselves the total surplus value produced by capital. A general rate of profit of this kind is only made possible by the fact that some commodities are sold above, others below, their value, or that the surplus value realised by the individual capital depends not on the surplus value it itself produces but on the average surplus value produced by the whole of the capitalist class.

d)[77] Therefore, if the surplus value is given, absolute or relative — i.e., on the one hand, there is a given limit to the normal working day, beyond which labour time cannot be extended, on the other hand the productive power of labour is given, so that the minimum of necessary labour time cannot be curtailed any further — profit can only be increased in so far as it is possible to reduce the value of the constant capital required for the production of the commodity. When constant capital enters into the production of a commodity, is required for its production, it is not its price (its exchange value) but its use value which alone comes into consideration. The amount of labour that flax e.g. can absorb in spinning does not depend on the value of the flax, but on its quantity, given the stage of production, i.e. given a definite stage of technological development; just as the assistance a machine affords to e.g. 100 workers does not depend on its value, price, but on its use value, its character as a machine. At one stage of technological development a bad machine may be expensive, while at a higher stage of technological development an excellent machine may be cheap. The English cotton industry was first able to develop once cotton was converted from an expensive into a cheap material by the invention of the cotton gin (1793) //because 1 old black woman could separate 50 Ibs of cotton fibres from cotton seed in 1 day immediately after the invention of this chopping machine, whereas previously the day’s labour of 1 black man was required to perform this process for a single pound of cotton//.

The value of the constant capital required at a particular technological stage can only be reduced, hence the profit, s/(c+v) can only be increased, while the surplus value remains the same, in two circumstances. Either if there is a direct fall in the value of the fixed and circulating capital employed, i.e. both become the product of less labour time, hence there is an increase in the productive power of the branches of labour of which they are the direct products. In this case there is an increase in the profit in a branch of labour because of a growth in the productivity of labour (hence to a certain degree a growth in surplus labour) in the other branches of labour which supply it with the conditions of production. [XVI-983] In this case too, therefore, the profit thereby obtained (or the increase of profit, or, and this is the same thing, the diminution of the difference between profit and surplus value), or the greater productivity of capital (for profit is the actual product of capital) is a result of the growth in the productivity of labour and the appropriation of that growth by capital. Only this does not take place directly, i.e. it takes place indirectly. Thus the growth of the profit a capitalist obtains through the cheapening of cotton and the spinning machine, though not a result of the rise in the productivity of spinning, is indeed a result of the rise in the productivity of machine manufacture and flax cultivation (or cotton cultivation, etc.).

The advantage of this is twofold, it raises the productivity of capital in two ways. In order to materialise a given quantity of labour, hence to appropriate a given quantity of surplus labour, a smaller outlay is needed in purchasing the conditions of labour, the constant part of capital, the value of which only reappears in the product but is not increased in it. There is therefore a fall in the production costs now required to appropriate a given quantity of surplus labour. This is expressed by a rise in the ratio of the variable part of capital to the constant part, hence to the total capital. There is therefore an increase in profit, for s/(c+v) clearly grows in line with a fall in the value of C, the numerical magnitude of C, since it would reach its maximum when C=0.

Secondly: Let us assume that a constant capital of a given magnitude was previously required e.g. to employ a given number of spinners and to appropriate a given quantity of their surplus labour. At the given stage of production the employment of these 100 men requires machinery of a certain quality and a definite size, and similarly a definite quantity of raw material, cotton, wool, silk, etc. But the value of this constant capital has nothing to do with the spinning process into which it enters. If it fell by a half, the surplus value produced in the spinning process would firstly remain the same as before, but the profit would have increased. If the constant capital was originally 5 /6 of the total capital, the variable capital 1/6 — hence e.g. out of £600, £500 constant, £100 variable — and the surplus value 30%, the rate of profit would come to 5% on £600 (100 x 6 makes 600; 6 x 5=30).(Rate of profit 5%: surplus value 30% = 600 (c+v):100(v)) (5x600=3,000, and 30X100 similarly = 3,000). The rate of profit was 5%. If now the production costs of the constant capital were to fall by half — i.e. if there were a doubling of productive power in the branches which provided this constant capital — therefore from 500 to 250, the total amount of capital employed would have fallen from 600 to 350. The surplus value, at 30, and the variable capital, at 100, would remain the same... So now it is 30 on 350. The rate of profit, instead of 30/(500+100), is 30/(250+100); so instead of 5% the profit is 8 4/7%. (350:30=100:8 4/7.) The profit would therefore have increased because in the first case the ratio of the variable capital to the total capital = 100:600= 1:6. In the second case it is 100:350 = 1:7 /2. In the first case the variable capital = 1/6 of the total capital, in the second it = 1/(7/2) =2 /7 . But the ratio is 1/6: 2/7 = 7/42: 12/42. The ratio of the variable capital to the total capital has therefore risen from 7/42 to 12/42, i.e. by 5/42. The rate of profit has increased by the same ratio as that by which the ratio of the variable capital to the total capital has increased, [XVI-984] because 7/42 : 12/42 or 7:12 = 5:8 4/7. (5×12 = 60, and 7×(8 +4/7) = 56+ (7x4)/7-56+4 = 60.)

This would therefore be the first gain, or, speaking generally, a capital of 350 would now bring in as much profit as a capital of 600 did previously, because the surplus value would remain the same, but the employment of the same amount of capital laid out in wages would now only require for its realisation a constant capital of 250 instead of the 500 required previously. The production costs required for the production of the surplus value and accordingly of the profit would have been reduced.

Secondly, however, £250 out of the total capital of £600 required previously for the production of the same amount of commodities and the same surplus value would be set free. This money could either be invested in another branch of business for the appropriation of alien labour, or employed in the same branch of business. Presupposing the same stage of production and therefore the same ratio between the different parts of the capital, twice the number of workers could be employed, hence twice the surplus labour could be appropriated, without any increase at all in constant capital. An increase of only £100 would be needed for wages; hence a total capital of £700, to make a gain (a surplus value) of £60 (60:200, the same as 30:100, surplus value as before is 30%). Previously £1,200 would have been needed (according to the previous rate). Or if the 250 were added as new capital to the old (where this is technically possible) and divided into c and v in the same proportion, 7 13/7 would be the share of labour and 178 4/7 the share of constant capital. According to the previous ratio, surplus value would then be 21 3/7 (or 30%) (100:30=73 3/7:21 3/7). The total profit on the capital of £600 (although the rate of surplus value remains the same, surplus value itself has increased, because the ratio of variable capital to total capital has increased) now = 30+21 3/7=51 3/7.

The rate of profit would have increased from 5% to 8 4/7% as compared with the original situation, while the amount of profit would have increased, because surplus value has increased, from 30 to 51 3/7. Every reduction in the value of the constant capital, leaving aside the fact that it increases the rate of profit, because it reduces the ratio of total capital to variable, now permits the exploitation of the same amount of labour with a smaller outlay of capital overall, therefore leaving the surplus value unaltered, and sets free a part of the capital, which can be converted now into variable capital, the self-increasing part of capital, instead of being converted into constant capital, as it was previously. Any increase in the value of constant capital (if the stage of production, hence the technological conditions of production, remain the same) only increases the production costs required for the production of the same surplus value, and therefore reduces the rate of profit. Any reduction in the value of constant capital, as long as the stage of production remains the same, increases the part of capital which can be converted into variable capital, capital which is not only self-preserving but self-increasing, and therefore increases not only the rate of profit, but its amount, because it increases the amount of surplus value.

[XVI-985] Another example.

If, therefore, there is a given capital, of e.g. £9,000 sterling, and if the same flax, machinery, etc., which cost £6,000 previously, and was worked on by 100 workers during the year, at £30 apiece, can now be bought at £3,000, the profit (surplus value calculated on the total capital) which accrued to the capitalist for the £6,000 would be as large as the profit for which 9,000 was previously necessary. He would need 1/3 less capital in order to absorb and appropriate the same surplus labour. £3,000 would therefore be set free for him. If the ratio remained the same, he could now, out of the £3,000 which had been set free, employ 1,500 for machinery and flax, 1,500 for wages, and absorb the surplus labour of 50 more workers than previously with the same capital of £9,000. In the first case, the rate of profit would have risen if he only employed £6,000, because the ratio of the variable to the total capital would have increased. In the second case, the amount of profit would have risen as well as the rate, if he continued to employ the £9,000 in production, because 1) 4,500 out of the 9,000 would have been exchanged for living labour, as against 3,000 previously, and because 2) the surplus labour of 50 more men would have been appropriated, the quantity of surplus labour would have increased not only relatively but absolutely. In both cases, the productivity of labour, in so far as it affects the constant capital, only increases the profit (the rate of profit) because it increases surplus labour relatively, in proportion to the capital laid out, or absolutely (the latter when a part of the capital which previously, on a given, on the same, scale of production, had to be converted into constant capital, now becomes free, or can be converted into variable capital).

The increase in the rate of profit — through a reduction in the ratio between variable capital and constant capital [or in the ratio of variable capital to]” the total amount of capital advanced, or, and this is the same thing, through a reduction in the value of the constant capital, as a result of the increased ‘productive power of the labour which produces it — originates in both cases solely from the fact that surplus value is increased relatively or absolutely in proportion to its production costs, i.e. to the total amount of capital required to produce it, or that the difference between profit and surplus value is lessened. This increase in the rate of profit therefore rests on the development of productive power, not in the branch of labour belonging to a particular capital, but in the branches of labour of which the product is the constant capital required in that branch of labour.

// In reality the part of capital which exists as fixed capital — or also all the commodity capital which was produced under the old conditions of production — is relatively devalued by this increase in productive power or the relative devaluation of this capital; just as the rate of profit is lessened, hence also profit is lessened proportionately to capital, whereas the value of that capital itself rises, if there is a reduction in productive power, an increase, it may be, in the cost of iron, wood, cotton, etc., and other elements which [form] fixed capital and circulating capital, to the extent that they enter into constant capital, given that surplus value remains the same. This effect is to be considered in dealing with competition .6’ This circumstance never comes into consideration with new capital investment; whether in the same business or in the newly established one; just as little with the raw material which has to be bought afresh.//

//Furthermore, the rate of profit can be increased by curtailment of circulation time, hence by all inventions which ease communications and speed up the means of transport, and similarly by speeding up the formal transformation processes of the commodity, thus through the development of credit and the like. But this actually needs to be considered under the heading of the circulation process.[54]//

A second kind of increase in the rate of profit arises from another source, not from economy in the labour which produces constant capital, but from economy in the employment of constant capital. Constant capital is on the one hand saved by the concentration of workers, by cooperation, by labour on a large scale. The same factory buildings, heating, lighting, etc., cost less, relatively speaking, when employed on a large than when employed on a small scale of production. Here it is the common application of the same use value which lessens the costs of production. Similarly, the cost of a part [XVI-986] of the machinery, etc., e.g. a steam-boiler, does not rise in proportion to its horsepower. (See example. [79]) Although its absolute value rises, its relative value falls, in proportion to the scale of production and the magnitude of the variable capital which is set in motion, or the quantity of labour power which is exploited. The economy a capital applies in its own production, e.g. spinning, rests directly on economy of labour, i.e. the exchange of as little objectified labour as possible for as much living labour as possible, the production of the maximum amount of surplus labour, which is only made possible by increasing the productive power of labour. The economy just mentioned, in contrast, rests on accomplishing this greatest possible appropriation of alien unpaid labour in the most economical way possible, i.e., on the given scale, with the smallest possible production costs. This economy, too, rests either on exploiting the productivity of social labour outside this particular branch of production, i.e. the productivity of the labour employed in the production of constant capital; or, in the case considered above, on economy in the employment of constant capital, which either directly makes possible saving through cooperation, etc., the social form of labour within capitalist production, and the scale of this production, or makes possible the production of machinery, etc., on a scale at which its exchange value does not grow uniformly with its use value. In both cases, the raised productivity is the increase in the productivity of labour which arises from the social form of labour, this time not [through changes] in the labour itself but in the conditions under which and with which it produces. It is also relevant here that in large-scale production the waste products more easily become the materials for new industry than does the scattered waste of small-scale industry; this likewise means a reduction in production costs.

Capital therefore has a tendency in the direct employment of living labour to reduce it to necessary labour, and always to curtail the labour necessary for the manufacture of a product by exploiting the social productive power of labour, hence to economise on living labour — to employ as little labour as possible for the manufacture of a commodity. In the same way, it has a tendency to employ this labour which has been economised and reduced to necessary labour under the most economical conditions, i.e. to reduce the exchange value of the constant capital to the minimum possible level — hence altogether to reduce production costs to their minimum. If we see, therefore, that the value of the commodity is determined not by the labour time contained in it as such, but by the necessary labour time contained in it, capital realises this determination first, and at the same time continuously curtails the labour socially necessary to the production of a commodity. The price of the commodity is thereby reduced to its minimum, since all the elements of the labour required to produce it are reduced to a minimum.

e) In order to calculate profit (like surplus value) we take not only the surplus value a particular capital produces in a given period of time (turnover time) but also a quantity of capital, e.g. 100, as a yardstick, so that the ratio is expressed in per cent.

f) It is clear that the rate of accumulation, i.e. of the real growth of capital, is determined by the profit and not by the surplus value, since, as we have seen, the same profit and the same rate of profit may express very different rates of surplus value. It is profit that expresses surplus value in proportion to the total amount of capital advanced, hence the real growth (or the ratio of real growth) of the total capital. The real gain the capitalist makes is therefore not expressed by the surplus value but by the profit. Surplus value is related only to the part of the capital from which it directly arises. Profit is related to the whole of the capital which has been advanced in order to produce that surplus value; this capital therefore contains not only the part directly exchanged for living labour, but also the part representing the sum of the value of the conditions of production under which alone the other part of the capital. can be exchanged for living labour and the latter exploited.

[XVI-987] Surplus value only expresses the excess of the part of living labour exchanged and appropriated in the production process over the equivalent given away in exchange for it in wages, in the form of objectified labour. Profit, however, expresses the excess of the value of the product over the value of the whole of the costs of production; hence it expresses in fact the increment of value which the total capital receives at the end of the processes of production and circulation, over and above the value it possessed before this process of production, when it entered into it.

Profit is therefore also the sole form which interests capital directly, and in it the memory of its origin is completely extinguished. The conversion of surplus value into profit therefore completes the mystification which makes capital appear as a selfactor and a person vis-à-vis labour, thus turning the objective moment of the production process into a subject.

g) How, then, is profit related to the size of the capital, presupposing the same surplus value? This is the same question as: How is the amount of profit related to the rate of profit?

But secondly, how does a general rate of profit originate, a rate of profit dependent on the size of the capital alone, and independent of the surplus value which is created by a particular capital in a particular branch of business, or of the productivity (i.e. the ratio of appropriation of alien labour) prevailing in a particular branch of business?

These two questions, which are connected with production costs, must be answered before we proceed to the solution of the most important question in this section — the decline of the rate of profit in the course of capitalist production.

//Before this, one further remark regarding 6 c).[80] Since commodities can be sold at a profit beneath their value — namely, provided that they are sold above the capitalist’s costs, the part of the production costs paid for by the capitalist himself, the part advanced from his own purse — and since the difference between the value of the commodity and costs of production allows the capitalist considerable room for manoeuvre and makes it possible to set very different price levels for the commodity below its value without liquidating profit altogether — it is clear that competition could force down the rate of profit everywhere, not only in one branch, but in many, indeed in all branches of production, through a gradual compression of prices below their value. If society consisted purely of industrial capitalists, this would balance out, since each of them would obtain his conditions of labour cheaper not only as a private consumer but as an industrial consumer, the rate of profit therefore rising again generally as a result both of the devaluation of the total capital advanced and of the diminution in the production costs of labour capacity, hence the rise of surplus value relatively to variable capital. But society includes classes with fixed incomes, the moneyed class, etc., creditors and so on, hence there are fixed deductions from surplus value or profit which do not fall with the reduction in the rate of profit or the fall of the prices of commodities beneath their value. These classes would make a double gain. The rate which would fall to their share would have a higher exchange value, because it remained unchanged, while the prices of commodities would on the average have fallen beneath their value. They would come to a greater proportion of the deduction, and would be able to buy more with this. Something of the kind took place in England between 1815 and 1830 (see Blake[81]). Under these circumstances, the situation of the actual industrial capitalists might be very precarious. The moneyed classes would in fact pocket the considerable part of the surplus value lost by industrial capital itself. However, such a state of affairs could only be temporary, since it would call forth bankruptcies among the industrialists (as among the English farmers between 1815 and 1830) and hold up the accumulation of capital. A reaction would necessarily occur. Therefore, although competition may reduce the rate of profit not only in a particular branch of industry, as long as it is higher than the average rate, but also, [XVI-988] as Adam Smith says,[82] in all branches, the latter effect can only be temporary. The capital accumulated in the hands of the fix[ed] income and moneyed classes would either have to be employed in the purchase of commodities for consumption, and in this case the price of the commodity would again move closer to its value, hence the rate of profit would again rise; or it would itself be loaned out again as capital. In the latter case there would be on the one hand a yet further increase in competition, hence the rate of profit, which had already fallen a long way, would sink still further owing to a further reduction of the prices of the commodities beneath their values, thereby bringing about a crisis, an explosion and a reaction; but on the other hand, the new placements of funds, whether as interest or as rent, would be made at a lower rate, in line with the fall in prices, thereby bringing forth a situation approximating to that in which all capitalists sold the commodities beneath their value, hence, through equalisation, at their value. The rate of profit would thereby rise to its normal level again.

From this standpoint, therefore, it appears that Adam Smith’s view is correct in one aspect, overlooked by his opponents, that it explains certain temporary phenomena of modern industry, but does not explain the general phenomenon which is involved in the normal decline of the rate of profit; all it does is to explain merely temporary general fluctuations, which are later again balanced out.

Further: This view does not in fact imply that the rate of profit in general sinks, but rather the rate of profit which appears directly as industrial profit. It implies that there merely takes place a different distribution, since in fact a considerable part of the surplus value is pocketed by the moneyed interest and the fixed income men, instead of the industrial capitalists themselves. There is, it suggests, merely a different distribution of profit in general; profit itself has not changed its rate, since it now appears as higher income in the hands of other classes. In the long term, indeed, this would lead to crises and reaction. So Adam Smith does not explain the actual phenomenon. But the value of the fixed incomes would rise, on the one hand because they would collect a higher rate of overall profit — although the rate would remain the same nominally — and secondly because they would in fact buy for their share not only more products, but also a greater amount of objectified labour, even if this labour was not paid for by them. //

It is clear that if the surplus value is given, and the rate of profit in which it is expressed is given //this may, as we have seen, vary greatly while the surplus value remains the same//, the amount of profit, the absolute magnitude of profit, depends entirely on the magnitude of the total capital employed If the profit on 100 thalers is 10, it is 10,000 on 100,000, namely 10 x 1,000, since the ratio of capital 100 to capital 100,000=10:(10 x 1,000). The amount of profit grows in this case in exactly the same measure as the value or the magnitude of the capital advanced; just as when the capital is given, the amount of profit depends on the rate of profit.

1) We see, however, that the same surplus value may be expressed in very different rates of profit, according to the ratio of the variable capital to the total capital.

2) But secondly, the surplus value itself is in the nature of things not the same for different capitals. It differs. In the first place, the ratio of the actual circulation time to production time varies, and therefore the turnover time of different capitals is different, and the surplus value really created stands in a ratio which is the inverse of that between circulation time and production time. Secondly, the normal working day differs with different capitals, and therefore surplus labour time is different, although this is initially only to be conceived as compensation for the proportions in which the different modes of labour stand towards simple average labour. Thirdly, the ratio of circulating to fixed capital, the ratio in which fixed capital turns over, etc., are different. Productivity differs in different branches of industry, and the proportion in which they participate in the productivity of other branches of industry is also different. For example, an industry which employs very few hands does not participate in the cheapening of agricultural products, or, in general, in the cheapening of means of subsistence, in the same measure as an industry which employs many hands, one setting in motion much living labour; just as an industry which employs little machinery does not participate in the same measure in the cheapening of machinery as one which employs a great deal of machinery.

[XVI-989] One can only speak of an average rate of profit when the rates of profit in the different branches of production of capital are different, not when they are the same.

A closer investigation of this point belongs to the chapter on competition.[67] Nevertheless, the decisive general considerations must be adduced here.

Firstly, it lies in the nature of a common or general rate of profit that it represents the average profit; the average of very diverse rates of profit.

The average rate of profit presupposes further that if a particular capital in a particular investment brings in a profit which rises or falls about a certain point, its profit rises or falls above or below the normal rate of profit, which is therefore determined precisely by the level designated from this point of measurement. At this level the rate of profit counts as the normal one, which capital as such ‘is by and large entitled to. But even now we are not yet at the decisive point.

A rate of profit — to the extent that it is not compensated for by the particular nature of the capital investment, in an analogous manner to the way concurrent circumstances, such as the particular nature of the labour, etc., modify somewhat the differences in length of the normal days of different branches of labour — above or below the average counts as an exceptional condition for capital in the particular branch of investment where it takes place, and it will be forced down or raised up by competition to the general level, through the entry of outside capitals into the privileged branch, or in the opposite case the exit of local capitals — capitals which are settled in that branch — out of the latter. The level of the rate of profit thereby falls in the first case, and rises in the second. The surplus profit, or the short-fall of profit, an individual capitalist encounters in a particular branch (district) of capital investment, does not belong to this discussion at all. What is involved here is rather the profit of capital in all the particular branches of production, or in every particular sphere of capital investment conditioned by the social division of labour — for every capital placed in average or normal conditions. This qualification is necessary, in order to proceed, through analysis, to what lies at the basis of the average rate of profit.

If we adopt some particular quantity of capital, e.g. 100, as a yardstick — i.e. a yardstick for comparing the magnitude of different capitals — the meaning of the average rate of profit is that on £100 a profit of e.g. £10, of 1/10 of the capital advanced, or of 10%, is made, entirely disregarding the particular nature or determination of the sphere of production in which this £100 is invested as capital. It therefore by no means follows that a sum of value of £100 can be invested as capital in every sphere of production. It only follows that in each of these spheres 10% is made on 100, whatever the magnitude of the capital required for engaging in a particular branch of production. A general rate of profit therefore means in fact nothing but that the total amount of profit is absolutely determined by the magnitude of the capital advanced. The capital may be large or small, the average rate of its profit is 10%, and indeed in the same circulation time, turnover time, hence 1 year for example, as the measure of circulation time. If circulation time is posited as indifferent for all capitals (or identical, which is the same thing); furthermore the rate of profit too; the amount of profit will depend entirely on the magnitude of the capital. Or, the amount of profit = a times x, in which a is a fixed magnitude, x is the variable which expresses the magnitude of the capital. Or, given the magnitude of the capital, the amount of profit is given, namely determined, by the general rate of profit. [XVI-990] That the general rate of profit = 10%, e.g., means nothing at all except that 1/10 of the capitals, in whatever branch they are employed, returns as profit or that the profit stands in the same ratio to the magnitude of the capital — has the same ratio to the magnitude of the capital advanced, its amount therefore depends directly on the magnitude — stands in direct ratio to the magnitude of the capital; hence is similarly independent of the real turnover time of the capital (since the rate of profit is the same for any given circulation time), is independent of its specific circulation time — i.e. of the ratio of its circulation time to its production time; is similarly independent of the organic relation of the different components of capital in each particular branch of production, hence independent of the real surplus value — i.e. the real quantity of surplus labour — which every individual capital absorbs or produces in every particular branch of production.

The conversion of surplus value into profit alters not only the numerical relation — or rather the expression of the numerical relation — but the form as such. Surplus value appeared as a relation in which objectified labour was exchanged for living labour, or in which objectified labour appropriated living labour without exchange. The organic relation of the different parts of the capital advanced to each other, and therefore also the relation of the surplus value to a specific component of the capital emerges, is expressed in this. The relation ceases as soon as surplus value is expressed as profit. All parts of the capital advanced appear as uniform magnitudes of value, only differing quantitatively — amounts of exchange value, sums of value which in relation to their quantity — or rather added together — uniformly have the quality of producing not only themselves but an excess over their original magnitude: profit. The capital is the main sum, the profit is the subsidiary sum produced by this main sum in a definite circulation time. The main sum, the capital, is related as ground (cause) to the subsidiary sum as the grounded (consequence, effect). This appears as the existing law of capitalist production. How and whence and why is so little expressed in this relation of capital and profit that the spokesmen of capitalist production, the political economists, give the most varied and contradictory interpretations of this phenomenon.

Nevertheless, even after this conversion of surplus value into profit, surplus value remains equal to profit as an absolute magnitude. Whether 100 is calculated as a profit of 10% on 1,000, or as a surplus value of 20% on the variable part contained within that 1,000, say 500, the 100 continues [to appear] as the same magnitude of value, only differently calculated //and in the difference of the calculation there exists the difference of form, the extinction of the relation of this excess over the capital advanced to the organic relation of the different components of capital//. In itself the distinction remains purely formal. The difference of surplus value in particular capital investments would therefore continue to be displayed here as a difference of profit.

The situation is entirely different, however, with the general rate of profit, the most general law of which is expressed in the fact that the rate of profit is equal for all capitals, or, and this is the same thing, that the amounts of profit are related to each other directly and exactly as the magnitudes of the capitals.

The general rate of profit, and therefore profit in its real, empirical shape, already implies the conversion of surplus value into profit and therefore the conversion of the rate of surplus value into the rate of profit. But then the differences in surplus value (in its rate) (and therefore also relatively in the total amounts of surplus value), as they emerge in the particular spheres of capital investment, partly owing to differences in the ratio of variable to constant capital, partly owing to the ratio of circulating and fixed capital (let us say owing to all the relations which emerge from the ratio of production time to circulation [XVI-991] time) — these different rates of surplus value, or the diversity of surplus value, continue to exist, although in the altered form of differences in profit or different rates of profit. These serve as the substance, the prerequisite, of the general rate of profit, and therefore of profit in its organic form They are equalised, reduced to their average magnitude, which is then the real (normal) rate of profit in all particular spheres — particular spheres of production of capital — produced by the division of social labour. On the basis of the first transformation, therefore, a second takes place, which no longer affects the form alone, but also the substance itself, in that it alters the absolute magnitude of profit — hence of surplus value, which appears in the form of profit. This absolute magnitude was untouched by the first transformation.

Whatever the production costs (in the capitalist’s eyes) in any particular sphere of production — hence of any particular commodity — the capitalist adds e.g. 10% (the general rate of profit) to the sum advanced, calculates thus that 10% will be added to the amount of commodities produced in a year. This 10% then enters into the price of the commodity, and if the commodity is sold at this price the normal profit, or the average profit, is realised. If, e.g., the capitalist were to reckon 2% over this average profit in the first half of the year, and 2% under in the second half, the total amount of commodities during a year, or the average profit he makes during a year, would represent the normal profit or average profit of a capital of a given magnitude, since the increases and reductions in profit during the daily transactions would have balanced out to that amount.

But in its essence profit consists of surplus value — not of a formally higher valuation of the product, as perhaps the money price rises nominally if the value of the material of money, gold perhaps, falls, without a simultaneous fall in the value of commodities. Surplus value is a genuine creation of new value. It represents more objectified labour — hence a higher real exchange value — than the labour originally objectified in the capital, i.e. it goes beyond its original exchange value. And this surplus quantity of labour is realised in a surplus quantity of product or use value. Just as it would be wrong to regard a greater quantity of use values or products as a greater quantity of objectified labour on account of their greater quantity — with an increase in the productivity of labour they may represent the converse, a smaller quantity of labour — so it is correct that at a given level of the productivity of labour, at a given stage of production, surplus labour or surplus value expresses itself at the same time as surplus product, more use value. If we consider the total capital, the total surplus value represents the total excess quantity of labour which is realised in the total surplus product, over and above the product which replaces the constant part of capital and is required for the reproduction of the whole of the working class — a surplus product which is in part converted back into capital, and in part forms the income of all the classes living, under various headings, from their command over alien labour, from their respective shares in this

surplus product.

If the addition of profit to price were merely formal, it would be nominal, in the same way as if the value of the total product were only distinguished from the total value of the capital advanced by being valued, let us say, in money whose value had fallen, or, equally, whose numerical expression had been magnified by being valued in silver instead of in gold. [XVI-992] Neither new value nor surplus product would be implied thereby. All capitalists would sell the same value at a higher money price, the same as if they were all to sell it at a lower money price or all to sell it at a money price corresponding to the value. It would then also be a matter of indifference whether a profit of 10% or 1,000% were added to the price of the costs of production, for the big figures which express a merely nominal increase of the price are just as irrelevant as if this nominal increase were to take place on a smaller scale. The percentages of this nominal increase would be a matter of complete indifference. The wage, i.e. the part of capital which is set aside for the reproduction of labour capacity, as well as the part of capital which replaces the constant capital advanced, would appear in the same ratio in bigger figures, in a higher monetary expression.

Just as the surplus value of the individual capital in each particular sphere of production is the measure of the absolute magnitude of the profit — in so far as this is merely a converted form of surplus value — so is the total surplus value produced by the total capital, hence the whole of the class of capitalists, the absolute measure of the total profit of the total capital, whereby profit should be understood to include all forms of surplus value, such as rent, interest, etc. (that this total profit implies an encroachment on wages is beside the point, as was shown earlier a). It is therefore the absolute magnitude of value (and therefore the absolute surplus product, amount of commodities) which the capitalist class can divide up among its members under various headings. The empirical, or average, profit can therefore be nothing other than the distribution of that total profit (and the total surplus value represented by it or the representation of the total surplus labour) among the individual capitals in each particular sphere of production, in equal proportions, or, what is the same thing, according to the different proportions in which they stand to the magnitude of the capitals, and not according to the proportion in which the capitals directly stand to the production of that total profit. It therefore only represents the result of the particular mode of calculation in which the different capitals divide among themselves aliquot parts of the total profit. What is available for them to divide among themselves is only determined by the absolute quantity of the total profit or the total surplus value. The rule of distribution is equal profit for capitals of equal magnitude or inequality of profit in proportion to the unequal magnitude of the capitals. What was merely formal in the first transformation, the calculation of surplus value on the individual overall capital as a uniform, distinct amount of value without regard to the organic relation of its components, becomes here a material difference, since the share of total profit or total surplus value is uniformly determined, measured, at so many per 100, hence according to the magnitude of the capitals, without regard to the proportion in which each individual capital in each particular sphere of production participates in the creation of that total profit or total surplus value. Just as in the first transformation the surplus value is formally determined as the excess of the value of the product over the value of the capital advanced, so here the share of each capital advanced in the excess of the value of the total product of the total capital over its total value is determined materially in proportion to the value of the capital advanced. The agency through which this calculation is performed is the competition of capitals with each other. From the moment at which the surplus value is converted as profit, i.e. excess over the capital advanced, the second practical consequence follows, that a particular excess in proportion to the capital advanced forms the profit or the surplus value falling to its share, which stands in proportion to its magnitude — the magnitude of the production costs — and these come down to the value of the capital advanced. Profit thus equalised, levelled, expresses for capitals in one sphere of production a higher surplus value than they really produce directly, [XVI-993] for others a lower one, and for both the average of these higher and lower amounts. The absolute measure of this rate of profit naturally depends on the absolute proportion of the surplus value to the totality of the capital advanced.

In fact the matter can be expressed in this way:

Profit — as first transformation of surplus value — and the rate of profit in this first transformation — expresses surplus value in proportion to the individual overall capital of which it is the product — treating all parts of this overall capital as uniform, and relating to the whole of it as a homogeneous sum of value, without regard to the organic relation in which the different components of this capital stand towards the creation of its surplus value.

Empirical or average profit expresses the same transformation, the same process, in that it relates the total amount of surplus value, hence the surplus value realised by the whole capitalist class, to the total capital, or the capital employed by the whole capitalist class, in exactly this way — it relates the total surplus value as profit to that total capital of society, without regard to the organic relation in which the individual components of that total capital have participated directly in the production of that total surplus value, on behalf, that is, of the individual independent capitals or the individual capitalists in the particular sphere of production. Just as, for example, with the individual capital of £900, if it yields a surplus value of £90, this profit is related equally to all components of the £900, and every component of the latter is valorised at 10%, thus, it may be, the 350 fixed capital, the 350 capital for raw material, and the 200 capital for wages, each provides 10%, each therefore produces a profit in proportion to its magnitude — “the capitalist generally expects an equal profit upon all the parts of the capital which he advances” (Malthus)[56] — so the total capital C socially, or the total amount of all the capitals of all the individual capitalists, is related to S, the surplus value, as the rate of profit r, for example, and every part of this total capital participates in the proportion r to P or S, hence in proportion to the magnitude of its value, irrespective of its direct functional relation in the production of S.

The second transformation is a necessary result of the first, which emerges from the nature of capital itself, whereby the surplus value is converted into an excess of value over production costs, i.e. the value of the capital advanced. In the first case, the absolute magnitude of the surplus value = that of the profit; but the rate of profit is less than the rate of surplus value. In the second case the absolute magnitude of the total surplus value = the magnitude of the total profit; but the average rate of profit is less than the average rate of surplus value (i.e. the ratio of surplus value to the total value of the variable capital contained in the total capital).

The transformation is formal in the first case, in the second material at the same time, since now the profit that falls to the share of the individual capital is in practice a different magnitude from the surplus value created by it, it is larger or smaller. In the first case, the surplus value is calculated only according to the magnitude of the capital which produces this particular surplus value, without regard to the capital’s organic components. In the second case, the share of the individual independent capital in the total surplus value is calculated in accordance with this capital’s magnitude alone, without regard to its functional relation to the production of that total surplus value.

In the second case, therefore, an essential difference enters the picture, both between profit and surplus value and between the price and the value of the commodity. Hence the difference between the real prices — even the normal prices of the commodities — and their values. The more detailed [XVI-994] investigation of this point belongs to the chapter on competition,[67] in which it will also need be demonstrated how it is that despite this difference between the normal prices of commodities and their values, alterations in the value of the commodity modify its price.

But it will be understood from the outset how through the confusion of empirical profit with surplus value — which profit presents in a very transformed form (just as through the confusion of the difference itself which corresponds to this between the normal prices and the values of commodities) — and this confusion is a common feature of all previous political economy, to a greater or lesser degree (only with the distinction that the more deep-going political economists such as Ricardo, Smith, etc., directly reduce profit to surplus value, i.e. want to display the abstract laws of surplus value directly through empirical profit, because otherwise any attempt to gain knowledge of the laws [of political economy] would have to be abandoned — whereas the economic plebs do the opposite, and directly set up and proclaim as laws of surplus value the phenomena of empirical profit; in reality proclaiming the semblance of lawlessness to be the law itself) [...]

The competition of capitals is nothing more than the realisation of the immanent laws of capital, i.e. of capitalist production, in that each capital confronts the other as the executor of these laws, the individual capitals bringing their inner nature to bear by the external compulsion which they exert on each other, according to their inner nature. But in competition the immanent laws of capital, of capitalist production, appear as the result of the mechanical impact of the capitals on each other; hence inverted and upside down. What is effect appears as cause, the converted form appears as the original one, etc. Vulgar political economy therefore explains everything it does not understand from competition, i.e. to state the phenomenon in its most superficial form counts for it as knowing the laws of the phenomenon.[83]

If a capital which turns over 6 times in a year only takes a profit 2 times smaller than a capital which turns over 3 times, one which employs much labour does not take any more profit than one which employs much fixed capital, one which suffers long interruptions in the production process itself no less than one which proceeds without interruption, etc., this means nothing but that the capitalists calculate the profit they make on the capital’s size, not on its direct causal connection with the process.

If each capitalist adds 10% to his production costs, this means nothing but that one capitalist adds a given amount more, the other adds a given amount less, than he really produces over and above those production costs.

It is in one respect the same as when the individual capitalists sell their commodities above or below their value because they are cheating or being cheated. The one realises more surplus value than he produced, the other less. But the two divide among themselves, even if for accidental motives, and unequally, the total surplus value their two capitals have produced. The same thing takes place with average profit or empirical profit, only following a general law which is entirely independent of the personal frauds committed by capitalists against each other, but rather asserts itself against and through these activities.

Adam Smith’s assertion that the capitalists would have no reason to employ a large instead of a small capital, unless profit bore some proportion to the magnitude of the capitals, is naive but incorrect.[84] Leaving aside its shallowness — a larger capital with a smaller profit may after all — within [XVI-999][85] certain limits — realise a greater amount of profit than a smaller capital with a greater rate of profit. The motive for the employment of larger capitals would therefore remain. What is alone important in Smith’s case is that he feels the difficulty of explaining this at all, whereas with the oeconomista vulgaris it is self-evident, just as everything is self-evident with that fellow.

The situation arises simply from this, that with the conversion of surplus value into profit the value of the capital advanced is converted into the production costs of the individual capitalists, the magnitude of these production costs is therefore converted into the magnitude of the capital advanced, which means that they calculate the same magnitude of the product — the actual product of capital is profit — in proportion to these production costs, so that the division of the total surplus value as it is present in empirical profit can take place. The relation of supply in particular branches of production gives rise of itself to this levelling and this average calculation.

The last point which has still to be considered under this heading is the entirely fossilised form capital has taken on these days, and the completion of the mystification peculiar to the capitalist mode of production.

We must return to this point.

Hence the phrase (of Torrens) that with the advance of civilisation it is not labour but capital. that determines the value of commodities. Similarly, that capital is productive, irrespective of the labour employed by it. (Ramsay, Malthus, Torrens, etc.)[86]

h) In relation to the costs of production there is a further phenomenon to be discussed: why with the development of capitalist production, and therefore of the volume and measure of development of fixed capital, the mania to prolong the normal working day sets in to such a degree that the intervention of governments becomes necessary everywhere precisely at that point. But this can come later.

7) General Law of the Fall in the Rate of Profit with the Progress of Capitalist Production[edit source]

We have seen (6 g)) that real profit — i.e. the current average profit and its rate — is different for the individual capital from profit, and therefore from the rate of profit, in so far as the latter consists of the surplus value really produced by the individual capital and the rate of profit therefore = the ratio of the surplus value to the total amount of the capital advanced. But it was also shown that considering the sum total of the capitals which are employed in the various particular spheres of production, the total amount of the social capital, or, and this is the same thing, the total capital of the capitalist class, the average rate of profit is nothing other than the total surplus value related to and calculated on this total capital; that it is related to the total capital exactly in the way in which profit — and therefore the rate of profit — is related to the individual capital, in so far as profit is considered only as surplus value which has been converted formally. Here, therefore, we once again stand on firm ground, where, without entering into the competition of the many capitals, we can derive the general law directly from the general nature of capital as so far developed. This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production.

[XVI-1000] Since the general rate of profit is nothing but the ratio of the total amount of surplus value to the total amount of capital employed by the capitalist class, we are not concerned here with the different branches into which surplus value is divided, such as industrial profit, interest, rent. Since all these different forms of surplus value are only components of the total surplus value, one part may increase because the other declines. We are concerned here, however, with a fall in the rate of the total surplus value. Even the rent of land — as Adam Smith has already correctly noted — falls with the development of capitalist production, instead of rising, not in proportion to the particular area of land of which it appears to be the product, but in proportion to the capital invested in agriculture, therefore precisely in the form in which it steps forth directly as a component of surplus value. This law is confirmed by the whole of modern agronomy. (See Dombasle, Jones, etc.)

So where does this tendency for the general rate of profit to fall come from? Before this question is answered, one may point out that it has caused a great deal of anxiety to bourgeois political economy. The whole of the Ricardian and Malthusian school is a cry of woe over the day of judgement this process would inevitably bring about, since capitalist production is the production of profit, hence loses its stimulus, the soul which animates it, with the fall in this profit. Other economists have brought forward grounds of consolation, which are not less characteristic. But apart from theory there is also the practice, the crises from superabundance of capital or, what comes to the same, the mad adventures capital enters upon in consequence of the lowering of [the] rate of profit. Hence crises — see Fullarton — acknowledged as a necessary violent means for the cure of the plethora of capital, and the restoration of a sound rate of profit.

//Fluctuations in the rate of profit, independent of organic changes in the components of capital, or of the absolute magnitude of capital, are possible if the value of the capital advanced, whether it is engaged in the form of fixed capital, or exists as raw material, finished commodities, etc., rises or falls in consequence of an increase or reduction, independent of the already existing capital, in the labour time needed for its reproduction, since the value of every commodity — hence also of the commodities of which the capital consists — is conditioned not only by the necessary labour time contained in it itself, but by the necessary — socially necessary — labour time which is required for its reproduction and this reproduction may occur under circumstances which hinder or facilitate it, and are different from the conditions of the original production. If under the changed circumstances twice as much labour time, or, inversely, half as much, is generally required to reproduce the same capital, as was needed to produce it, that capital, presupposing that the value of money remains permanently unchanged, would now be worth 200 thalers, if it was previously worth 100, or, if it was previously worth 100, it might now only be worth 50. If this increase or decline in value were to affect uniformly all sections of capital, profit too, like the capital, would now be expressed in twice as many or in half as many thalers. The rate would remain unchanged. 5 is related to 50 as 10 to 100 or 20:200. Let us assume however that the nominal value of fixed capital and raw material alone rises, and that they form 4/5 of 100, hence 80, the variable capital forming 1/5, hence 20. In this case the surplus value, hence the profit, would continue to be expressed in [XVI-1001] the same sum of money. Thus the rate of profit would have risen or fallen. In the first case surplus value = 10 thalers, which makes 10% on 100. But the 80 are now worth 160, hence the total capital = 180. 10 on 180 = 1/18 = 100/18 = 100: 18 = 5 = 5 5/9 %, instead of the previous 10 %. In the second case 40 instead of 80, the total capital = 60, on which 10 = 1/6 = 100/6. 100:6 = 16 = 16 2/3 %. But these fluctuations can never be general, unless they affect the commodities which enter into the worker’s consumption, hence unless they affect variable capital, hence the whole of capital. In this case, however, the rate of profit remains unchanged, even though the amount of profit has changed nominally. //

The general rate of profit can never rise or fall through a rise or fall in the total value of the capital advanced. If the value of the capital advanced, expressed in money, rises, the nominal monetary expression of the surplus value rises too. The rate remains unchanged. Ditto in the case of a fall.

The general rate of profit can only fall:

1) if the absolute magnitude of surplus value falls. The latter has, inversely, a tendency to rise in the course of capitalist production, for its growth is identical with the development of the productive power of labour, which is developed by capitalist production;

2) because the ratio of variable capital to constant capital falls. As we have seen, the rate of profit is always smaller than the rate of surplus value which is expressed in it. But the larger the ratio of constant to variable capital, the smaller it is. Or, the same rate of surplus value is expressed in a rate of profit which is the smaller, the larger the ratio of the total amount of capital advanced to the variable part of the latter, or the greater a part the constant capital forms of the total capital. Surplus value expressed as profit is S/(C+v), and the larger C is, the smaller this magnitude, and the more it diverges from S/v the rate of surplus value. For S/(C+v) would reach its maximum when C = 0, hence S/(C+v) = S/v.

But the law of development of capitalist production (see Cherbuliez , etc.) consists precisely in the continuous decline of variable capital, i.e. the part of capital laid out in wages, in return for living labour — the variable component of capital — in relation to the constant component of capital, i.e. to the part of capital which consists in fixed capital and in the circulating capital laid out for raw material and matierès instrumentales. The whole development of relative surplus value, i.e. of the productive power of labour, i.e. of capital, consists, as we have seen, in the curtailment of necessary labour time, hence also the reduction of the total amount of the capital exchanged for labour, through the increase in the production of surplus labour by means of division of labour, machinery, etc., cooperation, and the expansion in the amount of value and the mass of constant capital expended which this involves, accompanied by a reduction in the capital expended for labour.

So when the ratio of variable capital to the total amount of capital alters, the rate of profit falls, i.e. the ratio of surplus value to the total capital is the smaller, [XVI-1002] the smaller the ratio of variable capital to constant capital.

If, for example, in the production of India the ratio of the capital laid out as wages to the constant capital = 5:1, and in England it is 1:5, it is clear that the rate of profit in India must appear much larger, even if the surplus value actually realised is much smaller. Let us take 500. If the variable capital = 500 /5 = 100, the surplus value 40, the rate of surplus value will be 40%, the rate of profit only 10%. In contrast, if the variable part is 400 and the rate of surplus value is only 20%, this would make 80 on 400, and on 500 a rate of profit of 80:500, of 8:50. 8:50 = 16:100. Therefore 16%. (100:16 = 500:80 or 50:8 = 250:40 or 25:4 = 125:20. 25×20 = 500. 4×125 = 500.) So although labour would be twice as strongly exploited in Europe as in India, the rate of profit in India would be related to the rate of profit in ‘Europe as 16:10, as 8:5, = 1:5/8. Hence as 1:0,625. And indeed this is because 4/5 of the total capital is exchanged for living labour in India, and only 1/5 in Europe. If real wealth appears slight in those countries where the rate of profit is high, it is because the productive power of labour is slight, a fact which is expressed precisely in the high rate of profit. 20% is 1/5 on labour time, hence India could only feed 1/5 of the population not directly involved in the product; whereas 40% is 2/5, hence in England twice the proportion of the population could live without working.

The tendency towards a fall in the general rate of profit therefore = the development of the productive power of capital, i.e. the rise in the ratio in which objectified labour is exchanged for living labour.

The development of productive power has a double manifestation: [Firstly,] in the magnitude of the productive forces already produced, in the amount of value and the physical extent of the conditions of production under which new production takes place, i.e. the absolute magnitude of the productive capital already accumulated. Secondly, in the relative smallness of the capital laid out for wages, in comparison with the total capital, i.e. the relatively small amount of living labour which is required for the reproduction and exploitation of a large capital — for mass production.

This implies, at the same time, the concentration of capital in large amounts at a small number of places. The same capital is large if it employs 1,000 workers united into a single labour force, small if it is divided into 500 businesses employing two workers apiece.

If the ratio of the variable part of capital to the constant part, or to the total capital, is large, as in the above example, this shows that all the means towards the development of the productivity of labour have not been employed, that, in a word, the social forces of labour have not been developed, that therefore with a large quantity of labour little is produced, [XVI-1003] whereas in the opposite case a (relatively) large amount is produced with a small amount of labour.

The development of fixed capital (which produces of itself a development of the circulating capital laid out in raw material and matierès instrumentales (see Sismondi) is a particular symptom of the development of capitalist production. It implies a direct reduction, relatively speaking, of the variable part of capital, i.e. a lessening in the quantity of living labour. The two are identical. This is most striking in agriculture, where the reduction is not only relative but absolute.

// Adam Smith’s idea that the general rate of profit is forced down by competition — on the presupposition that capitalists and workers alone confront each other — or that the division of surplus value among different classes is not further considered — comes down to saying that profit does not fall because wages rise; but wages do indeed rise because profit falls, hence it is — from the point of view of the result, an increase in wages corresponding to the fall of profit — the same mode of explanation as Ricardo’s completely opposite one, in which profit falls because wages become more expensive, etc., or as Carey’s, because there is an increase not only in costs of production (exchange value) but in the use value of the wage. That profit temporarily falls as a result of competition between capitals — i.e. their competition in the demand for labour — is admitted by all political economists (see Ricardo). Adam Smith’s explanation, if he did not speak of industrial profits only, would raise this to a general law very contradictory to the laws of wage[s] developed by himself.//

The development of productive power has a double manifestation: in the increase of surplus labour, i.e. the curtailment of the necessary labour time; and in the reduction of the component of capital which is exchanged with living labour, relatively to the total amount of capital, i.e. the total value of the capital which enters into production. (See Surplus Value, Capital, etc.) Or, expressed differently: It is manifested in the greater exploitation of the living labour employed (this follows from the greater quantity of use values which it produces in a given time, hinc the curtailment of the time required for the reproduction of the wage, hinc the prolongation of the labour time appropriated by the capitalist without equivalent) and in the reduction in the relative amount of living labour time which is employed in general — i.e. in its amount relatively to the capital that sets it in motion. Both movements not only go [hand in hand] but condition each other. They are only different forms and phenomena in which the same law is expressed. But they work in opposite directions, in so far as the rate of profit comes into consideration. Profit is surplus value related to the total capital, and the rate of profit is the ratio of this surplus value, calculated according to a particular measure of the capital, e.g. as a percentage. However, surplus value — as an overall quantity is determined firstly by its rate, but secondly by the amount 0 labour employed simultaneously at this rate, or, and this is the same thing, the magnitude of the variable part of the capital. On the one hand there is a rise in the rate of surplus value, on the other hand there is a (relative) fall in the numerical factor by which this rate is multiplied. In so far as the development of productive power lessens the necessary (paid) part of the labour employed, it raises the surplus value, because it raises its rate, or it raises it when expressed as a percentage. However, in so far as it lessens the total amount of labour employed by a given capital, it reduces the numerical factor by which the rate of surplus value is multiplied, hence it reduces its amount.

Surplus value is determined both by the rate, which expresses the ratio of surplus labour to necessary labour, and by the amount’ of working days employed. However, with the development of the productive forces, the latter — or the variable part of the capital — is reduced in relation to the capital laid out.

If C = 500, c = 100, v = 400, and S = 60, s/v = 60 /400 = 15%, so that the rate of profit = 60 /500 = 12%. [XVI-1004] Furthermore, if C = 500, c = 400, v = 100, and S = 30, SI, = 30/ 100 = 30%, so that the rate of profit = 30/500 = 6%. The rate of surplus value is doubled, the rate of profit is halved. The rate of surplus value exactly expresses the rate at which labour is exploited, while the rate of profit expresses the relative amount of living labour employed by capital at a given rate of exploitation, or the proportion of the capital laid out in wages, the variable capital, to the total amount of capital advanced.

If C = 500, c = 400, and v = 100, for the rate of profit to be 12% or profit to be 60, surplus value would have to be 60, s/v = 60/100 = 60%.

For the rate of profit to remain the same, the rate of surplus value (or the rate of exploitation of labour) would have to grow in the same ratio as the magnitude of the capital laid out in labour grows, in the same way as the magnitude of the variable capital falls relatively, or the magnitude of the constant capital grows relatively. It is already strikingly apparent from one single circumstance that this is only possible within certain limits, and that it is rather the reverse, the tendency towards a fall in profit — or a relative decline in the amount of surplus value hand in hand with the growth in the rate of surplus value — which must predominate, as is also confirmed by experience. The part of the value which capital newly reproduces and produces is = to the living labour time directly absorbed by it in its product. One part of this labour time replaces the labour time objectified in wages, the other part is the unpaid excess amount, surplus labour time. But both of them together form the whole amount of the value produced, and only a part of the labour employed forms the surplus value. If the normal day = 12 hours, 2 workers who perform simple labour can never add more than 24 hours (and workers who perform higher labour can never add more than 24 hours x the factor which expresses the ratio of their working day to the simple working day), of which a definite part replaces their wages. The surplus value they produce cannot, whatever the circumstances, be more than an aliquot part of 24 hours. If, instead of 24 workers, only 2 are employed to a given quantity of capital (in proportion to a given measure of capital), or 2 workers are necessary in the new mode of production where 24 were necessary in the old one, in proportion to a given amount of capital, then if the surplus labour in the old mode of production = 1/12 of the total working day, or = 1 hour, no increase in productive power — however much it raised the rate of surplus labour time — could have the effect that the 2 workers provided the same amount of surplus value as the 24 in the old mode of production. If one considers the development of productive power and the relatively not so pronounced fall in the rate of profit, the exploitation of labour must have increased very much, and what is remarkable is not the fall in the rate of profit but that it has not fallen to a greater degree. This can be explained partly by circumstances to be considered in dealing with competition between capitals, partly by the general circumstance that so far the immense increase of productive power in some branches has been paralysed or restricted by its much slower development in other branches, with the result that the general ratio of variable to constant capital — considered from the point of view of the total capital of society — has not fallen in the proportion which strikes us so forcibly in certain outstanding spheres of production.

In general, therefore: The decline in the average rate of profit expresses an increase in the productive power of labour or of capital, and, following from that, on the one hand a heightened exploitation of the living labour employed, and [on the other hand] a relatively reduced amount of living labour employed at the heightened rate of exploitation, calculated on a particular amount of capital.

It does not now follow automatically from this law that the accumulation of capital declines or that the absolute amount of profit falls (hence also the absolute, not relative, amount of surplus value, which is expressed in the profit).

[XVI-1005] Let us stay with the above example. If the constant capital is only 1/5 of the total capital advanced, this expressed a low level of development of productive power, a limited scale of production, small, fragmented capitals. A capital of 500 of this kind, with surplus value at 15% (the variable capital at 400) gives a total amount of profit of 60. If we reverse the ratio, this expresses a large scale, the development of productive power, cooperation, division of labour, and large-scale employment of fixed capital. Let us therefore assume that a capital of this kind is of 20 times greater extent; 500×20 = 10,000, thus 6% profit on 10,000 (or surplus value of 30%, if the variable capital = 2,000) 600. A capital of 10,000 therefore accumulates more quickly with 6% than a capital of 500 with 12%. The one realises a labour time of 400, the other one of 2,000, hence an absolute amount of labour time 5 times greater, although relatively to its magnitude, or to a given amount of capital, e.g. 100, it employs four times less [labour time]. (See Ricardo’s example.)

Here, as in the whole of our analysis, we entirely disregard use value. With the greater productivity of capital it goes without saying that the same value employed at the more productive scale represents a much greater amount of use value than it does at the less productive scale, and therefore also provides the material for a much more rapid rate of growth of the population and consequently of labour powers. (See Jones.)

This fall in the rate of profit leads to an increase in the minimum amount of capital — or a rise in the level of concentration of the means of production in the hands of the capitalists — required in general to employ labour productively, both to exploit it, and to employ no more than the labour time socially required for the manufacture of a product. And there is a simultaneous growth in accumulation, i.e. concentration, since large capital accumulates more rapidly at a small rate of profit than does small capital at a large rate of profit. Once it has reached a certain level, this rising concentration in turn brings about a new fall in the rate of profit. The mass of the lesser, fragmented capitals are therefore ready to take risks. Hinc crisis. The so-called plethora of capital refers only to the plethora of capital for which the fall in the rate of profit is not counterbalanced by its size. (See Fullarton.)

Profit, however, is the driving agency in capitalist production, and only those things are produced which can be produced at a profit, and they are produced to the extent to which they can be produced at a profit. Hence the anxiety of the English political economists about the reduction in the rate of profit.

Ricardo already noted that the increase in the amount of profit accompanying a decline in the rate of profit is not absolute, but that there may be a decline in the amount of profit itself, despite the growth of capital. Strangely enough, he did not grasp this in general, but merely gave an example. Nevertheless, the matter is very simple.

500 at 20% gives 100 profit.

50,000 at 10% gives 5,000 profit; but 5,000 at 2% would only give 100 profit, no more than 500 gives at 20%, and at 1% it would only give 50 profit, hence only half as much as 500 at 20%. In general: As long as the rate of profit falls more slowly than capital grows, there is a rise in the amount of profit and therefore the rate of accumulation, although relative profit declines. If the profit were to fall to the same degree as the capital grew, the amount of profit would, despite the growth in capital, remain the same as it was with a higher rate of profit on a smaller capital. This would therefore also be true of the rate of accumulation. Finally, if the rate of profit fell in a greater proportion than the growth in capital, the amount of profit and therewith the rate of accumulation would fall along with the rate of profit, and it would stand lower than in the case of a smaller capital with a higher rate of profit at a correspondingly less developed stage of production.

[XVI-1006] //We do not consider use value at all, except in so far as it determines the production costs of labour capacity or the nature of capital, as with fixed capital, because we are considering capital in general, not the real movement of capitals or competition. But it may be remarked here in passing that this production on a large scale, with a higher rate of surplus value and a reduced rate of profit, presupposes an immense production, and therefore consumption, of use values, hence always leads to periodic overproduction, which is periodically solved by expanded markets. Not because of a lack of demand, but a lack of paying demand. For the same process presupposes a proletariat on an ever-increasing scale, therefore significantly and progressively restricts any demand which goes beyond the necessary means of subsistence, while it at the same time requires a constant extension of the sphere of demand. Malthus was correct to say that the demand of the worker can never suffice for the capitalist. His profit consists precisely in the excess of the worker’s supply over his demand. Every capitalist grasps this as far as his own workers are concerned, only not for the other workers, who buy his commodities. Foreign trade, luxury production, the state’s extravagance (the growth of state expenditure, etc.) — the massive expenditure on fixed capital, etc. — hinder this process. (Hence sinecures, extravagance on the part of the state and the unproductive classes, are recommended by Malthus, Chalmers, etc., as a nostrum.) It remains curious that the same political economists who admit the periodic overproduction of capital (a periodic plethora of capital is admitted by all modern political economists) deny the periodic overproduction of commodities. As if the simplest analysis did not demonstrate that both phenomena express the same antinomy, only in a different form.//

That this mere possibility disturbs Ricardo (Malthus and the Ricardians similarly) shows his deep understanding of the conditions of capitalist production. The reproach that is made against him, that in examining capitalist production he is unconcerned with “human beings”, keeping in view the development of the productive forces alone — bought at the cost of whatever sacrifices — without concerning himself with distribution and therefore consumption, is precisely what is great about him. The development of the productive forces of social labour is the historic task and justification of capital. It is exactly by doing this that it unconsciously creates the material conditions for a higher mode of production. What makes Ricardo uneasy here is that profit — the stimulus of capitalist production and the condition of accumulation, as also the driving force for accumulation — is endangered by the law of development of production itself. And the quantitative relation is everything here.

There is in reality a deeper basis for this, which Ricardo only suspects. What is demonstrated here, in a purely economic manner, from the standpoint of capitalist production itself, is its barrier — its relativity, the fact that it is not an absolute, but only an historical mode of production, corresponding to the material conditions of production of a certain restricted development period.

To bring this important question to a decisive conclusion, the following must first be investigated:

1) Why does it happen that with the development of fixed capital, machinery, etc., the passion for overwork, prolongation of the normal working day, in short the mania for absolute surplus labour grows, along with precisely the mode of production in which relative surplus labour is created?

2) How is it that in capitalist production profit appears — from the point of view of the individual capital, etc. — as a necessary condition of production, hence as forming part of the absolute production costs of capitalist production?

If we take surplus value, its rate is greater, the smaller the variable capital in proportion to it, and less, the larger the variable capital. s/v rises or falls inversely as v rises or falls. If v = 0, this [s] would be at its maximum, for no outlay of capital for wages would be necessary, no labour would have to be paid in order to appropriate unpaid labour. Inversely: the expression s/(c+v) or the rate of profit, would be at its maximum if c = 0, that is, if the rate of profit = the rate of [XVI-1007] surplus value, i.e. if no constant capital c at all had to be laid out in order to lay out capital v in

wages and thus realise it in surplus labour. The expression s/(c+v) therefore rises and falls inversely as c rises or falls, hence it also rises or falls against v.

The rate of surplus value is greater, the smaller the variable capital in proportion to the surplus value. The rate of profit is greater, the greater the variable capital in proportion to the total capital, and this proportion is greater the smaller the constant capital in proportion to the total capital, hence also in the proportion to which it forms a smaller part of the total capital than the variable capital. But the variable capital for its part is smaller in proportion to the total capital, the greater the proportion of the total capital and therefore of the constant capital to the variable capital.

Assume s = 50, v = 500, c = 100. Then s' = 50/500 = 5/50 = 1/10 = 10%. And Pp. (rate of profit) 50/600 = 5 /60 = 1/12 = 8 1/3%. Hence s/v is greater, the smaller v is, — is greater, if s is given, the greater v is and the smaller c is, but s/v increases when c increases. If now s/v becomes 3 s/v, and c grow 3 times, so that 3s/(3c+v) which was originally related

to c as v: (v+c)

is now related as v:(v+3c)

v = (c-v)/(v+c) and v = (c-v)/(v+3c)

v = c/(!+c/v) v = c/((1+3c/v)

If s became greater than v in the measure to which c grew or v becomes greater than c+v, hence if the rate of surplus value grew through greater employment of constant capital in the same measure as the proportion of variable capital to total capital declines, the rate of profit would remain unchanged.

Originally we had s/(c+v) = p'. Now we have 3s/(3s+v) = p'.

The first question is by how much s/(3c+v) [is less than] s/(c+v),

s/(c+v) — s/(3c+v) = s(3c+v)-s(c+v)/(c+v)(3c+v)

= s(3c+v-c-v)/(c+v)(3c+v) = s(2c)/(c+v)(3c+v)

[XVI-1008] Let surplus value = 120. Variable capital = 600. In this case s', or rate of surplus value, = 120/600 = 20%. If the constant capital = 200, then p' = 120/800 = 12/80 = 3/20 = 15%. If now the constant capital is increased threefold, from 200 to 600, and everything else remains unchanged, then s' = 20% as before, but p' now = 120/ 1,200 12 /120 = 6/60 = 3/30 = 1/10 = 10%. The rate of profit would have fallen from 15 to 10 [per cent], by 1/3; the constant capital would have tripled. The variable capital was previously 100/800 = 6/8 = 3/4 of the total capital, it is now 600/1,200, only 1/2 or 2/4, it has therefore become smaller by 2/3.

But if the surplus value increased threefold through the tripling of the constant capital, i.e. if it grew from 120 to 120×3 = 360, then s' would now = 360 /600 = 16 /60 = 6/10 = 3/5 = 60%, and p' would = 360/1,200 = 36/120 = 6/20 = 3/10 = 30%.

But since the variable capital is now related to the total capital as 600:1,200, whereas previously it was as 600:800, it is now 1/2 of the total capital, and was previously 6/8 or 3/4, so it has fallen.

[XVI-1009] s = 120, v = 600, c = 200. s = 120/600 = 20%, p' = 120/800 = 15 %.

s = 120. v = 600. c = 600. s' = 120/600 = 20%. p' = 120/1,200 = 10%.

15:10 = 3:2 = 1:2/3. Hence p' has fallen by 1/3, c has risen 3 times, total capital has grown from 800 to 1,200, by 1/2; finally v was originally related to c as 600:200 = 3x200 = 3c, but now = v. Hence v has fallen 3fold against c. Finally v was previously related to c as 600:800 = 6:8 = 3:4 = 3 /4 c. Now it is related as 600:1,200 = 6:12 = 2:4; = 1/2 or 2 /4c. Hence it has fallen against c by 1/4.

For the rate of profit to remain the same at 15%, the surplus value would have to rise from 120 to 180, hence by 60 (but 60:120 = 1:2), hence by a half. Furthermore, [a rise in] s' from 120/600 or 20% to 180/600 or 30%, from 20 to 30, is again [a rise] by 50%.

The surplus value had to increase in the same proportion as the total capital grew from 800 to 1,200, i.e. by 50%, that is it had to increase from 20 to 30%. Originally v was 3 /4 of the total capital, now it is 2/4. But 3/4 C×20 is as much as 2/4 C×30, namely — 60C/4 (=15%).

[[...] that the sum of surplus value not only does not fall, but rises [...] to the actual rate [of surplus value] depends on the number of workers employed, that with the use of machinery, due to the action of the laws inherent in machine production, the productive application [...] , the better division of labour and combination of labour due to fixed capital, grows.]

//It is self-evident that the variable capital may constantly grow in the absolute sense, i.e. the absolute number of workers may grow, although it is constantly falling in proportion to total capital and fixed capital. Hence the inane dispute over whether machinery reduces the number of workers. It almost always reduces the number when introduced, not in the sphere in which it has itself been introduced, but through the suppression of workers who carry on the same industry at the previous stage of production. For example the machine spinners drive out the hand spinners, the machine weavers the hand weavers, etc. But in the branch of industry which employs the machinery the number of workers may grow constantly in the absolute sense // although here men are often driven out by women and young persons // although it declines relatively. //

[XVI-995] Let us first assemble the facts.

C = v+c. s = surplus value. s' = rate of surplus value. p' = rate of profit. s' = s/v, p' = s/c or s/v+c.

[...]

C = 800. c = 200. v = 600. s = 120. In this case, C = 1/4 C (800/4 = 200) and v = 3/4 C (=3×?/4 =?? s' = 120/600 = 20%. If c increases from 200 to 600, by a factor of three, C will rise from 800 to 1,200, i.e. by 50%.

Since C = 1/4 C, its threefold increase causes it to grow from 1/4 to 3/4 (by 2/4). The total capital is now 3/4 C + 3/4C = 1 2/4 C. It has therefore risen by [...]. It was originally = 3 4C ( = 600), so if it is tripled this brings it from 3/4 to 9/4, from 600 to 1,800, and it brings the total capital to 2,000 ([...] C[...]/[...]C over and above the original capital 6 /4C = 1,200 (1,200 + 800 = 2,000). How far therefore the total capital [...] becomes [...] growth in c, depends on the original proportion of c to C which presents itself entirely as a particular proportion between c and v [...] of C. So the greater the proportion of c: v or of c: C (c+v), the more does the total. amount C grow through [...] the more does the rate of profit fall and the greater is the growth in the rate of surplus value required for the rate of profit to remain the same. [...] the growth of the total capital if the rate of surplus value is given.

In the case of an increase of C from 800 to 1,200, of c from 200 to 600, the constant capital is tripled and the total capital grows by [...] by 50%. In this case the rate of surplus value or s' continues to be 20% and s = 120. But p' = 120 /1,200 = 10%. Surplus value and rate of surplus value [...] have fallen from 15 to 10, i.e. by 1/3 or 33 1/3%. Why is there this difference, that the rate of profit falls by 33 1/3 % [...] grows by 50%? Because the relation of the rate of profit expresses itself as the inverse of the relation of the two capitals we have compared. [...] or 1,200. This growth is from 800:1,200 = 2:3, hence from 2:(2+1) or by 50%. The fall in the rate of profit expresses itself inversely, as fall of [...] from 120/800 to 120/1,200 or 120/800:120/1,200 = 3:2; hence as a fall of 1/3 or 33 1/3%.

The fall in the rate of profit therefore depends directly on the growth in the total capital, if the variable capital remains the same; its fall expresses itself in inverse proportion to the growth of the capital. If this grows from 2:3, the rate of profit falls from 3:2. Furthermore, if the variable capital remains the same, the growth of the total capital can only derive from the growth of the constant capital. However, the proportion in which a particular increase in constant capital causes the total capital to increase depends on the original ratio between c and C. This inverse relation explains in part why the rate of profit does not fall in the same proportion as the capital increases, even if the rate of surplus [value] remains the same. If 2 increases to 4, that is a growth of 100%. If 4 falls to 2, that is a fall of 50%.

b) If in the second case indicated above the rate of profit is to remain the same, the profit, hence the surplus value, will have to rise from 120 to 180, i.e. by 60 or 1/2 of 120, rise by half its original magnitude. The surplus value would therefore have directly to grow in the same proportion as the total capital, by 50%, therefore rising in a greater proportion than the fall in the rate of profit, surplus value remaining the same.

If c had risen to 1,200 instead of 600, the total capital would have risen to 1,800, for C would have risen by 1,000, hence by 125%. [...] remain the same, the total amount of surplus value = the total profit, would have had to rise to 270. But 270:120 must [imply] a growth of 150 [...] or 125% on top of 120. 120 on 120 is 100%, and 30 on 120 is 1/4 or 25% (4x30 = 120) [...] %.)

c) How in this case (b) would s' or surplus value have risen?

It was originally 120 /600 = 20% or 1/5 of the variable capital. If the capital grows to 1,200 or c is tripled, 180/600 or 30% or [...]. In the third case, if the capital grows to 1,800, [surplus value is] 270/600 = 9/20 of the variable capital, = 45%. In [this case the rate of] surplus value has risen from 20 to 30%, i.e. by 50%, to the same degree as the total capital has grown in this case and the absolute surplus value or [...] has risen in this case from 20 to 45; i.e. by 25; but 25:20 = 1 1/4 (20 + 1/4 20 or 5) hence 125%. (This [...] only on the growth of the increment, not the relation of the numbers to each other as such.) The rate of surplus value would therefore have to [grow] directly [as the] total capital grew or in the same proportion as the absolute surplus value would have to grow for the rate of profit to remain unaltered with a growing [...].

Variable capital amounted to

Case I: 600 out of total capital constant capital 800 = 3 /4 C; 200 = 1/4 C

Case II: 600 1,200 = 2 /4 C; 600 = 2/4 C

Case III: 600 1,800 = 1/3 [C]; 1,200 = 2/3 C

[?????]: 600 3,600 = 1/6 [C]; 3,000 = 5/6 C.

Surplus value or profit had to increase to 540; the rate of surplus value = 540/600, 9/10 or 90%. 90% against 20 [...] of 70. But 70 to 20 would be 350%. The increase of capital would be 3,600-800 = 2,800, similarly [350%]. In this case the rate of surplus labour = 9/10 of the total working day, hence given 10 hours of labour 9 hours. [...] [XVI-996] [...], although entirely corresponding to the growth of the total capital with variable capital remaining the same, now express the rate of rise and fall inversely in the same value expression as the capital [...]. If the capital rises from 2 to 4, the rate of profit falls from 4 to 2. The other rises by 100%, [...]

[...] and the rate of surplus value, which is an identical relation if variable capital remains the same, does not grow as capital grows or variable capital [...] total capital. There is absolutely no rational reason why the rise of productive power should observe exactly the same numerical ratio. It [...] of relative surplus value grows and its growth is expressed in the ratio of the reduction in the variable capital [...], but not in the same ratio as this proportion declines. Productive power grows, hence surplus labour. Firstly, there lies here [...] the matter. One man may produce as much use value as 90. Never more than an average of 12 hours a day in value is [...], as this [...] surplus value never more than 12 hours — x, where x expresses the labour time necessary for his own production. The surplus value, [...] the labour time which he himself works, not by the working days he replaces. If 90 men worked only % an hour of surplus time a day, this would be [...] hours. If the one man needed only one hour of necessary labour time, he would never [produce] more than 11 hours of surplus value. The process is double. It increases the surplus labour time of the working day, but it also reduces the numerical coefficients of those working days, [...] capital. Secondly: The development of productive power is not uniform; certain branches of industry may themselves be more unproductive but this is determined by the general productivity of capital.

[...] firstly at a stage of production which remains the same, without great revolutions in productive power, in proportion to its already existing [...] only gives rise to a total capital of 2, whereas 1,000 at 10% gives 1,100. c. 1,100 prod[... Ex]ample of 800, v = 600, c = 200, and surplus value = 160 or rate of profit equal to 20%, a capital of 100,000 would give [...] instead Of 3/4 only 1/6 variable, (3 /4 = 18/24, and 1/6 = 4 /24) hence employs 14 /24 or 7/ 12 less variable capital relatively speaking, at [...] 50% it continues to be 5,000. His variable capital, and the living labour employed by it, would still be 16,6661/6 in total amount, hence [...] it would still be nearly 28 times greater than the capital employed in the first case. But the rate of profit is determined, because the rate of surplus value is determined, by the ratio of the variable capital to the total capital. At simple interest £100,000 would grow into 200,000 in 20 years, whereas 800 at 20% would only produce an accumulation of 3,200 in 20 years (160×20). In the second 20 years 200,000 at 5% would grow to 400,000. The other capital at 20%, in contrast, would only grow to 12,800.


[a] As a rule // see under surplus value for the exception: intensification of labour and therefore in fact increase of labour by machinery // machinery only creates relative surplus value through the curtailment of necessary labour time and therefore the prolongation of surplus labour time. This result is brought about by the cheapening of the commodities which enter directly or indirectly into the worker’s consumption.

Surplus value is formed by two factors. Firstly the daily surplus labour of the individual worker. This determines the rate of surplus value, hence also the proportion in which variable capital is increased through the exchange with living labour. Secondly, the number of workers simultaneously exploited by capital or the number of simultaneous working days.

If the rate of surplus value is given, the magnitude of the surplus value — the surplus value itself as an independent magnitude — depends on the number of workers employed. If this [number and the number of simultaneous] working days is given, the magnitude of the surplus value depends on its rate.

[...] now evidently has a tendency to affect the two factors of surplus value in opposite directions. It increases the rate [...] reduces the number of workers // relatively anyway; with respect to a definite measure of capital, e.g. per cent// whose labour is exploited at an increased rate.

[...] each one provided 1 hour of surplus labour a day. By the employment of machinery 6 workers should each provide 2 hours of surplus labour a day [...] In this case 6 workers provide 12 hours of surplus labour, just as previously 12 did. The time during which the 12 workers [work] every day, assuming [a norm]al working day of 12 hours, [can] be regarded as a total working day of 144 hours, of which [132 hours are necessary labour] time, 12 surplus labour time. In the second case the total working day consists of 72 hours, of which 60 are necessary labour time, [12 surplus labour time]. Since a total working day of 72 hours now contains as much surplus labour as the day of 144 hours, in the latter case [6 workers] appear [to be use]less, superfluous for the production of 12 hours of surplus value. They are therefore suppressed by the employment of machinery.

[...] — which lies at the basis of all growth in relative surplus value — prolongation of surplus labour time through [curtailment of necessary] labour time; however, a process which was only employed previously in regard to the working day of the individual worker is now employed [...] composed of the sum total of the working days of the workers simultaneously employed. The retranchement now takes [...]. In the first case the sum total of hours of labour remains the same. It is merely their division between necessary and surplus labour, between [...], which is altered. But now there is a change not only in the division of labour time but also in the sum total of labour time employed.

[...] total working day of 144 hours e.g., which is no longer necessary,. since the employment of machinery, to [produce] 12 hours of surplus labour. Superfluous, useless labour is removed. From the capitalist standpoint all labour is useless, i.e. unproductive, which is not necessary [...], which would therefore be required for the mere reproduction of the worker himself. In the above example 72 [...], i.e. 6 days of labour. I.e. 6 of the 12 workers are dismissed. In the first case the magnitude remains [...] ([...] hours contained in it) the same. The division alone has changed. In the second case the magnitude changes — the total amount [...] the division of the same. In the first case, therefore, the value remains the same, while the surplus value increases. In the second case [...] at the same time the labour time objectified in the product, while the surplus [value] increases.

[...] of simple cooperation and division of labour [takes] place. This is as with [...] Relatively to the product [...] the number of workers is reduced [...] workers [...] capital C [...] constant [...], [XVI-997] with machinery, an absolute reduction (with regard to a particular capital) takes place. In certain branches of industry, agriculture [...] reduction is in fact always in advance, without being checked as in other branches of industry by the circumstance that at the new rate [...] old number of labourers may be successively absorbed, but even an absolutely greater although relatively much smaller [...]

The way in which the rate of profit is altered even in the case considered above, where the rate of surplus value grows in the same (or [a greater proportion]) than the fall in the number of workers, hence the fall in one factor finds compensation in the growth of the other through more [...] — hence the magnitude of the surplus value remains unchanged or even grows — depends on the proportion in which [...] is [affected by] a change in the components of the total capital or on the proportion in which this change proceeds. [...] The surplus value the capital makes can only derive from the number of workers it exploits, or from the number of workers who [...] society — alias the class of capitalists as a whole — is affected by the setting free of the workers he has dismissed, [...]

It is now an entirely self-evident general law that with the progressive increase in the employment of machinery the magnitude [...] remain, but must fall; i.e. that the reduction in the number of the [...] (in relation to a particular measure of capital) [...] reduction in the number cannot be continuously counterbalanced by a corresponding increase in the rate of surplus value the working day of the individual worker is exploited.

Assume that 50 workers provide only 2 hours of surplus [labour]; in that case the surplus value created by them = 100. Assume further [...] if 10 men were replaced by 1, 5 would replace the 50. [...] labour time = 5×12, = 72 a hours. The same for the total value of their product. The surplus [value] created by them [is] < than 72, since only equal to 72 — the necessary labour time. Hence it is < than 100 by much more. There therefore takes place so large that the reduction in the absolute amount of labour which is employed, brought about through the development of productive power, [...] by an increase of equal size in the rate of surplus value — where surplus value therefore falls, despite the growth in the rate of surplus value. [...] A fall in the amount of surplus value — or the total amount of surplus labour employed — must necessarily come about with the development of machinery [...] it is [shown] here that capitalist production enters into contradiction with the development of the productive forces and is by no means their absolute [...] and final form.

//If the 50 workers could all be employed at the new rate, or even only 25 perhaps, surplus value would grow, and not only its rate, as compared with the earlier case. Hence the importance of the scale on which machinery is employed, and its tendency to employ as many workers as possible at the same time, combined with the tendency to pay for as few necessary working days as possible.// (50) (150)

b) Let us assume a capital of 600. Let 400 of this be laid out in labour, 200 in constant capital, instruments and raw material. Let the 400 represent 10 workers. If a machine were to be employed, which together with the raw material = 520, and if the capital laid out in labour were only to be 80 now, 10 workers would be replaced by 2 or 5 by 1. The total amount of capital laid out would remain the same, hence production costs would remain the same. The 2 workers would not produce more surplus labour time for each 12 hours than the 10 produced, for wages would have remained the same. Nevertheless, the quantities of commodities produced under the changed conditions of production might on certain presuppositions become cheaper, although it is presupposed that this quantity has not increased, or that no more commodities are produced with the same capital under the new process of production than were previously produced under the old one. Since the same quantity of raw material has been worked on as before, 150, the machinery has now risen from 50 to 370. // Namely 370 machinery, 150 raw material, 80 labour. 370 + 150 + 80 = 600. //

Assume now that the machinery employed has a turnover time //reproduction time// of 10 years. Of the value employed, 37 (370/10) would enter into the annual output of commodities for the replacement, wear and tear, of the machinery. The sum total of the production costs of the commodities //disregarding profit and surplus value here, as the rate remains the same// would now be = 37 + 150 + 80 = 267. The production cost of the commodity under the old process = 600, whereby we assume that the instruments which enter into the process (estimated at 50) must be renewed every year. The price of the commodities would have been cheapened in the ratio 267:600. To the extent that the commodity enters into the worker’s consumption, its cheapening would bring about a reduction in the labour necessary for his reproduction and thereby an increase in the length of surplus labour time. //But initially, as in any employment of machines, capitalist II would admittedly sell cheaper than capitalist I, but not in the same proportion as his production costs had fallen. This is in fact an anticipation of the cheapening of the production costs of labour which occurs through machinery [...] [If] his workers receive the same wages as previously, they can admittedly buy more commodities (more of the commodities they themselves have produced) but not in the proportion in which they have become more productive. It would be the same thing if the capitalist paid them in his own commodity, as if he were to give them a quantity which was admittedly larger, but smaller in the proportion to which this quantity expressed exchange value.// Even if we disregard the relation itself, and consider the empirical form, in which the capitalist calculates interest, say 5%, on his total capital according to the part of it which has not been consumed. Then 5% on 300 (the part of the capital not consumed in the first year) = 15, or 5% profit e.g., similarly 15, therefore 30. Thus the price of the commodities would come to 280 + 30 = 310, still almost half as cheap as in the first case.

In fact only 370 thalers were laid out for fixed capital, 150 capital for raw material, and 80 for labour.

However, if in order to replace 5 workers by one the capital [...] the machinery had to increase from 50 to perhaps 2,000 instead of 370, the total capital therefore rising to 2,300, the wear and tear contained in the commodity annually would = 2,000/100 = 20. Production costs would = 250, with interest and profit of 150. 250 + 150 + 80 = 480. 10% on [...] So in this case by inequality [...] 2,000 again = [...] machinery made dearer.

[XVI-998] [...] in two ways:

[...] turnover time peculiar to fixed capital — mode of circulation — a much smaller aliquot part of it enters into the value [...] product — than is really required for production. Only its wear and tear, the part of it that is worn out in the course of a year, enters into [the value of the pro]duct, because only this part really circulates. Hence if the capital remains the same and there is only a change in the proportion of the capital [...] component of the capital laid out [in] labour, there is a cheapening of the product, the ultimate result of which is a cheapening [...] in the production costs of labour, hence an increase in the rate of surplus value, i.e. of surplus labour time.

[If] capital [remains] the same, and there is also no increase in surplus time (or no original reduction in wages) [...] measure, as the turnover time (reproduction time) of the fixed capital declines in velocity.

[...] the aliquot part of the old capital, which is converted into fixed capital, but the capital had rather to [...] so that the total capital might grow, the proportion of this growth, required for the number of workers [...] occur, in which the commodity produced with the machine became dearer than that produced with hand labour [...]

[...] posited on the assumption that the amount of commodities produced by the smaller number of workers is not larger, [...] [than the] number produced without machinery, or on the assumption that [...] capital with machinery does not [...] than previously without it. [...]

[...] workers employed produced more than the 10 without it, they thus produce perhaps as much as 20 [...] always a definite number, but perhaps a greater number than they force out. In this case 1 replaced [...] could perhaps only be employed if both were employed. In any case, the part of capital laid out in [...] would have to be doubled. I.e. the magnitude of the capital could not [remain] unaltered.

[...] but if the slow turnover time of the capital cheapens the product, even if the old capital increases again, hence a greater amount of commodities than before is not produced, then this is even more so in the other case.

This belongs to the section on production costs, just as the previous comments on surplus value must be treated under the heading “Surplus Value”.

//The total amount of the capital advanced enters into the labour process, but only the part of the capital consumed during a particular period of the labour process enters into the valorisation process or into the value of the product. (See Malthus. ) Hence the smaller value or the greater cheapness of the commodities which are e.g. produced with the same capital of 500, if 2/5 of this are fixed capital and 1/5 variable capital, than if the proportions are inverted. (Even if profit and interest are calculated on the whole of the capital, only an aliquot part of it enters into the value of the commodity, not the capital itself, as in the case in which the whole of the capital or the greatest part of it is laid out in living labour.) But the profit is calculated on the whole of the capital, including the unconsumed part of it. Although the unconsumed part of the capital does not enter into the value of the product of the individual capital considered for itself, it does enter into the average production costs of capitalist production, in the form of profit (interest), because it constitutes an element of the average profit, and an item in the calculation by means of which the capitalists divide among themselves the total surplus value of the capital. //

// The rate of profit depends upon, or is nothing other than, the ratio of the surplus value (considered as an absolute magnitude) to the magnitude of the capital advanced. But the surplus value itself — i.e. its absolute magnitude — may fall even though the rate of surplus value rises, and rises considerably. The amount of surplus value or its absolute magnitude must indeed fall, despite any rise whatever in the rate of surplus value, once the [...] of surplus value of the labour which is displaced by machinery is greater than the total amount of value, or labour, which steps into its place. Or the surplus time of the displaced worker[s] is greater than the total labour time of the workers who replace them. Thus if 50 are replaced by 5. And the surplus labour time of the 50 was 2 hours (with a normal working day of 12 hours). Their surplus labour time or the surplus value created by them = 100 hours. The total labour time or the value created [by the 5] (hence the necessary labour time + surplus) = 60 hours. Assume that these 5 workers provide twice as much surplus time, or that surplus value = 4 hours every day for each of them. So that for 5 there are 20 hours. The rate of surplus value has grown by 100%; the total amount of surplus value or the surplus value itself is only 4×5 = 20 hours. The surplus value is only 1/5 of the 100 created by the 50, smaller by 80%. If now 15 workers were employed at the new rate the amount of surplus value would rise to 60, if 20 to 80, if 25 to 100. Half as many workers would have to be employed at the new rate in order to produce as much surplus value as at the old rate. But if 50 were employed, they would produce twice as much, namely 200. Not only the rate of surplus value, but also the surplus value itself would have doubled.// //Assume that the 5 only produced surplus value at the same rate as the 50, hence only 10 hours. Then 50 workers would have to be employed just as before in order to produce the same surplus value, although they would produce 10 times as many commodities in the same time. This in the branches of industry where the product does not enter into the consumption of the workers themselves. Here the profit derives purely from the fact that the necessary labour time, over a certain average period, stands higher than the labour time needed by the capitalists who have introduced the new machinery; they therefore sell the commodity above its value. This is, however, different from sheer fraud. They sell it above the value it costs them, and below the value it costs society before the general introduction of the machinery. They sell the labour of their [...] higher labour, they buy it as yet at [...] With the [...] at the new rate. But there is also an increase in c[...] more significant [...]

[XVI-1009] //In the latter case he sells the individual commodity cheaper than it can be produced given the still generally prevailing production costs, he sells it below its average value, but not cheaper in the same proportion as he himself produces it below its average value. He sells the total amount of the commodities produced in an hour, in a day — //and with the new means of production he provides a greater total amount in the same time// — above their value, above the hour or the day of labour time contained in them. If he produces 20 yards with the same production costs as the others incur in producing 5, and if he sells them % below the average price, he is selling them 3/5 above their value. If the 10 yards cost 10x and he sells the 20 at 20 × 4x/5 = 80x/5 = 16x, he is selling them at 6 over their value of 10. 1/5 of 10 is 2, or 3/6 of 10 is 5; 20 cost him 10; or 2 costs him 1 or 5/5. What now is the relation to his workers? If they continue to receive the same wages as before, they also receive commodities for their wages (i.e. in so far as the more cheaply produced commodity enters into their [XVI-1010] consumption). And let this take place for all the workers, each of whom would be able to buy more of this specific commodity with the aliquot part of their wage which is expended for it.

The capitalist would make a surplus profit of 3/5 or 60%. He sells them the commodity 1/5 cheaper, but he sells the labour contained in it 3/5 dearer than the average labour, hence at a value standing 3/5 above the average labour. 3/5 of 12 hours of labour = (12 × 3) / 5 = 36/5 = 7 1/15. This surplus labour, which they have provided for him through the higher potentiation of their labour, he pockets.

Let us assume that necessary labour time = 10. Thus under the old conditions they would obtain 10/12 of the product 10. In the old situation 1 hour of labour produces 1/12 of the product of a day, hence in 10, 10/12 = 8 thalers, for example. In the new situation 16/12 is produced in one hour of labour = 4/3, 1 1/3. In 3 hours 4 thalers, in 6 hours 8 thalers. Thus they work 6 hours of surplus labour. Previously it was only 2.//

//Adam Smith correctly adduces in favour of an average profit — i.e. a profit purely determined by the magnitude of the capital — the example of the use of silver instead of iron, or gold instead of silver, of a more costly raw material in general, under otherwise identical conditions of production. Here the part of the capital advanced in the form of raw material may grow hundredfold, and more, ditto therefore the profit, with the same rate of average profit. Although not the slightest change takes place in the organic relations between the different components of the capital. //

//The Yankee economist Wayland is very naïve. Because relative surplus value is only produced in branches of industry directly or indirectly involved in the production of articles destined for the workers’ consumption, hence it is there in particular that capital introduces cooperation, division of labour and machinery, and because this occurs to a much lesser extent in luxury production, he concludes that the capitalists work to the advantage of the poor, not the rich, and capital there develops its productivity in the interest of the former, not the latter. //

Average surplus value — disregarding here absolute surplus value, and considering only relative surplus value, which arises from the curtailment of necessary labour time through the development of the productive powers of labour — is the total amount of surplus value in all specific branches of production, measured against the total capital laid out for living labour. Since the development of productive power is very uneven in the different branches of industry (which directly or indirectly produce the means of subsistence entering into the worker’s consumption), uneven not only in degree but often proceeding in opposed directions, as the productivity of labour is just as much [XVI-1011] bound up with natural conditions which may lead to a decline in productivity while the productivity of labour grows // the whole of the investigation into the extent to which natural conditions influence the productivity of labour independently of the development of social productivity and often in opposition to it, belongs into the analysis of rent// — it results from this that this average surplus value must stand very much below the level to be expected from the development of productive power in the individual branches of industry (the most prominent ones). This is in turn one of the main reasons why the rate of surplus value, although it grows, does not grow in the same proportion as the variable capital declines in its proportion to the total capital. This would only be the case (assuming that the proportion is correct in general; it is correct for the rate of surplus value, as has been shown previously,’ but not for surplus value) if those branches of industry in which the variable C declines the most against fixed, etc., were to make their products enter into the consumption of the worker in the same proportion. But take here, for example, the proportion between industrial and agricultural products, where the relation is precisely the opposite.

Let us now consider a particular branch of industry. If an increase of productive power occurs in it, the increase which occurs in this particular branch absolutely does not imply a direct increase in the branch of industry which provides it with its raw material (with the exception of agriculture, since its product itself provides its raw material, in seeds, and this is again a peculiarity of agriculture). The raw material branch itself at first remains completely unaffected by the increase, and may also remain unaffected subsequently. //Nevertheless, a cheaper raw material does not step in to replace it, unless the same raw material becomes cheaper, as cotton does not replace sheep’s wool.// But the productivity is demonstrated by the fact that a greater quantity of raw material is needed to absorb the same quantity of labour. Thus this part of constant capital at first grows unconditionally with the greater productivity of labour. If 5 produce as much as 50, or more, 50 will work up 10 times more raw material. The raw material must initially increase in the same proportion as the productivity of labour. Or if we assume that 5 produce as much as 50, and 45 are dismissed, the 5 now need 10× as much capital as did the 5 previously, or as much as 50. This part of the capital has grown 10 times, at least, measured against the capital laid out in labour. //With greater exploitation this can be restricted somewhat, if on the one hand there is a relative reduction in waste through the improved quality of the labour, and on the other hand because the waste is absolutely more massive, more concentrated, can serve better as raw material once again for new, different production, hence in fact the same raw material stretches further, as to its value. This is an item, but an insignificant one.// However, this is not to say by any means that fixed capital, buildings, machinery (lighting, etc.) (apart from fixed capital the matierès instrumentales in general) increase in the same proportion, so that 10 times as much would now be required by the 5 as they required before. On the contrary. Although machinery of greater bulk becomes dearer absolutely, it becomes cheaper relatively. This is particularly true for the motive force, steam engines, etc., the production costs of which fall (relatively) with [the increase in] their horse power or other power. This part — hence the total constant capital — therefore by no means grows in proportion with the growth in productive power, although it does grow absolutely, to an insignificant degree. The total capital therefore does not grow [XVI-1012] proportionally in relation to the growth of productive power.

If out of the 500 there were originally perhaps 300 for workers, 150 for raw material and 50 for instruments, it follows that a doubling of productive power through the application of machinery would require the employment of at least 300 for raw material, and if 50 workers’ produced this product of twice the size, 50 for labour; but it does not follow that the cost of machinery, etc., for these 30 workers would rise from 50 to 500, a tenfold increase. The cost of machinery would perhaps only rise to double the amount — to 100; so that the total capital would have fallen from 500 to 450. The ratio between the variable capital and the total capital would now be 30:450. 30/450 = 3/45 = 1/15. 1:15.

Previously the ratio was 300:500, 300/500 = 3:5. 1/15 = 3 /45; and 3/5 = 27/45. According to this, however, the total capital required to produce a certain surplus value would have fallen. Assume in the first case that the surplus value = 2 hours out of 12 = 2/12, in the second case = 4/12 or 1/3.

In the first case 1/6 of 300 (if a worker = 1 thaler) = 50. And this is 10% of 500.

In the second case 1/3 of 30 = 10. 450 are required for the production of these 10. If we assume that 300 workers are employed at this new rate, they would produce 100. The total capital needed to produce the 100 would rise to 450×30 = 4,500×3 = 13,500. In the previous ratio it was 1,000 to produce 100.

But assume that fixed capital falls still more, not perhaps relatively in proportion to the growth of the productive forces. If the 30 workers produce as much as the 300 did previously, they will need 500, just as before: 150 for raw material, 30 for labour (as previously 300), but perhaps only 100 for fixed capital. The total capital is now 210, of which variable capital is 3/21 = 1/7, [XVI-1013] previously = 3/5. (300 out of 500)

If the surplus value were now to increase 5fold, the 30 would give a surplus value of 50, where the 300 gave one of 10. Thus on 300, 30, would be on 30 — 15.

The total capital is 500 in the first case, 210 in the second case. 410 would now give 30, hence more than 500 previously.


The growth of productive power allows more commodities to be produced in the same labour time. Therefore, it does not raise the exchange value of the commodities produced in this way, but only their quantity; it rather lessens the exchange value of the individual commodities, while the value of the total amount of commodities produced in a given time remains the same.

To say that there is an increase in productivity is the same as saying that the same raw material absorbs less labour in the course of its conversion into the product, or that the same labour time requires more raw material for its absorption.

For example, a pound of yarn requires exactly the same amount of cotton, whether a large or a small amount of labour is required for the conversion of the cotton into yarn. If the productivity of the spinner rises, the quantity of cotton contained in a pound of yarn absorbs less labour. The pound of yarn therefore falls in value, gets cheaper. If 20 times as many pounds of cotton as before are spun in an hour, e.g. 20 pounds instead of 1 pound, each pound of yarn falls by 1/20 in the value component the labour of spinning adds to it; in the differential value between a pound of cotton and a pound of yarn (leaving aside the value of the fixed capital present in the spun yarn). Nevertheless, the value of the product of the same time is now greater than before, not because more new value has been created, but only because more cotton has been spun, and the value of this has on our assumption remained the same. The newly created value would be the same amount for the 20 pounds as previously for the one pound alone. For 1 pound it would in the new mode of production be smaller by 1/20.

Presupposing therefore that the commodities are sold at their value, the increase of productive power (with the exceptions mentioned earlier) only creates surplus value in so far as the cheapening of the commodities cheapens the production costs of labour capacity, hence shortens the necessary labour time, hence lengthens surplus labour time.

The product of every particular sphere of production can therefore only create surplus value in so far as, and in the proportion in which, this specific product enters into the average consumption of the workers. But every such product — since a developed division of labour within society is a fundamental prerequisite for the development of commodities in general and even more for capitalist production — only forms an aliquot part of the worker’s total consumption. The increase of productive power in every particular sphere therefore creates a surplus value by no means in proportion to the increase of productive power but only in the much smaller proportion in which the product of this particular sphere forms an aliquot part of the worker’s total consumption. If a product formed 1/10 of the worker’s total consumption, a doubling of productive power would allow the production of 2/10 in the same time as ‘/to was produced previously. 1/10 of the wage would fall to 1/20, or by 50%, while the productive power would have risen by 100%. 50% on 1/10 x = 5% on 1x. E.g. 5% on 100 comes to 105. 50% on 100/10 or 10 comes to 5, the same total amount. The growth of productive power by 100% would in this case have cheapened wages by 5%. [XVI-1014] It is therefore clear why the striking growth of productive power in individual branches of industry appears to be entirely out of proportion with the fall of wages or the growth of relative surplus value. Hence capital too — to the extent that this depends on surplus value, a point we shall soon investigate more closely — is far from increasing in the same proportion as the growth in the productive power of labour.

Only if productive power were to increase evenly in all branches of industry which directly or indirectly provide products for the worker’s consumption could the proportional growth of surplus value correspond to the proportional increase of productive power. But this is by no means the case. Productive power increases in very different proportions in these different branches. Contrary movements often take place in these different spheres (this is due partly to the anarchy of competition and the specific nature of bourgeois production, partly to the fact that the productive power of labour is also tied to natural conditions, which often become less productive in the same proportion as productivity rises, in so far as it depends on social conditions) so that the productivity of labour rises in one sphere while it falls in another. //Think for example of the simple influence of the seasons, on which the greater part of all the raw products of industry depends, exhaustion of forests, coal seams, mines and the like. // The growth of average total productivity is therefore always and unconditionally much less than this growth appears in a few particular spheres, and indeed in one of the main branches of industry, the products of which enter into the worker’s consumption, agriculture, it is as yet far from keeping pace with the development of the productive powers in the manufacturing industry. On the other hand, in many branches of industry the development of productive power has no influence, either directly or indirectly, on the production of labour capacity, hence of relative surplus value. Quite apart from the fact that the development of productive power is not only expressed in an increase in the rate of surplus value but also in a (relative) reduction in the number of workers.

Hence the growth of surplus value is by no means in proportion to the growth of productive power in particular branches of production, and, secondly, it is also always smaller than the growth of the productive power of capital in all branches of industry (hence also those branches whose products enter neither directly nor indirectly into the production of labour capacity). Hence the accumulation of capital grows — not in the same proportion as productive power increases in a particular branch, and not even in the proportion in which productive power increases in all branches, but only in the average proportion in which it increases in all the branches of industry of which the products enter directly or indirectly into the overall consumption of the workers.


The value of a commodity is determined by the total labour time, past and living, which enters into it, which is contained in it; hence not only by the labour time which is added in the final production process, from which the commodity as such emerges, but by the labour contained in the fixed capital and circulating capital, or in the conditions of production of the labour last to be added, by the labour time contained in the machinery, etc., the matières instrumentales and the raw material, in so far as their value reappears in the commodity, which is entirely the case with raw material and [XVI-1015] the matières instrumentales, whereas the value of the fixed capital only reappears partially in the product — in proportion to its wear and tear.

If 1/4 of the value in a commodity consisted of constant capital and 3/4 of wages; if as a result of an increase of productive power in this particular branch the amount of living labour employed were to fall from 3/4 to 1/4, and if the number of workers employed in its production were to be reduced from 3/4 to 1/4, then, given the presupposition that the 1/4 of labour was exactly as productive as the 3/4 was previously (and not more so), the value of the new fixed and circulating capital, apart from the raw material contained in the 1/4, could rise to 2/4. Then the value of the commodity would remain unchanged, although the labour would have become more productive by 3/4 to 1/4, i.e. by 3 to 1, i.e. it would have tripled its productive power. Since the value of the raw material would have remained the same, the new fixed and circulating capital would not be able to rise as far as 2/4 of the old value of the commodity, thus permitting the commodity to become cheaper, with a real fall in its production costs. Or the difference between the new labour time and the old would have to be larger than the difference between the value of the old constant capital and the new (deducting the raw material). It is not possible to add the same amount more of past labour as a condition of labour as has been deducted of living labour. If the 1/4 of workers were to produce more than the 3/4 did previously, so that the increase in the productivity of their labour were greater than the reduction in their numbers or their total labour time, the new constant capital could grow //disregarding surplus value here and speaking only of the value of the commodity, on which after all the surplus value depends, because the cheapening of the production costs of labour capacity depends on the lessening of the value// by 2/4, and even by more than 2/4, only it would now have to grow in the same proportion as the productive power of the new labour.

Secondly, however, this relation is also brought about, 1) by the fact that the fixed capital only enters in part into the value of the commodity; 2) the matières instrumentales, such as the coal consumed, the heating, lighting, etc., are proportionally economised by labour on a large scale, although their total value increases, and therefore a smaller value component of the same enters into the individual commodity. But the condition remains the same, that the value component of the machinery which enters into the individual commodity as wear and tear, and the matières instrumentales which enter into it, should be smaller than the difference in productivity between the new and the old labour. Nevertheless, this does not exclude the possibility that an equally large or even a larger quantity of constant capital might be used for the total amount of commodities, e.g. the number of pounds of twist, which are produced in a given period of time, e.g. a day, than was previously expended in the form of wages. Only a smaller quantity in respect of the individual commodity. Presupposing, therefore, that the 1/4 n workers produce exactly as much in one day as the 3/4 n workers produced previously, the law would remain absolute. Because the amount of commodities produced would remain the same in proportion to these 1/4 n workers as it was for the 3/4 n workers. The value of the individual commodity could therefore fall only if the new constant capital < than that previously expended in wages and now no longer in existence. It can therefore be said absolutely that in the proportion in which a smaller quantity of labour replaces a greater quantity of labour[XVI-1016] does not need to be identical, but may be, and mostly is, greater than the proportion in which the number of workers is diminished (the relative number of workers) — the constant capital which enters into the commodity //and in practice also the interest and profit on the whole of the constant capital, which admittedly enters into the labour process but not into the valorisation process// must be greater than the proportion in which the new constant capital grows (here the raw material is left out). This is only an aspect to be introduced in distinction to the one-sided consideration in dealing with surplus value. To be inserted in the section on production costs.

This does not, however, (owing to the way in which the fixed capital is reproduced) prevent the total capital //hence also the part of it which is not consumed in the labour process, but still enters into it// from being absolutely greater than the previous total capital.

Thus if e.g. 1 replaces 10, the capital which is allotted to him in the form of machinery, etc., and matières instrumentales — in so far as it enters into his product — is smaller than the previous capital which was required for the 10 workers. The proportion of capital laid out in labour has fallen 10 times here, but the new constant capital has perhaps only risen 8 times. From this point of view, therefore, the capital laid out in labour has not fallen proportionally in the same degree as the capital required for its realisation [has increased]. Or the total amount of capital which enters into the production of the one worker is smaller than the total amount of capital which enters into the production of the 10 workers replaced by him. And, although the part of capital laid out in wages has fallen 10 times in comparison with previously, it still forms a larger part of this new capital than 1/10, because this new capital, which enters into the production of the one worker, has itself become smaller than the old capital, which entered into the production of the 20 workers.

On the other hand, however, the total capital which is required as condition of production for this increase in the productivity of labour — including namely the part which does not enter as wear and tear into the product — but is rather consumed in a series of work periods — is greater — may be much greater than the previous total capital, so that the part of the total capital laid out in labour has declined in a still greater proportion than the productivity of labour has grown. The more the fixed capital develops, i.e. the productivity of labour, the greater this unconsumed part of the capital, the smaller the proportion of the part of capital laid out in labour in relation to the total capital. From this point of view it might appear as if the magnitude of the capital grew more rapidly than the productivity of labour //but even the total capital cannot grow to the extent that the interest and profit on it raise the production costs of the commodity to the level to which the productivity of labour has risen//. But this only means that the portion of the capital annually produced which is converted into fixed capital is always increased relatively to the portion of the capital which is laid out in wages; by no means, however, that the total capital — which is in part fixed, in part converted into wages — grows as quickly as the productivity of labour.

If the part of capital laid out in labour thus falls, this is even more the case if the growth in the part of capital which consists of raw material is brought into consideration at the same time.

[XVI-1017] Let us take an extreme case: the rearing of sheep on a modern scale, where previously small-scale agriculture predominated. But here two different branches of industry are being compared. The amount of labour — or of capital laid out in wages — which is suppressed here is enormous. Hence the constant capital can also grow enormously. And it is very much the question whether the total capital which is here allotted to the individual shepherds is greater than the total amount of the capitals which were previously divided among several hundred shepherds.

It is questionable whether, in individual branches of industry in which the total capital undergoes extraordinary growth, profit originates at all from the surplus value produced in these branches and not rather, in connection with the calculations made by the capitalists between themselves, from the general surplus value produced by the sum total of all the capitals.


Many ways of increasing productive power, particularly with the employment of machinery, require absolutely no relative increase in capital outlay. Often only relatively inexpensive alterations in the part of the machine which provides the motive force, etc. See examples. Here the increase in productive power is unusually great compared to the capital outlay which falls to the relative share of the individual worker — of the individual commodity as well. Thus here — at least as far as this part of the capital is concerned — the capital laid out in raw material grows the more rapidly — no noticeable reduction in the rate of profit — at least not to the extent that it would be caused by an increase in this part of the capital. On the other hand, although the capital does not grow here so much relatively speaking, it is true to say, as it is in the general case overall, that for the most part the absolute amount of capital employed — hence the concentration of capital or the scale on which work is done — must grow very significantly. More powerful steam engines (of more horsepower) are absolutely dearer than less powerful ones. But relatively speaking their price falls. Even so, a greater outlay of capital — a greater concentration of capital in one hand — is required for their employment. A bigger factory building is absolutely dearer, but relatively cheaper, than a smaller one. If every aliquot part of the total capital is smaller in proportion to the total capital employed by the labour saved, this aliquot part can mostly be employed solely in such multiples as will raise the total amount of capital employed to an extraordinary degree or in particular the part of the total capital not consumed in a single turnover, the part the consumption of which extends over a period of turnovers lasting many years. It is in general only with this work on a large scale that productive power is increased tremendously, since it is only in this way that:

1) the principle of multiples, which underlies simple cooperation, and is repeated in the division of labour and the employment of machinery, can correctly be applied. (See Babbage, on how this increases the scale of production, i.e. the concentration of capital.)

2) The greater altogether the number of workers employed on the new scale, the smaller, relatively, the portion of fixed capital which enters as wear and tear for buildings, etc. The greater the principle of the cheapening of production costs by joint utilisation of the same use values, as lighting, heating, common use of the motive power, etc. [XVI-1018] The more is it possible to employ absolutely dearer, but relatively cheaper, instruments of production.


The circumstance that in some branches of production, railways, canals, etc., where an immense fixed capital is employed, these are not independent sources of surplus value, because the ratio between the labour exploited and the capital laid out is too small.


A further remark needs to be added to the previous page:

It is possible that if a capital of 500 was needed for 20 workers, and now a total capital of only 400 is needed for 2, 2,000 workers will now have to be employed, hence a capital of 400,000, in order to employ the aliquot parts of the 400 productively. It has already been shown’ that even with an increased rate of surplus value the relative reduction in the number of workers to be exploited can only be counterbalanced by a very great increase in the multiple of labour.

This is seen (appears) in competition. Once the new invention has been introduced generally, the rate of profit becomes too small for a small capital to be able to continue to operate in the given branch of industry. The amount of necessary conditions of production grows in general in such a way that a significant minimum level comes into existence, which excludes all the smaller capitals from this branch of production for the future. It is only at the beginning that small capitals can exploit mechanical inventions in every sphere of production.


The growth of capital only implies a reduction in the rate of profit to the extent that with the growth of capital the above-mentioned changes take place in the ratio between its organic components. However, despite the constant daily changes in the mode of production, capital, or a large part of it, always continues to accumulate over a longer or shorter period on the basis of a definite average ratio between those organic components, so that no organic change occurs in its constituent parts as it grows.

On the other hand, a reduction in the rate of profit can only be enforced by a growth in capital — because of a growth in the absolute amount of profit — as long as the rate of profit does not fall in the same proportion as the capital grows. The obstacles which stand in the way of this are to be found in the considerations we have already brought forward.


Absolute plethora of capital.


Increase in workers, etc., despite the relative decline in variable capital or capital laid out in wages. However, this does not take place in all spheres of production [XVI-1019]. E.g. not in agriculture. Here the decline in the element of living labour is absolute.

An increase in the amount of labour on the new production basis is in part necessary in order to compensate for the lessened rate of profit by means of the amount of profit; in part in order to compensate for the fall in the magnitude of surplus value which accompanies the rising rate of surplus value on account of the absolute reduction in the number of workers exploited by means of an increase in the number of workers on the new scale. Finally the principle of multiples touched on earlier,


But it will be said that if the variable capital declines in sphere of production I, it increases in the others, namely those which are employed in the production of the constant capital needed for sphere of production I. Nevertheless, the same relation enters here, e.g. in the production of machinery, in the production of raw products, matières instrumentales, e.g. coal. The tendency is general, although it is first realised in the different spheres of production by fits and starts. It is counterbalanced by the fact that the spheres of production themselves increase. In any case, it is only a need of the bourgeois economy that the number of people living from their labour alone should increase absolutely, even if it declines relatively. Since labour capacities become superfluous for the bourgeois economy once it is no longer necessary to exploit them for 12 to 15 hours a day. A development of productive power which reduced the absolute number of workers, i.e. in fact enabled the whole nation to execute its total production in a smaller period of time, would bring about revolution, because it would demonetise the majority of the population. Here there appears once again the limit of bourgeois production, and the fact becomes obvious that it is not the absolute form for the development of productive power, that it rather enters into collision with the latter at a certain point. In part this collision appears constantly, with the crises, etc., which occur when now one now another component of the working class becomes superfluous in its old mode of employment. Its limit is the surplus time of the workers; it is not concerned with the absolute surplus time gained by society. The development of productive power is therefore only important in so far as it increases the surplus labour time of the workers, not in so far as it reduces labour time for material production in general. It is therefore embedded in a contradiction.


The rate of surplus value — i.e. the ratio of surplus to necessary labour time for the individual worker (therefore in so far as surplus value is not modified in the different spheres of production by the proportion between the organic components of capital, turnover time, etc.) — is automatically balanced out in all the spheres of production, and this is a basis for the general rate of profit. (The modifications which in this way influence the necessary costs of production are compensated for by the competition between capitalists, by the different items which they bring into consideration when dividing among themselves the general surplus value.)

[XVI-1020] That the rate of surplus value rises means nothing other than that the cost of production of labour capacity falls, hence necessary labour time falls, in the proportion to which the specific product of that particular sphere of production which has become cheaper enters into the general consumption of the workers. This cheapening of labour capacity, reduction in necessary labour time, increase in absolute labour time, therefore takes place uniformly, and influences all spheres of capitalist production uniformly, not only those in which the development of productive power has taken place, but also those whose products do not enter at all into the consumption of the workers, and in which the development of productive power can therefore create no relative surplus value. (It is therefore clear that in competition, once the monopoly in the new invention has come to an end, the price of the product is reduced to its production costs.)

If, therefore, 20 workers who work 2 hours of surplus labour are replaced by 2, it is correct, as we have seen already, that these 2 can under no circumstances provide as much surplus labour as the 20 did previously. But in all spheres of production the surplus labour rises in proportion to the cheapening of the product of the 2 workers, and it rises without any alteration having taken place in the ratio of the organic components of the capitals employed by the spheres of production.

On the other hand, an increase in the value of the product of a sphere of production of this kind, which enters into the reproduction of labour capacity, has just as general an effect; this may wholly or partially paralyse that surplus value.

In the first case, however, the surplus labour time gained is not to be estimated by the sphere of production in which the increase of productive power has taken place, but by the sum total of the diminutions of necessary labour time in all spheres of capitalist production.

But the more general the relation becomes, with 2 replacing 20 in all or most spheres of production, under the same proportions between total capital and variable capital, the more does the relation in the totality of capitalist production raise the relation in the particular spheres of production. I.e. no reduction in necessary labour time could create the amount of surplus value there was previously, when 20 worked instead of 2.


And under all circumstances the rate of profit would then fall, even if the capital itself increased so much that a number [of workers] equally great or even greater than before could be employed under the new conditions of production.


The accumulation of capital (considered materially) is double. It consists on the one hand in the growing amount of past labour, or the available amount of the conditions of labour; the material prerequisites, the already available products and numbers of workers, under which new production or reproduction takes place. Secondly, however, in the concentration, the reduction in the number of capitals, the growth of the capitals present in the hands of the individual capitalist, in short in a new distribution of capitals, of social capital. The power of capital as such grows thereby. The independent position achieved by the social conditions of production [XVI-1021] vis-à-vis the real creators of those conditions of production, as represented in the capitalist, thereby becomes increasingly apparent. Capital shows itself more and more as a social power (the capitalist is merely its functionary, and it no longer stands in any relation to what the labour of an individual creates or can create), but an alienated social power which has become independent, and confronts society as a thing — and through this thing as a power of the individual capitalist. On the other hand, constantly increasing masses [of people] are thereby deprived of the conditions of production and find them set over against them. The contradiction between the general social power which capital is formed into, and the private Power of the individual capitalist over these social conditions of production becomes ever more glaring, and implies the dissolution of this relation, since it implies at the same time the development of the material conditions of production into general, therefore communal social conditions of production.

This development is given by the development of productive power along with capitalist production and by the manner in which this development of productive, power takes shape.

The question now is, how is the accumulation of capital affected by the development of the productive forces, in so far as they find expression in change[s] in surplus value and the rate of profit, and how far is it influenced by other factors?

Ricardo says that capital can grow in two ways: 1) in that a greater amount of labour is contained in the greater amount of products, hence the exchange value of the use values grows along with their quantity; 2) in that the quantity of use values grows, but not their exchange value, hence the increase occurs simply through an increase in the productivity of labour.